Indices benefitted mainly on the back of gains made by Ceylon Tobacco Company (+8.2% WoW), John Keells Holdings (+4.0% WoW), Commercial Leasing Finance (+12.8% WoW), Commercial Bank (+2.5% WoW), and Peoples Leasing and Finance (+9.1% WoW).
Benchmark index sustained a bull run throughout the week except for Tuesday which ended virtually flat slipping 0.1%.
Daily turnovers and volumes continued to be healthy where the averages stood at LKR 1,162.5mn and 92.2mn respectively.
Heavy local Institutional and high net worth interest along with foreign participation was witnessed on selected blue chip counters, which triggered a number of crossings during the week.
Amongst the counters that witnessed significant crossings during the week were Aitken Spence where more than 3.8mn shares changed hand at LKR 100, whilst John Keells Holdings witnessed over 1.1mn shares change hands at prices between LKR 238.0-LKR 250.0. The latter emerged as the highest turnover contributor for the week with a cumulative turnover of over LKR 848.0mn. In addition, 63.4mn shares of Taprobane Holdings crossed off at LKR 3.00, whilst c.18.7mn shares Lanka Orix Finance changed hands at LKR 3.30. Amongst the other counters that witnessed crossings during the week were Chevron Lubricants Lanka, Hayleys, Commercial Bank, Hatton National Bank, Lanka IOC, and Ceylon Tobacco Company.
Both voting and nonvoting shares of SMB Leasing recorded considerable volumes during the week, of which the voting share of SMB Leasing recorded the highest volume of c.81mn followed by Taprobane Holdings, SMB Leasing (x) and Lanka Orix Finance.
The week saw foreign purchases amounting to LKR 2,018.1mn whilst foreign sales amounted to LKR1,842.8mn. Market capitalisation stood at LKR 2,602.6bn and the YTD performance is 5.8%.
The Return of the Retailer may keep hopes alive…
The Colombo stock exchange witnessed a buying spree during the week continuing the upward momentum that was gathered following the beginning of the New Year. The highlight of the trading activities can be pointed out as the return of the retail investors to the market and their relatively high contribution to the turnover and volumes at the Colombo Bourse. The continued positive sentiment shown by foreign investors as well as the institutional trading interest provide further strength and stability to the current revival in activity levels of the Colombo Bourse.
This could also yield to a possibility of reallocation of savings currently placed in the non-banking financial institutions of the economy towards the equity market. This is so given that risk levels in especially the relatively small to medium scale finance companies have increased following the collapse of few medium scale finance companies together with the financial difficulties faced by the sector as a whole. The revival in trading activity on the Colombo Bourse under this backdrop could prove to be a further catalyst to the expected reallocation of savings in the economy from the non banking finance sector towards equities.
The directive put forward by the monetary authority of Sri Lanka to merge the small scale banks and finance companies of which the relative risk level seems a touch high with that of the more established banks and finance companies, appears to be motivated by the increasing risk levels especially within the non-bank finance sector. The move is expected to improve the scope of the Central Bank to regulate and monitor the banking and finance sector more closely and effectively.
Further, on the other hand, the rupee has been witnessing depreciation pressure during the past few days over the high importer demand for dollars. The higher demand for dollars by importers however indicates that there is also a pick up in credit growth in the economy and hence the subdued level of aggregate demand seen throughout the previous year is currently seems to be gradually recovering.
To read entire report: http://research.srilankaequity.com/t882-24-01-2014-weekly-review-asia-wealth-management-co-ltd#1003