Amidst heavy retail activity:

Stocks extend gains

Positive trend continued in the market this week with indices showing encouraging gains fueled largely by heavy retail trading on mid and low value stocks. The ASPI (All Share Price Index) closed the week at 2630.8 points on Friday up by a modest 29.3 points or 1.1 percent compared to last week, while the MPI (Milanka Price Index) showed a similar movement, rising by 19.1 points or 0.6 percent to 2983.6 points.

Merchant Bank (MBSL) attracted heavy investor interest this week on rumours of a possible takeover by the company or a merger with the Ceylinco Group Company, The Finance. 9.6 million MBSL shares were seen traded for the week, adding up the largest portion of contribution to the weekly turnover. The Counter showed a significant 47.3 percent appreciation Week on Week to close at Rs.27.25 per share on Friday, emerging as the third highest gainer for the week. During the week MBSL traded between a wide range of Rs.18.25 and Rs.30.50 per share.

Continuing to remain among the top contributors the blue chip JKH posted a turnover of Rs.199.4 million while trading 1.5 million of its shares during the week. JKH closed the week unchanged from last week at Rs.135.50 on Friday, having fluctuated between a narrow price range of Rs.135.00 and Rs. 136.50 per share during the week.

The rumoured takeover/merger by MBSL led The Finance (TFC) to rank among the top three contributors for the week witnessing a notable 28.8 percent improvement in its share price to close the week at Rs.28.75 per share. During the week 7.0 million of TFC shares switched hands contributing Rs. 195.1 million towards weekly turnover. The counter during the week traded within a broad price band of Rs. 23.50 and Rs. 31.75 per share.

Meanwhile, Seylan Bank (Non Voting) saw its price rising by a noteworthy 32.4 percent for the week amid heavy retail interest particularly towards latter part of the week.

The counter saw a volume of 14.1 million shares changing hands, becoming the highest traded stock for the week. It contributed Rs. 169.5 million to the week’s turnover before closing at Rs. 12.25 per share.

Activity levels were largely dominated by retail investors this week, with interest mostly skewed towards rumour-driven mid and small cap stocks. Total turnover although dipped 11.4 percent during the holiday shortened four-day week amounting to Rs. 3.1 billion, the average daily turnover for the week witnessed a noteworthy 10.7 percent improvement compared to last week to record at Rs. 768.6 million.

Foreign participation for the week fell to 14.5 percent of all activity compared to 33.1 percent posted last week. Foreign purchases added up to Rs. 446.7 million and the foreign sales totaled to Rs. 444.5 million during the week, recording a marginal foreign inflow of Rs. 2.2 million.

Amongst the heavily traded stocks volume wise this week were, Seylan Bank (Non Voting), Nawaloka, Blue Diamond (Non Voting), Merchant Bank and Vallibel.

Point of View

Market to hold strength amidst high investor confidence

The market as we expected remained in the positive territory with the ASPI gaining 1.1 percent during the week.

However, investor interest was highly skewed towards rumour-driven mid and small cap stocks with activity levels improving notably on the back of heavy retail trading.

We expect the market to hold strength backed by the prevailing bullishness over the economic and long-term earnings outlook.

While profit taking may come at regular price intervals on rumour-driven stocks due to aggressive retail trading, the overall trend of the market we believe would be positive.

Any dip of fundamentally sound stocks in our opinion is unlikely to last long, as bargain hunters would exploit these opportunities.

Meanwhile, the market did not react to the news on uncertainly over the GSP+ scheme in any major way, showing the relative strength of other key positive economic news such as the influx of foreign funds, stability on the external front, decline in inflation and falling lending rates.

Such improvements in key economic variables we believe would facilitate a steady rebound of GDP growth in the second half. Thus we continue to advise investors to take positions in fundamentally sound stocks in key growth sectors.

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.

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