Thursday, 28 March 2013

Investor interest shifting toward low risk counters.....

The week concluded with firm interest on blue chips with both indices dipping marginally week on week. The All Share Price Index lost 33.2 points to close at 5,735.7 points (-0.6% WoW), while the S&P SL20 index fell 19.1 points to close at 3,293.6 points (-0.6% WoW). The ASI fell mainly on the back of the losses made by Ceylon Tobacco (-2.1% WoW), Bukit Darah (-2.0% WoW), Sampath Bank (-2.6% WoW), Carsons Cumberbatch (-1.1% WoW) and Peoples Leasing & Finance (- 4.4% WoW).

The dip in both indexes during the week can also be attributed to the shift in investor interest from counters with moderate growth prospects towards fundamentally strong blue chip stocks with higher growth prospects. It is notable that Banking and Diversified sectors have emerged as the key growth drivers of the Colombo bourse marked by foreign as well as local interest on key counters such as John Keels Holdings, Commercial Bank, Hatton National Bank and National Development Bank. The relatively higher interest on fundamentally strong counters by both retail and high net worth participants indicates a general change in the level of risk appetite within the market. This demonstrates a shift of investor interest towards low risk and fundamentally strong growth stocks that may serve the purpose of a safe haven investment at a time where the overall direction of the economy is being reassessed by market forces. We are of the view that these significant changes in market behaviour indicates that the Stock Exchange is maturing in terms of its level of responsiveness to general economic conditions.

Commercial Bank backed by both large scale and retail investors emerged as the main contributor to the turnover during the week adding circa 20% to the total turnover. Further, Sampath Bank, John Keels Holdings and National Development Bank together contributed circa 40% to the weekly turnover demonstrating the major involvement by selected large cap counters in raising turnover levels in the Colombo Bourse.

Meanwhile, Bank, Finance & Insurance sector counters attracted heavy investor interest during the week with sector contributing circa 53% to the weekly turnover. On the other hand, Diversified sector driven by the crossings pertaining to John Keels Holdings chipped in with a 16% contribution to the total weekly turnover. Hence Bank, Finance & Insurance sector and Diversified Sector led the investments spree during the week with a cumulative contribution of circa 70% to the total turnover.

Top contributors to the weekly volume were Asia Siyaka Commodities, Commercial Leasing & Finance, PC House, Commercial Bank and Expo Lanka Holdings .The average daily turnover for the week was LKR 1,110.3 mn up 57.5%WoW whilst the average daily volume was 66.3 mn shares.

Significant foreign investor interest was observed over the week with foreign purchases amounting to LKR 1,204.2 mn, whilst foreign sales amounted to LKR 728.1 mn. Market capitalisation stood at LKR 2,205.1 bn, and the YTD performance is 1.6%.

Institutional and foreign participation keeps the bourse alive, whilst retailers remain in the side line

The short week’s trading activities at the Colombo bourse were primarily on a sluggish mode after witnessing a positive momentum during last week. The bench mark index traded within a very narrow range, to wrap up the week in red. Retailers were largely adopting a “wait and see” approach whilst institutional and foreign participation held up the bourse’s performance. John Keells Holdings continued to be the favourite pick of the foreign investors, whilst country’s leading banks too grabbed the attention of high net worth, institutional and foreign investors.

Even though the market activities were lethargic during the week presumably due to the holiday mood creeping in and the increasing treasury yields, foreign activity continued to dominate the market with a weekly net foreign inflow of LKR476mn. It’s noteworthy to mention that the primary reason behind this is that the Colombo bourse continues to remain as an attractive frontier market whilst selected blue chip companies future prospectus remains promising. Further it is noteworthy to mention that Sri Lankan corporate listed debt market has shown signs of revival following the concessions provided for corporate bond investments through 2013 budget proposals. Several Banking, Finance & Insurance sector giants have already taken advantage of this new development while recently Lion Brewery and Softlogic Holdings have revealed their plans to raise LKR3bn and LKR750mn respectively through debenture issues. This would enable firms to borrow at a rate of interest relatively below the AWLR and more closer to AWFDR depending on the credit rating, allowing firms to realign their attention towards long term investments and hence further optimizing the resource allocation of the corporate sector.


Quote for the day

"When everyone believes something is risky, their unwillingness to buy usually reduces it’s price to the point where it’s not risky at all. Broadly negative opinion can make it the least risky thing since all optimism has been driven out of it’s price." -  Howard Marks

LSL Market Review 28th Mar 2013

On Thursday, profit taking in the wider market and a marked drop on Sampath Bank upon employee’s share options being exercised brought the indices lower. DFCC hit a 52-week high of Rs. 131.50 amidst an overall surge in most banking counters. Banking counters are sought after as investors view them as stable investments with regular dividends.

ASI dipped 9.31 points (0.16%) to close at 5,735.68 and the S&P SL20 index lost 6.30 points (0.19%) to close at 3,293.57. Turnover was Rs. 2,040.4Mn.

Top contributors to turnover were Commercial Bank with Rs. 614.2Mn, Sampath Bank with Rs. 357.6Mn and Asia Siyaka Commodities with Rs. 278.5Mn. Most active counters for the day were Sampath Bank, Nation Lanka Finance and Commercial Bank.

Notable gainers for the day were Infrastructure Development up by 24.4% to close at Rs. 199.00, Dunamis Capital up by 20.0% to close at Rs. 12.00 and SMB Leasing up by 14.3% to close at Rs. 0.80. Notable losers for the day were PCH Holdings down by 10.0% to close at Rs. 5.40, Galadari Hotels down by 6.9% to close at Rs. 12.20 and HNB Assurance down by 6.7% to close at Rs. 47.70.

Cash map for today was 55.14%. Foreign participation was 30.01% of total market turnover whilst net foreign selling was Rs. 33.77Mn.