Investors now chase after LOLC Finance after CLC’s zenith

• Illiquid LOLC finance entity’s share price soars by 75% as investors shift gears after like-wise Commercial Leasing becomes first listed firm to achieve half a trillion market cap.

Investors yesterday chased after yet another illiquid stock of LOLC Group, propelling its price 75% after heavy trading. 

LOLC Finance, public float of which is only 5.4% or 283.5 million shares, rocked the market accounting for highest turnover, trading, and price gain. 

It saw 182.4 million shares change hands via 17,355 trades for Rs. 3.14 billion. Its intra-day high was Rs. 21.50, up by 75% from Friday’s close before finishing the day at Rs. 20.90, still up by 70%.

Investors’ play on LOFC yesterday was after Commercial Leasing and Finance PLC (CLC) last week catapulted to become the first half-a-trillion market capitalisation company (Rs. 539.5 billion). With only a 0.45% (28.7 million shares) public float held by 2,557 shareholders, CLC closed last week up 87.58% or Rs. 38.50 to Rs. 84.60, before hitting an intra-week high of Rs. 87.90. 

CLC last week saw 33.7 million shares change hands via 23,500 trades for Rs. 2.3 billion.

Net assets value per share of CLC as of 30 September 2021 was Rs. 3.65, up from Rs. 3.01 from a year ago. Six months earnings per share was 29 cents, and for the second quarter it was 20 cents. These indicators suggest that CLC gained not on fundamentals but investor cum analyst scenarios either based on technicals or probability theories.  

However yesterday, CLC saw a sharp dip by 15% or Rs. 12.50 to Rs. 71. It saw 9.1 million shares change hands via 6,595 trades.

Last week, LOLC gained by 31% with 128.4 million shares changing hands via 10,762 trades for Rs. 1.4 billion. Last week’s total volume was far exceeded within yesterday itself.

The investor chase after illiquid stocks, especially of LOLC Group, has sparked interest as well as concerns. The matter was even taken up at the Sri Lanka Investment Forum in Dubai on Friday and its misleading effect on the All Share Price Index (ASPI). Apart from the Dubai-based Lankan expats, high net worth investor Imtiaz Buhardeen, who was present at the forum, raised the issue. 

Colombo Stock Exchange officials hinted that a public float adjusted computation of ASPI was being explored among other related options.

Deals on LOLC Group companies and related parties boosted turnover at CSE to Rs. 8.2 billion yesterday though price indices were mixed. The ASPI declined by 11 points and S&PSL20 improved by 15 points. 

Asia Securities said after witnessing heavy volatility, triggered by CLC in the first half of the session, the ASPI stabilised oscillating between marginal gains and losses and eventually edged 11 points or 0.1% lower while the more liquid S&P SL 20 index snapped a four-session declining streak, supported by price gains in EXPO, LOLC, and TKYOX. 

Excluding the sharp price movements in CLC and LOFC, the ASPI was up 67 points at market close. Turnover reached a two-month high boosted by LOFC and EXPO which accounted for 50% of total turnover. 

“The ASPI commenced the session reaching an intra-day low of 10,324 (-308 points) and within a few minutes surged 380 points to cross the 10,700 level and scale a fresh record high at 10,704. The index subsequently consolidated and moved within the range of 10,600-10,640 for the rest of the session. The breadth of the market remained negative with 75 stocks ending higher against and 121 price decliners,” Asia said. 

It said foreigners recorded a net outflow of Rs. 38.2mn while their participation remained flat at 1.1% of turnover (previous day 2.0%). Net foreign buying topped in BIL at Rs. 6 million and net selling topped in LLUB at Rs. 32 million. 

First Capital said the bourse headed back to the negative territory, despite recording a 2-month high turnover of Rs. 8.3 billion. As macroeconomic concerns and market overheating worries escalated, index dropped 534 points, hitting an intraday low of 10,098 within the first few minutes of the session. 

Eventually, market managed to scale up gradually during the mid-day as retail investors gained their confidence back hitting an intraday high of 10,728 before closing at 10,621 losing 11 points. Turnover was recorded at a healthy level of LKR 8.3Bn, led by the Diversified Financials sector, followed by the Food, Beverage and Tobacco sector, accounting for a joint contribution of 64%. 

NDB Securities said the ASPI edged down as a result of price losses in counters such as Commercial Leasing & Finance, John Keells Holdings and DFCC Bank.

It said high net worth and institutional investor participation was noted in Hayleys Fabric, Chevron Lubricants Lanka and Expolanka Holdings. Mixed interest was observed in Commercial Leasing & Finance, LOLC Holdings and Ambeon Capital whilst retail interest was noted in Lanka Orix Finance, Browns Investments and R I L Property. 

Diversified Financials sector was the top contributor to the market turnover (due to Lanka Orix Finance, Commercial Leasing & Finance and LOLC Holdings) whilst the sector index lost 2.56%. The share price of Lanka Orix Finance increased by Rs 8.60 (69.92%) to close at Rs. 20.90. The share price of Commercial Leasing & Finance recorded a loss of Rs. 12.50 (14.78%) to close at Rs. 72.10. The share price of LOLC Holdings appreciated by Rs. 5.75 (0.89%) to close at Rs. 651.00.

Food, Beverage & Tobacco sector was the second highest contributor to the market turnover (due to Browns Investments) whilst the sector index increased by 0.51%.

The share price of Browns Investments moved up by Rs. 0.50 (4.63%) to close at Rs. 11.30. Expolanka Holdings was also included amongst the top turnover contributors. The share price of Expolanka Holdings gained Rs. 8.75 (4.41%) to close at Rs. 207.00.