Shadow Over Bourse

• Beginning Of the End Of ‘QE’

By Paneetha Ameresekere

Panic selling by locals saw the benchmark ASPI fall by 2.20% over its previous day’s close to end last week at 5,951.83 points, while the newly introduced S&P SL 20 Index fell by 2.32% to 3,342.96 points on a Rs. 978 million turnover.
Shareholder wealth lost, Friday over Thursday: Rs. 55.2 billion. Shareholder wealth lost week on week to Friday (August 23):  Rs. 115.9 billion (4.5%).
Issues of governance, weak corporate earnings made worse by rising electricity prices and falling gold prices which would hit banks’ pawning portfolios also continued to dog the bourse, while in other negative developments, the continual exit of foreign funds from blue chip JKH, the market’s second largest capitalised stock, due to alleged uncertainty they have associated it with, in regard to this conglomerate’s multi million dollar foray in to its virginal betting and gaming business, is another debilitating factor affecting the bourse.
“Fears about the possibility of foreign funds now exiting from the Treasuries market, extending their reach to cover the stock market as well due to the possibility of the Federal Reserve System rolling back its quantitative easing (QE) programme soon because of the recovery of the US economy also loom large,” sources told this reporter.
The bourse on Friday witnessed a net foreign outflow (NFO) of Rs. 72.5 million, though on an overall basis it has had witnessed a net foreign inflow (NFI) of Rs. 18.3 billion (US$ 137.9 million*) in the year to date.
“The market is weak,” the sources said.
JKH Falls 3.1%
As a result of continued foreign selling (local buying) of JKH at Friday’s (August 23) trading, that saw its share values come down by 3.10% over its previous to Rs. 240.30 whilst contributing Rs. 474.1 million to the day’s turnover. The second biggest contributor to the day’s turnover was state owned HDFC with Rs. 300.2 million on a “local to local” sale. HDFC’s shares closed at
Rs. 33.30 a unit, down 2.08% over its previous, while the third biggest contributor to Friday’s turnover was Commercial Bank (Com Bank) with Rs. 72.7 million, also on a “local to local” transaction, with its share closing at Rs. 117, down 1.35% over its previous.
On the previous day Thursday (August 22), the destruction of shareholder wealth in the bourse continued for the second consecutive day, with shareholder wealth dissipating by Rs. 12.7 billion, following the previous day Wednesday’s figure of Rs. 44.3 billion as the market braced itself for further shocks due to a weak investor sentiment.
And foreign funds continued to exit from blue chip JKH, further bringing down the value of this stock by 0.56% to Rs. 248 on Thursday, due to alleged uncertainty they have had associated with, in regard to this blue chip’s multi million dollar foray in to its virginal betting and gaming business.
On Thursday  the benchmark ASPI fell by 0.5% to 6,085.88 points and the S&P SL 20 by 0.35% to 3,427.62 points, with the market experiencing a NFO of Rs. 92.50 million.
Com Bank and Hemas were subject to ‘foreign to foreign’ transfers, pushing up Thursday’s turnover to Rs. 653 million.
JKH contributed Rs. 203 million, Hemas Rs. 176.9 million (down 0.6% to Rs. 33.20 a share) and Com Bank Rs. 81.7 million, up 0.08% to Rs. 118/60 a share.
On the previous day Wednesday (August 21), investors saw Rs. 44.3 billion of their shareholder wealth wiped out as the ASPI fell by 1.73% and the newly introduced S&P SL20 by 1.71%.

The situation has had been made to further deteriorate with the continual exit of smaller foreign funds from blue chip JKH “with its fall aided and abetted by the decline in Ceylon Tobacco’s (CTC’s) prices by 5.11% to Rs. 1,290”. CTC is the bourse’s largest capitalised stock followed by JKH. Previously these columns alleged that CTC’s recent share price increase was due to manipulation because this rise came at a time when the Government increased the tax on cigarettes by Rs. 2 a stick, which therefore didn’t warrant for its share price to increase.
Now sanity appears to be prevailing with the price of CTC’s shares falling, at least on Wednesday.
JKH too contributed to the market’s demise, with its share value falling by 3.82% to Rs. 249.40. Sampath Bank that contributed the largest to the day’s turnover with Rs. 506.2 million out of Rs. 955.71 million was also responsible for its fall, with its share price declining by 0.89% to Rs. 189/20 at the end of the day’s trading.
A small consolation was that Sampath was also the reason for Wednesday recording a NFI of Rs. 337 million, after 2.6 million of its shares were bought at a discounted price of Rs. 190 a share by foreigners.
HNB Holds Bourse
Meanwhile at the beginning of the week on Monday too, foreigners continued to exit from blue chip JKH, while the only bright spot was ‘substantial’ foreign buying in to blue chip HNB (non voting shares), a continuation from the previous Wednesday’s (August 14) trading after a gap of two days.
Tuesday August 20 was a holiday for the bourse on account of poya.
As a result, the bourse experienced a NFI of Rs. 849.31 million, with HNB (NV) contributing over 70% of the day’s turnover of Rs. 1.1 billion, John Keells Stock Brokers in a report said.
However, the benchmark ASPI declined by 0.14% over its previous day’s close to 6,224.34 points; while the newly introduced S&P SL 20 Index gained by 0.08% to 3,494.18 points at the end of Monday’s trading, data showed.
* On the basis that the spot next price with which trades were done, was Rs. 132/70 to the US dollar as at Friday.