On renewed optimism:

Stocks surge

Stocks witnessed a solid week with gains accelerating towards the latter part of the week supported by signs of improving institutional participation and the upgrading of country’s sovereign rating outlook by S & P.

Comparing Week on Week (WoW) the ASPI (All Share Price Index) gained by a notable 78.6 points or 3.1 percent, to close at 2601.5 points, while the MPI (Milanka Price Index) increased by 113.5 points or 4.0 percent to close the week at 2964.5 points.

Institutional investor appetite was largely drawn towards the bluechip counters with heavy trading witnessed on counters such as JKH and Commercial Bank (COMB). High interest was also seen on Colombo Dockyard (DOCK). Nonetheless, JKH remained the highest contributor towards turnover for the second consecutive week, with the counter contributing Rs.844.5 million or 24.3 percent towards total turnover.

Approximately 6.2 million shares of JKH traded this week while the share price showed a 1.1 percent increase from last week, closing the week at Rs.135.50 per share. During the week the stock traded between the range of Rs.134.00 and Rs.136.75 per share.

Meanwhile DOCK and COMB injected Rs.144.6 million and Rs.138.00 million respectively towards this week’s turnover with both counters gaining ground from last week’s closing levels. DOCK closed the week 5.8 percent up at Rs.127.00 while COMB observed a gain of 2.9 percent to close the week at 150.00 per share.

Investors were upbeat on leisure sector counters this week, with 5 of the top 10 gainers being hotel shares. Serendib Hotels, Tangerine, Miramar, Hotel Services, Reefcomber and Taj Lanka rose WoW by a notable 31.3 percent, 30.0 percent, 22.5 percent, 20.6 percent, 20.0 percent and 18.0 percent respectively with counters closing the week at Rs.66.00, Rs.72.50, Rs.61.25, Rs.20.00, Rs.1.80 and Rs.23.00 per share. Among the hotel sector counters Hotel Services managed to contribute Rs.171.3 million to the week’s turnover becoming the week’s second largest contributor while trading a total of 8.7 million shares during the week.

Total turnover this week amounted to a sizeable Rs.3.5 billion, with Thursday’s turnover surpassing Rs.1.0 billion, while average daily turnover stood at Rs.694.3 million showing a WoW increase of 83.7 percent.

Foreign participation for the week was relatively high at 33.1 percent of all activity compared to 28.5 percent posted last week. Foreign purchases added up to Rs.1.1 billion and the foreign sales totaled to Rs.1.2 billion during the week. However foreigners were net sellers for the week amounting to Rs.126.2 million. Hotel Services, Reefcomber, Vallibel, Nawaloka, JKH and Dialog were among the most actively traded stocks during the week.

Point of View

Positive trend to continue

Market posted strong gains towards the latter part of the week as investors aggressively took positions in blue-chips and hotel sector shares, showing renewed optimism over economic and stock market outlook. Week-on-Week (WoW) ASPI gained 3.1 percent, while the MPI rose 4.0 percent with a notable improvement in trading volumes.

We expect the overall market trend to be positive for yet another week with healthy activity levels. Signs of improved institutional participation in the market and renewed hopes over foreign inflows following the upgraded outlook of the sovereign rating would act as the key factors affecting market sentiment.

Thus we continue to advise investors to take positions in liquid counters with strong fundamentals. Meanwhile, the interest on hotel sector is likely to continue over the coming week as well with aggressive retail activity taking place with the start of the new month. However, we do not rule out the possibility of occasional profit taking by retailers, thus we advise the investors to be alert of potential trading opportunities.

The information contained herein has been compiled from sources that Acuity Stockbrokers (Private) Limited (ASB) believes to be true and reliable but we do not hold ourselves responsible for its completeness or accuracy.

No matter published herein create any liability of any kind on ASB. All opinions, views, findings and conclusions included in this report constitute ASB’s judgment of this date and are subject to change without notice.

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