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Head of investment research at NDB Stockbrokers says the market will be attracting fresh investment
Despite the bourse’s current favorable price to earnings ratio’s foreign investors are still opting to take a back seat.
In an interview, Waruna Singapulli, head of investment research at NDB Stockbrokers says the market is on the verge of bottoming out and attracting fresh investment.
LBR: Despite higher profitability the market has stumbled. As an analyst where do you see the market bottoming out?
A: I think the reason for the stumble is that a lot of speculation took place this year. So with that we saw some speculating stocks going up and some time people getting stuck at high prices and not being able to sell at a profit. That is what really caused the prices to come down.
So profitability has increased and based on that you can still say the stocks are attractive. So fundamentally it should not come too far down. But based on the market sentiment and market weakness, speculative stocks are going up and people get stuck with stocks. That can bring it down a little further. I doubt it will be coming down much further with this point.
LBR: What kind of an impact has come from the regional markets?
A: Well, Sri Lanka usually had not got affected by the regional markets. Sri Lanka has more or less performed independently. If you look at the valuations in the regional markets like India, Hong Kong, Malaysia, they are trading around PE of 17X where Sri Lanka is probably around 16X.
So that is not much of a difference at all and Sri Lanka could be seen as a little more attractive. But having said that yes, the global scenario with the US debt issue and China slowing down there may be a little bit of uncertainty which may have some impact. The investors may be a little cautious. They will not be as bullish.
LBR: Looking at the current earnings and forward earnings where do you see forward Price to Earnings ratio is heading?
A: When you say forward PE, we can say right now Sri Lanka is trading at around 15 to 16 times based on 2010 -2011 results. When you say forward PE you are referring 2012 results. So when you are looking at that by the current price level the overall market is probably trading around 13 times. I think it can go up to about 15 times at least over the next two to three years. It may come down closer to 10 times in the long run.
LBR: What is your view on blue chip stocks?
A: The MPI has come down this year. Blue chip stocks have been underperforming quite a bit. Again what happened was when speculative stocks were not performing people were selling the blue chips and trying to hold on to their speculative stocks. I think overall, the market is slightly undervalued.
There are a lot of blue chips which are more undervalued because there are speculative stocks which are overvalued. So I think once the market settles down and stabilizes there will be a good demand for those stocks in the latter part of the year.
LBR: Is there are very specific sector that you are bullish about?
A: I think overall banks and finance, manufacturing and maybe even hotels stock prices have come down. There may be a few sectors which are attractive.
LBR: In the last two to three years Sri Lanka’s IPO market has been quite hot. We have seen some major listing. Going forward where do you think Sri Lankas IPOs are? Do you see the number of IPOs slowing down in the future or do you see the growth will continue?
A: I think it will anyway slow down a bit because prices have come down and the market is fairly weak right now. But once that settles and once the investors return it will pick up. So immediately it will slow down and will pick up and go forward I think, may be next year.
LBR: Do you think there is enough market or investor momentum for to IPOs to move forward?
A: Actually IPOs drained out lot of cash from the market. A lot more listings will be coming in. It needs more capital and investors. So we have to attract new investors obviously. Maybe existing investors have to put more money into the market. I think you have to do it gradually. I think you have to be bit careful when you schedule the number of IPOs and how much of money that can be raised on the market.
LBR: If you look at foreign investors, they have been net sellers for the last two to four years. Has the foreigners selling out been a major factor in the market?
A: I think there were a lot of reasons. The people who came early have wanted to realize profits over the last two years. They will be waiting right now probably to see where it bottoms out since it is coming down. Because you do not want to see it going down in a few weeks after you put money into it. They will probably wait till it stabilizes at a certain point. Then I’m sure they will come.
The market is too volatile. People will be a little cautious. Last year we saw over 100 percent returns on average. People might have to expect a bit low this year. You can’t have 100 percent returns every year.
http://www.lbr.lk/fullstory.php?nid=201108012307141921
Despite the bourse’s current favorable price to earnings ratio’s foreign investors are still opting to take a back seat.
