Bourse puts on a brave face with rebound

In a welcome move, the Colombo stock market yesterday bounced back strongly though on thin volumes, confirming its continued struggle to perform with strong conviction.

The market’s value rose by Rs. 17 billion after having lost Rs. 55 billion in the previous two days. The ASI gained 46.05 points or 0.86% and MPI by 29.97 points or 0.61%. The S&P SL20 index moved up 16.27 points or 0.55%. Turnover was only Rs. 488 million.

“Market rebounded on thin volumes today as bargain hunting set in. Many blue-chips gained ground whilst turnover was concentrated amongst a handful of blue-chips. The market will see many bargain hunting opportunities in the near term as investors generally liquidate small quantities ahead of the festive season,” Lanka Securities said.

Cash map for yesterday was 79.57%. Foreign participation was 57% of total market turnover whilst net foreign buying was Rs. 25 million.

Asia Wealth Management said the Colombo Bourse turned to the positive territory as it witnessed heavy buying spree across the board, facilitating the market to travel on an upward trend throughout the day. Thus, trading activities in most of the counters were on green, delivering substantial price gains.

Softlogic Stockbrokers said yesterday’s market uptick has supported to erase the dark clouds of the Bourse to add in some hope that the slow run is the usual seasonal market play with the holiday moods of the investors.

“Although we expected the institutions and the foreign play to cool down towards the year end being a period for settlements and balancing out investments. However, in reverse, the big play in the market has not totally evaporated with the dominance of crossings and big trades on the turnover levels,” it said, adding, “This could be taken as an encouraging factor for the smaller players.”

It said early morning crossings in Environmental Resources Investments and Aitken Spence secured the market turnover at initial hours before Sampath Bank joined the crossings board for the day. Environmental Resources Investments, which encountered a number of stake changes recently with a restructure made to their investment holdings, saw a crossing carrying 9.3 million shares at Rs. 16 each.

Environmental Resources Investments’ most recent 18.98% acquisition, Browns Investment, also saw four trades taking 299,000 shares at Rs. 3.6, accelerating the counter’s active move during the day.

Apart from the 344,000 share crossing at Rs. 122 each, Aitken Spence also witnessed two on-board transactions totally taking 235,800 shares at the same price. Sampath Bank registered a 140,000 shares changing hands at Rs. 187 each followed by two on-board deals totalling 101,400 shares at Rs. 185.3 and Rs. 186.

A number of hefty deals in Lanka IOC drove the counter to be spotted on the top turnover list. Five trades carrying and or more than 100,000 shares totalling 936,200 shares were transacted over a price range of Rs. 19 to Rs. 19.50. Lanka IOC has been spotted as a ‘Buy’ with an assuring earnings pattern after the price increase for diesel in October, Softlogic said.

Lanka Tiles too was amongst the counters which caught the eye in terms of sizeable on-board deals. The tile manufacturer saw two trades carrying 121,500 shares at Rs. 67. A very rarely active counter, Lanka Ventures, saw activity building up for the day but slanting more on the selling side. The price however closed flat at Rs. 30.

Some buying evolved around John Keells Holdings leading the counter to gain 0.9% for the day.  Finance sector interest was visible in Nations Finance (+2.2%), Commercial Bank (+0.4%), Vallibel One (+1.7%), Vallibel Finance (-0.3%) and Union Bank (+0.7%).   

DNH Financial said in the absence of any market moving news, it expects the Bourse to end the week on a quiet note.

In terms of market trajectory, given the prospect of limited downside risk, DNH Financial advises investors to selectively enter the market given its expectation of medium to longer term growth prospects. Its rationale is based on the following:

Equities will benefit from the strong economic top down story, improved corporate sector performance in selected stocks and likelihood of international asset allocations into emerging/frontier markets such as Sri Lanka

The Bourse is currently down 11%YTD presenting an excellent opportunity for investors not following the herd to invest in a well structured portfolio of stocks that will outperform in a complete market cycle

Market cap to GDP at 35% is still significantly low compared to other emerging markets, leaving considerable scope for growth

Strong organic fund flows and fast growing FII flows will provide liquidity support to the Bourse

Weak form efficiency will provide opportunity to create significant alpha  

Growth will continue to be driven by domestic factors and largely unaffected by global macro-economic recessionary woes