Sri Lanka Stock Picks

Sri Lanka stock picks site has been developed to give first hand information with regard to share trading opportunities available for investors who do not like go through lengthy research reports, calculations,etc but to have a clear idea about stocks that have future up side potential.Our service is just not for day traders but for the investors who wish to see their money growing in the long run.Our main objective is to provide information relating to trading under one roof.

Monday, March 19, 2012

Colombo worst hit exchange among frontier markets

* Huge JKH deal gives EPF Rs. 800mn capital gain, but only time will tell whether the exchange would recover

The Colombo Stock Exchange is the worst hit among frontier markets and only time will tell whether or not the huge Rs. 14.5 billion trade last Friday involving the sale of JKH shares held by the EPF to a Malaysian government controlled fund, Khazanah, would uplift sentiments as the high of cost credit hold back speculators.

Central Bank Governor Ajith Nivard Cabraal told The Sunday Island that the capital gain from the transaction was around Rs. 800 million.

"As retails go into hibernation, the institutional market has to become very active this year. On Friday the 16th the Malaysian Sovereign wealth fund made a massive purchase of JKH showing confidence in the Sri Lankan economy. The foreign interest being generated this year is a positive sign for the larger economy; however we are yet to see this positive move flow into the speculators who are most likely being held back by the higher cost of credit," Bartleet Religare Securities (BRS) said.

"The Colombo Stock Exchange has lost 10% YTD. It has lost 19% YTD when taking the currency into consideration which has depreciated to 125 to date from 114 this year against the USD. This puts CSE amongst the worst hit exchanges in the frontier markets group. Other markets such as Vietnam and Pakistan have gained 24% and 18 % YTD respectively along with other global indices which seems to be more correlated with global affairs. This makes Sri Lanka an interesting opportunity for global value investors who seek alpha. According to Bloomberg the Sri Lankan markets is now trading at 11.50 which is in aligned with the SP Asia 50 index which is currently trading at a multiple of 11.13.

Other markets are trading at much higher multiples.

"The ASPI has been trading in a range of 5,000 and 5,650. Since the downfall of the market in February 2011 we are yet to experience a solid bear market rally. The market has made a temporary bottom at 5,000 for now and a bear market rally at these present levels could be in the cards. This would take the index towards 6,200. On the downside however if we continue to see selling pressure we are likely to break 5,000 and head towards 4,400 the market’s 200 weekly moving average. We are correctly going through a period of consolidation and the market is yet to decide which way it wants to go," BRS said.

source - www.island.lk