MARKET REPORT

Indices down despite improved retail activity

The negative sentiment continued this week, as investors remained cautious over the mixed corporate earnings. The ASPI (All Share Price Index) shed 34.8 points or 1.41% to close at 2431.8 points while the more sensitive MPI (Milanka Price Index) lost 91.4 points or 3.12% to 2840.4 at week’s close.

The fall in indices came in the back of a notable drop in the share price of the index heavyweight telecom giant Dialog, after the release of its disappointing 2nd quarter earnings on Wednesday.

Speculative trading on Hotel Developers (HDEV) helped counter in becoming the largest turnover generator for the week amounting to Rs.85.1 million. The share price of HDEV shot up by a substantial 54.6% Week on Week (WoW) to close at Rs.68.00 per share, topping the list for highest gainers of the week.

The counter during the week fluctuated in a wide price range of Rs.88.75 (highest) and Rs.44.00 (lowest) per share. The total number of HDEV shares traded for the week amounted to 1.2 million.

Interest on United Motors continued with counter generating the 2nd highest contribution towards the weekly turnover.

The share closed up by a notable 33.8% WoW at Rs.89.00 per share standing 2nd in terms of top gainers for the week. Approximately 0.87 million shares of United Motors traded adding closer to Rs.73.0 million towards weekly turnover.

Distilleries managed to remain under investor focus for yet another week with a trade volume of 0.73 million during the week. Interest on Distilleries led the counter towards generating a contribution of Rs.63.4 million for the week with the bulk of the activity coming on Tuesday. The counter ended the week 2.8% lower at Rs.86.00, while having being traded between a price range of Rs.85.25 and 87.25 per share.

The blue chip JKH saw over 0.56 million of its shares changing hands during the week becoming the 4th largest contributor with a turnover of Rs.57.6 million. However the JKH share price witnessed a 4.2% WoW decline to close at Rs.102.00 per share on Friday after being traded between the prices of Rs.102 and Rs.108.

The overall market turnover which was driven mainly by retail activity remained low during the week dropping by 59.1% to Rs.1.04 billion compared to Rs.2.54 recorded last week, while the average daily turnover amounted to Rs.207.62 million for the week as against Rs.507.44 posted during the week before.

Foreign participation this week declined significantly to 19.1% from 57% recorded last week. Foreign sales this week outpaced total foreign buying resulting in a Rs.92.6 million net foreign outflow for the week.

Total foreign buying for the week stood at Rs.152.1 million, down 90.1% while foreign sales totalled to Rs.244.7 million, declining by 85% compared to last week.

The most actively traded stocks for the week were Sierra, Tess Agro, Vallibel and Seylan Merchant (Non Voting).

Speculative trading likely to continue.

Indices headed south during the week as high cap Dialog lost ground in the back of lower than expected financial performance. However the retail participation improved this week amidst speculative trading, resulting the activity levels to remain modest.

During the week All Share Price Index (ASPI) fell by 34.8 points while Milanka Price Index (MPI) lost 91.4 points compared to last week.

We expect retail investors to stay active in the marketplace as speculative trading likely to exist over the coming week. However considering high risk involved, we advise investors to be cautious and not to chase too aggressively behind these rumour driven counters.

“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.

Nestle Lanka affected by economic downturns

Nestle Lanka Plc declared its April - June (Q2) results on Friday. Whilst turnover increased marginally by 3.8% the profit before tax (PBT) dropped significantly by 21.5% over the corresponding period last year.

Managing Director Stuart Young said, “Nestle Lanka Plc like most other companies is facing the effect of globally high commodity and energy prices compounded by the very high local inflation. In view of the soaring cost of living and reduced consumer spending we have not been able to pass on these cost increases fully to the consumer thereby impeding margins. This is specially the case with milk powders which are under price control.

Though the H1 results are good due to Q1 benefiting from very high opening inventories at much lower rates and some proponed invoicing in March due to implementation of the new ERP system in early April, the Q2 pressures on volumes and margins are expected to continue in Q3 and Q4”.

However, Young expressed confidence in the longer term resilience of the Sri Lankan economy and felt that in the medium term the business environment in the country would once again prove conducive to growth and profitability.