Upward trend continues as penny stocks dominate

REPORT: The market retained an upward trend this week, though the growth momentum was far less than what was witnessed last week. The ASPI (All Share Price Index) rose by 39.1 points comparing Week on Week (WoW), while during last week the index managed to rise by 67.7 points.

The MPI (Milanka Price Index) meanwhile improved by 51.8 points this week, compared to an 85.6 point rise witnessed last week.

It is interesting to note that the market has so far risen for two consecutive weeks, with even daily movements being on an upward trend. On Friday the ASPI closed at 2226.6 points, while the MPI closed at 2856.2 points.

Dockyard remained the highest contributor towards turnover this week, contributing Rs. 355.3 million towards weekly turnover.

The major portion of the contributions came on Friday with 13.9 million shares trading as a foreign to foreign crossing at a price of Rs. 25.50 per share.

The counter closed at Rs. 25.25 per share on Friday showing a slight 1% increase in share price WoW.

Nawaloka took center stage this week, amid speculative trades driving the share price by a significant 23.1% compared to last week. During the week the stock traded at a high of Rs. 4.90 per share, however prices slipped amid the Exchange halting the trade of the stock on Thursday.

While trading commenced within a short time, the halting saw investor sentiments dampen, resulting in the share price falling by 19.5% on Thursday.

Highest traded stock

Approximately 70 million of Nawaloka shares traded, making it the highest traded stock for the week, while the counter was the second highest contributor towards turnover contributing Rs. 275.2 million.

Another penny stock, Vanik Incorporated also experienced a halting of trade this week on Thursday. Vanik had observed renewed interest for the past couple of weeks, while speculation of a change of management have been driving the share price of the stock.

During the week Vanik shares traded at a high of Rs. 5.25 per share, while subsequent to the halting of trade, share prices fell by 12.2% on Thursday. The counter contributed a notable Rs. 223.7 million towards weekly turnover, while 51.4 million of shares traded during the week.

On Friday the share closed at a price of Rs. 4.30 per share, up by a sizable 19.4% WoW. Vanik Incorporated (non voting) shares was the top gainer this week with the share price improving by a significant 66.7% compared to last week. A notable 22 million of non voting shares traded this week, with the counter closing the week at Rs. 4 per share.

Banking counter Nations Trust observed renewed interest amid 4.3 million of its shares being traded on Wednesday. The major part of 4.17 million shares was traded at a price of Rs. 22 per share and was reportedly bought by high net worth investor Dr. Senthilverl.

The counter managed to contribute Rs. 105.1 million towards weekly turnover with 4.8 million of its shares trading during the week. The share price witnessed a modest 5.7% increase to close the week at Rs. 23 per share, while trading within the range of Rs. 23.50 and Rs. 21.25 per share.

Stronger performance

The week saw market heavy weights Dialog, JKH and HNB announcing their quarterly results, with strong performance being witnessed in the counters.

While Dialog and HNB witnessed a modest share price increase of 5% and 6.4% respectively, with relatively low quantities of both shares trading, JKH witnessed a slight 1.3% dip in share price.

This seemed to emphasis the current market sentiment, which have been skewed towards low value counters, with heavy retail participation.

Turnover for the week witnessed a 25.2% dip this week, amid the absence of large trades in the likes of what was witnessed last week. The total turnover for the week amounted to Rs. 1.9 billion, while the average daily turnover remained moderate at Rs. 381.1 million this week.

Foreign participation improved this week to 24.6% of total activity, with the Dockyard trade on Friday boosting participation levels.

Both foreign purchases and foreign sales were impacted by the trade, which contributed Rs. 354 million. Foreign sales for the week amounted to Rs. 472.3 million, while foreign sales totalled Rs. 467 million.

The resultant net foreign inflow was a low Rs. 5.3 million for the week.

Amongst the heavily traded stocks this week were, Nawaloka, Vanik Incorporated, Vanik Incorporated (Non Voting), Asiri Surgical and Dockyard.

Market gained for the third straight week amid investor optimism on the peace front ahead of Norwegian peace envoy's visit to Sri Lanka next week.

The average daily turnover during the week was satisfactory as retail investors showed high interest on penny stocks. During the week All Share Price Index (ASPI) gained 1.79% compared to last week's closing levels.

However the market didn't react to the recent incidents in the East as investors have become immuned to these types of isolated incidents.

Meanwhile the Norwegian peace envoy Jon Hanssen Bauer is expected to arrive in the country next week in order to discuss the issues after LTTE's demands to remove the peace monitors belonging to European Union (EU) countries.

In our opinion these discussions will also give an important signal to the investors about the commitment of LTTE in coming back to the negotiation table.

Thus we feel that any positive result from these discussions would propel the investor confidence, which could lead to further strengthening the market sentiment.

Although we expect pockets profit taking during the coming week, we do not believe that there will be a change in the overall positive sentiment that we witnessed over the last 3 weeks with investors awaiting favorable news from the peace front.

The activity levels are expected to remain modest around Rs. 250-300 million levels, as investors are likely to look for trading opportunities in the market place. However we advise investors to take a cautious approach when trading on speculative counters by taking regular profits.

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