Monday, August 1, 2011

No doom but was it a real Bull last week?

A whopping Rs. 130 billion increase in market’s value during the last three days of the week proved too much to believe but improved investor sentiments are being welcomed by all in the Bourse.

The CSE after falling sharply in the first two days of the week bounced back the next three days propelling the market capitalisation by Rs. 130 billion. Overall the week saw the ASPI jumping 308.1 points and the MPI by 180.3 points.

“We see confidence regaining within investors,” Asia Wealth Management said adding “the question is how sustainable the confidence and the ‘bull run’ would be.”

“However, an encouraging point is that fundamentally strong stocks moved-up in price during the recent Bull run,” Asia added.

Noting that investors need to be more focused on the fundamentally strong counters, Asia said “From a fundamental perspective there is no reason for the market to show bearish elements. If it’s the settlement period which is hampering the market, then everybody should be trading at their capacity.” It said macro fundamentals of the economy are sound; the earnings expectations of the market is healthy; market currently trades at a trailing PE of 17.9x; hence with a market earnings expectation of a minimum of 40% the market trades at forward PE of circa 12.9x. “In light of the above we do not see any reason for a dooms-day market,” Asia Wealth Management said.

Acuity Stockbrokers said that the market last week was mainly driven by retail investor interest in blue chips and mid-caps with sound corporate earnings reported so far boosting investor confidence.

“Sri Lanka’s sovereign ratings have been upgraded by both Fitch Ratings and Moody’s recently, while the USD 1bn bond has attracted investor interest being oversubscribed seven times indicating investor confidence in Sri Lanka’s macro-economic outlook. This confidence should be reflected in the Equity Markets in future and we expect the market to sustain its trend during the week ahead,” Acuity added.

Other analysts viewed the sharp rise in the latter part of the week as less credible though others took strength from the fact that blue chips were gaining better respect from investors.

source - www.ft.lk

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