Bourse braces for crucial week

Monday, 8 August 2011 00:00 - - {{hitsCtrl.values.hits}}

The Colombo stock market is up against a crucial week from today hoping for that much awaited lifeline from the regulator as well as investor graduation to fundamentals from weak-hearted preoccupation with speculative stocks.

The Bourse last week ended with both the ASPI and MPI recording losses to close at 6751.29 and 6152.23, respectively. The ASPI decreased by 1.37% and the MPI decreased by 0.93%. Asia Wealth Management said the loss of steam created a doubt in the sustainability and whilst bringing signs of another bear run dipping the indices.

“Once again we find investors drifting away from fundamentally strong counters to more speculative counters. The prime reason we find for this week’s bearish element is the effect of T+5 where profits were booked by retailers, especially from last week’s poultry run over the fear of forced selling,” it said. The year to date foreign interest on the bourse is an unfavourable net outflow LKR8.62 bn which is not a positive sign, it added.

“Overall we expect the bearish nature to prevail in future until the bourse consolidates and undergoes major price corrections where fundamentals dominate speculation,” Asia Wealth opined.

Acuity Stockbrokers said negative retail sentiment dominated markets with the bourse recording a steady, albeit marginal, decline over the week.

Corporate earnings though strong, failed to negate the losses witnessed in the market, Acuity said. Quarterly earnings to date from the Banking & Finance sector, Chemical & Pharmaceutical sector, Food & Beverages sector and Hotels & Travel sector were all positive; Plantations sector earnings however were mostly negative.

“The SEC commissioner’s decision over the broker credit request is likely to dominate market sentiment over the week ahead. Strong corporate earnings are also likely to continue flowing in over the week. Despite the short-term volatility in markets, valuations on fundamentally sound stocks with earnings potential offer attractive investment opportunities at the current price levels especially as the market PER at close on Friday was 20.9x relative to this year’s peak in February of 21.1x,” Acuity added.