Bourse gains sharply

Stock Market Review for the Week Ended 10th May 2013:

The bourse had a good week with the All Share Price Index gaining a sharp 3.94 percent and the S&P SL20 gaining 3.67 percent.

Year-to-date, the bourse closed last week 10.76 higher while the S&P SL20 did better at 14.44 percent.

A net foreign inflow of Rs. 663.97 was reported during the week, taking up the total net inflow to Rs. 9,597.86 million.

Markets opened on Monday displaying a bullish sentiment with the change in ownership of Lanka Ceramics was the highlight of the day. The share gained a 50% as the capital gain of the selling party, CT Holdings amounts to c.Rs. 2.0bn. Royal Ceramic was the buying party to the transaction (76.1% stake of the Lanka Ceramic). On the back of that move, the market closed on a positive territory with a turnover of Rs 4.1 Bn. ASI gained 107.99 points (1.80%) to close at 6,121.17 and the more liquid S&P SL20 index gained 55.13 points (1.62%) to close at 3,461.12. Top contributors to turnover were Lanka Ceramic with Rs. 3.2Bn, Royal Ceramics 65.2Mn and John Keells Holdings with Rs. 42.5Mn.

Most active counters for the day were Vallibel One, nation Lanka Finance and Lanka Ceramics. Further, blue-chip such as Nestle, John Keells, Dialog Axiata, Chevron Lubricants and National Development Bank reached 52week high prices on Monday aiding the positive performance for the day. Foreign participation accounted for 3% of the total market turnover as net buyers; with a total net foreign inflow of LKR 28.2mn.

Shares closed at their highest in almost 18 months on Tuesday primarily led by blue-chip counters as a result of heavy foreign buying as well as due to strong anticipation of a rate cut by the Central Bank’s policy meeting this week. The Bourse closed surpassing 6,200 levels as 20 stocks reached 52 week high prices including high-cap Aitken Spence up by LKR 7.80, Chevron Lubricants up by LKR 2.90, Nestle up by LKR 4.90, John Keells Holdings up by LKR 4.60, DFCC Bank up by LKR 6.50 and National Development Bank up by LKR 5.00. On this backdrop, the ASI gained 80.51 index points (1.32%) to close at 6,201.68 and S&P SL 20 Index advanced by 50.83 index points (1.47%) to close at 3,511.95. Top contributors to the turnover were Vallibel One with LKR 127.0mn, Seylan Bank non-voting with LKR 100.0mn and Commercial Bank with LKR 99.9mn. Daily market turnover was at LKR 1.4bn as foreign participation for the day amounted to 14.3% of the total market activity. A net foreign inflow of LKR 248.8mn was recorded for the day extending the net foreign inflow for this year to Rs 9.21 Bn.

On Wednesday, the market maintained its positive momentum with retail counters rallying around blue-chips to secure positivity. The main index ASI gained 8.42 points (0.14%) to close at 6,210.10 and the S&P SL20 index gained 9.35 points (0.27%) to close at 3,521.30 while a turnover of Rs. 1,465.4Mn was recorded for the day. Crossings took place in Commercial Bank, boosting the turnover while the share price closed at LKR 118.70 gaining 0.17%. Bank Finance and Insurance sector contributed mostly to the market turnover while the sector index was up by 0.37%. Consequently, top contributors to turnover were Commercial Bank with Rs. 371.6Mn, Vallibel One with Rs. 114.0Mn and John Keells Holdings with Rs. 105.1Mn while the most active counters for the day were Vallibel One, Pan Asia Bank and Capital Alliance Finance.  Foreign investors reversed their sentiment by being net sellers on Wednesday, while the net foreign outflows amounted to LKR 93 Mn.

Shares gained for the sixth straight session on Thursday to hit a new 18 month high backed by strong performance in the banking sector in anticipation of a rate cut. The ASI gained 28.61 points (+0.5%) to close at 18 month high of 6,238.71. S&P SL 20 index closed at 3,526.51 with gain of 5.21 points (+0.2%). Investor anticipation over a policy rate rate reduction drove the activity levels across the board and the market turnover reached Rs. 2.1bn. Crossings were witnessed on several counters, namely Commercial Bank, HNB, NDB and Distilleries while strong retail activity was taking place in Touchwood, NTB and Capital Alliance Finance. Commercial Bank foreign stake was reduced by 2,677,198 shares while the share price closed at LKR 118.50. Accordingly, Bank, Finance and Insurance sector contributed mostly to the market turnover while the sector index rose by 1.16%.

Foreign participation accounted for 26% of the market activity as foreigners were net buyers with a net foreign inflow of Rs.194.1mn.

On a decisive move, the Central Bank of Sri Lanka cut policy rates by 50bps on Friday as anticipated by investors throughout the week. On this backdrop, the main share ASI index gained 11.29 points (+0.18%) to close at 6,250 points while the more liquid S & P SL index gained 4.39 points (+0.12%) to close at 3,530.90 points. This positive investor sentiment drove the main ASI index up more than 225 points this week. Turnover for the day was at Rs 1.472 Bn as several crossings were recorded on Commercial Bank, Distilleries and The Lion Brewery Ceylon. Beverage, Food and Tobacco sector contributed mostly to the market turnover posting a rise in sector by 47.30 points while on the contrary; Bank, Finance and Insurance sector suffered a decline of 13.15 points. Foreigners were active buyers for the day with a net foreign inflow of Rs 285 Mn.

In the backdrop of this prevailing positive market sentiment, we are particularly bullish on Access Engineering, Vallibel One and a few counters in the Banking sector. Having strong growth rates Access Engineering is geared up to perform on solid price levels. Vallibel One was recorded as one of the top traded shares this week as well as a top contributor to daily turnovers throughout the week after closing at Rs 20.60 on Friday. The Banking sector in particular, Commercial Bank, HNB and NTB recorded several crossings this week with strong retail and foreign activity focused on these counters. The Banking sector with a sector PE of close to 9x (last 4 Quarters) as well as Central Bank’s easing of the Monetary Policy poses a fairly confident drive ahead.

(Courtesy: Innovest Investments Pvt. Ltd – an Investment Management Company licensed by the Securities & Exchange Commission of Sri Lanka)

source - www.island.lk