Boom back at Bourse

The Colombo stock market yesterday bounced back strongly with its valuations rising by Rs. 57 billion a development which analysts said was a direct result of SEC partly relaxing its rigid stance whilst others pinned it to investors being flushed with funds post-Laugfs IPO.The benchmark ASPI shot up sharply by 240 points or over 3% in early morning trade before settling down to finish the day up 178 points or 2.84% higher.

The market capitalisation rose by Rs. 57 billion to Rs. 2.13 trillion from Rs. 2.07 trillion on Monday. The number of trades shot up to 18,000 from 10,000 on Monday. Trading volume amounted to 322.5 million shares as against average trading volume of 45.2 million and 42.5 million in the past five days and 30 days respectively.

The 90-day average volume of the bourse is 70 million.

Most analysts said that the Securities and Exchange Commission’s (SEC) decision to extend the deadline to clear debts and formalise credit arrangements from the original 1 January 2011 to June 2011 boosted investor sentiment. Until yesterday the market had lost over Rs. 240 billion in value or 13% dip since all time peak enjoyed in early October.

“Indices boosted over 150 points with a healthy turnover as regulator extended the deadline given to brokers to clear credit given to clients,” NDB Stockbrokers said.

Analysts claimed yesterday’s rebound was a good learning for SEC as to how a tight-fist approach can depress investor sentiment and activity. There was speculation that the regulator was under pressure from both investors and politicians to relax its tough stance which some alleged was “overregulation.”

However others said that whilst relaxation was welcome the market also benefited from the availability of an estimated Rs. 5 billion by way of refunds post-Laugfs IPO. The Rs. 2.5 b IPO of Laugfs drew Rs. 42.3 b worth of applications.

Furthermore, on Monday the market had also reached what they described as “maximum sold limit” suggesting selling had bottomed out.

The rebound also was spiced with a few strategic deals. Softlogic stepped up its bullish acquisitions by picking up 10% stake in Asiri Hospital Holdings on top of 26% existing stake and in the process triggering the Takeovers Code.

Seylan Bank saw a crossing of 12.4 million shares at Rs. 100 each in a deal worth 1.2 billion, the highest contributor for yesterday’s high turnover of Rs. 4.8 billion.  Seylan’s share price closed up 6.8% to Rs. 95.

The market also saw six other crossings including 3 million shares of illiquid Cargills at Rs. 195 each, 508,914 shares of JKH mostly at Rs. 301 each and 70,000 shares of Central Finance at Rs. 715 each. Premier blue chip closed Rs. 6.20 or 2% up to Rs. 298.80. JKH along with Carson Cumberbatch (up Rs. 31.30 to Rs. 1,001.30) and Spence (up Rs. 4.50 to Rs. 174.10) were major contributors to gain in the index.

Another healthy note was foreigners remaining net buyers for the second consecutive day though lower (Rs. 230 million) as against Rs. 675 million on Monday.  Over the past three sessions, they have bought Rs. 1.65 billion worth. However foreign investors have sold a net Rs. 26.3 billion in shares this year.

Yesterday best performing sector was Stores & Supplies (+7.66%) whilst the worst was Oil Palms (-2.45 %). With yesterday’s rise, Colombo’s year to date gain crossed the 90% mark, ahead of second-ranked Indonesia’s 40% gain.

In response to stock broker recommendations, the SEC on Monday partly relaxed its earlier tough stand on provision of credit to investor clients.

The SEC said it granted permission to stock brokers to reduce their current debtor’s positions by at least 50% by 31 March, 2011 and by 100% latest by 30 June, 2011. Previously the deadline for 100% was 1 January, 2011.

SEC said the decision was made as a consideration of granting the small time investors additional time to clear their current debt outstanding consequent to representations made by the Colombo Stock Brokers’ Association and other market participants.

Whilst the deadline has been extended the SEC said that original directive stands in force.

The Colombo bourse is trading at a forward price-to-earnings ratio of 19.6 compared with all-Asia’s 13.2 and global emerging markets’ 12.3, Thomson Reuters StarMine data showed. The CSE’s 14-day relative strength index is at 45.3, close to the lower neutral limit of 30.

Meanwhile the rupee edged up to 111.30/34 a dollar from Monday’s 111.45/48 on stock-related inflows, currency dealers said according to Reuters.

Softlogic triggers Takeover code on Asiri; SLIC General Fund exits

Softlogic Holdings yesterday triggered the Takeovers and Mergers Code on Asiri Hospitals Plc when it acquired 10% stake for Rs. 808 million on top of an existing 26.3% shareholding already held.

Fast becoming a top conglomerate, Softlogic bought 9.24% from Sri Lanka Insurance (SLIC) General Fund for Rs. 740 million and a further 0.7% stake from SLIC Life Fund. The deals were done at Rs. 9 per share.

With yesterday’s sale SLIC General Fund exited from Asiri whilst Life Fund is estimated to be still having a 15% stake.

Prior to yesterday’s purchase, Softlogic Group held around 26.3% and the latest addition increases its holding to 36.4%.

By virtue of crossing the 30% threshold set by the SEC’s Takeovers and Mergers Code, Softlogic is expected to make a mandatory offer to remaining shareholders of Asiri. In October Asiri acquired 10% stake in Asiri Surgical for Rs. 502 million from SLIC thereby increasing the holding to 39.5% triggering the Code and the mandatory offer is on. The acquisition was to maximise synergies within the Group.

Asiri Group includes Central Hospital, Aisiri Central, Asiri Diagnostics, Asiri Hospital Matara, Matara Medi House and Digasiri Medical Services. The parent recently changed its name to Asiri Hospitals Holdings Plc.

Asiri yesterday closed at Rs. 9, up by 50 cents whilst Surgical closed unchanged at Rs. 9.10