Indices sink deeper as concerns mount

Market yet again witnessed sharp falls during the week to close significantly lower WoW amid continuing downfall in global equity markets on growing concerns of a global economic downturn.

The ASPI fell 6.4% WoW to its lowest close since February 2005 while the MPI lost 6% to reach its lowest level since April 2004. Overall, at week’s close the ASPI fell 114.1 points to 1669.9 points while the MPI closed down 118.9 points to stand at 1870.3.

The blue chip JKH dominated the week’s market activity aided by few big transactions, which took place on Monday and Thursday. However despite recording the week’s largest turnover of Rs.204.6 million, representing 33% of the total weekly turnover the share price slipped by a marginal 0.8% WoW to close at Rs.64.25 per share. During the week 3.1 million JKH shares traded within a price range of Rs.64.25 and Rs.67.75 per share.

Renewed investor interest put Chevron among top contributors during the week with a total turnover of Rs.36.6 million towards the weekly turnover. During the week a total of 0.4 million Chevron shares were traded, within a price band of Rs.96 and Rs.97.50 per share. The stock witnessed a 0.26% price decline over the week’s trading to close at Rs.97.00 per share.

The other counter to record a high turnover for the week was Nestle with a value of Rs.26.7 million. Nestle saw nearly 0.1 million shares trading during the week with the share price in the range of Rs.275 & Rs.285 per share. Nestle share price edged down by a notable 5.2% for the week to close at Rs.275.

Mobile giant Dialog saw its share price falling 3.7% during the week to close at Rs.6.50 per share. Counter with Rs.18.5 million turnover was ranked 4th in terms of total activity and witnessed 2.7 million shares changing hands at a lowest price of Rs.6.25 and a highest of Rs.7.00 per share.

Total market turnover during the week amounted to Rs.618.3 million, showing a 34.2% decline over last week’s Rs.940 million. The week’s average daily turnover showed a greater drop of 47.4% to stand at Rs.123.7 million compared to last week’s Rs.235 million.

Foreign sales were heavier during the week resulting in a net foreign outflow of Rs.21.2 million. Foreign purchases for the week stood at Rs.66.3 million down significantly by 83% while foreign sales amounted to Rs.87.5 million, showing a WoW dip of 28%.

Foreign investors were less active during the week with their participation amounting to 12.4% for the week as against 27% recorded last week.

Volume wise the most heavily traded stocks during the week were Vallibel, JKH, Dialog and Seylan Bank (Non Voting).

Point of view

Negative trend

unlikely to reverse

Losses mounted as indices fell to levels that were last seen during early 2005. Activity levels also plummeted with market players opting to stay on the sidelines. During the week market fell by 6.4% compared to last week’s closing levels.

We do not expect a change in the sentiment in the coming week, thus the negative trend is likely to continue on thin volumes. Meanwhile we saw global/regional markets falling steeply with deepening recession woes this week and it seems like markets around the world are still far from reaching a bottom.

Therefore we feel the movements in other markets would significantly impact the sentiment of the Colombo bourse as we saw over the past few months.

In addition the negative factors such as high interest rates and slowing corporate earnings in our opinion would continue to hurt the market momentum thus we strictly advise investors to remain cautious in the short term.

(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.)