Sri Lanka Stock Picks

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Tuesday, August 10, 2010

Stock exchange all red last morning but brokers said
fundamentally sound stocks to make strong rebound

At the close of trading yesterday, the All Share Price Index reached 4,862.86 points, down 202.21 points or 3.99 percent while MiLanka Price Index fell by 210.30 points, or 3.65 percent, to 5,549.15 points.

The day’s turnover reached almost Rs. 1.3 billion with Commercial Bank shares trading in large volumes. 178 stocks were inked in red while only six counters gained in value.

"There was continued selling pressure on the speculative stocks, and retailers who could not settle the purchases of last week were seen selling off other fundamentally sound stocks and this was why there was downward pressure on prices," a stock broker said.

Last week the Securities and Exchange Commission (SEC) moved the stock exchange to suspend trading of Dankotuwa Porcelain PLC (DPL), Touchwood Investment PLC (TWOD), Blue Diamonds Jewellery Worldwide PLC (BLUE) and the share warrants of Environmental Resources Investment PLC (GREG) owing to unusually excessive price movements and extra ordinary trading volumes. These were later lifted and a 10 percent band was set for buying and selling of stocks.

According to brokers, investors who had purchased these speculative stocks could not sell them as buyers offered prices below the 10 percent band imposed by the SEC.

"There is some buying interest but investors are expecting prices to go down further so they are not rushing in right now. We expect this downward trend to continue for another day or two," he said.

Another broker confirmed these views and said some investors seemed to be scared of entering the market for the time being.

However, brokers believe fundamentally sound stocks would make a strong recovery before long. "We believe fundamentally sound stocks would recover fairly quickly," a broker said.

Trading began yesterday with the ASPI on 5,065.07 points and MPI on 5,759.45 points but by 1pm 174 counters tumbled while only 5 stocks saw their prices appreciate.

Close to 1pm last after afternoon, the All Share Price Index (ASPI) had lost 211.66 points, or 4.18 percent, to reach 4,853.41 while the Milanka Price Index (MPI) of more liquid stocks lost 204.64 points, or 3.55 percent, to reach 5,554.81 points.

The five gainers by this time were; Lanka Ashok Layland PLC, which gained Rs. 100 after opening at Rs. 3,400, Malwatte Valley Plantations, which reached Rs. 56.20 from 54.60, Browns Beach Hotels PLC up by Rs. 1.80, Udapussellawa Plantations PLC, up 80 cents and HDFC, up Rs. 2.30.

John Keells Holdings, Sri Lanka Telecom, Nestles, Environmental Resources Investments and Bukit Darah were the biggest losers by 1pm last afternoon.

The drastic fall took place within one and half hours after the market opened for trading at 9am, after which the ASPI steered steadily around its new, but much lower equilibrium.

A little after 1pm the stock exchange slipped further; the ASPI was down 4.27 percent or 216.42 points to 4,848.65 while the MPI lost 207.79 points or 3.61 percent to reach 5,551.66.

source - www.island.lk