Bourse starts November negative

By Dinali Goonewardene

The Colombo stock market began November on a negative note with both indices down due to relatively low activity except some one-off deals and selective buying on fundamentally-sound shares.

Negative sentiments from October spilled over to the new month as Rs. 13 billion in value was wiped off. In October the market lost around Rs. 161 billion in value.

The All Share Price Index fell 0.59% to 6281.85, a 11 month low while the Milanka Price Index fell o.48% to 5604.15 on turnover of Rs. 1.25 billion. Reuters said investors stayed on the sidelines, lacking direction ahead of next year’s budget scheduled on Nov. 21.

NDB Stockbrokers said interest on fundamentally sound counters is likely to continue with apparent slow down of the speculative cycle.

“Existing prices seem to attract bargain hunters which can be viewed as a positive sign,” it added.

SC Securities said: “The market sentiment eroded further with investors continuing to be on the sidelines.”

Apart from related party deals on Hayleys, which accounted for the bulk of turnover, the second largest contribution came from John Keells Holdings, which saw 267,200 shares trade contributing Rs. 50.4 million to turnover and closing the day a rupee lower at Rs. 188.10.

Sampath Bank contributed Rs. 21.8 million to turnover when 106,600 shares traded and closed Rs. 1.90 lower at Rs. 205. The counter elicited interest following the release of its third quarter results before settling lower.

MBSL, which struck a deal to sell MBSL Savings Bank for Rs. 562 million to a consortium led by Navara Capital, saw its share price up Re. 1 after 137,500 shares traded. Galadari Hotels failed to shine despite the Dubai Government buying a 16% stake for Rs. 1.18 billion as the share price peaked to a high of Rs. 32.70 and closed 10 cents lower from Monday’s finish.

Retail counters such as Central Investment and Finance Plc, HVA foods Plc and Free Lanka Capital Holdings Plc witnessed heavy trading during the day, Lanka Securities said in a research report. Yesterday was the renunciation date of People’s Merchant Bank rights and aggressive levels of trading were witnessed during the day. Rights closed at Rs. 1.20 (up Rs. 0.40).

Foreign participation stood at 3.1% of the total market activity and net foreign outflows for the day were Rs. 40.5 m.

Losers outperformed gainers by 130 to 67 on Tuesday, Thomson Reuters data showed. The bourse had fallen 7.4 per cent since 1 October. It has been dragged down to Asia’s eighth-best performer with a year-to-date loss of 5.33 per cent, Reuters said.

Arrenga Capital said despite the active play in the steady pack and positive corporate earnings disbursement, investor confidence has been diminishing with question to when the rally, to alleviate this oversold condition, would resume.

“The previous investor excitement for IPOs too seems to be missing with the low level of liquidity in the market. We, at present, advise our investors on a wise market timing strategy as most investors have the worst of timing by selling out in with large losses at or near correction lows,” Arrenga Capital said.

“This was evident with the soothing of the recent penny stock short rallies that created heavy losses, leading to margin calls. This had led most small new entrants not becoming interested again until the next rally or bull market is underway for some time and most of its gains have already been made. Even the regulatory frame monitoring the stock market has stopped some high net worth individual participation in recent days,” it added.

DNH Financial said that as the market continues to trade sideways with a downward bias, attempting to seek quality on the bourse will not happen by chance, but will be the effort of a careful bottom-up selection process.

“While high-quality stocks on the bourse may always be welcome for risk management, their time to actually outperform may indeed have begun by being ideally positioned to take advantage of 30-40% corporate EPS growth for 3Q2011. Should the market falter, their robust balance sheets and steady earnings will provide a strong defence; conversely, should the market rally, their strong competitive positions should allow them to outperform,” DNH added.