Price band stocks cheer SEC move

The reduction of the duration of price band applicability from Friday was cheered by none other than investors who played on those already subject to the Securities and Exchange Commission (SEC) directive.

At present there are three companies which were under SEC price band directive and they are Alufab, Huejay and Berwela Walk Inn. Though the duration of their stay in the band won’t change, all three stocks figured among the top 10 gainers on Friday.

Beruwela Walk Inn, despite retaining losses of nearly Rs. 500 million and sans a hotel since April 2004, continued to attract investor interest. On Friday it gained by Rs. 21.70 or 9.96% to close at Rs. 239.50. It also figured within the top five gainers for the week, up 34.3% or Rs. 61.20. The stock peaked to an all-time high of Rs. 267.40 earlier in the week thereby getting caught to the price band.

Huejay on Friday gained by 9.8% or Rs. 18.30 to close at Rs. 205 whilst Alufab, the senior of the trio in the price band, gained by 9.06% or Rs. 7.30 to close at Rs. 87.90.

Effective from 29 April, SEC decided to cut the duration of the 10% high or low price band to five market days as opposed to 10 market days previously. Originally the rule was applicable for 15 market days.

Though some expected the SEC’s move to boost investor sentiments, other than the three price band stocks, illiquid and third tier companies, there wasn’t much cheer.

On Friday ASPI moved by 0.2% and the MPI shed by 0.30% whilst turnover was only Rs. 1.3 billion. For the week ASPI shed 99.6 points or 1.34% whilst the MPI lost 124.9 points or 1.34%.

NDB Stockbrokers warned investor participation had drastically dropped since March. However, it added: “Possible positive interim results may break the dull momentum.”

Asia Wealth on the other hand said that despite the initiation of releases of the latest quarterly earnings, investors did not show active signs, causing the overall market sentiments to look exhausted.

Most of the results released were impressive. Companies which released results included Commercial Bank, Sampath Bank, Pan Asia Bank, Merchant Bank of Sri Lanka, Seylan Bank, HNB Assurance, Ceylon Tobacco (all first quarter) Piramal Glass, Hydro Power Free Lanka and Royal Ceramics (2010/11 year ended).

Asia said blue chip counters which added spice to previous weeks’ performance too lost ground last week, forcing the MPI to register a Week-on-Week (WoW) dip. Despite a few prominent dealings, no active buying was seen from the institutions and high net worth side.

Taking into account last week’s investor involvement, Asia was of the view this week’s recovery remains ambiguous.

“It is acceptable to expect the market to change direction once the key entities of high investor interest disclose their quarterly performance during Jan-Mar. Thus, accumulation on specific counters can be expected as investors eye stocks holding good earnings potential. This can be further encouraged with the Securities Exchange Commission having reduced the price band duration from 10 to five days,” Asia said.

“However, the active involvement may get dissolved as investors’ free up cash for the upcoming IPO – Expolanka. Hence, we continue to advice our investors to get into a ‘buying’ mode on the counters showing sustainable earnings potential,” Asia Wealth pointed out.

Key buys of Asia Wealth are Bairaha Farms, CIC, Commercial Bank, Distilleries, HNB, JKH, Lion Brewery, Royal Ceramics, Sampath and Tokyo Cement.

Acuity Stockbrokers said: “Despite the strong quarterly results which have started to flow in, investor sentiment remains cautious and we expect the week ahead to remain at similar momentum.”