Sri Lanka Stock Picks

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Monday, February 28, 2011

Union Bank record IPO, SEC moves to boost market – Brokers

The twin developments of the record-breaking IPO of Union Bank of Colombo as well as progressive moves by the Securities and Exchange Commission (SEC) last week are expected to fuel further investor momentum this week, two brokers said.

“With the beginning of a new month, we expect the week ahead to be back on track, reporting strong turnovers and healthy share volumes, hoping our investors to be alert on the Banking sector counters, which are expected to gear up along with Union Bank (breaking record, estimated to be over 225 times oversubscribed),” Asia’s Research Team said. Union Bank’s Rs. 375 million IPO had drawn 30,100 applications worth Rs. 84.3 billion as of Friday after its closure on Thursday.

It noted that last week headwind struck the bourse which was sliding down during the early part, to revive marginally towards the later part wrapping up on a mixed note. Trading witnessed active retail buying, on low to mid caps, whilst a prominent shift of interest from plantations, to a chicken run.

As the fundamentally strong counters currently being reasonably priced, we expect our investors to be prudent on their long term investments, whilst taking a cautious approach, especially on speculative favourites, on short positions.

Acuity Stockbrokers said trading at the Colombo bourse was dominated by retail interest in selected stocks however, on thin volumes with the indices closing on a mixed note.

“We expect the current sentiment and momentum to continue into the week ahead,” Acuity added.
It also said that an estimated 50 IPOs are planned in 2011 with approximately 10 to enter the market before April and the resulting increase in market capitalisation will strengthen the bourse.

“The SEC has also announced plans for a growth focused regulatory framework for 2011, while reducing the 10% share price band restriction from 15 to 10 days and 50% credit issue also being waived. Minimum free float requirements and regulations on private placements prior to IPOs is also expected to strengthen investor confidence,” Acuity pointed out.

Year to date the Colombo Bourse has gained by 16.2% making it Asia’s best performing.

NAMAL gets new Board

PIONEER unit trust manager National Asset Management Ltd. (NAMAL) has got a new Board of Directors following the sale of 70% stake in it by Distilleries Company of Sri Lanka to a consortium involving Union Bank of Colombo and Ennid Capital Ltd., for Rs. 455 million.

The new appointments were approved by the NAMAL Board at its meeting last week.

The new Directors who will represent Union Bank and Ennid Capital are Ajita de Zoysa, Alexis Lovell, Anil Amarasuriya, Jitendrakumar Warnakulasuriya, Yiu Joe Toh, Khoo Siew Bee and Avancka Heart whilst DFCC, which continues to own a 30% stake in NAMAL, will be represented by Nihal Fonseka and Tyronne de Silva with Manohari Gunawardena as Alternate Director to Fonseka.

source - www.ft.lk