Colombo’s equity market – A retrospective look

The Colombo bourse commenced 2012 on a dwindling sentiment with a market correction after an exceptional performance in 2009 and 2010 (in which the market gained some 112 per cent and 96 per cent year on year, a TKS Securities report said.

“The high interest rate platform prevailed during the most of 2012 further dampen the overall performance luring most of the retail investor fraternity to low risk fixed income investments. On the back of this gloomy market condition, there were only five new listings during 2012 and corporate profit growth of near 5.3 per cent (without capital gains for the first nine months of 2012),” it said.
 The All Share Index dipped 7.7 per cent during 2012 whilst the total market capitalization stood at Rs 2,167 billion against Rs 2,213.9 billion 2011.

Relaxation of credit rules, positive economic outlook by IMF and ADB and oversubscription of the sovereign bond facilitated the market to gain to some degree, according to the report. The devaluation of the rupee, credit cap imposition (of 18 per cent) and NSB dilemma overshadowed the positive sentiments to drag down the market to negative territory. “� reduction of policy rates (by 25bps) and removal of credit ceiling augurs well for the market to witness a turnaround in 2013,” the report said.

During 2012 the sector indices were in line with the overall market performance except for beverage, food and tobacco sectors outperforming with a price gain of 31per cent year on year by end 2012. However, the other sectors reported a dip with the fundamentals in each sector standing firm during testing times where most of the fundamentals lured the attention of foreign and local investor fraternity, the report said.

The report noted that imposition of credit ceiling on banks and upward revision on policy rates during early part of 2012 saw banking counters taking a setback. “This led the sector to report a dip of nearly 12 per cent in 2012.” It added that a late policy revision by the state during December 2012 augurs well for the sector in the coming year to rebound.

The report said that amidst the booming tourism industry witnessed in the aftermath post war Sri Lanka, the leisure sector continued to attract the cynosure of the investor fraternity but failed to cheer the overall market sentiments where it dipped some nine per cent during the year under review.

“The bearish run in the Colombo bourse led it to an attractive valuation segment where institutional (both local and foreign) and high net-worth investors was seen active on diversified sector (down nearly five per cent in 2012). In the meantime, the upward tax revision on motor vehicles saw the motor sector been hit hard to report a (nearly) 42 per cent dip in the year.”

source - www.sundaytimes.lk