Indices drop amid cautious trading

The indices drifted downward on early part of the week to close lower week on week, led mainly on price declines in few blue chip stocks. During the week activity levels remained moderate, as investors waited cautiously for better 1st quarter corporate earnings.

The ASPI (All Share Price Index) lost 15.9 points or 0.6% at 2635.7 points while the more liquid MPI (Milanka Price Index) slid 47.9 points or 1.46% to close at 3235.3 points for the week.

The blue chip JKH edged out as the largest contributor for the week by generating a contribution of Rs. 77 million, with a trading volume of 0.65 million. The stock fluctuated between the price range of Rs. 116.5 and Rs. 118 during the week before closing 1.3% lower at Rs. 116.5 per share. The bulk of JKH turnover came on Tuesday.

Interest on Colombo Dockyard saw the share rising 1.56% to Rs. 65 this week in anticipation of strong earnings growth during the first quarter thus enabling the counter to trade 0.65 million shares during the week. The counter aided by the crossing that took place on Wednesday added Rs.42 million to the week's turnover level.

Speculative trading on Lanka Cement saw 2.63 million shares trading for the week within the price range of Rs. 13.75 and Rs. 15.00 per share. According to media reports heavy trading came after the government decision approving the Indian Birla Group to visit the company's defunct manufacturing plant in Kankasanturai.

Lanka Cement gained 5.36% WoW to Rs. 14.75 per share while contribution to the weekly turnover amounted to Rs. 38.6 million placing the counter as the 3rd largest contributor to the week's market activity.

In addition, Environmental Resources too saw considerable quantities changing hands during the week, which amounted to 1.55 million shares, becoming one of the highest traded stocks for the week. The counter dipped 5.62% WoW to close Rs. 1.25 lower at Rs. 21.00 per share.

Dull investor sentiment kept the activity levels relatively low for the week with the total weekly activity amounting to a mere Rs. 800 million compared against Rs. 5.9 billion made during last week. Average daily turnover meanwhile stood at Rs. 198.5 million, down by 83.2% during the week, which consisted of 4 trading days only.

Foreign investors remained net buyers for the week amounting to Rs. 71.4 million. Foreign purchases for the week stood at Rs. 225.3 million, while foreign sales totalled to Rs. 153.9 million. The foreign participation for the week was 23.9% of total activity showing a decline compared to 64.4% witnessed last week.

Ceylon Glass, Lanka Cement, Environmental Resources and Vallibel were among the most heavily traded stocks during the week.

Investors look for direction

Market sentiment was relatively dull this week as investors adopted a wait and see approach until the corporate results are released. During the week market fell by 16 points compared to last week's closing levels.

In the coming week we expect the market activity levels to improve as investors are likely to chase stocks in growth sectors. Furthermore we believe that the investors would be closely monitoring 1st quarter 2008 corporate earnings as they search for direction in the marketplace.

Inflation goes through the roof

The price levels in the country continued to increase at a brisk pace in April 2008 as New Colombo Consumer Price Index (CCPI-N) stood at 25% on Point-to-Point basis and 18.7% on annual average basis compared to 23.8% and 17.8% in the previous month (March 2008).

The increase in inflation can be mainly attributed to the surge in prices of key food items such as rice, vegetables, fish etc.

In our opinion inflation would continue to rise in the coming months with little change expected in the trend of food and energy/fuel prices. Thus according to our projections point to point inflation would stand slightly higher at 25.2% in May 2008 while annual average inflation is expected to reach 19.7%.

However we expect a decline in the growth rate of Month on Month (MoM) inflation as a result of monetary policy tightening and the easing of high demand of consumer goods after the festive season.

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.