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Asian Tribune is published by E-LANKA MEDIA(PVT)Ltd. Vol. 20 No. 109

Macro worries hit the share market

By Quintus Perera - Asian Tribune

According to the weekly review of the HNB Stockbrokers the overall market momentum remained sluggish with indices continuing to slide downward for the 3rd consecutive week. The declined prices of market heavyweights such as Dialog, JKH and SLT was the primary factor behind the fall in indices. The All Share Price Index (ASPI) lost 46.3 points or 1.81 percent to 2513.9 points while the more liquid Milanka Price Index (MPI) slipped a significant 74.3 points 2.20 percent to close at 3299.7 points on Friday, compared to last week’s closing levels.

Colombo Dockyard emerged as the highest contributor for the week with turnover amounting to Rs.129.3 million of which the majority was observed on Thursday. The counter was also the number one traded stock during the week with a volume of around 2.5 million shares. The Dockyard share closed 0.75 rupees or 1.42 percent lower at Rs.52.25 after peaking at Rs.54 during the week.

Plantation sector counter Malwatte appeared among the investor favorites for yet another week with a turnover of Rs.60.9 million, representing almost 6.2 percent of total market turnover. The share price of Malwatte closed 4 rupees higher at Rs.34.50 for the week witnessing an impressive 13.1 percent price gain. During the week approximately 1.8 million Malwatte shares changed hands.

Ranking in the 3rd place is the banking stock DFCC. During the week approximately 0.4 million DFCC’s shares were seen trading contributing over Rs.50.8 million to weekly market turnover. Counter traded between a high of Rs.132 and a low of Rs.125, before closing at Rs.130.25 on Friday, witnessing a Rs.5.25 or 4.2 percent price appreciation during the week.

Speculative trading was witnessed on the low cap stock Touchwood during the week, which posted a turnover figure of Rs.47.5 million, becoming the 4th largest for the week. The week saw around 0.43 million Touchwood shares trading within a wide price range of Rs.99 & Rs.121. Although the counter topped in terms of turnover the share price saw dipping by 8.7 percent to close at Rs.110.25 on Friday.

Total turnover for the week amounted Rs.984 million, showing a 21.4 percent reduction compared to last week with Thursday contributing the highest turnover of Rs.358.5 million. The cautious approach adopted by the investors in the back of rising interest rates and inflation restricted the activity levels causing average daily turnover to stand at Rs.196.9 million compared to Rs.250.6 million last week.

Meanwhile foreign investors remained on the sidelines this week accounting for only 22.7 percent of the total market activity compared to 20.6 percent last week. Foreign purchases stood at Rs.279.4 million an 18.1 percent drop compared to last week while foreign sales witnessed a smaller drop of 4 percent to Rs.168.3 million. The higher foreign buying compared to foreign sales resulted in a net foreign inflow of Rs.111.10 million for the week, down by 33 percent comparable to last week’s Rs.165.70 million

Heavily traded stocks for the week were Dockyard, Vallibel, Malwatte and Kelsey.

Meanwhile in their point of view HNB Stockbrokers indicated that the iIndices continued to move towards negative territory for the 3rd consecutive week with no positive news from the macro front. Market lost 46.3 points during this week’s trading. We expect the sentiment to remain negative with interest rates continuing to go up affecting the stock market performance. Furthermore, activity levels would remain modest although trading opportunities are likely to exist in the market place.

Earnings continue to grow

The corporate earnings of the top 15 companies in terms of market capitalization grew by a healthy 31 percent in the back of turnaround in LIOC and strong performance by banks. However excluding LIOC, which made a loss last year, the earnings growth is limited to 20 percent. The four banking stocks included in our analysis contributed 35 percent towards the earnings growth over the last 9 months. Furthermore the exceptional performance of Carsons and Bukit Darah amid high palm oil prices also contributed towards profit growth in

In their opinion the last quarter earnings growth would be lower than the 1st 9 months with banking sector and LIOC earnings likely to come under pressure. Although the high cap counters posted strong earnings this year the mid and small caps earnings were negatively impacted by higher interest rates and inflation. HNB Stockbrokers feel the total market earnings growth would be lower than the high cap earnings growth, thus they stick to our 22 percent market earnings growth forecast for 2007.

- Asian Tribune -

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