Stock values under spotlight as June quarter ends today

Today marks the end of the June quarter and all investor eyes will be focused on how stocks perform with hope of better valuations from the market.

For December-end financial year companies it will be the completion of the first half whilst for March-end firms it is the end of the first quarter.

A comparison of present day market and a year ago is a revelation but a welcome pick up in investor sentiment and buying yesterday according to analysts should strengthen prospects for a better market today. The market capitalisation improved by Rs. 6 billion yesterday marginally reducing the month-to-date dip to Rs. 146 billion from Rs. 152 billion as of Tuesday.

On 30 June last year the market capitalisation was only Rs. 1.5 trillion whereas by yesterday it had grown to Rs. 2.36 trillion. Last year same time the market on its boom mode registering a 36% gain by end June though at present the 2011 year to date gain is only 3.65%. MPI which was growing by 37% in the first half of last year today is languishing with 9.58% negative return.



The market’s valuation however remains the same with Price Earnings Ratio at 23 times a year ago as opposed to 22.9 times yesterday. As against over 30 times PER during 2011 peak in mid-February analyst believe current valuations are more attractive especially for the medium to long-term investors. However the biggest dilemma for the market is lack of cash which has prompted certain circles in broking community to clamour for relaxed rules from the regulator with regard to credit. This request however is being treated with much caution by the SEC so as to prevent a further threatening systemic credit risk in the market.

Commenting on yesterday’s market John Keells Stock Brokers said “The indices remained volatile during the day with a majority of the large cap counters losing value while the market debutant OGL remained the largest contributor to the day’s turnover.”

NDB Stockbrokers said ASPI was volatile during the day while MPI was mostly on a downward trend. However, ASPI closed in green with the buying pressure witnessed towards the end of trading. “Speculation was witnessed today as well to a certain extent,” it added.

 Manufacturing sector was the main contributor to the market turnover, while the sector index decreased by 0.43%. Diversified sector also contributed significantly to the market turnover (due to Aitken Spence). The sector index increased 0.08% today.

Aitken Spence was the main contributor to the market turnover with eight crossings (3,158,500 shares at Rs. 133). The share price declined Rs.1.90 (1.41%) and closed at Rs. 137.50. Motor sector was on the up with the interest witnessed in Diesel and Motor Engineering and Lanka Ashok Leyland. Renewed interest in counters such as Distilleries and Laugfs Gas was witnessed today. Foreign stake in Distilleries was further reduced by 822,800 shares.

TKS Securities said the broader market ended on a positive note whilst the more liquid index continued to shed ground. Aitken Spence Holdings emerged as the top trader on the back of institutional investor interest and contributed for circa 16% of day’s turnover.

Further the counter saw 3.2 mn shares changing hands during the day. Orient Garments which made debut in the CSE gained 21.3% from the introductory price and witnessed institutional and high net worth investor interest. Aitken Spence Hotel Holdings attracted institutional investor interest where the counter saw 2.6 mn shares changing hands during the day. Further Diesel and Motor Engineering and Distilleries enticed institutional investor interest.

A net outflow of foreign funds were seen during the day, where foreign purchases amounted to LKR63.4 mn (USD578.1 k), whilst foreign sales amounted to LKR410.2 mn (USD3,740.3 k).