Business Market Report

Foreign purchases and sales showed a notable increase:

Market makes late recovery amid Friday’s renewed interest

THE market opened lower and continued to be so during most part of the week except on Wednesday and Friday where the market witnessed a marginal increase of 3.72 points on Wednesday and a substantial rise of 23.1 points on Friday which drove up the market index to close marginally below last week’s 2,586.6 points.

The ASPI (All Share Price index) slid a mere 1 point or 0.04 per cent to 2,585.6 points while the MPI (Milanka Price Index) edged up 0.37 per cent or 12.9 points to end at 3,519.1 points.

People’s Merchant (PMB) topped this week with over Rs. 357 million turnover constituting 26.18 per cent of week’s total turnover. The stock traded within a wide price range of Rs. 26 and 40.5 per share gaining a massive 46.3 per cent price appreciation for the week.

The interest on PMB counter was predominantly due to DPMC Financial Services (Pvt) Ltd selling their 29.27 per cent stake in the Company to 3 parties namely Galleon International Master fund SPC Ltd (11 per cent), Lionhart Investments Limited (10 per cent) and Lanka Orix Leasing Company Ltd (7.8 per cent).

With Touchwood Limited (Hong Kong) selling 29.18 per cent stake it held in the forestry firm Touchwood Investments Limited to Lanka Orix Leasing Company, approximately 3.5 million shares of the Company changed hands during the week adding a turnover of Rs. 295.21 million to the total market turnover. The share price closed Rs. 6.25 higher at Rs. 91.75 after peaking at Rs. 94.

Premier blue chip counter JKH, with 1,770,250 shares traded at a price range of Rs. 127-130 contributed Rs. 228.7 million to the weekly turnover. Out of the JKH’s weekly turnover 72 per cent was witnessed during Friday’s trading alone. Renewed interest was shown on Nestle with 191,200 of its shares trading for the week.

The share price witnessed a WoW increase of 0.19 per cent to close at Rs. 261 per share. The counter was among the leading contributors towards the weekly turnover with over Rs. 49 million of turnover.

The big trades on bluechip counters Dialog and JKH, which took place during the last trading hours of the week pumped the weekly turnover where Friday’s turnover alone contributed Rs. 702.8 million or 51.5 per cent to the total market turnover.

The week as a whole made Rs. 1.36 billion worth of turnover, up by 21.1 per cent from previous week. Meanwhile the daily average turnover stood at Rs. 273 million. The week felt increased foreign activity with foreign participation amounting to 37 per cent of total activity compared to last week’s 13 per cent.

Foreign purchases and sales showed a notable increase of 201.5 per cent and 328.7 per cent to stand at Rs. 555.7 million and Rs. 460.4 million respectively.

This resulted in net foreign inflows of Rs. 95.3 million, up 23.9 per cent making overseas investors net buyers for the week. Most traded stocks during the week were People’s Merchant, Touchwood, Ceylon Glass and JKH.

Point of view

Stick to fundamentals

As expected by us, the market remained weak as investors continued to adopt a cautious approach. Overall the market remained almost flat losing 1 point compared to last week despite a late recovery on Friday.

We expect the sentiment to remain dull during the coming week with the market expected to find resistance at 2600 levels until some positive news emerges that would boost investor confidence.

Furthermore we advice investors to focus more on fundamentally sound counters due to the low short term trading opportunities and increased uncertainties.

Rs. 30 wage hike

This week the daily wages of plantation workers were increased by Rs. 30, to amount to Rs. 200.

This wage hike followed the last years 33 per cent wage increase granted with the expiration of previous collective agreement.

In our opinion this wage increase would put further pressure on the margins of plantation companies. However on a positive note, the tea prices averaged significantly (32 per cent) higher this year compared to last year cushioning the position of Regional Plantation Companies (RPCs).

Furthermore the rupee has depreciated more than 5 per cent this year benefiting plantation companies due to their exporter status.

(This information has been compiled from sources that we believe to be reliable but we do not hold ourselves responsible for its completeness or accuracy. No matter published herein create any liability of any kind of HNB Stockbrokers (Private) Limited or its associates. All opinions views findings and conclusions included in this report constitute our judgment of this date and are subject to change without notice.)