Sunday, April 29, 2012

Colombo bourse sluggish for too long

Stockmarket Review

By Elton Ebert

The stock market has been mired under a cloud of depression for far too long a period. This is creating problems all round, for the stock brokerages, reduced income for the margin providers, and loss of revenue to the state. Paradoxically it is the retail segment who are the winners! Most of them suffered losses through forced selling earler, but since they do not invest now, they don’t lose.

There are some who were lured by the high priced IPOs but since they do not have funds they do not invest in IPOs now and therefore suffer no loss due to the IPOs trading below their issue price.

There are some retail players who have saved some money by not investing recently and could now invest their savings in fixed income securities earning good rates.

Moderate interest was evident in JKH, Commercial Bank and HNB while Keells Hotels came in for extra demand when almost four million shares were transacted. Nestle in which a massive final dividend is accruing until June 4 reached Rs.1249.80 but closed at Rs1170 on Friday. Swarnamahal Financial Services, Panasian Power and Textured Jersey were in the active slot. Shares in the plantations sector were unchanged but some prices at the auctions were interesting. However the situation in the Middle East creates an air of uncertainty which affects the prices here.

Mackwoods Energy which recently issued 25 million shares at Rs.14 through an IPO commenced trading on the Diri Savi Board on Wednesday, quickly falling into the casualty list. A mere 725,267 shares were transacted on Wednesday, closing at Rs.14.20,and continued to lose favour. It ended for the week at Rs,13.80, after dipping to Rs 13 earlier. Meanwhile Access Engineering was the other casualty closing at Rs 21.50.

There are reports that a few companies who were scheduled to come out with their IPOs are now in the process of reducing their issue prices while the others have put on hold their proposed IPOs expecting improved market sentiment. Echoing this sentiment a veteran player in the market said that if any new IPOs are to find favour with the investors it should be a company with a good track of earning good profits and at a sensible price. Further retail players say that they will not get trapped by grandiose advertising unlike earlier.

The fact that JKH and Central Finance have requested further time from the Central Bank to reduce their stake in Nations Trust Bank PLC (NTB) has drawn the curiosity of many investors. A few shareholders in NTB seem to think the bank may reduce these holdings after a share split is made.

Another investor who collects only bank shares has got information that a group from the Middle East who was interested in these blocks backed off when the Colombo market slipped into reverse gear.

LOLC states that they have issued 7-year going concern, loss absorbent unsecured Subordinated unlisted debentures to Saakya Capital (Pvt) Ltd as follows; Rs.2 billion on February 23 and Rs 1 billion on February 27, 2012, who are now the sole debenture holders.

Changes in directorates: Citrus Leisure, Kalpitiya Beach Resorts Ltd & Waskaduwa Beach Resorts Ltd -- Raynor Silva resigned as a director effective April 16 from all these companies.

Turnover for the week of Rs.2 billion was just a shade better than last week when the figure was Rs. 1.8 billion.

The All Share Price Index was 53.60 points or 1% higher than last week closing at 5429.59. while the Milanka ended 71.46 points or 1.10% lower than last week at 4853.53.

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