Positive momentum with healthy corporate earnings

STOCK MARKET: The positive momentum which started off last week continued through this week, even amid trading being shortened due to a special CSE holiday which fell on Monday.

Activity improved in the market on healthy volumes this week, as both indices gained for the week.

The ASPI (All Share Price Index) rose by a noteworthy 26.1 points to close the week at 2973.6 points, though in percentage terms the growth was modest amounting to a mere 0.89%. A similar 23.9 point increase was witnessed in the MPI (Milanka Price Index) this week with the index closing at 4121.2 points.

Rekindled interest on the Distilleries counter amid the expectation of a strong quarterly performance by the company, led to the share becoming the highest contributor towards weekly turnover this week contributing Rs. 254.6 million.

The share price moved up by as significant 17.2% this week, to close at Rs. 127.75 per share, while during the week it touched a peak of Rs. 128 per share. A total of 2.1 million of Distilleries shares traded this week.

SLT was yet another counter which seemed to be in investor appetite this week with earnings expectation for the 4th quarter being high. SLT saw 6.1 million of its shares trading this week, while contributing Rs. 198.9 million towards turnover this week.

However the share price failed to appreciate, markedly this week, with the counter closing the week at Rs. 33.50 per share, compared to last week's closing price of Rs. 33 per share.

JKH's reign as the highest contributing stock towards weekly turnover, which lasted for 7 consecutive weeks ended as interest on the counter seemed dwindle this week. Trading volumes this week fell significantly to stand at 816,900 shares compared 3.9 million shares traded last week.

Turnover contributions this week were around 1/5th the level recorded last week, totaling Rs. 164.02 million for the week.

The share price too was showing a slight decline this week falling by 2% compared to last week, to close at Rs. 200 per share.

Added interest was seen in the Richard Pieris counter this week with a 1.9 million share stake exchanging hands on Wednesday.

The stake went through at Rs. 90 per share, while the contribution towards Wednesday's turnover amounted to Rs. 190 million.

For the week a sum of 2.1 million shares traded, contributing Rs. 191.5 million towards total turnover for this week. The share closed the week unchanged at Rs. 80 per share compared to last week.

ACL traded ex-bonus (1 for 1 bonus issue) this week on Friday, which led to the share price been adjusted to Rs. 143.25 per share.

On Friday the counter was also seen trading at a high of Rs. 147 per share.

Contribution towards weekly turnover amounted to Rs. 122.4 million, while the counter saw 682,700 shares trading this week.

Total activity for the week amounted to an encouraging Rs. 2.7 billion, in the midst of the week being limited to 4 trading days with Monday being a holiday.

The daily average turnover for the week improved to stand at Rs. 668.8 million, 14.3% up compared to last week's Rs. 584.9 million.

Foreign investors were net sellers this week amounting to a notable Rs. 324.9 million. Foreign purchases amounted to Rs. 373.7 million while foreign sales amounted to Rs. 698.6 million during the week.

Foreign participation as a percentage of total activity stood at 20% moving lower compared to the last week where participation levels stood around 39%.

The highest traded stocks for the week were SLT, Nawaloka, Sierra Cables, RCL and Ceylon Glass.

Market managed to retain the positive momentum throughout the week even though investors continued to look for profit taking opportunities. During the week market gained by 26.1 points to close at 2973.6 points compared to last Friday's closing level.

We expect a mix of profit taking and bargain hunting during the coming week resulting the indices to move sideways. However we do not rule out the possibilities of volatility in market presenting trading opportunities for the investors.

Furthermore the healthy activity levels witnessed so far in 2007 is likely to continue in the coming week with domestic investors expected to take the lead.

Meanwhile the corporate results released thus far for the quarter ending Dec 2006, showed mixed results with certain companies such as JKH feeling the heat of rising interest rates and inflation in the economy.

Nevertheless most of the key blue chips are likely to post steady financial results despite the macro pressures thus we advise investors to slowly accumulate counters such as SLT, Dialog, Distilleries etc. which are likely to post healthy results.

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