In an interview, Waruna Singapulli, head of investment research at NDB Stockbrokers says the market is on the verge of bottoming out and attracting fresh investment.
LBR: Despite higher profitability the market has stumbled. As an analyst where do you see the market bottoming out?
A: I think the reason for the stumble is that a lot of speculation took place this year. So with that we saw some speculating stocks going up and some time people getting stuck at high prices and not being able to sell at a profit. That is what really caused the prices to come down.
So profitability has increased and based on that you can still say the stocks are attractive. So fundamentally it should not come too far down. But based on the market sentiment and market weakness, speculative stocks are going up and people get stuck with stocks. That can bring it down a little further. I doubt it will be coming down much further with this point.
LBR: What kind of an impact has come from the regional markets?
A: Well, Sri Lanka usually had not got affected by the regional markets. Sri Lanka has more or less performed independently. If you look at the valuations in the regional markets like India, Hong Kong, Malaysia, they are trading around PE of 17X where Sri Lanka is probably around 16X.
So that is not much of a difference at all and Sri Lanka could be seen as a little more attractive. But having said that yes, the global scenario with the US debt issue and China slowing down there may be a little bit of uncertainty which may have some impact. The investors may be a little cautious. They will not be as bullish.
LBR: Looking at the current earnings and forward earnings where do you see forward Price to Earnings ratio is heading?
A: When you say forward PE, we can say right now Sri Lanka is trading at around 15 to 16 times based on 2010 -2011 results. When you say forward PE you are referring 2012 results. So when you are looking at that by the current price level the overall market is probably trading around 13 times. I think it can go up to about 15 times at least over the next two to three years. It may come down closer to 10 times in the long run.
LBR: What is your view on blue chip stocks?
A: The MPI has come down this year. Blue chip stocks have been underperforming quite a bit. Again what happened was when speculative stocks were not performing people were selling the blue chips and trying to hold on to their speculative stocks. I think overall, the market is slightly undervalued.
There are a lot of blue chips which are more undervalued because there are speculative stocks which are overvalued. So I think once the market settles down and stabilizes there will be a good demand for those stocks in the latter part of the year.
LBR: Is there are very specific sector that you are bullish about?
A: I think overall banks and finance, manufacturing and maybe even hotels stock prices have come down. There may be a few sectors which are attractive.
LBR: In the last two to three years Sri Lanka’s IPO market has been quite hot. We have seen some major listing. Going forward where do you think Sri Lankas IPOs are? Do you see the number of IPOs slowing down in the future or do you see the growth will continue?
A: I think it will anyway slow down a bit because prices have come down and the market is fairly weak right now. But once that settles and once the investors return it will pick up. So immediately it will slow down and will pick up and go forward I think, may be next year.
LBR: Do you think there is enough market or investor momentum for to IPOs to move forward?
A: Actually IPOs drained out lot of cash from the market. A lot more listings will be coming in. It needs more capital and investors. So we have to attract new investors obviously. Maybe existing investors have to put more money into the market. I think you have to do it gradually. I think you have to be bit careful when you schedule the number of IPOs and how much of money that can be raised on the market.
LBR: If you look at foreign investors, they have been net sellers for the last two to four years. Has the foreigners selling out been a major factor in the market?
A: I think there were a lot of reasons. The people who came early have wanted to realize profits over the last two years. They will be waiting right now probably to see where it bottoms out since it is coming down. Because you do not want to see it going down in a few weeks after you put money into it. They will probably wait till it stabilizes at a certain point. Then I’m sure they will come.
The market is too volatile. People will be a little cautious. Last year we saw over 100 percent returns on average. People might have to expect a bit low this year. You can’t have 100 percent returns every year.
http://www.lbr.lk/fullstory.php?nid=201108012307141921
