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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Bourse In “Humpty Dumpty” Fall

Bourse In “Humpty Dumpty” Fall

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1Bourse In “Humpty Dumpty” Fall Empty Bourse In “Humpty Dumpty” Fall Sun Oct 07, 2012 2:10 am

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
Has The Tailspin Begun?
The benchmark ASI and the more sensitive MPI in the first four days of trading last week fell by 110.64 points (1.9%) and 170.27 points (3%) respectively.

These falls are attributed to profit taking. In contrast, these indices in the previous week gained by 61.92 points (1%) and 111.64 points (2%) respectively, week on week.

Concerning the bourse’s volatility, almost prophetically, The Sunday Leader business pages on its 23.9.12. issue quoting a source in an article titled “Bourse’s Volatility Here to Stay,” said:- quote: “… The market will go through with these cyclical effects of ups and downs, making gains for a few days and then falling and afterwards recouping; some investors will lose their money, but it’s still sustainable,’… Certain stock brokers are also behind this ‘pump and dump’ game,…” unquote.

And in a similar article titled “Politicos, Brokers; Bourse’s Tailwind” which quoted another source and which appeared in this publication’s 16.9.12., issue, it said, quote: “The bourse is like a sailing ship pushed forward by a tailwind, a market source describing the stupendous gains made by it these days, said.

The tailwind is politicos and brokers, he said. The bourse at Friday’s (September 14) trading saw the benchmark ASI go up by 149.68 points (2.59%) over that of the previous day Thursday’s close to finish last week at 5,926.90 points while the more sensitive MPI gained by 168.76 points (3.11%) to finish Friday at 5,588.19 points.

Turnover was Rs. 3.2 billion. ‘Politicos invested in the bourse last year, so they have a vested interest in its performance,’ he claimed.

‘I have been an active participant of the bourse for the past 19 years and in 18 of those 19 years politicos didn’t care two hoots about the bourse until now,’ the source said. It then too had its ups and downs, but that didn’t bother them.

…In an environment where liquidity is tight and interest rates are rising, there is seemingly no justification for the bourse to make gains when the fixed income market is more appealing, the source added. … ‘It is a case of buy-sell, buy-sell, no one is holding on to stocks,’ the source said.

It’s akin to a stone rolling down the hill which gathers momentum as it goes down, he said. But when profit taking overtakes the bourse and when selling starts, there will be more sellers than buyers, he said. That’s when the market starts to go on a tailspin…..” unquote. Has that tailspin begun?

Meanwhile at Thursday’s trading the ASI fell by 29.34 points (0.50%) and the MPI by 47.54 points (0.86%) over the previous day Tuesday’s closings. Turnover was a miserly Rs. 565.5 million. Net foreign inflows (NFIs) were a negligible Rs. 16.11 million. On the previous day Wednesday, the ASI fell by 37.84 points (0.64%) and the MPI by 53.52 points (0.96%) over Tuesday’s closings.

John Keells Stockbrokers (JKS) commenting on Wednesday’s performance said: “Sustained selling pressure centred on large caps dragged the indices down sharply amid low activity levels with turnover being driven by a crossing on Sampath Bank which accounted for a 52% share “. Wednesday’s turnover was Rs. Three billion, with the bourse returning a Rs. 682.1 million NFI. On the previous day Tuesday, the ASI fell by 35.76 points (0.60%) and the more sensitive MPI by 55.79 points (0.99%) over that of the previous day’s close on a modest Rs. 748 million turnover. NFIs for the day were a mere Rs. 24.46 million. JKS in a report said that the fall was due to profit taking, an action that has been continuing since the previous day. It also said that 30% of the turnover generated was from Touchwood (a second tier stock) and also from LOLC.

Meanwhile the bourse on the back of profit taking saw the ASI fall by 7.70 points (0.13%), while the MPI fell by 13.42 points (0.24%) on Monday’s trading (over that of the previous day’s close) on a Rs. 1.1 billion turnover. Foreign trades, ie both buying and selling of Dialog shares saw the market recording a Rs. 111.61 million NFI. Market inflow since the beginning of this year to September 28 was Rs. 31.5 billion while the bourse’s price to earnings ratio as at that day was 16.17 times, according to stockmarket data. JKS Commenting on Monday’s trading said,: “The ASPI gave back gains after crossing the 6,000 mark to end marginally lower amid moderate activity levels, driven by trades on Dialog, Touchwood Investments (a second tier stock) and LOLC accounting for over 42% of turnover.”

No Hope
The market’s negative mode continued unchanged at Friday’s trading with a Rs.65.51 million net foreign outflow.

On a “low” Rs. 551.7 million turnover, the benchmark ASI made an 18.34 point (0.31%) gain over the previous day’s close to finish last week at 5,879.69 points while the more sensitive MPI fell by 9.18 points (0.17%) to close at 5,466.50 points.
http://www.thesundayleader.lk/2012/10/07/bourse-in-humpty-dumpty-fall/

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