Bourse blip! - Three days in to the New Year, market’s dip tops 1.5%; ASI below 6,000 points; Rs...
Three days in to the New Year, market’s dip tops 1.5%; ASI below 6,000 points; Rs. 32 b lost in value
Within just three market days since New Year, the Colombo Bourse has already surpassed the 1% decline threshold closing yesterday with a negative return of 1.67% and losing Rs. 32 billion in value since end 2011.
The dip yesterday was the sharpest in the New Year, with ASI down by over 1% and Milanka Index by over 2%. Turnover was Rs. 459 million, slightly better than Tuesday’s Rs. 380 million.
On a normal day the 1% dip wouldn’t have been of concern given Colombo’s overall dip of 8.5% in 2011. Analysts were highly concerned that yesterday’s dip was despite the Central Bank coming up with a robust roadmap for 2012 and beyond. “On Tuesday specific details may not have been fully digested. However yesterday given the wide publicity and reading, the Roadmap had apparently failed to spur the market,” an analyst lamented.
A fund manager said the dip was unfortunate and disheartening since the roadmap looked good and the Central Bank justifiably may have had enough confidence to make the forecast very optimistic midst gloom globally. “Achieving 8% growth in 2012 marking it the third consecutive year of such high growth would be highly commendable. If that rosy forecast were to be ignored, even a GDP growth of over 6% could be very high in the worsening global situation,” another analyst opined.
“Despite positive macro-economic outlook and envisaged high inflows, the failure of the market to be revitalised confirms the serious lack of confidence and perhaps Roadmap wasnt convincing enough,” analysts added.
“Stock market is a leading indicator of business sentiments as well as investor perceptions. The Government rode on it in 2009 and 2010 when it gained by 125% and 96% respectively. In the same vein the dip in 2011 and so far this year should be of serious concern rather than merely liking it to correction,” they emphasised.
Others attributed the low level of activity to external factors and liquidity issues as well as indecision on some beneficial moves by the regulator Securities and Exchange Commission. Independent observers were quick to point out that Rs. 500 million turnover was the true character of Bourse sans questionable play by some investors.
Brokers disagree and emphasised that potential of Colombo Bourse given the strong fundamentals was greater provided all stakeholders act with trust and confidence.
Large investors remained on the sidelines awaiting credit guidance from the main regulator according to Reuters.
“It was a disappointing day on the Sri Lanka bourse with the ASPI declining by 1.0% to 5973 to close below the psychologically important support level of 6000. This was on the back of retail selling in a number of counters,” moaned DNH Financial.
“Market seemed to drown deeper into trouble as the indices fall off – the – track sharply,” Arrenga Capital said yesterday. “Nothing seems to boost the investor confidence that keeps fading by the day as the market bottom – out puzzle still remains unanswered. Analysing a trend over the past two months, the benchmark index have being moving back and forth around the psychological point of 6,000 looking for a direction, and the question remains as to what would be the turnaround point,” it added.
“The market continued to denote a bearish sentiment as investors preferred to remain on the side lines waiting for a sign of better times in the Colombo bourse,” noted Lanka Securities.
NDB Stockbrokers said heavy retail activity dominated the market amidst many counters losing ground. Continued interest in Environmental Resources was witnessed while JKH managed to top the turnover list.
Diversified sector was the highest contributor to the market turnover (due to John Keells Holdings) and the sector index declined by 1.90%. The share price of John Keells Holdings slid by Rs 0.70 (0.41%) to close at Rs 169.00.
Investment Trust sector became the second highest contributor to the market turnover (due to both shares and warrants of Environmental Resources) and the sector index decreased by 2.74%. The share Price of ERI dipped by Rs 4.10 (10.93%) to close at Rs 33.30 while warrant 2’s price decreased by Rs 1.90 (12.26%) to close at Rs 13.60.
Ceylon Tobacco Company and Ceylon Leather Products were among the top contributors to the market turnover.
CTC’s price declined by Rs 9.00 (1.84%) to close at Rs 481.00 while Ceylon Leather Products saw its price coming down by Rs 3.40 (3.47%) to close at Rs 94.50.
Banking sector players, Seylan Bank and Nations Trust Bank, saw some interest as they advanced by 2.3% and 0.5% respectively amidst bearish sentiments, whilst National Development Bank continued to glide down as it closed at Rs. 128.0 with a 4.5% plunge. Interest also prevailed in Aitken Spence Hotel Holdings, Colombo Dockyard, commercial Bank and Distilleries as well, as each closed in the red. Meanwhile, Insurance sector player Ceylinco Insurance [Non – Voting], topped the price gainers’ list as it advanced by 9% at its close of Rs. 328.2.
“While today’s market performance was clearly disappointing, we believe that it is only temporary and a re-rating is in the offing,” DNH Financial attempted to sound optimistic. “Given that several blue chip stocks are currently trading on single digit valuations, we see little excuse for bottom up investors to avoid the market and advise investors to select counters with sustainable financial attributes,” it argued.
“While equity investors have been hit relatively hard over the past couple of months following a series of events which has taken attention away from the strong corporate performance of several blue chip heavyweight and middleweight counters, we believe the window to invest is now open for those willing to have a alpha driven approach. In this respect, we wish to emphasise that stock selectivity will determine the winners from the losers,” DNH added.
