Top stocks lose Rs. 280 b in value

A sample of top 20 stocks have lost a combined value of Rs. 280 billion so far this year, with analysts pointing to the Government as the biggest loser given its major holdings via State funds.

An analysis done by the Daily FT of top 40 stocks in terms of market capitalisation and excluding newly-listed entities revealed a combined Rs. 279.1 billion in value wiped off between 31 December 2010 closing and last week.

The dip in value of top stocks which are fundamentally sound ranged from a high 46% (Spence Hotels) and a low of 2% (SLT) in the comparable period confirming victims are not only penny and speculative counters.

In almost all leading stocks, State funds have substantial shareholding. For example, the premier blue chip JKH, which saw its value dip by 21% or Rs. 39.4 billion, has EPF as the third largest shareholder with an 8% stake.

Leading commercial banks, whose control is collectively held by several State funds, have lost much value as well. COMBank (18.7% State funds ownership) was down 18%, HNB (with 22% State holding) by 39%, DFCC (with over 33% State holding) 45%, NDB (with 34% State holding) 30% and Sampath (with over 12% State holding) by 24%. Colombo Dockyard, in which several State entities collectively own 29%, was down 18%, whilst State funds also have holdings in Aitken Spence and Dialog among others.

The Colombo stock market continues to be beset with its miserable run, closing last week with the All Share Index’s negative return topping the 12.5% mark and the Milanka Index nearing the 30% level with 28.4%. Both indices are at their lowest level in 14 months. From the all-time level of mid-February 2011, the ASI is down 25.6% and the MPI by 31%.

Whilst most popular stocks have tumbled, some have weathered the storm. In our top stocks analysis, companies such as Carson, Bukit, CT Holdings, Hayleys, Central Finance and several multinational firms have grown between 2010-end and last week.

Since the market rose to dizzy heights early this year on penny or speculative stocks, their values have tumbled quite sharply. This basket of stocks was most sought after by retailers who, according to analysts, have burnt their fingers. The sustained bearish run continues to raise concerns among all stakeholders. For starters, despite experts maintaining that the market has corrected itself and prices are now attractive, not many investors have returned, nor have those remaining begun buying. This has prolonged the agony for brokers and investors alike.