Market rallies on war gains

Colombo bourse extended its gains across the board this week amidst a wave of optimism leading to improved market activity. Military victories together with the Central Bank's rate cut gave a boost to market sentiments increasing the overall trading volume. Indices closed strongly on Friday up for the consecutive third week with the ASPI (All Share Price Index) gaining 119.7 points or 6.9 percent to 1845.0 points while the more sensitive MPI (Milanka Price Index) surged by 146.6 points or 8.0 percent to close at 1971.3 points.

The largest listed conglomerate stock JKH managed to drive the market, becoming the highest contributor and the second highest traded stock during the week. Around 4.4 million JKH shares traded this week, with sizeable quantities trading towards the latter part of the week.

Contribution of JKH towards weekly turnover amounted to Rs.286.2 million. During the week counter traded within a wide price range of between Rs.63.75 and Rs.68.50 per share and closed at Rs.68.00 per share modestly up by 6.3 percent Week on Week (WoW).

NDB saw a notable 2.5 million shares trade this week contributing Rs.230.3 million towards the weekly turnover. The share closed marginally higher at Rs.93.75 per share on Friday, after trading at a high of Rs.95.75 and a low of Rs.92.50 per share during the week. NDB coupled with JKH accounted for 37 percent of total weekly turnover.

The other banking stock to emerge among the top four contributors for the week was the largest listed bank, COMB (Commercial Bank) that contributed Rs.71.6 million towards the weekly turnover. During the week 0.9 million COMB shares changed hands within a wide price range of Rs.80.75 and Rs.93.50 per share and closed at Rs.91.50 on Friday, up by a sizable 12.3 pecent WoW.

Noticeable interest was seen on the hotel sector stocks this week as investors expected a quick finish to the war. AHOT Properties managed a turnover of Rs.53.0 million for the week with its trading volume amounting to 1.8 million shares. The counter hit a lowest price of Rs.29.00 and a highest of Rs.32.00 during the week, before closing at Rs.31.00, up by a notable 8.8 percent compared to last week's closing level.

Turnover this week was significantly higher at Rs.1.4 billion compared to last week's Rs.159.3 million, which was restricted to three trading days.

The positive developments in the war and the economic front provided a healthy boost in activity levels with substantial interest developed on blue chip counters. Average daily turnover stood substantially higher at Rs.279.8 million for the week compared to previous week's Rs.53.1 million.

Both foreign purchases and foreign sales were up substantially during the week with foreign purchases amounting to Rs.138.0 million and foreign sales reaching Rs.586.4 million.

This resulted in a net foreign outflow of Rs.448.4 million and the foreign participation during the week stood at a modest 25.9 percent of total activity. Volume wise the highest traded stocks during the week were Reefcomber, JKH, Seylan Bank (Non Voting) and Tokyo Cement (Non Voting).

Point of View

Market to remain bullish

As expected by us, the indices got a boost during the week in the back of positive developments in the war front and sliding interest rates. Overall the market gained by 6.9 percent during the week compared to last week's closing levels.

The positive trend would continue, as investors are likely to search for bargain hunting opportunities in the marketplace. Furthermore we expect the market to remain sensitive towards the developments in the war front, thus more positive news could further boost the investor sentiment.

Meanwhile interest rates declined further by around 100 basis points this week and we feel further reduction in rates are likely in the short term. Therefore with market fundamentals improving we advise investors to slowly accumulate undervalued stocks with a medium term view.

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