Despite fears that foreign investors may continue to exit emerging markets off in response to the cut back in the US fed’s bond buying program, DNH Financial believes that foreign allocations to domestic equities could remain (notwithstanding the possibility of a temporary sell-off), with robust domestic economic and corporate EPS growth providing the necessary tailwind.
It said descending close to the 6,200 support level, it is easy to shy away from the market on the conviction that it may lose further ground due to the perceived lack of any relevant support despite expectation of robust 2Q2013 corporate results for blue-chip counters.
“While we don’t rule out the possibility of further sideways movement in the short term, we are nevertheless reasonably convinced that the market should garner firm interest from foreign investors who may adopt a cherry-picking approach focusing on counters that present strong and sustainable value in high growth and defensive sectors,” DNH said.
“This should provide the necessary foundation for the market’s systematic rise over the medium to longer term. In this respect, we advise investors to focus on companies with largely monopolistic attributes and strong brand loyalty within sectors and sub-sectors that are both growth and resilient.
We reiterate the need to construct a diversified portfolio of stocks that have strong top line revenue growth and low debt to equity ratios,” DNH Financial added.
source - www.ft.lk
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