Stock market struggles on 2012 debut

The Colombo stock market showed signs of struggle on the New Year’s first day of trading, managing to close up on a razor-thin margin with a turnover of just Rs. 419 million.

In an apparent reflection of continuity of past year’s woes, the ASI gained by 0.01% or 0.4 points whilst MPI improved by over 10 points or 0.2%.

The Colombo bourse ended 2011 down 8.5% and as Asia’s 10th best performer after enjoying a roller coaster ride of 95% gain in 2010 and 125% jump in 2009.

 “The market started on a positive note with both indices posting gains steadily. However a lack of activity seen in the mid and late periods of trading resulted in the markets closing only slightly higher,” NDB Stock Brokers said.

“Market initiated trading for 2012 extending its sluggish momentum, however remained in the green most of the day,” Arrenga Capital said whilst SC Securities noted, “The Colombo bourse ended the first trading day of the year 2012 in the green by a whisker.”

 “On a fresh ground, the Colombo bourse started the New Year operations on a lacklustre note. In the morning sessions the market displayed a fresh hope with a greenish move however the bourse depicted low level of activity in the latter part to end dormant,” opined Lanka Securities.DNH Financial said the market opened the year on a quiet note.

How the market began 2012 was contrary to expectations of many. There was optimism that given the sound macroeconomic fundamentals and in a bid to put the woeful 2011 to history, Colombo Bourse would kick off the New Year on a more spirited note. However this was absent and analysts and some traders were quick to point to delayed support actions on the part of the Securities and Exchange Commission as a key reason. Lack of confidence in equities market is another factor in addition to uncertainty over exchange and interest rate scenario.

As exclusively featured in a Daily FT Investor tabloid yesterday, brokers had expressed mixed forecast for 2012 with some expecting the market to slide and other pointing out value stocks and expecting economic growth to fuel gains in the share market.  

The highest contributors to turnover yesterday were Commercial Bank which saw 601,200 shares trade including a crossing of 550,000 shares at Rs. 100 each. The share which contributed Rs. 60 million to turnover gained Rs. 1 to close at Rs.101.

NDB Bank, which saw its price appreciating by 10.5% last week, pared off gains closing 2.7% down to Rs. 134.40.

Among the other heavily traded stocks were Hayleys which saw 125,700 shares trade at Rs. 375 levels contributing Rs. 48.5 million to turnover to close the day Rs. 15 higher at Rs. 390 and 125,700 shares of Colombo Land which traded at Rs. 56.50 levels contributing Rs. 36.7 million to turnover. Of this 400,000 was a crossing at Rs. 56 contributing Rs. 22.4 million. The share closed up Rs. 1.20 at Rs. 56.20. The top three turnover generators contributed approximately 34% of the day’s turnover, SC Securities said in its daily report.

Retail participation continued to be centred upon stocks including Regnis Lanka, HVA Foods, Environmental Resources Investments and Tess Agro, as the latter led the day’s most active list. Colonial Motors, also was actively traded as it closed the day with a 1.6% gain according to Arrenga Capital.

The Banks, Finance and Insurance sector followed by the Beverages, Food and Tobacco sectors were the highest contributors to turnover for the day. Net foreign sales were Rs. 57.9 million.

Foreign investors were net sellers of Rs. 57.95 million worth shares yesterday. Offshore outflow in the last five sessions through

Monday was Rs.1.32 billion rupees, with more than 90% of that generated by Commercial Bank, traders said. Net offshore selling in 2011 had been Rs. 19.1 billion. Foreigners sold a record Rs. 26.4 billion in stocks in 2010.

Reuters reported that the market has been looking for an easing of credit limits imposed by the SEC, which along with the resignation of the regulator’s head and deputy, and a 3% currency devaluation, have dampened the market.

New direction from the new SEC head on credit limits is expected in early January, brokers said.

Brokers in November, complaining that tougher regulation was hurting stock market prices, met President Mahinda Rajapaksa to urge him to intervene in his capacity as finance minister to revive the slumping bourse.

The rupee meanwhile closed flat at 113.89/90 to the dollar for a 28th straight session since a 3% devaluation effective from 21 November, with the central bank selling around $20 million to defend it, dealers said.

Dealers said importers were buying dollars to settle import bills while exporters were holding on as local media on Monday reported that there may be further rupee devaluation, on top of the 3%, implemented from 21 November.

But the Central Bank Governor Ajith Nivard Cabraal told Reuters that the bank is not contemplating a fresh move to devalue its rupee currency for this year.     The bank has spent around $710 million to keep the exchange rate steady since 21 November. It spent a net $1.36 billion in the first nine months of the year to keep depreciation pressure at bay.