Budget 2007 will result in positive impact on earning perspectives

MARKET REPORT: The market shed some weight this week after gaining for 9 consecutive weeks, as indices fell comparing WoW(Week on Week).The ASPI (All Share Price Index) slid quite modestly by 2.1 points compared to last week, closing at 2683.9 points on Friday.

However the more sensitive MPI (Milanka Price Index) gained by a notable 30.4 points, to close at 3594.3 points for the week. Most evident during this week was the lack of foreign participation to the scale of what was witnessed during the past couple of weeks.

Banking counter NDB became the highest contributed stock for the week with a 2.7 million chunk of its shares trading on Friday.

The quantity traded as a foreign to local sale. Approximately 3.3 million of NDB shares traded this week with the counter contributing Rs.672 million towards weekly turnover. NDB shares traded within a range of Rs.202 and Rs.195.50 per share closing the week at Rs.200.50 per share.

Conglomerate JKH saw its shares falling slightly by 2.8% this week, however managing to become the second highest contributor towards weekly turnover.

The share price reached a peak of Rs.197 per share for the week, though closing at Rs.191 per share. Contribution from the counter towards weekly turnover amounted to Rs.562.3 million with 2.9 million shares trading for the week.

Distilleries yet again, managed to come amongst the top gainers for the week, with its share price rising by a notable 15.4% compared to last week.

The counter traded at a peak price of Rs.98.50 per share, while trading at a low of Rs.81.75 per share for the week. Distilleries contributed Rs.336.8 million towards weekly turnover, closing the week at a price of Rs.97.50 per share. Around 3.7 million shares of the counter traded for the week.

Meanwhile correspondingly LMF, which owns approximately 12% of the Distilleries counter saw its share prices pick up yet again this week. LMF share price rose by 11% WoW, to close at Rs.43 per share on Friday. The counter traded between a range of Rs.43.50 and Rs.36 per share during the week.

Yet another counter, which saw its share price shoot up this week, was ACL. The counter closed the week at Rs.179.75 per share up by a significant 21.4%, in the back of a 1:1 bonus announcement made this week.

A total of 0.7 million ACL shares traded this week, with the share price fluctuating between a wide range between Rs.200 and Rs.147.50 per share this week.

Turnover fell significantly by 57% compared to last week, to amount to Rs.3.2 billion, while average daily turnover fell below the Rs.1 billion mark this week to stand at Rs.642.8 million.

Average daily turnover posted during the past couple of weeks managed to stay above the Rs.1 billion mark, backed by high foreign participation.

Foreign investors were net sellers this week amounting to Rs.788.5 million, driven mainly by the foreign sale of NDB shares on Friday. Total foreign sales for the week amounted to Rs.1.2 billion with Friday alone posting foreign sales amounting to Rs.746.1 million.

Foreign purchases this week stood at Rs.405.1 million down considerably by 89.2% compared to last week. Meanwhile as noted previously foreign participation fell significantly this week to 24.9 % of total activity compared to 40% recorded during last week.

SLT, Sierra Cables, Distilleries, Ceylon Glass and Tokyo Cement (Non Voting ) were amongst the highest traded stocks this week.

The positive trend witnessed in the market over the last nine weeks ended this week as profit taking dragged the market to negative territory.

The activity levels also showed a sharp drop in the absence of strategic transactions and low retail participation compared to last week. Overall the market lost marginal 2.1 points during the week compared to last week's closing levels.

Overall the budget 2007 is likely to result in a positive impact on most of the sectors mainly on an earning perspectives The incentives given to key sectors such as construction, food and beverage and healthcare etc. would benefit the companies that are listed under those sectors.

Meanwhile the banking sector would see mixed impact, however in our opinion the smaller banks would face serious difficulties when it comes to meeting the capital adequacy requirements as a result of new profit distribution rule.

Furthermore telecom, the biggest sector in terms of the market capitalization is unaffected from the budget 2007, thus we believe that two telecom counters SLT and Dialog would continue to maintain its growth trend in the future.

The volatility is likely to continue in the market place as investors would continue to take profits in the coming week.

However, the activity levels are likely remain at modest levels with most of the investors mainly eying on key blue chip counters. Considering the possible volatility in the market, we advise investors to take a trading view.

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