Friday, 17 May 2013

Gains in large cap counters take market to the green

 The week concluded on a positive note with the All Share Price Index gaining WoW owing to gains witnessed across the board. The ASI gained 130.7 points WoW to close at 6,380.7 points (2.1%), whilst the S&P SL 20 Index gained 58.4 points WoW to close at 3,589.3 points (1.7%). Indices gained mainly on the back of the gains made by John Keells holdings (6% WoW), Nestle Lanka (8.1% WoW), Ceylon Tobacco (5.1% WoW), Sri Lanka Telecom (4.4% WoW) and Cargills Ceylon (5.2% WoW).

 Sri Lankan stocks which witnessed a bearish momentum during the beginning of the week saw a revival towards mid week with institutional activity helping the indices to edge up to end the week on a positive note. Heavy retail and institutional activity was witnessed as at the end of the week with strategic transactions dominating turnover levels. Furthermore, the week witnessed the release of 1Q2013 earnings of most of the Banks. Majority of the banks witnessed a decline in their profitability largely owing to the slowdown in loan growth amidst the high market rates and the FOREX losses incurred due to the appreciation of the LKR during the quarter. 

However, despite the unsatisfactory results of the sector, heavy investor play was witnessed in the banking sector during the week presumably because investors expecting an improvement in sector performance going forward with the market interest rates falling down. Re affirming this Banking, Finance and Insurance sector index witnessed a WoW gain of 0.5% while the sector contributed a circa of 33% to the weekly turnover. 

Aitken Spence backed heavy institutional investor play during the week, which assisted the counter to top the list in terms of turnover adding circa 16.5%. John Keells Holdings also emerged among the top turnover list backed primarily by large scale foreign transactions. Counter witnessed a 6.0% WoW gain in its market cap while reaching an all time high of LKR285.00 as at Friday. Due to the high investor play witnessed in the above two counters the diversified index witnessed the highest WoW gain of 3.2% while the sector contributed 35% to the weekly turnover. During the week crossings were also recorded in counters such as Piramal Glass Ceylon, Dialog Axiata, National Development Bank, Commercial Bank and Sampath Bank. On the back of these developments, the week saw an average turnover of LKR1.2bn and an average volume of 42.9mn. 

Furthermore, Piramal Glass Ceylon, Dialog Axiata, PC House , Free Lanka Capital Holdings and Aitken Spence topped the list in terms of volume traded during the week. 

The week saw foreign purchases amounting to LKR3,159.8 mn whilst foreign sales amounted to LKR 1,572.1 mn. Market capitalisation stood at LKR 2,450.2 bn, and the YTD performance is 13.1%.


Conclusion:

Borrowing costs trend downwards whilst foreign interest retained... 
After a hesitant start on account of profit taking, the market continued its upward trend adding 2.1% WoW to its index value. This could be a delayed reaction to the Central bank’s decision to ease policy rates and its monetary policy stance. In response to the policy rate revision, Treasury bill rates in the primary and secondary offers dipped whilst the Central bank kept a tight hold on liquidity to prevent excess borrowings which could spur demand-pull inflation, as inflation currently remains at an elevated level. 

Contemporaneously the LKR strengthened against the USD over the week and according to currency dealers, this could be as a result of commercial banks translating dollar holdings to LKR in order to increase the supply of domestic loanable funds. This development along with a drop in Banks’ average weighted prime Lending rate (AWPLR) subsequent to the policy rate revision suggests that demand for loans could be on the rise. This would have implications for the future earnings of banking sector counters, which could witness growth in their loan books (which witnessed a slowdown in 1Q2013) and result in higher earnings. 

This would explain the continued interest witnessed in banking sector counters which witnessed a slowdown in 1Q2013 earnings primarily due to currency conversion effects and a slowdown in loan growth. This could in turn have a positive trickle-down effect on the rest of the sectors of the economy as the lower interest rate environment could galvanize firms to invest in expansionary activities which could result in value creation for equity holders. This could partly explain the continued foreign interest in the domestic equity market which recorded a high net foreign inflow of LKR1.6 bn for the week.
Source: Asia Wealth Management Research

Quote for the day

"A man should never be ashamed to own that he is wrong, which is but saying in other words that he is wiser today than he was yesterday." -  Alexander Pope (1688-1744)

LSL Weekly Report 17 May 2013


Thursday, 16 May 2013

Quote for the day

"Your goal as an investor should simply be to purchase, at a rational price, a part-interest in an easily understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now... If you aren't willing to own a stock for ten years, don't even think about it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also, will the portfolio's market value."-  Warren Buffett

LSL Market Review 16 May 2013


The stock market rose on Thursday, lifted by stronger-than-expected earnings and low interest rates, hit an 18 month high with a 1.1% percent (65.88 points) increase to 6,287.00. S&P index increased by 0.9% (33.03 points) to 3,531.37.

Market turnover reached Rs.1.9bn, out of which 62% was accounted by crossings.

7.2mn shares of Aitken Spence changed hands among foreign investors at Rs.132.60 per share in two crossings. Moreover, 9.8mn shares of Piramal Glass at Rs.6.90, 5mn shares of Dialog Axiata Rs.9.50 and 0.9mn shares of Commercial Bank at Rs.115.50 changed hands in off-the-floor deals.

Top contributors to the turnover were Aitken Spence (Rs.1.0bn), Commercial Bank (Rs.153mn) and Piramal Glass (Rs.76mn). Retail activity was seen in counters such as Janashakthi Insurance, Regnis Lanka and Overseas Realty. Janashakthi Insurance (Rs.14.10,+12.8%) and Overseas Realty (Rs.17.00,+6%) reached 52 week high on better-than-expected earnings. JINS quarter profits increased by almost 7 times compared to the same quarter last year.

Cash map for today was 55%.

Foreigners were net buyers with an inflow of Rs.85mn. Foreign participation accounted for 66% of the turnover. Net inflow was seen counter such as Piramal Glass, Dialog and John Keells while outflows were recorded in Commerical Bank and Environmental Resources.

Wednesday, 15 May 2013

Quote for the day

"The turn of the cycle has created some tough choices. Warren Buffett has said, ‘You don't know who is swimming naked until the tide goes out.’ "  -  David Einhorn

LSL Market Review 15th May 2013


Market ended with mixed results today. Most of the banking sector counters excluding Hatton National Bank and Seylan Bank witnessed drop in prices such as Commercial Bank by LKR 1.10, Sampath Bank by LKR 2.00, and National Development Bank by LKR 4.10. Investor interest were gathered around Motor sector stocks such as motor sector counters such as Colonial Motors (up by LKR 9.90), United Motors (up by LKR 5.40) and Diesel & Motor Engineering (up by LKR 4.60).

ASI advanced by 14.53 index points to close at 6,221.12 while S&P SL 20 Index dropped by 2.16 points to close at 3,498.34.

Total market turnover was LKR 1.7bn. Top contributors to the turnover were John Keells Holdings by LKR 443.4mn, National Development Bank by LKR 379.4mn and United Motors by LKR 123.8mn. In terms of sectors Bank Finance Insurance, Diversified Holdings and Motors sectors emerged as notable contributors to the daily turnover. Several crossings were made by top three contributors to the turnover aw well by Cargills Ceylon and Sampath Bank. Aggregated value of the crossings accounted for 54% of the market turnover.

Further, apart from the motor sector stocks Regnis Lanka, PC House and Piramal Glass were among the mostly traded stocks during the day. Foreign participation accounted for 39% of the total market activity. At the end of the day foreign investors were net buyers with a net foreign inflow of LKR 859.9mn. Cash map closed at 54.7%.