Sunday, December 30, 2012

Prospects for equities positive in 2013 as interest rates fall

ASPI hits 10-week high

The All Share Price Index on the Colombo Stock Exchange hit a ten-week high last week with the ASPI closing at 5,607.13 points on Friday, up 90.64 points from the previous week’s close with brokers saying that the market closed the last trading week for the year "on a relatively positive note."

Acuity Stockbrokers said that although negative sentiment had weighed markets down most of this year, total returns on the broad index have shown a marginal improvement since last year dropping 7.7% against 8.5% in 2011.

Corporate earnings for the trailing 12-months to September 2012 had improved rising 3% since September 2011, the brokerage said, with the market price earnings ratios consequently decreasing.

Foreign inflows in the bourse had remained consistently buoyant throughout the year hitting an all-time high of Rs.38.58 billion year-to-date. This was in stark contrast to the net foreign outflows experienced over the previous three years.

Acuity was hopeful that prospects for equities in 2013 would be strong with interest rates having declined 250 basic points since its peak in September. The brokerage noted that the rates had risen from 8.71% in January to 13.82% in September and is currently at 11.32%.

The report noted that share market prospects looked good particularly in the context that lower GDP growth was likely to push down interest rates.

"Markets are likely to remain fundamental-driven in 2013 as corporate to continue consolidate their post-war boom position," the report said.

While the ASPI was up 90.64 points week-on-week last week, the MPI and S&P SL20 too recorded marginal gains with the MPI up 1.5% and S&P up 1.15%.

Turnover levels were low due to the holiday-shortened week and were driven largely by crossings in JKH, Sampath and Browns Investments which together accounted for approximately 78% of the week’s total turnover, Acuity said.

JKH was the week’s highest turnover generators with Rs.781.01 million representing 61.29% of the total market turnover. Browns Investments contributed 8.48% and Sampath 7.47%.

Foreign investors closed the week as net buyers with inflows of Rs.0.74 billion, down from the previous week’s Rs.1.19 billion. Average daily net inflows amounted to Rs.247.34 million against Rs.238.16 million the previous week.

John Keells Stock Brokers said that the indices had edged higher during the holiday-shortened week with turnover driven by trades on JKH and Browns Investments inclusive of crossings. Foreign interest was mainly on JKH resulting in a net inflow of Rs.742 million for the week, JKSB said.

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