Growth primarily due to strong performance:

Renewed interest on plantation stocks

The market ended lower for the week with indices experiencing volatility throughout the week. Active trading during the mid week pushed the indices up although mild profit taking towards the latter part of the week seemed to impact on the indices.

The ASPI (All Share Price Index) fell by 6.9 points or 0.27 per cent to close the week at 2507 points this week. The MPI (Milanka Price Index) closed the week at 3273.1 points down by a much higher amount of 26.6 points or 0.81 per cent compared to last week’s closing levels. Price declines of the index heavyweight counters JKH, Dialog & SLT lead to such bigger drop in the MPI.

In the spot light this week was the high cap conglomerate JKH, re emerging as the highest turnover generator, having traded a sizeable volume of closer to 1.45 million and generating a turnover of Rs. 182.7 for the week.

The Rs. 66.2 million trade on Tuesday and another Rs. 90.6 million trade on Wednesday helped boost market activity this week.

However the share price of the counter dipped by a slight 0.59 per cent on a WoW basis to close at Rs. 126.25 after hitting a high of Rs. 128 per share.

The burst on plantation stocks seemed to ease off during the latter part of the week nevertheless Balangoda managed to come out as the 2nd largest contributor towards the weekly turnover.

Balangoda share closed up Rs. 4.25 at Rs. 22.00 witnessing an impressive price appreciation of 23.9 per cent. Approximately 5.76 million shares of the plantation stock were traded adding Rs. 115.85 million to the total turnover.

Banking stock NDB managed to capture investor interest with 0.5 million shares trading this week.

Counter observed little change of 0.62 per cent in the share price to close at Rs. 161.25, while trading between the range of Rs. 160 and Rs. 161.25 per share. NDB contributed Rs. 82.5 million worth of turnover over the week becoming the 3rd largest contributor for the week.

Apart from the above stocks another stock which appeared to be among the investor favourites were the telecom stock SLT having traded a volume of 1.85 million to post a turnover of Rs. 58 million.

During the week’s trading the share price of the counter touched a peak of Rs. 32 and a low of Rs. 31 before concluding the week at Rs. 31.25. The share value on a WoW basis depreciated by 1.57 per cent.

Total turnover for the week was slightly higher than last week, standing at Rs. 996.3 million, indicating a 1.2 per cent increase.

Revived investor optimism on plantation stocks coupled with big trades on JKH saw Rs. 666.8 million or 67 per cent turnover being generated on Wednesday and Thursday alone causing average daily turnover to stand at Rs. 199.26 million compared to Rs. 196.88 million last week.

Somewhat improvement in foreign activity was witnessed during the week where total foreign participation stood at 29.5 per cent compared to 22.7 per cent of last week.

Foreign purchases amounted to Rs. 302.5 million while foreign sales totalled to Rs. 285.9, which were up by 8.3 per cent and 69.6 per cent respectively.

Thus the resultant net inflow amounted to Rs. 16.6 million down 85.1 per cent as against last week.

Meanwhile the most traded stocks for the week were Balangoda, Madulsima, Vallibel and SLT.

Activity levels to remain modest

Indices remained volatile within a narrow range with relatively low activity levels. The market fell by marginal 6.9 points during the week compared to last week’s closing levels.

We expect a similar momentum to continue in the market with indices fluctuating in a narrow range on thin volumes. However we advise investors slowly accumulate the undervalued counters taking a relatively longer-term view.

Economic update

BOP jumps as US$ 500 million funds come in October

Although the trade deficit increased by 24 per cent YoY the exports continued to grow at a healthy pace in October 2007.

Strong performance witnessed in exports during 2007 continued, with October exports growing by 18.2 per cent compared to September 2006 to stand at US$634.8 million.

The growth in the period under review was primarily due to the strong performance shown in agricultural exports, which accounts for 22 per cent of the total exports. Agriculture exports increased by 21.5 per cent YoY driven mainly by tea with prices jumping above Rs. 350 per kilogram for low grown teas. Furthermore the industrial exports also grew by a noteworthy 12.1 per cent YoY. Meanwhile imports escalated by 20.5 per cent YoY to US$ 1.08 billion during October 2007 in the back of increase in investment goods and intermediate goods by 36 per cent and 21.8 per cent respectively.

October 2007 balance of trade recorded a deficit of US$442.9 million, 24 per cent higher compared to US$ 357.2 million in October 2006.

Cumulative exports during the 1st 10 months (from Jan to Oct 2007) increased by 13.1 per cent to US$ 6.29 billion as against the same period last year while cumulative imports increased by 7.3 per cent to US$ 9.13 billion resulting in a marginal drop in trade deficit by 3.7 per cent to US$ 2.85 billion compared to US$ 2.95 billion in the corresponding period last year.

The Balance of Payments (BOP) that was shrinking since April got a boost in October in the back of US$ 500 million bond issue to stand at US$ 696 million.

Furthermore, the Gross Official Reserves position that stood at US$2.60 billion at the end of September improved to US$ 3.22 billion by end October 2007.