Agriculture sector growth shows strong performances

Overall, the market remained dull with the stocks swinging within a narrow price range. The market seemed to fall back during early trading but rebounded during latter part of the week.

ASPI (All Share Price Index), after closing low consecutively for the past four weeks managed to close positively this week rising by 3 points to close at 2510.0 points.

However the more sensitive MPI (Milanka Price Index) was unable to hold ground as it declined by 5.8 points or 0.18% to closing the week at 3267.3 points.

HNB became the highest contributor towards turnover, contributing Rs. 888.7 million, backed by two strategic transactions to foreign parties, which took place on Wednesday. A total of approximately 7 million shares at a price of Rs. 119 changed hands adding a turnover of Rs. 839.6 million on Wednesday boosting market activity.

The Counter traded at a high of Rs. 121.75 per share and a low of Rs. 111 per share to close the week at Rs. 121 per share, up 8.2% on WoW.

JKH the number 1 turnover generator in the previous week stood at the 2nd place during this week with a turnover of Rs. 136.2 million. The conglomerate saw its share price drop by 0.4% WoW while trading between a range of Rs. 125.5 per share and Rs. 127 per share. The JKH share closed Rs. 0.5 lower at Rs. 125.75.

Investor interest was also witnessed on the banking stock Sampath which observed 0.56 million of its shares being traded to generate a turnover of Rs. 67.5 million. The stock closed flat for the week at Rs. 120 per share.

The plantation stock Agalawatte ranked 4th with a contribution of Rs. 37.2 million. Agalawatte was also seen, being traded heavily with approximately 1.2 million shares changing hands throughout the week.

The share price showed a notable increase of 10% this week compared to last week’s closing price of Rs. 30 per share. During the week the counter traded between a range of Rs. 34.25 and Rs. 30.00 per share before closing at Rs. 33 per share.

Overall activity levels had improved by a substantial 72.5% to Rs. 1.72 billion, despite the week being limited to four trading days only. The Rs. 1.16 billion on Wednesday pumped by the strategic deals on HNB reflected 67.3% of the total activity for the week. Meanwhile the average daily turnover stood at Rs. 429.7 million, up significantly by 115.6% on a WoW basis.

The week saw a substantial increase of 273% in foreign purchases, to stand at Rs. 1.13 billion and foreign sales to stand at Rs. 168.7 million witnessing a 41% decline. The resultant net inflow was Rs. 959.5 million. Foreign participation stood at 37.7% of total activity for the week.

The heavily traded stocks during the week were HNB, Nawaloka, Agalawtte and Ceylinco Seylan.

Sentiment remained dull during the week with volatility continuing in the marketplace. The All Share Price Index (ASPI) gained marginally by 8.0 points compared to last week’s closing level.

In the week ahead we expect the market to remain dull with holiday mood drying up activity levels.

However we do not rule out opportunities for short-term trading in the market during next week.

Sri Lanka’s Gross Domestic Product (GDP) expanded by an accelerated growth of 7.0% during the 3rd quarter of 2007 compared to 7.7% in the corresponding period last year.

Though the economic growth was down compared to the last year, 3rd quarter showed a significant improvement compared to 1st and the 2nd quarters that only grew by 6.1% and 6.4% respectively. During the 3rd quarter of 2007 the agriculture, industry and services sectors grew by 3.7%, 7.5% and 7.4% respectively.

The agriculture sector growth was driven by strong performances in rubber and tea, which grew by 8.6% and 3% YoY. However the paddy production during the 3rd quarter was hit by disturbances due to security situation in the Eastern province and unfavourable weather in Northern-western province.

YoY paddy production was down by 4.1%. Meanwhile the industrial sector continued to expand at a healthy pace in the back of improved performances in textiles and garment industry by 7.9% and manufacturing by 6.7% YoY.

Furthermore the construction sector expanded by 9% during 3Q of 2007 compared to the corresponding period last year. Services sector that showed a slower YoY growth during the 2007 2nd quarter of 6.5% accelerated considerably during the 3rd quarter contributing most towards the GDP growth.

Service sector growth was mainly fuelled by the performances in transport & communication and trade sector.

Though we view the improved 3rd quarter performance as a positive sign, we believe GDP growth would continue to come under pressure in the medium-term as a result of high interest rates, inflation and the uncertainty with regard to the Northern and Eastern conflict.

Thus we expect the 2007 GDP growth to be considerably lower in 2007 compared to 2006 growth of 7.7%.

“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.