Market fails to sustain Malik-free momenum

The Colombo stock market yesterday miserably failed to live up to its Wednesday’s heroics of unprecedented cheer over the moving out of regulator Malik Cader.

Yesterday the ASI dipped by 54.84 points (-0.85%) to end at 6,397.44 while the sensitive MPI decreased by 34.41 points (-0.60%) to settle at 5,709.14. Market turnover stood at Rs. 875.5 m. This was the complete opposite of Wednesday’s Rs. 61 billion rise in value.

Some were quick to conclude that the market had come to its senses over the true impact of moving out SEC Director General Malik Cader owing to allegations of overregulation, but others said that given the extraordinary rise on Wednesday, profit taking by short-term minded investors was obvious.

Headlining its daily market report as ‘Temporary euphoria ends,’ NDB Stockbrokers said the bourse started on a positive note continuing from Wednesday, but lost its momentum as selling pressure intensified across the board.

“It suggests that yesterday’s bull run was largely artificial as expected,” NDB added. However, the broker highlighted the fact that the People’s Leasing IPO was oversubscribed despite the prevailing negative sentiment.

“The market could not sustain the impressive gains in the indices that were recorded (on Wednesday), as investors were more in a selling mood,” noted SC Securities.

Arrenga Capital said that despite the morning sprint to record a high of 6,488.03 points, the market took on a vicious and volatile downhill ride. “The strong revival (on Wednesday) is believed to have brought back investors to the market,” it said, adding that following Wednesday’s gain in most stocks, profit-taking led to the market’s dip yesterday as investors lost patience after a long lapse of holding time.

DNH Financial said yesterday’s market performance was “indeed disappointing,” given the fact that the majority of the 3Q2011 corporate results filtering into the market have been exceptionally strong even though most investors opted to remain on the sidelines.

“While short-term investors may continue to choose to trade on newspaper headlines, we reaffirm the need to focus on fundamentally strong stocks to generate superior returns in the medium to longer term. Consequently we advise investors to build a robust portfolio of quality stocks before mis-pricings are corrected and individual valuations rerate to market multiples,” DNH Financial added.

Yesterday turnover of Rs. 875.51 million was primarily contributed by HVA Foods (HVA), Colombo Land (CLND) and John Keells Holdings (JKH) collectively accounting for a 40% share.

The Beverage, Food and Tobacco sector was the biggest contributor to the market turnover (due to HVA Foods) and the sector index decreased by 0.21%. The share price of HVA Foods decreased by Rs. 2.60 (5.53%) to close at Rs. 44.20. The Diversified Holdings sector also contributed heavily to market turnover (due to John Keells Holdings and Vallibel One) and the sector index decreased by 0.36%. The share price of both counters closed flat.

Losers outpaced winners with SMB Leasing (W0015), The Lighthouse Hotel and Citrus Leisure declining by 9.1%, 8.9% and 8.7%, offsetting advances in Infrastructure Developers, Udapussellawa Plantations and SMB Leasing (X), which gained 49.3%, 18.6% and 14.3% respectively.

Panasian Power Plc, Lanka Hospitals Plc and East West Properties Plc also witnessed heavy trading.

Foreign participation was posted at 10.88% of the total market activity and at the end of the day foreign investors were the net buyers with a net foreign inflow of Rs. 40.44 million.