HNB Stockbrokers' weekly market:

Indices remain volatile on thin volumes

The indices started off on a low scale on Wednesday, followed by the long holiday weekend, which shortened the week to 3 trading days. Stocks on Thursday rose slightly higher, but nevertheless ended down WoW in the absence of any gains on Friday.

Comparing WoW the ASPI (All Share Price Index) was down 10.9 points or 0.42% at 2585.8 points while the more liquid MPI (Milanka Price Index) witnessed a 33.9 points or 1.08% dip at 3122.3 points.

The highest contributor towards turnover for the week was Kelani Tyres, which contributed Rs.107 million. A considerable 1.97 million of Kelani Tyre's shares traded with the majority trades coming towards the latter part of the week. The share price of the counter observed a noteworthy increase of 31% emerging as the highest gainer for the week. The share closed at Rs.58 per share, while trading at a high of Rs.59 and a low of Rs.44 per share during the week.

Top Listed blue chip counter JKH came out as one of the top contributors this week with a total contribution of Rs.51 million, which was 9% of total market activity. The conglomerate traded approximately 0.44 million shares within a price range of Rs.116.25 and Rs.117.75 per share closing flat at Rs.117 at week's close.

Colombo Fort Land traded a total of 1.9 million shares becoming the 3rd highest traded stock for the week. The shares were traded within a wide price band of Rs.23 & Rs.27.50 that showed an impressive 18.5% increase from its previous close while the stock contributed Rs.49.25 million towards the week's market turnover.

Revived interest on Dockyard saw the share rising WoW to close up Rs.0.75 at Rs.67.00 per share, trading almost 0.65 million shares in volume with the bulk changing hands on Thursday. Counter's contribution towards the weekly market turnover stood at Rs.41.6 million.

Market activity level remained low for the week due to a lack of participation from both foreign and local investors.

The cautious mood exerted by the investors kept the activity levels slim during the three-day week at Rs.557.6 million, showing a decline of 27%.

The daily average turnover meanwhile stood at Rs.185.9 million, up 21.8% as against last week's level, which comprised of a full 5 day trading week.

Foreign investors were net sellers this week amounting to Rs.37.6 million. Foreign purchases slumped 55.4% to Rs.76.5 million; while foreign sales witnessed a lesser fall of 31.7% to Rs.114.1 million. Foreign participation fell this week to stand at 17% of total activity, compared to last week's participation level of 22 %.

Vallibel, Kelani Tyres, Fort Land and Vanik Incorporation were among the highest traded stocks for the week.

Mixed corporate earnings to keep investors wary

Market remained flat on very thin volumes as holiday shortened week kept investors away from the market. Overall the market fell marginally by 10.9 points compared to last Friday's closing levels.

In the coming week we expect the market activity levels to improve as investors are expected to come back to the market after vesak holidays. However the movements in the indices are unlikely to change significantly compared to last 2-3 weeks, thus the market is likely to remain volatile within a narrow range.

Economic update

Oil continues to hit the trade balance Jump in imports in the back of high petroleum costs continued to widen the trade deficit while exports growth slowed down for yet another month.

During the month of March 2008, the earnings from exports grew by 7.8% to US$680.2 million compared to corresponding period last year. The export growth was mainly fueled by strong agriculture exports which grew by 29.1% Year on Year (YoY) to US$153.1 million compared to US$118.6 million in March 2007.

The growth in earnings from tea and other minor agriculture crops can be mainly attributed to the healthy agriculture exports. However the industrial exports during the period under review only increased by 3%.

Imports in March 2008 surged by 32.5% to stand at US$1.13 billion compared to US$852.7 million in the corresponding period last year.

The sharp increase in imports during the period came in the back of the jump in intermediate goods by 44% YoY to stand at US$628.9 million.

Rise in intermediate goods imports were driven mainly by the petroleum imports which shot up by 95.1% YoY. Furthermore the consumer goods also increased significantly by 37.1% in March 2008 compared to March 2007.

Much higher increase in imports compared to exports caused trade deficit to widen by 102.4% to US$449.4 million compared to the corresponding period last year.

Meanwhile cumulative (From Jan to Mar) exports stood at US$1.88 billion while the cumulative imports stood at US$3.26 billion resulting in a trade deficit of US$1.39 billion, 107.2% higher than for the same period last year. Nevertheless on a positive note the growth in cumulative worker remittances stood healthy at 23.5% YoY to stand at US$752.2 million diminishing the impact of widening trade deficit.

By the end March 2008 the balance of payments stood at US$416 million while gross official reserves amounted to US$3.52 billion (3.5 months of imports).