Investors urged to focus on stocks with new value

Stock market investors are being urged to focus on companies with new value following the correction experienced in recent weeks.

“From a valuation point of view, the market has stepped down to a lower valuation plateau with the trailing 4 quarter earnings multiple at 18X , thus we can also expect foreign attention to revert as foreigners would start to eye the new firms of rich value,” Asia Wealth said in its market report.

It said despite investors being on their toes waiting for the market to heat up, they are taking a very cautious approach with their buying power now tightened as brokers are forced to cut down debt by at least 50% by 31.3.2011.

“Bargain hunters are on an alert mode to strike on under-valued hidden gems as the freefall of the bourse persists.



Hence going forward, we believe the market to exhibit similar performance as deadlines for settlement periods near, coupled with the holiday season, Asia Wealth said.

Furthermore, the new IPOs can also expect to dry up the market as investors free up cash to get set for the upcoming fresh takings.

Asia Wealth Research continues to advice its intelligent investors to make use of trade opportunities taking refuge in fundamentally strong companies with superior operating models. It also said news of firms hoping to get listed on CSE during 2011, signals active trading over the medium term; with CSE widening its investment scope from 244 companies.

Acuity Stockbrokers said although the existing sentiments are likely to persist, it expects revival in activity levels with investors likely to strengthen their portfolios by tapping fundamentally sound scrips which has high growth potential.

Last week the downturn in the market continued with slight midway recovery; however the indices could not be lifted on a positive note.

Acuity said short term profit booking, settlement pressures and blocking of funds in IPOs strained the activity levels. “Investor interest was indicated as fresh buying on several counters and also net foreign buying was noted during the week. The year to date return of 8% at Colombo bourse points towards overall positive investment outlook,” Acuity added.FT Key Take