The week concluded on a negative note with the All Share
Price Index plunging WoW owing to retail profit taking, whilst crossings drove
the week’s turnover and volume levels. The ASI lost 94.7 points WoW to close at
5,735.6 points (-1.6%), whilst the S&P SL 20 Index lost 50.9 points WoW to
close at 3,223.3 points (-1.6%). Indices lost mainly on the back of the losses
made by Ceylon Tobacco Company (--3.4% WoW), Dialog Axiata (-4.2% WoW), Bukit
Darah (-3.8% WoW), Sampath Bank (-6.2% WoW) and Aitken Spence (-3.6% WoW).
The week prolonged last week’s sluggish momentum with weekly
turnover levels remaining below par. A similar momentum was also witnessed in
most of international stocks. MSCI world index which measures the stock market
performance of developed countries witnessed a WoW dip of circa 1.1%. Most
European stocks stumbled due to the regions weak recovery process from the
recession, while the US official data showed an increase in the country’s
unemployment rate which would have also contributed to the lacklustre momentum.
MSCI frontier market index which measures the stock market performance of
frontier markets also witnessed a marginal dip of circa 0.3% WoW.
Entities continued releasing their December financial
results this week which on average has been below expectations, as most
companies have witnessed a slowdown in their business activities during the
quarter. In addition IMF revised down growth rates for Sri Lanka due to high
inflation risk and lower tax revenue collection, coupled with the impending
hearing at the United Nations Human Rights Council (UNHCR).
During the week, investor focus was centred upon selected
Bank, Finance and Insurance and Diversified counters with each sector
contributing a circa 48% & 30% to the week’s turnover respectively. Hatton
National Bank spearheaded the market contributing circa 30% of the weekly
turnover along with the announcement of an attractive final dividend further
enhancing value of the counter. The share also encountered positive news during
the week where the government obtained the cabinet approval to borrow from
Hatton National Bank to finance two colossal infrastructure projects.
Hence all three investor groups were seen active on the
above high cap banking counter.
Further, John Keells Holdings also continued to gain
investor interest where the counter witnessed several off market deals during
the week. John Keells Holdings made a price gain of 3% WoW to reach a 52 week
high of LKR236.50 on Friday. Commercial Bank of Ceylon also witnessed heavy
investor play during the week where both institutional and retail investors
were active on the counter. In addition, Ceylon Tobacco Corporation, Asiri
Surgical Hospital and Sampath Bank also joined the top turnover calibre during
the week.
Top contributors to the weekly volume consist of Asiri
Surgical Hospital, Hattion National Bank, Seylan Merchant Bank and Dialog
Axiata. The average daily turnover for the week was LKR787.5mn mn whilst the
average daily volume was 108.3mn shares.
Significant foreign investor interest was observed over the
week with foreign purchases amounting to LKR2,664.6 mn,whilst foreign sales
amounted to LKR1,950.7 mn. Market capitalisation stood at LKR2,199.8 bn, and
the YTD performance is 1.6%.
Conclusion
Short term uncertainty results in low investor
activity..
Sentiments at the Colombo Bourse appears to have witnessed
an about-face during the week with both the ASI & S&PSL20 index losing
considerable value and the YTD performance of the ASI
falling below 2%. This has been accompanied by a marked decline in turnover and
volumes for the week compared to the previous weeks. This decline may be a
response to a combination of factors including; weaker than expected quarterly
earnings results, the IMF’s decision to revise down its GDP growth forecasts of
Sri Lanka for 2013E from 6.5% to 6.3% as well as the heightened political risk
arising from the coverage surrounding the outcome of United Nations Human
Rights Council (UNHRC) decision. Further, the recent decision to prevent the
outright sale of private land to non-citizens may not augur well for foreign
activity in the Colombo Bourse. While investors revise down their expectations
to take into account short term weaknesses in the economy, institutional &
foreign interest continues to be sustained in large cap blue chip counters
which are perceived to have high growth prospects. The IMF too concedes that
while short term weaknesses persist with respect to the economy’s fiscal
deficit and BOP position, the economy has achieved sufficient structural
changes to enable it to maintain its current growth trajectory, which the IMF
projects to be the highest for the South Asian region. Hence we expect earnings
of fundamentally sound counters to be consistent in line with these growth
prospects and hence we reiterate that investors should maintain a long term
view of investing to maximise their returns.
Source: Weekly Review by Asia Wealth Management Research
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