Monday, July 25, 2011

Continued liquidity crunch affects bourse with dull week

Both indices reached the lowest levels for 2011 at the close of trading on Friday, with the ASPI losing 239.78 points to close at 6,537.25 and the MPI losing 281.38 points to close at 6,029.75. The ASPI decreased by 3.54 percent and the MPI decreased by 4.46 percent, while overall activity levels have also recorded a week on week decline.

The weekly turnover value recorded a 35.56 per cent decrease to Rs 6.75Bn, amounting to a daily average value of Rs 1.35Bn, when compared with last week’s daily average turnover of Rs 2.10Bn. Blue chip JKH and new entrants Softlogic and ExpoLanka accounted for 20.71 per cent of the week’s total turnover value.

The number of shares traded decreased by 39.53 percent, averaging 58.67Mn shares traded daily as against 97.03Mn traded last week.

The Diversified sector led the turnover in value this week, accounting for 30.45 per cent of turnover in value amounting to Rs 2.06Bn.

The Banking & Finance sector was the second highest contributor to turnover, accounting for 24.02 per cent amounting to 1.62Bn. Third highest on the turnover value list was the Manufacturing sector with 9.93 per cent or Rs 0.67 Bn.

Volume of turnover for the week was dominated by the Banking and Finance sector with 85.03Mn shares being traded or 28.98 per cent of volume of turnover.

The Diversified sector followed, representing 25.29 per cent of total turnover volume (74.20Mn shares traded).

Third highest contributor to turnover volume was the Manufacturing sector, which accounted for 11.66 Per cent or 34.21Mn shares. Market Capitalization as at today’s close i.e. Rs 2319.92Bn, recorded a loss of Rs 84.9Bn in value or 3.5 per cent as against last week?s close. Paragon was the major price gainer (60.1 percent) this week, closing at Rs 2690.0 from last week’s closing price of Rs 1680.0.

Hotel Sigiriya was the second largest price gainer, recording a 26.1 per cent increase to close at Rs 77.2 (from Rs 61.2). Bimputh Lanka gained 24.7 per cent from its previous price of Rs 65.7 to close at Rs 81.9.

Confifi Hotel was the major price loser over the week, declining 27.5 per cent to close at Rs 194.3. O’nally and AMF Co. were also major losers with O’nally decreasing 23.5 per cent to Rs 97.5 and AMF Co declining 20.3 Per cent to close at Rs 574.5.

Swarnamahal Finance and Eastern Merchant declined 19.7 per cent and 18.2 per cent respectively.

Foreign participation, fell drastically over this week, with a net selling position amounting to Rs 571.21Mn, relative to last week?s net buying position of Rs 165.47Mn.

Expolanka topped the volume list recording 24.83Mn shares changing hands representing 8.46 per cent of the aggregate share volume. Panasian Power contributed 7.98 per cent of aggregate share volume with 23.40Mn shares changing hands.

Point of view

The downward trend persisted throughout the week?s trading amidst a continued liquidity crunch. Both indices closed on a negative note with the year to date return of the Colombo bourse recording a negative 1.5 per cent at Friday’s closing level of 6537.25. The market has declined 16.3 per cent from its peak of 7811.82 in February 2011 relative to the rally in 2010 which saw the market peak at 7147.77 and record a dip of 12.5 per cent to bottom out at 6257.01 in less than two months.

Valuations on fundamentally sound stocks with earnings potential offer attractive investment opportunities at the current price levels, however the immediate direction of the market remains volatile.

Corporate earnings for the June quarter are expected to flow in next week which will present attractive valuations at current levels, which should give some impetus to investor sentiment and market momentum.
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