Aug 08, 2012 (LBT) - The market traded in a narrow band once again with the ASPI closing at 4890 amidst weak investor participation. Turnover declined to LKR160 mn with trading in Dialog, Commercial Bank and Tokyo Cement accounting for 32% of the day’s total.
Losers outpaced gainers with Serendib Land, Regnis and Singer Industries declining by 12.0%, 11.3% and 8.0% offsetting gains inSMB Leasing(X), Hayleys Exports and Palm Garden which rose by 33.3%, 19.2% and 18.1% respectively. Meanwhile, Asian stock markets rose today, buoyed by more positive employment data out of the U.S. and expectations that central banks in the U.S. and Europe may take steps to support their economies.
In corporate news, Richard Pieris & company (RICH) reported 12% growth in turnover to LKR8.1 bn during the 1Q2012 compared to LKR7.2 bn recorded during the previous comparable period. RICH’s gross profit increased by 85% to LKR 1.9 bn supported by flat cost of sales while operating profit rose by 521% to LKR 920 mn during the period.
Notwithstanding the higher finance and tax expenses, the group recorded a net profit of LKR511mn vis-a-vis a loss of LKR 90 mn during the previous comparable period. With both buyers and sellers largely sitting in the wings, as we head further into the 3rd quarter, we expect market activity to remain relatively restrained in the near term. However weexpect momentum to gather steam in the medium to longer term with a break to the upside from the relatively sideways flag that we have been experiencing so far. Consequently, we view the current market environment as an opportunity for investors to clean their books, re-align their portfolios and reposition themselves with a flight to quality. We consequently advise investors to break away from the herd, maintain a healthy investment horizon and focus on companies that will deliver quality earnings despite high interest rates. On a sector basis, we believe that conventionally defensivesectors such as Telecoms could experience a slowdown in top line growth exacerbated by downward pressure on margins due to price competition. Conversely, we believe that several of the traditionally more cyclical sectors such as Manufacturing, Construction and Tourism could generate highly attractive defensive attributes, such as strong volume growth and pricing power which should enable them to maintain margins while generating sustained cashflow.
However investors may need to be highly selective picking stocks that are not overly leveraged or have high energy requirements.
http://www.lbt.lk/stock-market/movement/2398-lbtmarket-wednesday
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