First Capital Equities expects market to bounce back
Monday, 3 March 2014 02:00
First Capital Equities expect the Colombo stock market to bounce back with active participation of local investors on fundamentals and return of foreign buying.
“Following the sell offs by foreign investors during past few weeks, many investors began to panic when stocks declined only by a few percentage points. However we don’t expect the market to be bearish, as local investors took heart and were encouraged by the fact that foreign investors had returned with net purchases in last few days of February 2014,” First Capital Equities said.
“We expect the market to bounce back with the positive local investor sentiment supported by strong earnings, high dividend payout and robust economic conditions. We advise investors to maintain a positive sentiment as we are expecting a spike in the market in the near term which will cause an upturn in the market,” the broking firm added.
It said the Central Bank of Sri Lanka reduced the policy rates further with T-bill rates falling across all maturity periods with three months, six months and 12 months T-bill yields declining to 6.72%, 6.89% and 7.07% respectively in February. Meanwhile, inflation during the month declined by 0.2% to CCPI index of 177.8, indicating a 4.2%YoY reduction. The decline in interest rates and the inflation rate will provide investors a solid macroeconomic environment for investments.
First Capital Equities also said corporate earnings have improved.
“Given all these factors, we do not believe that the decline in the market seen so far is sustainable. We expect foreign buying in Sri Lankan equities to rise, however limited to quality companies with sustainable attributes,” the broking firm said.
“We advise investors to take advantage of price weakness in the market, but strictly on a selective basis by focusing on stocks with a strong business model and sustainable top line and bottom line growth supported by robust economic conditions,” First Capital Equities added.
Bourse ends February on the up
The month of February ended with indices continuing its gains from Friday’s mainly owing to price gains in John Keells Holding.
The ASPI gained 0.05% and S&P SL 20 lost 0.44% for the week.
The year-to-date change in ASI was a positive 0.47% though S&P SL 20 Index is down 1.23%.
Due to heavy foreign selling the market has lost much of its gains enjoyed in January when it closed the first month of the New Year up 5.67%.S&P SL 20 Index finished January with 5.5% gain as well.