Renewed interest in Banking counters

STOCK MARKET: The market started off on positive note this week, however failed to hold ground, sliding throughout the major part of this week.

While indices picked up yet again on Friday, the market closed the week in the red, falling below last week’s closing level.

However the fall in the market witnessed this week remained modest with the ASPI (All Share Price Index) declining by 5.5 points compared to last week, to close on Friday at 2986.7 points.

However the more sensitive, MPI (Milanka Price Index) rose by 19.1 points, moving on an opposite direction to ASPI, closing at 4184.2 points this week.

The disparity in the movement between the MPI and ASPI can be attributed to the decline in the price of counters such as Carsons, which does not come under the MPI.

Market heavy weight counters SLT, JKH and Dialog took the top three slots in terms of contribution towards total turnover for this week. SLT was the highest contributor towards weekly turnover contributing Rs.653.1 million.

A total of 15.7 million SLT shares traded for this week, while the share price rose by a notable 7.8% during the week to close at Rs.41.50 per share. During the week the counter peaked at a high of Rs.43.50 per share, while trading at a low of Rs.39.50 per share.

JKH managed to retain investor interest with a 2.1 million parcel of JKH shares trading on Friday. The trade boosted Friday’s turnover, with JKH contributing Rs.405.2 million. For the week a sum of 2.8 million JKH shares traded, with the total contribution towards the week’s turnover amounting to Rs.545.4 million.

The counter traded between a price range of Rs.190.25 per share and Rs.187.75 per share, closing the week slightly above last week’s closing, at Rs.188 per share.

Mobile telephone provider Dialog also saw an increase in investor interest this week with total volumes traded standing at 11.5 million shares, up from 10.4 million shares traded last week.

The counter contributed Rs.316.4 million towards weekly turnover with the share price closing unchanged this week at Rs.27.50 per share. During the week however a slight movement was witnessed in the share price, with prices touching a high of Rs.28 per share.

Renewed interest was seen in banking counter NTB with 4.1 million shares trading this week. Of this the major portion of 3.8 million shares traded on Monday contributing Rs.132.7 million towards the day’s turnover.

The share price however showed modest movement, rising by 0.7% compared to last week, to close on Friday at Rs.34.25 per share. Total contribution towards weekly turnover from NTB amounted to Rs.141.2 million.

Meanwhile another banking counter DFCC announced a 1 for 4 rights at Rs.140 per share and a 1 for 5 bonus during this week. Subsequent to the announcement share prices reacted favourably moving up by 4% to close the week at Rs.210 per share.

Taking the spotlight this week was Touchwood, with the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) stating the estimates used by the company in its 2005 and 2006 accounts were unreliable.

This conclusion made by SLAASMB left prices sliding subsequent to trading commencing on Wednesday. As a result Touchwood became the top loser for the week with its share price losing 39.2% to close at Rs.79 per share. The counter touched a low for the week of Rs.70.25 per share on Wednesday.

Activity dampened reducing by 36.2% Week on Week to total Rs.3.04 billion this week while the average daily turnover amounted to Rs.607.3 million.

Foreign investors remained net buyers this week, totaling Rs.104.7 million for the week. Both Foreign purchases and foreign sales were significantly lower this week, resulting in foreign participation standing at a low of 27.6% of total activity compared to last week, which posted 51.2%.

Foreign purchases stood at Rs.889.4 million, down by 58.6% compared to last week, while the foreign sales amounted to Rs.784.7 million dropping by 71.2% compared to last week.

Volume wise the highest traded stocks this week were Nawaloka, SLT, Dialog, Ceylon Glass and Sierra Cables.

As highlighted by us during last week, market sentiment dampened further as profit taking continued in the market place. This resulted ASPI to end lower compared to last week by 0.18%.

The average annual inflation increased to 15.8% in February compared to 14.8% in January. Nevertheless Month on Month (MoM) inflation showed a decline of 1.3% in the back of decrease in prices of key food items such as vegetables and fish.

In our opinion the MoM inflation would continue to decline in March, although annual average is expected to climb further to 16.8%.

Furthermore the Central Bank tightened monetary policy by increasing interest rates further by 50 basis points last month. In our opinion further rate hikes are likely in the medium term in order to cut down the excess credit growth in the economy.

Overall we expect the negative real returns to continue in the medium term making equity markets more attractive to investors.

Colombo bourse to remain less affected amidst jittery regional markets Asian, European regions and US markets plunged during the week on the expectations of a possible slow down in the US economy.

However Colombo Stock Exchange (CSE) remained largely unaffected by these developments.

We expect the CSE to remain resilient to these external developments during the coming weeks, as Sri Lankan economy is relatively less depended on US and the high local participation in the market compared to foreign participation. Thus we advise investors not to panic with the happenings in the global markets.

We expect the market sentiment to remain sluggish with investors trying to book profits during the coming week.

However volatility is likely to continue, as investors are likely to take short-term positions. We expect the indices to fluctuate in a narrow range during the coming week, however trading opportunities would continue to exist in the market on a daily basis.

Therefore we advise investors to maintain liquidity in order to capitalize on trading opportunities in the market place.

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