Stocks soar on spirited support

• ASI gains by 5% as Bourse’s value swells by Rs. 96 b
• Brokers positive after fresh meeting with SEC
• EPF, private institutional and high networth investors active on attractive valuations

The Colombo stock market yesterday produced a major rebound gaining by 5% thanks what some described as “spirited support” whilst others emphasised it was largely due to all round buying on attractive valuations.

The Bourse’s value shot up by whopping Rs. 96 billion in its biggest ever gain reducing the gap of the massive Rs. 112 billion lost on Monday and Tuesday on account of margin calls, negative sentiments over volatile exchange rate and fuel price hike impact on the economy.

Continuing buying by EPF also boosted the market for the first time though the biggest fund’s activeness in the previous days failed rejuvenate weak hearts of ordinary investors. Broking community was also on a better mindset following a positive meeting on Wednesday with the Securities and Exchange Commission Chairman Tilak Karunaratne and his team. Analysts also said that Central Bank assurance with regard to forex market and rupee’s gain yesterday also boosted sentiments.

“The meeting that took place between the CEO’s of the stock broking houses and the SEC chairman ended with on a positive note and as a result market confidence has grown,” New World Securities said. However it also added that EPF, ETF and fund manager’s involvement in the market was seen and contributed to the days turnover. 

Opposition parties were quick to pin the rebound to organised buying by EPF and coordinated action by the “players” in the market.  Whilst there was all round buying, analysts however said that EPF was in the market aggressively early this week yet that failed to prevent the massive plunge.  Furthermore despite presence of state heavyweights as well as active play by institutional and high net worth investors, the turnover being Rs. 1.1 billion may suggest that the market was less inclined on selling. Interestingly the single largest contributor to the turnover Aitken Spence (1.04 million shares traded for Rs. 119 million) wasn’t caused by ‘coordinated local play” but Aberdeen picking up bulk of the shares at Rs. 114 each.

 As Daily FT reported, foreigners seize buying opportunities when there is blood in the market and there has been net inflow by non-nationals for the past week.  

If the second largest contributor HNB (0.65 million shares traded for Rs. 93 million) too wasn’t EPF-linked as the major buyer was Captains who continue to favour banking stocks though was seen on the selling side of Commercial Bank yesterday.

On the other hand big stocks SLT (up 6%), CTC (5%) and JKH (2%) which made the highest contribution to the movement of the indices were sought after by private institutional investors.

However, analysts and brokers said EPF was collecting quantities as it has done since Monday especially with regard to counters such as Carsons, Dialog, CT Holdings and among its basket included Dockyard, Haycarb DIMO, Central Finance and Dipped Products. ETF too was active collecting Commercial Bank.

The rebound yesterday was also supported by sharp gains by second tier and speculative stocks. The bottom of the top five turnover contributors list comprised Swarnamahal, ERI and HVA Foods.

NDB Stockbrokers said speculative counters gained steadily during early trading which eventually led to gains across the board.

Bank, Finance and Insurance sector was the highest contributor to the market turnover (due to Hatton National Bank - HNB and Swarnamahal Finance - SFS) the sector index gained 5.30%.

The share price of HNB increased by Rs 3.50 (2.47%) to close at Rs 145.00 while share price of SFS gained Rs 11.50 (7.03%) to close at Rs 172.10.

Diversified sector became the second highest contributor to the market turnover (due to Aitken Spence) and the sector index increased by 3.13%. Aitken Spence share price closed flat at Rs 114.00. Foreign holding of Aitken Spence increased by 1,037,600 shares during the day.

SC Securities said the investors shifted gears as the negative sentiment turned positive resulting in aggressive buying.

Arrenga Capital said strong upsurge drove the indices into positive terrain with active participation by retail investors. 

“The steep decline up to Tuesday was primarily on speculative counters where most values of stocks have returned to pre-bull run prices (in 2009). This resulted in speculative play throughout the day,” Arrenga said adding the positive investor sentiment led most counters to end on the green with only 6 counters closing on negative territory. 

“We believe today’s upsurge lacked institutional and high net worth (local and foreign) participation, thus prudent investors should use these opportunities to book profits while accumulating on a downward trend. On a positive note, foreign inflows seem to be continuing although at a small level. We believe large and continuous net foreign inflows would be the catalyst to reverse the downward trend,” Arrenga added.

Swarnamahal Financial Services topped the speculative list returning to its upward trend as the counter recorded a 52-week high of Rs. 172.4 before closing the day at Rs. 172.1 (+7.0%). Retail investor favourite Environmental Resources Investments gained heavy buying interest as the counters surged 23.4% to close at Rs. 19.4 with 3.2 million shares trading. HVA Foods and Citrus Leisure returned with strong buying interest as the counters gained +19.2% and +23.8% closing at Rs. 21.6 and Rs. 37.5 respectively.

Agstar Voting, Non-Voting and Nation Lanka Finance [Warrants] were the debutants to the market and performed well. Agstar touched an intra- day high of Rs. 18.9 and closed trading at Rs. 16.9 whilst National Lanka gathered considerable investor interest gaining +1000% to close at Rs. 3.2.