Foreigners toast the Colombo bourse

The market ended the week on a positive note with both indices gaining ground through the week.

The ASPI (All Share Price Index) recorded a week on week increase of 171.2 points i.e. 3.8 percent to close at 4,676.89, while the MPI (Milanka Price Index) appreciated by 221.43 points or 4.35 percent to close at 5,316.22.

Total weekly turnover recorded was Rs 9.58bn a 1 percent dip week on week. Market turnover was driven by the Diversified sector amounting to Rs. 2.4bn or 25.3 percent of the total weekly turnover dominated by investor interest in JKH.

The Banking and Finance sector followed contributing Rs 1.89bn i.e. 19.7 percent of the total weekly turnover. John Keells Holdings was the top contributor to the week’s Turnover amounting to 16.6 percent of the total turnover.

The blue chip stock added over Rs 1.59bn to the week’s turnover with 7.69mn shares being traded to close at 214.75 up 5.8 percent.

Dankotuwa Porcelain (DPL) and Finlays (JFIN) contributed significantly to the turnover amounting to Rs 761.8mn and Rs 561.1mn respectively. 15.27mn shares of DPL changed hands during the week with the stock gaining 40 percent against opening price to close at Rs 52.50.

Another stock which contributed significantly to the turnover was Finlay Colombo as additional lots of 1mn and 2.68mn shares were purchased during the week by ‘James Finlay Ltd. UK thereby increasing its shareholding to 96.4 percent of the issued capital of the company.

Heavily traded stocks were SMB Leasing with a trading volume of 39.99mn shares and Tess Agro recording 32.5mn shares. However, SMB Leasing was among the top 10 losers for the week closing at Rs 1.60 down 5.88 percent from last week. Foreign investors were net buyers this week amounting to a net amount of Rs 1.15bn continuing the previous week’s momentum recording a 21 percent increase in the buying position.

Foreign purchases at Rs 2.3bn showed an increase of 16.55 percent from last week while foreign sales also recorded as increase of 12.36 percent to Rs 1.16bn. Ceylon Printers an DPL were among the top gainers for the week recording a price gain of 61.29 percent and 40 percent respectively to close at Rs 100 and Rs 52.50. Volume wise highest traded stocks this week were, SMB Leasing, Tess Agro, Nawaloka, Piramal Glass and DPL together contributing 38 percent of the week’s trading volumes.

Point of view

The market recovered this week as against the slight dip experienced late last week due to profit taking. We expect the investors to be bullish on the Colombo bourse during the week ahead continuing on the current momentum with investor interest in blue chips and banking sector stocks carrying forward.

The policy rate cut of 25bps also gives an impetus to the capital markets making the Colombo bourse a lucrative investment hub.

Policy rate revision to boost capital markets

The Central Bank lowered the repo and reverse repo rates by 25bps each to 7.25 percent and 9.5 percent respectively early this week. Inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI) has continued to decline, for the fourth consecutive month, reaching 4.8 per cent in June 2010, while annual average inflation reached 3.9 per cent in June.

Given the decline in inflation and the growth in GDP, cutting key policy rates should help in lowering lending costs further and stimulate economic activity. GDP growth in the first quarter of 2010 has been estimated at 7.1 per cent and the economy is expected to expand by around 7 per cent during the year.