Monday’s gains push ASPI to close high

Indices remained modestly active and growth trend continued even with the end of the speculative poll results. During the week ASPI (All Share Price Index) breached the previous high held on Tuesday. The ASPI ended the week with a gain of 1.93 percent or 70.3 points at 3706.7 points while the MPI (Milanka Price Index) rose by 2.09 percent or 87.4 points to close at 4269.2 points on Friday.

JKH was the highest contributor to the week’s turnover, contributing approximately Rs. 822.7 million; the counter witnessed active trading throughout the week. JKH volumes for the week stood at 4.67 million, improving substantially compared to 3.1 million traded last week.

The counter closed at Rs. 173 per share, with the share price depreciating by 2 percent Week-On-Week.

Apart from the above, Asia Capital and Seylan Bank-non voting (SEYB.X) contributed considerably to the week’s turnover. Asia Capital contribution was approximately Rs. 336 million and SEYB.X was Rs. 271 million to the total turnover, with approximately 33.6 million Asia Capital and 12.2 million SEYB.X shares trading respectively during the week. SEYB.X saw major portion of their volume, being traded on early part of the week while high turnover for Asia Capital towards end of the week. Asia Capital saw its price appreciating moderately by 5.1 percent to close at Rs. 10.25 per share this week, while SEYB.X ended the week at Rs. 22.50 per share up by 12.5 percent Week-On-Week.

Environmental Resources (GREG) gained retail interest this week as well, resulting in 1.8 million of its shares trading for the week with high interest seen on Friday. The counter contributed Rs. 284 million while trading within a wide range of Rs. 137.50 and Rs. 183.00 per share for the week. The share price appreciated by 33.6 percent compared to last week, to close at Rs. 179.00 per share.

Turnover for the week totaled Rs. 7.2 billion, which was an increase of 67.7 percent compared to last week due to heavy retail buying despite Thursday being a holiday. Conversely, average daily turnover for the week increased by 25.8 percent to Rs. 1.8 billion during the week.

Foreign investors remained net sellers for yet another week, standing at a net amount of Rs. 1.15 billion. During the week foreign sales amounted to a total of Rs. 2.1 billion while total foreign purchases for the week stood at Rs. 975 million. Foreign participation remained at 21.45 percent of total activity, compared to last week’s participation level of 22.2 percent. Among the highest traded stocks during the week were Seylan Merchant (Non Voting), Asia Capital, Seylan Merchant (Voting), Seylan Bank (Non Voting) and Nawaloka.

Quarterly earnings looking good

The week ended 05.02.10 saw the ASPI moving 70.3 points (1.93 percent) up.

With the said climb the ASPI has reached a level of 3706.7; the biggest contribution for the climb came from Monday trading (contributing to the tune of 54.98 points up).

For the last two weeks companies have been issuing their quarterly earnings. On a generalist view, many of the companies have shown improved results.

Purely based on the latest earnings results, Acuity advices you to pick stocks taking to consideration both low P/E multiples and the positive ROE above COE.

However, companies that have high P/E multiples, but generate positive ROE above COE, would be “growth stocks”. Thus, though, they would not contribute value, similar to a value stock, that has low P/E multiples, they would posses long term sustainable growth.

Also, its is noted that when analyzing the QoQ EPS of many companies, the latest Dec Quarter earnings have shown material growths, thus, with the economy recovering the said companies should be able to show better earnings compared to the previous quarters.

Hence, companies which currently posses low ROE’s, but in close proximity to the COE levels, should be able to show better results in the future quarters with the earnings levels improving. Thus, striking out stocks which show ROE less, but close to the COE would be unhealthy.

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. ASB has the sole copyright for this report and the information and views contained cannot be reproduced or quoted in part or whole in any form whatsoever without the written permission from ASB.