Bourse booms with hope; market’s value up by Rs. 25 b

Speculative play on property sector persists; foreign sell-out continues topping Rs. 9 b mark year to date
The Colombo stock market gained yesterday with hope of regulatory support with regard to extension of broker credit to investors.

The market’s value shot up by Rs. 25 billion yesterday as opposed to a Rs. 11 billion loss on Tuesday. Most analysts said that investor sentiments improved triggering a buying spree in anticipation of a boost to the bourse from a positive response to broker proposals on credit rules from regulator, the SEC, on Wednesday evening.

The ASI rose by 70 points or 1% and MPI by 35 points or 06% whilst turnover was Rs. 2.5 billion.

Recovery in global markets also boosted sentiments and saw improved foreign activity though they were net sellers to the tune of Rs. 210 million, up from Rs. 117 million on Tuesday.

"Renewed buying across the board pushed the indices higher with retail speculative buying on land and property counters driving the day’s activity levels,” John Keells Stock Brokers said.

“The market indices gained its lost ground on the back of increased retail and high net worth participation,” SC Securities said.

“The bourse was resilient,” said Lanka Securities, in the light of overall uncertainties with benchmark indices spurring life during the day with the expectation of favourable news from the SEC meeting. Furthermore property sector rally sustained, displaying notable gains and heavy trading with high turnover on these counters.

“Retail investors continued to be the most active players hitting on low priced counters to report healthy activity levels,” Arrenga Capital said.

“Market was dominated by the property sector counters today while all the sector indices gained apart from Banks, Finance and Insurance sector,” NDB Stockbrokers said. Price appreciations of large cap counters like John Keells Holdings and Bukit Darah helped the indices gain, it added.

Land and Property sector was the main contributor to the market turnover (due to East West Properties, Seylan Developments, Colombo Land & Development and Overseas Realty), and the sector index increased by 3.63%.

East West Properties was the main contributor to the market turnover with a crossing of 926,300 shares at Rs. 38. The share price increased by Rs. 3.40 (9.80%) and closed at Rs. 38.10. Foreign holding of the company decreased by 1,221,900 shares.

Manufacturing sector also contributed significantly to the market turnover (due to Laxapana Batteries) and the sector index increased by 1.76%. The share price of Laxapana Batteries increased by Rs. 2.30 (20.54%) and closed at Rs. 13.80.

Arrenga said property sector counters continued to capture investor attention as they led retailers’ priority list for the day. Following East West Properties’ announcement about their first green field hotel project to build a 150-room star resort in Weligama, the counter continued to be actively traded registering a 119% price gain since 1 August 2011 to close at Rs. 38.1.

Institutions were seen active in Aitken Spence whilst high net worth participation in Commercial Bank led it to register a block of 124.2k shares being transacted at Rs. 236.5. Following Diesel & Motor Engineering’s performance of Rs. 636.4 m (up 320.9% YoY) during 1QFY12), the counter grabbed investor attention.

Furthermore, two crossings totalling to 15 m shares were transacted on Browns Investments today whilst renewed retail play was evident in Laxapana Batteries, which registered a price gain of 20.5%.

Reuters said the bourse rose more than 1% as retail investors bought shares on hopes of a margin trading relaxation, while regional markets’ gains knocked the Colombo Stock Exchange out of its seat as Asia’s best performer.

Sri Lanka’s main share index rose 1.03 per cent or 69.71 points to 6,819.90, the highest close since 1 August. The island nation’s bourse was Asia’s best performer in 2009 and 2010, nearly tripling in value after the end of a civil war, Reuters added.

However, a margin trading phase-out has hurt it this year, giving its first negative on-the-year returns since 2008.

Sri Lanka’s regulator has said it may ease up on the margin trading ban, as brokers have asked, and that has created the expectation of a rebound if it happens. “Even though there is no correlation with global markets, the sentiments of other markets’ performance and on the expectation of a favourable answer on margin trading, retail investors were seen today,” a stockbroker said on condition of anonymity.

On Wednesday, world shares clawed back more ground as investors rattled by a run of heavy losses took comfort from the Federal Reserve’s pledge to keep interest rates near zero for two more years.

The Asia-wide drop in equity markets on Tuesday briefly propelled Sri Lanka’s bourse back into the top Asia spot, but a rebound in Indonesia’s main stock index on Wednesday dropped it to second place, with a 2.77 per cent gain this year.

The rupee ended firmer at 109.66/70 a dollar from Tuesday’s close of 109.77/79 on heavy dollar selling by a bank, dealers said.

source - www.ft.lk