Stocks close higher despite month end profit taking

The bourse extended gains from last week with the indices opening higher on Monday, after the country’s request for an IMF stand by facility was granted approval on 24th Friday. However the momentum slowed down as market headed towards the month end with the usual profit taking coming in. Overall the ASPI (All Share Price Index) gained 33.9 points or 1.4 percent to stand at 2525.7 points while the liquid MPI (Milanka Price Index) ended 45.2 points or 1.6 percent higher at 2838.4 points.

Dominating the week’s market turnover was the most favored blue chip counter JKH standing as the highest contributor on Tuesday, Wednesday and Thursday. JKH traded 4.1 million shares during the week, generating a turnover of Rs.572.4 million. The counter switched hands at a highest price of Rs.144.00 and a lowest of Rs.134.00 before closing 2.5 percent lower Week on Week (WoW) at Rs.135.75 per share. The bulk of turnover from JKH came on Tuesday, amounting to Rs.318.9 million.

Telecom counter stock Dialog was the highest traded stock this week, with 38.3 million shares trading for the week. The share price appreciated 14.3 percent WoW, to close at Rs.6.00 per share. Strong interest was witnessed on the counter on Monday and Wednesday while its contribution for the week amounted to Rs.212.4 million. The counter traded within the range of Rs.5.25 per share and Rs.6.50 per share during the week.

Hayleys MGT was on the spot light this week, amid a 6.9 million stake being sold by NDB amounting to Rs.210.0 million. Reportedly the block was bought over by Hayleys, increasing its stake to 55 percent from 41 percent. During the week MGT traded at a lowest price of Rs.38.00 per share, while the highest traded price stood at Rs.39.00 per share.

Meanwhile banking stock Sampath saw 1.3 million of its shares trading for the week contributing Rs.151.6 million towards the weekly market turnover. The counter traded between a wide price range of Rs.113.00 and Rs.125.00 per share, before closing up 11.0 percent higher WoW at Rs.123.25 on Friday.

Turnover for the week amounted to Rs.2.6 billion, which was a 28 percent decline compared to last week’s turnover of Rs.3.6 billion. Average daily turnover for the week stood at Rs.522.2 million.

Foreign participation stood slightly lower at 28.9 percent of total activity this week compared to 31.2 percent posted last week. However, the levels have largely seen improving from 12 percent - 15 percent at the beginning of the year. Foreign purchases for the week amounted to Rs.764.1 million, down by 37.9 percent while foreign sales added up to Rs.744.5 million witnessing a 27.7 percent decline compared to last week.

The highest traded stocks during the week were Dialog, Janashakthi Insurance, Piramal Glass, Hayleys-MGT, Sierra Cables and Lanka Cement.

Point of View

Momentum sustainable; foreigners become net buyers for the first time since the end of war Market got into a flying start on Monday following the approval of long-awaited IMF standby facility, however slowed down as the week progressed amidst usual month end profit taking by investors. Nevertheless, ASPI managed to gain 1.4 percent on a Week-on-Week basis.

2Q corporate earnings we believe would take more investor attention in the weeks ahead and as we mentioned last week, 2Q results are likely to give mixed signals to investors. Thus the volatility in indices would likely trail investor reactions to earnings news of key companies.

However, the overall sentiment we believe will continue to remain strong on post war economic prospects and expectations of higher foreign inflows after the approval of the IMF loan. Foreigners were net sellers in the market during May and June in which period the ASPI gained 32.3%. Net foreign outflow during May and June stood at Rs. 1.9 billion and Rs. 97.6 million respectively.

However, the trend has gradually reversed in July with the market witnessing a net foreign inflow of around Rs. 530.0 million for the month. We believe the IMF loan has alleviated concerns over the country’s BoP and the currency to a larger extent, thus there is potential for the current trend of foreign inflows to steadily strengthen going forward.

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