CSE turns a real market!

The Colombo Stock Exchange (CSE) is turning to become a real market of producing a dip and a gain within a day, showing early signs of maturity though some remain sceptical overall.

Having appreciated by nearly 11% in 12 market days, there was quick profit taking in early morning trading yesterday. This saw the ASI dip by 1% but there was a rebound as retailers reinvested gains, a redeeming feature which the Daily FT has been highlighting.

Given the lacklustre performance in the recent past, the “down and up” scenario was described by some as “volatile,” but most analysts believe the market will adjust itself soon.

“What is most significant is the rebound in investor sentiments, return of retailers and high level of activity without a change in rules and regulations but purely on the appointment of a new Chairman at SEC,” analysts opined.

In July the ASI was down 20% whilst by yesterday the year-to-date dip has been reduced to 11%. Since the Presidential forum on capital markets, the market’s value has swelled by over Rs. 190 billion.

Yesterday the ASI was up by 0.3% and the MPI gained 24.59 points or 0.49% whilst the S&P index dipped by 7.3 (0.25%). Turnover once again crossed the Rs. 1 billion mark for the second time this week. Foreigners were net buyers to the tune of Rs. 66.5 million.

“The indices fell on profit taking during the early hours of trade and bounced back sharply due to a fresh round of buying centred on second tier counters,” John Keells Stock Brokers said.

“Stocks regained lost territory during the latter part of trading – a trend which has been seen throughout the week. A poor start was offset by continued bullish activity in the Bourse with renewed interest seen on selected blue-chips,” Lanka Securities added.

NDB Stockbrokers said: “The market started on a positive note with turnover getting an early boost owing to Asiri Hospital Holding’s 7.9% acquisition of Asiri Surgical from Sri Lanka Insurance.”

 “Retailers’ bullish sentiments continued to dominate the market activity with turnover crossing the Rs. 1 billion mark. Despite the volatility seen in early hours, which dragged the market into the negative territory, the broad market gained 16 points to end the day in green with the Bourse gaining for the eighth consecutive day,” it added.

Yesterday top contributors to turnover were Asiri Surgical with Rs. 338.5 million, John Keells Holdings with Rs. 60.7 million and Expo Lanka Holdings with Rs. 46.9 million. Most actively traded counters for the day were Expo Lanka Holdings, Commercial Leasing & Finance and Free Lanka Capital Holdings.

Noteworthy gainers for the day were Lanka Cement up by 40.0% to close at Rs. 14, Commercial Leasing & Finance up by 32.4% to close at Rs. 4.80 and Central Investments & Finance up by 12.8% to close at Rs. 5.30.

Noteworthy losers for the day were Nawaloka Hospitals down by 5.9% to close at Rs. 3.20, Amana Takaful down by 5.3% to close at Rs. 1.80 and Agstar Fertilizer down by 4.8% to close at Rs. 7.90.

Lanka Securities said cash map was 66.95% but stands at 52.05% exclusive of the deal on Asiri Surgical.

NDBS also said heavy retail activity was seen in Free Lanka Capital Holdings and Blue Diamond nonvoting whilst fundamentally-sound counters such as John Keells Holdings, Distilleries, Sampath Bank, Seylan Bank nonvoting and Expo Lanka continued to draw investor attention.

The Healthcare sector emerged as the top contributor to the market turnover (due to Asiri Surgical) and the sector index slid 1.09%. The share price of Asiri Surgical edged up by Rs. 0.30 (3.70%) to close at Rs. 8.40.

The Banking, Finance and Insurance sector became the second highest contributor to the market turnover (due to Seylan Bank nonvoting and Sampath Bank) and the sector index gained 1.72%. The share price of Seylan Bank nonvoting increased by Rs. 0.10 (0.33%) to close at Rs. 30 while Sampath Bank’s share price gained Rs. 1.90 (1.01%) to close at Rs. 190.50.

The Diversified sector was also seen among the highest contributors to the market turnover (due to John Keells Holdings and Expo Lanka Holdings) and the sector index shed 0.32%. The share price of John Keells Holdings gained Rs. 1.90 (0.96%) to close at Rs. 199 while Expo’s share price gained Rs. 0.10 (1.32%) to close at Rs. 7.70.

Softlogic Stockbrokers said Asiri Surgical Hospital is one of the attractive health sector counters trading at a trailing PER of 9.5X, whilst it described Expolanka Holdings as a counter still trading below its initial offer price of Rs. 14.

It also said foreigners’ recent favourite brewer, Lion Brewery, saw a 100,000 share block being taken in the market at Rs. 240 each. The counter, which had stagnated at Rs. 200-210 before the latest foreign accumulation, reached its 52-week high of Rs. 240 yesterday. Its parent, Ceylon Beverage Holdings, was spotted in the mid-trading top gainers’ list as it headed as much as 21.9% to Rs. 390 but slowed down to close flat at Rs. 320.

Among the other gainers of the retail-oriented counters were: Janashakthi Insurance, Textured Jersey, ACL Cables, Environmental Resource Investments, Lanka Orix Finance, Blue Diamonds [Non-Voting], Piramal Glass and Seylan Merchant Bank. Seylan Bank [Non-Voting] saw a 258,900 share on-board trade at Rs. 30 provoking the counter to race as much as Rs. 35.50 but cooled off to close with a marginal gain at Rs. 30.

Softlogic said the value hunters remained immune of the market changes as they continued their bottom hunt on the selective picks. Of such activity were; Commercial Bank [Voting and Non-Voting], Nations Trust Bank, Distilleries Company of Sri Lanka, Sampath Bank, Hatton National Bank Non-Voting] and Aitken Spence Hotel Holdings.

People’s Leasing Company, amongst Softlogic’s potential stock list, ran up as much as Rs. 13.70 for the day before closing at Rs. 13.30 following a number of mid-sized quantities.

Giving an opinion on the market, Softlogic said although it has been the retail mass behaviour which has been prominent in recent days, the blue chips have continued to see steady accumulation primarily impelled by local investors.

“Some wish to avoid the market classing it as a dangerous run but if one move out of the quick buck theme and focus on the steady valued ones, you could be safe. Bourse has brought luck to all types on investors from the retail to the institutional lot in the recent days. A bit foreign outflow was observed during the bull run but local investors were too busy gathering in their portfolio that the foreign sales went unnoticed. Investors have now also shunned the waiting need before the T bill auction. Today’s market can be taken as a trading opportunity to revive the cash positions of drying portfolios grabbing back many other sideline players’ active involvement,” it said.

Supported by positive investor sentiment and pent up momentum DNH Financial believes that the current market movement could be the beginning of a gradual but sustainable rally that could allow the Bourse to comfortably cross the 5,500 level sooner than later.

“While we are definitely encouraged by the recent momentum in the market, we nevertheless advise investors to accumulate quality stocks which are expected to outperform on an absolute and risk adjusted basis,” it added.

“Although some market commentators may begin to question the sustainability of Sri Lanka’s economic growth pointing to the possibility of a deceleration given the impact of high oil prices and balance of payments pressures, we believe that economic growth will still continue at above average levels compared to most other emerging markets. Additionally, shrugging off the sceptics who may still argue that the performance of the Sri Lanka Bourse is inextricably linked to the performance of global markets, given its reliance on domestic factors, the Bourse is likely to prove significantly independent of external forces and will be spared much of the contagion that is sweeping through major markets in Europe as a result of the Eurozone debt crises,” DNH Financial said.