Retail participation improved amid speculative trading

The overall market sentiment remained dull, though activity levels picked up towards the latter part of the week. ASPI (All Share Price Index) was up almost 2 points or 0.08% to 2424.1 points while the MPI (Milanka Price Index) closed 0.7 points or 0.02% weaker at 3314.2 points.

Leading the way was JKH becoming the key contributor to the market turnover with a contribution of Rs.1.14 billion as well as being the highest traded stock for the week.

JKH alone contributed to 59% of the total turnover before ending flat at Rs.126 per share on Friday. Foreign interest was largely seen in the counter with majority of the turnover arising on Thursday solely based on the 4.8 million foreign crossing.

Conglomerate Hayleys, saw 1.6 million of its shares been bought by a long standing business partner Promar overseas, approached as the second largest contributor in the weekly turnover.

Out of the stock’s Rs.206.8 million weekly turnover, Rs.200 million came along on Thursday. Despite the loss of Rs.60 million recorded for the quarter ended June 2007, the share shed only 0.85% to close at Rs.117 per share.

Speculative trading was on seen Asha Central this week with nearly 1.85 million shares being traded on the last 2 days of the week, leading to a total contribution of Rs.108.2 million by the counter.

The speculation came along with the announcement on the negotiations to acquire the controlling interest of the Company, which is currently held by Euroam Management Services. Asha Central was the top gainer for the week, with its share price appreciating by a significant 98% WoW.

Renewed interest was witnessed in Dipped products which traded 755,700 shares over the week generating Rs.75.5 million towards total market turnover. The share peaked at Rs.97.75 per share indicating a dip of 2.25% in the share price.

The market turnover showed an encouraging 404% WoW improvement, to stand at Rs.1.95 billion, mainly attributing to the heavy weight stock JKH which managed to push up the week’s turnover. Meanwhile the average daily turnover stood at Rs.390.70 million compared to Rs.77.52 millions posted during the week before.

Foreign purchases for the week stood at a high level of Rs.1.45 billion compared to Rs.186.7 million last week, lead by foreign interest witnessed on the JKH counter.

Similarly the foreign sales were up by 474.7% to Rs.474.1 million positioning the foreign investors as net buyers with a net inflow of Rs 984.7 million. Foreign participation for the week amounted to 49.47% whereas last week it was 34.73%.

The most traded stocks for the week were JKH, Dialog, Walker & Greig and Vallibel.

The market witnessed volatility during the week providing trading opportunities to investors. The turnover levels also improved with more retail participation, however bulk of the market activity was on JKH with foreigners showing continuous interest on the Counter.

Both All Share Price Index (ASPI) and Milanka Price Index (MPI) remained flat compared to last Fridays closing levels.

We expect the market to remain volatile during the coming week with relatively low turnover levels. Thus we advise investors to grab trading opportunities in the marketplace amid the likely volatility in indices.

Furthermore we feel that investors should accumulate counters such as JKH, SLT, Commercial Bank, Sampath Bank, Distilleries considering the strong fundamentals of these stock and attractive current market prices.

A healthy growth in exports and a sharp decline in petroleum imports during June helped the trade balance to drop significantly during the 1st half of 2007.

In June exports grew by 6.8% to US$ 675 million mainly due to noteworthy contributions from industrial and agriculture exports.

Meanwhile June imports declined by 11.5% to US$ 831.9 million compared to US$ 939.6 million in June 2006, backed by a 39.8% fall in petroleum imports.

This resulted the trade deficit to decrease significantly by 49% to US$ 156.9 million in June 2007 compared to corresponding period last year.

Furthermore during the first six months of 2007 the cumulative exports and imports increased by 12.9% and 3.9% respectively to US$3,568.5 million and US$ 5,149.8 million resulting in a trade deficit of US$ 1,581.3 million, 11.8% lower than what was experienced during the 1H of 2006.

A lower trade deficit combined with an increase in worker remittances by 18.4% to USD$ 1,313.5 million had a favourable impact of the Country’s Balance of Payment (BoP). BoP for the fist six months of 2007 record a surplus of US$ 192 million.

However both BOP and Gross Official Reserves (GOR) declined during the month of June by US$ 57 million resulting in GOR of US$2,719 million (3.1 months of exports) by end June 2007.

(HNB Stockbrokers (Private) Limited has the sole copyright for this report and the information and views contained cannot be reproduced or quoted in part or whole in any form whatsoever without the written permission from HNB Stockbrokers (Private) Limited.)