Markets likely to be subdued despite last week’s surge

Stock market investors who had hoped that the sharp improvement in the market on Wednesday and Thursday following the Central Bank relaxing monetary policy and reducing interest rates were disappointed when some of the earlier gains were lost on Friday, brokers said.

However the market continued the previous week’s late rally, with the broader index edging up a cumulative 129.58 points on Wednesday and Thursday before slipping to 5,522.72 points (on the All Share Price Index) on Friday, Acuity Stockbrokers said in a market report.

"The mid-week ASPI surpassed 5,500 points for the first time in nearly a month, backed by improved sentiment following the Central Bank’s announcement of a policy rate cut," the report said.

Volumes, nevertheless, remained broadly unchanged with a daily average turnover value of Rs.0.55 billion against the previous week’s Rs.0.54 billion and the year-to-date average of Rs.0.9 billion, Acuity said.

"Markets are likely to remain mostly subdued ahead of the holidays," the report said.

Analysts described the Central Bank’s announcement last Wednesday of reduced key policy rates as a largely unexpected move. The December rate was reduced by 25 basic points to 7.5% for repos and 9.50% for reverse repos.

"The accommodative stance which comes after a lapse of seven months was mostly unforeseen by markets specially as November inflation levels edged higher (9.5%) year-on-year versus 8.9% yoy in October due to supply-side constraints, Acuity said.

"The Central Bank, however, eased its policy corridor citing the efficacy of the demand management policies and its expectations for moderate inflation by the second quarter of 2013," the report said.

As a result, market rates also declined last week with the yield on six-month Treasuries dropping a significant 32 basic points to 11.78% relative to 12.10% the previous week.

Meanwhile, the Central Bank underscored its stance still further by announcing the possible removal of the current credit ceiling, adding that recent trends in credit markets indicate a reasonable leeway for such a move, Acuity said.

The ASPI was up 135.39 points (2.51%) last week while the MPI was up 145.95 points (2.98%) and S&P SL20 moved up 70.94 points (2.40%).

Foreign investors continued to chase JKH which made the highest contribution to last week’s turnover value accounting for 11.33% of the total turnover – Rs.310 million. HNB followed closely contributing Rs.301.39 million (11.01%) while Commercial Bank accounted for Rs.285.11 million (10.42%).

Foreign investors closed the week in a net buying position of Rs.0.18 billion against Rs.0.98 billion a week earlier. Average daily net inflows amounted to Rs.35.77 million against the previous week’s Rs.195.09 million.

John Keells Stock brokers reported that "the indices rebounded sharply on the back of a surprise cut in rates," saying that the rally was led by diversified, beverage and banking sector large caps.

Trades on JKH, HNB, ComBank, Dialog, CTC and Nestle accounted for 55% of the weekly turnover inclusive of crossings, the JKSB weekly report said.

It said that foreign activity remained strong over the week resulting in a net inflow of Rs.178.8 million. NDB, ComBank, Dialog, CTC and Nestle accounted for 55% of tdhe weekly turnover inclusive of crossings, the JKSB week report said.

It said that foreign activity remained strong over the week.
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By The Nation

Shares rose on Monday amidst improved interest on blue-chip counters. An announcement made by Dialog Axiata about the acquisition of a 26% stake in Digital Commerce, which owns Anything.lk e-commerce site, drove the activities levels of the counter and DIAL closed at LKR 8.10 after hitting an intra-day high of LKR 8.20. Dividend-paying stocks were in the spotlight today with Nestle Lanka (LKR 1,454.0,+6.1%) and Ceylon Tobacco (LKR 750.0,+5.5%) reaching the 52 week highs. The ASI advanced 14.46 points (+0.3%) to 5,404.86 while MPI increased by 12.52 points (+0.3%) to 4,906.14. The S&P LK 20 index added 5.49 points (+0.2%) to trade at 2,958.11. The turnover was LKR 560.5m.

Indices managed to close higher again on Tuesday helped by gains made on Nestle and Ceylon Tobacco Company. Few private deals were seen on Nestle, Hatton National Bank and National Development Bank which dominated today’s turnover. Retail participation remained on the sidelines as most of the highest contributors to turnover were comprised of blue-chips. ASI gained 12.92 points (0.24%) to close at 5,417.78, MPI gained 7.28 points (0.15%) to close at 4,913.42 and the S&P SL20 index gained 5.10 points (0.17%) to close at 2,963.21. Turnover was Rs. 488.9m.

Colombo stocks rose on Wednesday with the ASI heading for its highest close in three weeks, on monetary easing by the CBSL. Earlier today, CBSL reduced the policy rates by 25bps while removing the credit ceiling on the banks in the view of fuelling the economic growth in 2013. Taking the cue, the treasuries declined across all the maturities at today’s auction with 1-yr rate declining by 41bps to 12.45%. Retail investors showed interest across the board with 225 stocks posting gains out of the 260 traded. ASI advanced by 98.86 points (+1.8%) to 5,516.64 recording the highest daily gain since September 14th while MPI and S&P LK20 index gained 97.77 points (+2.0%) and 31.34 points (+1.1%) to close at 5,011.19 and 2,994.55 respectively. The market turnover stood at LKR 480.0m.

Positive momentum continued into today’s trading with most blue-chips gaining ground. Retail participation gathered activity today on improved sentiment. Gains on Ceylon Tobacco Company helped to bolster the indices with relatively high activity seen on the normal board. Banking sector counters such as Sampath Bank, National Development Bank and Commercial Bank also gained ground. It should be noted that foreigners were net sellers on both Wednesday and Thursday. ASI gained 30.72 points (0.56%) to close at 5,547.36, MPI gained 52.77 points (1.05%) to close at 5,063.96 and the S&P SL 20 index gained 29.74 points (0.99%) to close at 3,024.29. Turnover was Rs. 702.3m.

Market opened on Friday with mixed sentiments but steadily lost momentum thereafter. However, improved activity and higher prices were seen on Commercial Bank, John Keells Holdings and National Development Bank helped to minimize the drop. Most retail active counters were trading in negative territory on low volumes as turnover was dominated by blue-chips.

ASI dropped 24.64 points (0.44%) to close at 5,522.72, MPI lost 18.76 points (18.76%) to close at and the S&P SL20 index declined marginally by 1.50 points (0.05%) to close at 3,022.79. Turnover was Rs. 505.4m.

Top contributors to turnover were Commercial Bank with Rs. 223.1m, John Keells Holdings with Rs. 109.7Mn and Distilleries with Rs. 37.5Mn. Most active counters for the day were HVA Foods, and National Development Bank and Commercial Bank.

Notable losers for the day were Blue Diamonds non-voting up by 5.9% to close at Rs. 1.80, Lanka Milk Foods up by 5.6% to close at Rs. 95.00 and Panasian Power up by 4.2% to close at Rs. 2.50. Notable losers for the day were Ceylinco Insurance down by 9.8% to close at Rs. 305.00 Blue Diamonds (voting) down by 4.9% to close at Rs. 3.90 and Browns Investments down by 2.6% to close at Rs. 3.80.

Cash map for today was 45.42% clearly showing that market has cooled down slightly.
http://www.nation.lk/edition/business/item/13587-weekly-market-focus.html