From bust to boom?

 

If some felt the Bourse has gained too much too soon, then the 100 points each rise by both the ASI and MPI yesterday was telling. The rise in the ASI between its lowest level of 4,738 on 6 June and yesterday was 1,040 points or 22%, whilst in terms of market capitalisation it is Rs. 407 billion. The recent rebound has reduced the ASI’s year-to-date dip to below 5% by yesterday as opposed to 22% in early June. ASI is now at 8-month high. If the momentum persists, which many expect whilst some don’t, the CSE with a few more months for year-end is just short of Rs. 400 billion to surpass the all-time-high market capitalisation of Rs. 2.6 trillion achieved on 2011 Valentine’s Day.

Yesterday’s top blue chips JKH, Commercial Bank and HNB dominated turnover with foreigners accounting for net inflow of Rs. 150 million, enhancing the year-to-date record inflow to a staggering Rs. 29.4 billion.

The continued buying interest by foreigners despite willing sellers upping the premium in the background of the market’s re-rating is a further indication by rebound-proponents that the rally is credible. Volume of shares traded yesterday was 99.5 million via 27,000 transactions.

The ever-strengthening rebound also comes as SEC Chairman Dr. Nalaka Godahewa holds his first stakeholder consultation with stock brokers today.

Reuters said the ASI has risen 15.2% in the last 13 sessions on hopes that the new SEC under Godahewa will produce ideas to revive the market. Quoting unnamed brokers, the Reuters report said a correction is long overdue as things can go on the boil too much, which isn’t good for the market.

NDB Stockbrokers said yesterday: “The Bourse continued its upbeat momentum and both the ASPI and MPI managed to record triple digit growth. Bullish sentiments were witnessed across the board with turnover surpassing the Rs. 1 billion mark for the sixth consecutive day to post Rs. 1.9 billion.”

The ASPI crossed the 5,700 mark, cutting down the year-to-date loss to 4.9% from 18.6% seen at the end of July, it added.

Heavy accumulation was witnessed in index heavy John Keells Holdings and Banking sector counters Commercial Bank, HNB, NTB, and Sampath Bank. Retail favourite counters such as Nation Lanka Finance, Free Lanka Capital Holdings, and Seylan Developments also witnessed activity during the day.

Banking, Finance and Insurance sector was the top contributor to the market turnover (due to Commercial Bank, Nation Lanka Finance, Hatton National Bank, and Nations Trust Bank) and the sector index gained 2.99%.

The share price of Commercial Bank gained Rs. 3.30 (3.02%) to close at Rs. 112.50, whilst Nation Lanka’s share price increased by Rs. 2.10 (18.58%) to close at Rs. 13.40. Further, both HNB and NTB recorded gains, with counters increasing by Rs. 8.10 (5.39%) and Rs. 1.40 (2.29%) to close at Rs. 158.50 and Rs. 62.50 respectively.

The Diversified sector became the second highest contributor to market turnover (John Keells Holdings) and the sector index increased by 1.90%. The share price of John Keells Holdings gained by Rs. 4.10 (1.97%), to close at Rs. 212.50.

Manufacturing, Beverage, Food and Tobacco and Power and Energy sectors contributed heavily to market turnover, with sector indices gaining 1.73%, 1.02% and 2.88% respectively.

Softlogic Stockbrokers said: “The upbeat sentiment of investors continued as the Bourse witnessed equivalently strong institutional and retail participation.”

“The ASPI surged above the 5,750 point mark touching 5,787.09 points at its highest before closing with a gain of 108.92 points at 5,777.22,” it added.

The MPI took a gradual uptrend, yet again outweighing the gain of the benchmark index to close at 5,440.64 points. The largest positive contributors for the day were John Keells Holdings (+1.9%), Hatton National Bank (+7.48%) and Nation Lanka Finance (+16.8%).

The S&P SL20 secured its highest gain since introduction as it surged 59 points at its close, with major gains stemming from C T Holdings (+6.3%), Hatton National Bank (+5.7%), National Development Bank (+4.3%) and Aitken Spence (+3.2%). YTD performance of the index moved to positive territory. Further, Aitken Spence Hotel Holdings, which saw notable interest during recent times, touched a 52-week high of Rs. 80.

 Softlogic said with considerable recent foreign interest in Commercial Bank voting and non-voting, DFCC Bank and Pan Asia Bank, the Banking sector players edged up to the top turnover slot dominated by Commercial Bank. This was led by a large on-board transaction of 497,800 shares at Rs. 110 followed by two off-board blocks amounting to 750,000 shares at Rs. 110 and Rs. 111.50.

The non-voting shares of both Commercial Bank and Hatton National Bank attracted focus as they traded at their 52-week high levels of Rs. 94 and Rs. 116.50 respectively before closing at Rs. 93.40 (+4.68%) and Rs. 115.70 (+7.48%). Further, Seylan Bank non-voting regained interest as around 362,000 shares were seen traded on-board at Rs. 32.50

Interest in John Keells Holdings extended with its recent foreign inflows, as it saw a price appreciation of 2.2% at its intra-day high of Rs. 213, whilst strong buying interest stepped in with an on-board transaction of 100,000 shares being picked on-board at Rs. 210. The final hour of trading recorded an off-market parcel carrying 100,000 shares of the conglomerate, executed at Rs. 213. Renuka Holdings encountered an off-board block at a 52-week low price of Rs. 38, constituting of around 695,100 shares.

Several large trades were executed in Free Lanka Capital, amongst which a large block of two million shares were seen transacted at Rs. 3.20.  Retail play was observed in Nation Lanka Finance, Laugfs Gas voting and non-voting and Singer Finance.

People’s Leasing Company, with significant foreign and local interest during recent times, encountered several large trades on board, whilst having gained 3.6% at its intra-day high. The counter closed at Rs. 14.

The new introductions, Asia Siyaka and George Steuart Finance, saw their prices reaching very high rates as they touched intra-day highs of Rs. 10.5 and Rs. 320 respectively. However, Asia Siyaka closed with 7.1% at Rs. 9.2 whilst George Steuart maintained its high point at close with 49.7%.

“The overall positive market sentiments have supported these fresh entrants to record massive gains from their reference prices, deviating from the old days of unsuccessful debuts,” Softlogic Stockbrokers said.

DNH Financial said: “We advise investors to take advantage of the current rally in the Bourse to reposition their portfolios by selling into strength momentum stocks and buying on weakness quality stocks that are likely to outperform over the medium to longer term.”

“Our investment strategy is to build a highly robust portfolio of alpha stocks strategically positioned to tap the next cycle of 3Q2011 corporate results, which we believe is tied to local consumption dynamics. In this respect, we are buyers of counters in the Banking, Diversified, Utility, Industrial and Healthcare sectors, which we expect would benefit fully out of the domestic expansion and generate firm top-line growth, sustainable margins and earnings, and are ideally positioned to outperform the market,” DNH added.