The Colombo Equities kicked off the New Year on a strong note and closed in the positive territory for the fifth consecutive day as the policy rate cut boosted the investor sentiment. Policy rate cut
The central bank reduced its standing lending facility rate by 50 basis points to 8% while maintaining the other at 6.5%, in the view of boosting the economic growth amid the benign inflationary pressures. According to Government statistics, the inflation has reduced to 22 month low of 4.7% in December 2013.
This was the third time central bank reduced the policy rates in the last twelve months. In-line with the reduction in policy rates, the market interest rates have declined over the period. For example, the Commercial Bank average weighted prime lending rate has declined by 452 bps to 9.88%. Share prices increased across the board
The reduction in the policy rate enthused the stock market and ASI posted the fifth largest daily gain in an opening day and closed at 5,968.04, with a gain of 55.26 points or 0.9%. Interestingly the bourse has opened for the New Year on a positive note since 2003. On the other hand, the 20 script S&P gained 24.40 points or 0.8% to close at 3,288.27.
Gainers outweighed the losers 196 to 27. Cash map closed at healthy 66%.
Price appreciations in blue chips such as John Keells Holdings (LKR 229.00,+0.8%), Distilleries (LKR 199.00,+3.1%), Commercial Leasing Co (LKR 4.00,+5.3%), Lanka IOC (LKR 35.30,+6.7%) and DFCC (LKR 132.00,+2.3%) contributed positively to the index performances.
Six scripts namely, Lanka IOC, John Keells Holdings – warrant 22 (LKR 86.10,+7.6%), Tokyo Cement (LKR 29.40,+3.2%), John Keells Holdings -warrant 23 (LKR 97.00,+2.7%), Tokyo Cement – nonvoting (LKR 25.30,+8.1%) and Richard Peiris Exports (LKR 47.80,+7.2%) reached 52 week high during the day.
The market turnover was LKR 944mn. Top contributor to the turnover: Commercial Bank
Commercial Bank accounted for 51% of the market turnover and reported a turnover of LKR 486mn. 3.7mn shares of Commercial Bank changed hands in a single crossing today at a price of LKR 118.00 per share. The script closed at LKR 120.00,-0.3%.
Apart from Commercial Bank, John Keells Holdings (LKR 57mn), Chevron Lubricants (LKR 57mn) and Lanka IOC (LKR 32mn) were among the top contributors to the market turnover while Lanka IOC, Asia Asset Finance (LKR 2.00,+5.3%), John Keells Holdings – warrant 22, Textured Jersey (LKR 16.00,+5.3%) and HVA Foods (LKR 10.50,+6.1%) were among the heavily traded stocks of the day. Net foreign selling
Foreign investors were net sellers after six consecutive days’ of net buying with a net outflow of LKR 351mn. Foreign participation accounted for 42% of the market activity. Net foreign outflows were reported in stocks such as Commercial Bank (LKR 429mn), Overseas Realty (LKR 19mn) and Lanka IOC (LKR 9mn) while net inflows were reported in counters such as John Keells Holdings (LKR 47mn) and Distilleries (LKR 23mn).
Pursuant to the capitalization of reserves, 70mn voting shares and 10mn non-voting shares of Tess Agro were listed today. The voting share closed at LKR 1.30,0% and nonvoting share closed at LKR 1.10,+10%.
As per the announcement made to CSE, Dankotuwa Porcelain concluded the acquisition of 76% stake in Royal Fernwood Porcelain Limited for a consideration of LKR 300mn. The counter closed at LKR 13.30,+3.1%. Rights issue in Arpico Finance
Arpico Finance announced a rights issue (02 new shares for every 03 shares held at LKR 50.00 per share) to raise LKR 149mn to meet the tier-1 long term capital adequacy requirement. Arpico Finance which is a member of Alliance group successfully raised LKR 356mn through a debenture issue in November 2013. The counter closed at LKR 104.00,+8.3%. Road map 2014
Meanwhile, Central Bank governor delivered his annual policy speech and presented the road map - monetary and financial sector policies for 2014 today. As per the media reports, NDB and DFCC banks will have to merge and the plans for the merger are expected to be submitted by June 2014. In anticipation of this merger, both stocks gained notably during past month where DFCC share price increased by 10.0% to LKR 132.00 and share price of NDB increased by 5.8% to LKR 164.00 in one-month period.
Further, in the view of creating strong local banks, the governor mentioned that smaller banks with less than LKR 100bn in assets should grow or merge during a ‘reasonable period’. As per Sep 2013 interim financials, assets base in Pan Asia Bank (LKR 66bn), Sanasa Development Bank (LKR 29bn), Union Bank (LKR 35bn), DFCC Bank (LKR 89bn) and HDFC Bank (LKR 24mn) were below the LKR 100bn mark.
Moreover, the central bank expects to reduce the number of non-bank financial institutions to 20 from 58. Thus the regulator has encouraged the finance companies to merge with each other/banks.