Markets rebounds, ASPI gains

Markets rebounded from last week's downtrend to record a week-on-week gain. The ASPI gained 0.53% to close the week at 5765.94 points, an increase of 30.26 points over last week, while the S&P SL 20 index increased 18.96 points (or 0.58%) to close the week at 3312.53 points.

Nations Trust Bank was the highest contributor to the week’s total turnover value, contributing LKR 1.42bn and accounting for 30.59% of total market turnover. JKH accounted for 15.15% (or LKR 700.84mn) of total turnover value while Sampath Bank trailed with a contribution of LKR 577.24mn (or 12.48%) to the week's market turnover value.

Total market turnover value for the week amounted to LKR 4.63bn, an increase of 38.91% relative to last week's three day cumulative of LKR 3.33bn. The daily average turnover value for the week however, amounted to LKR 925.37mn relative to last week's LKR 1.11bn. Market Capitalization meanwhile gained marginally by 0.30% (or LKR 6.52bn) to LKR 2211.57bn, up from last week's market capitalization of LKR 2205.05bn.

The Banking and Finance sector continued to dominate total market turnover value, accounting for 48.19% (or LKR 2.23bn) of the market, helped primarily by Nations Trust Bank which contributed 63.47% to total sector turnover. The Diversified sector backed by JKH was the second largest contributor to total turnover value accounting for 18.09% (or LKR 837.22mn) of the market.

The Hotels &Travel sector meanwhile recorded a turnover value of LKR 137.23mn, helping account for 2.97% of the week?s total turnover.

The Banking and Finance sector was also the highest contributor in terms of the share volume, accounting for 65.10mn shares (or 57.40%) of the total trades for the week. The Diversified and Manufacturing sectors meanwhile were the second and third largest contributors for the week, exchanging 15.16mn shares (or 13.37%) and 8.89mn shares (or 7.84%) out of total market turnover volume, respectively.

The highest price gainer for the week was Convenience Foods (Lanka) with a W-o-W gain of 31.02% to close at LKR 183.30, relative to last week’s close of LKR 139.90. Union Bank gained 30.00% (W-o-W) to close at LKR 22.10 while Ceylon Leather closed the week at LKR 79.50, up 27.61% relative to last week.

Ceylon Printers was the highest price loser for the week despite just two of its shares trading over the week. The counter closed down 42.07% to close at LKR 811.00 from last week's close of LKR 1399.90. Serendib Engineering Group declined 18.71% over the week to close at LKR 166.00, while PCH Holdings closed at LKR 4.90, representing a W-o-W decline of 16.95%.

Foreigner investors closed the week in a net buying position with daily average net inflows amounting to LKR 0.18bn relative to last week's average net inflows of LKR 0.16bn and representing a 13.35% W-o-W increase. Daily average foreign purchases increased 16.17% (W-o-W) to LKR 0.47bn from LKR 0.40bn recorded last week, while daily average foreign sales increased 17.89% to LKR 0.29bn from LKR 0.24bn recorded last week. In terms of volume, Union Bank and JKH led foreign purchases, while Free Lanka and Tokyo Cement led foreign sales. In terms of value too JKH and Union Bank led foreign purchases, while Tokyo Cement and Brown and Company led foreign sales.

Point of View

Markets staged a late rally this week, with the ASPI closing the week 30.26 points stronger, despite dropping 31.06 points at the start of the week. Renewed buying interest on select stocks, particularly Union Bank, Sampath Bank, and NDB boosted both indices, while improved retail activity on smaller caps was also evident. Average turnover levels however, declined over the week (16.66%) to close at LKR 0.93bn. Foreign activity meanwhile remained positive for 5 consecutive days with daily average net inflows increasing over last week.

Market sentiment should be positive in the week ahead with blue-chips and banking counters continuing to garner interest.

The country's external trade balance narrowed for the 5th consecutive month in January, declining 24.0% Y-o-Y as a 21.3% Y-o-Y decline in imports helped offset an 18.2% decline in exports.

The decline in imports was primarily due to a 58.4% decline in petroleum imports and lower imports of transport equipment, gold and vehicles. Inflows to the services component of the current account also remained robust with tourism earnings growing 20.5% Y-o-Y and workers remittances increasing 10.8% Y-o-Y. Capital flows meanwhile remained strong with net foreign inflows to the CSE amounting to USD 10.4mn (USD 4mn in January 2012) amid a noticeable increase in transaction volumes while net inflows to Treasury bills and bonds amounted to USD 289 mn (cf. USD 170mn in January 2012). Meanwhile, T-bill rates across all maturities were flat for the first time in four weeks, with weighted average yields across the 3-month.