Friday, April 20, 2012

Band lifted, Bourse booms

The Colombo stock market yesterday produced a late rally following the removal of the 10% price band by the Securities and Exchange Commission (SEC).

 The market’s value swelled by Rs. 41 billion whilst main All Share Index gained by 2% or 111 points as sentiments of investors and brokers got a boost following the regulatory action for the better.

Marking the end of what had been a thorn in the eye of the market for one and half years, the SEC said its Commissioners at their meeting on Wednesday decided in favour of the lifting of the five-market-day 10% price band on certain securities based on an agreed formula which takes into account volatility and volumes, with immediate effect.

 Despite the removal the SEC said it will continue to monitor the behaviour of the market and the price band may be re-imposed in future if the situation so warrants. Most brokers made it a point to welcome the removal of the price band in addition to linking it to the market’s revival yesterday whilst some cautioned investors from being carried away.

 DNH Financial said “In a welcome move, the ASPI changed course rising by 2.1% to close the session at 5519 as the 10% price ceiling on stocks was lifted.”

 “The Colombo Bourse received a boost on the news of the lifting of the price band rule by the SEC,” added Arrenga Capital whilst Asia Wealth Management chipped in saying, “Activities at the bourse showed a positive turnabout with the SEC’s decision to direct the Colombo Stock Exchange to lift the 10% price band with immediate effect.” Lanka Securities also said Colombo bourse recovered strongly with the price appreciations in index heavy high dividend payers and due to the lifting of 10% price band regulation.

 The 2% gain yesterday brought the year to date negative return back to below double digit levels.
 Some analysts viewed the removal of price band as “too late” since the market had got a prolonged beating.

 The true test of investor reaction can only be measured if the Bourse remains positive today as well.
 The surge in the ASPI yesterday was the largest gain since 17 February. The rise in the more liquid Milanka, however, was a modest 32 points to close at 4,939.

 Turnover yesterday was Rs. 359 million driven by active play on blue chips as well as speculative stocks.

 Trading in John Keells Holdings, Commercial Bank and Hatton National Bank(X) accounted for 40% of the day’s turnover. JKH saw trading worth Rs. 61.6 million followed by Commercial Bank (Rs. 56.1m), Hatton National Bank – non voting (Rs. 12.6m) and Commercial Bank non-voting (Rs. 12.0m). Both Commercial and HNB closed up by Rs. 4.10 and Rs. 5 respectively whilst JKH dipped.

 DNH said gainers modestly outpaced losers with SMB Leasing (X), Ceylon Tea Brokers and Nation Lanka Finance (W0021) rising by 25.0%, 18.4% and 16.7% offsetting losses in Bimputh Lanka , Samson International and Shalimar which declined by 25.1%, 12.2% and 11.3% respectively.

“Even though the low volumes were recorded, strong price appreciations in high dividend payers such as Ceylon Tobacco (by Rs. 93.50) and Nestle Lanka (by Rs. 30.00) contributed positively to the market performances,” Lanka Securities said.

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