ASI heading for its high close

Colombo stocks rose today with the ASI heading for its highest close in three weeks, on monetary easing by the CBSL. Earlier previous day, CBSL reduced the policy rates by 25bps while removing the credit ceiling on the banks in the view of fuelling the economic growth in 2013. Taking the cue, the treasuries declined across all the maturities at yesterday's auction with 1-yr rate declining by 41bps to 12.45%.

ASI advanced by 98.86 points (+1.8%) to 5,516.64 recording the highest daily gain since September 14th while MPI and S&P LK20 index gained 97.77 points (+2.0%) and 31.34 points (+1.1%) to close at 5,011.19 and 2,994.55 respectively. The market turnover stood at LKR 480.0mn.

Retail investors showed interest across the board with 225 stocks posting gains out of the 238 traded.

The highest contribution for the turnover came from HNB (LKR 88.1mn), Nestle (LKR 49.6mn) and John Keells Holdings (LKR 44.6mn). The three crossings reported in HNB and Nestle accounted for only 18% of the total turnover. The cash map (exl crossings) advanced to 58% reflecting the upbeat momentum of the local investors.

Central Investments and Finance Co (+16%), Stafford Hotels (+13.5%), HVA foods (+10%) and Laugfs Gas-non-voting (+8%) were among the top performers while heavy interest was seen in Peoples Leasing, Nation Lanka Finance and SMB Leasing-non-voting.

Interestingly foreigners were net sellers today, ending two consecutive days of net buying. Foreign participation accounted for 28% of the total turnover with a net outflow amounting to LKR 31mn.

Colombo bourse trades at a price earnings ratio (PER) of 11.9x, below the MSCI emerging markets PER of 12.6x and MSCI frontier emerging market PER of 13.4x, suggesting more room for price increase. The market RSI has increased to 56, still below the overbought level of 70. The technical indicators point towards the possibility of sustaining the positive momentum seen in the last few days.

Lanka Securities Research