Forbes ABN AMRO business roundup
Stock Market
For the trading week ended Friday 11th of February 2000— Investors still on the sidelines
— Currency depreciation expected to slow down as current account improves
— NDB; The worst is overInvestors still on the sidelines. Market activity from both local & foreign counters remained at unimpressive levels as investors maintained a wait and watch attitude till the publication of interims next week. Average daily turnover registered a 82% decline, at Rs. 20m. Both indices registered declines due to some profit taking mainly in the Trading and the Manufacturing sectors. The overall market benchmark ASPI declined 0.6% to close at 557.8, whilst the MPI followed registering a 0.1% decline to close at 924.6. Foreign activity declined contributing towards a mere 27% of total activity as opposed to last weeks 30%, however this curtailed foreign selling limiting the net out flow for the week to Rs. 42m. compared to last weeks Rs. 218m.
Currency depreciation expected to slow down as current account improves. The current account deficit for 1999 is expected to come in at about 2.1% of GDP, better than our expectation of 2.6%. Deficit for 2000 has been changed to a slightly lower rate of 3.2% compared to our previous expectation of 3.6%. This relatively high deficit would adjust to only 0.04% of GDP going into 2001 from our previous expectation of 0.5% as investment goods fall with the completion of Sri Lankan Airlines fleet upgrade. This means slower currency depreciation going into 2001. This has already been seen with currency depreciation for December 1999 coming at 6% (three-month moving average) compared to 12% in December 1998. However our 2000 view remains a depreciation of 8%. For 2001 we expect a 5.5% depreciation.
NDB; The worst is over. NDB reported a 7% decline in net profit to SL Rs. 752m for FY99. This was largely due to a loss of SL Rs. 285m on sale of shares compared to a profit last year. There was an investment release of SL Rs. 185m this year compared to a sizeable provision last year. Excluding provisions and one-offs, growth works out to about 14% driven by a substantial rise in other income and associates. The growth in other income was a result of the bank’s greater move into areas such as trade finance, which still make up a relatively low amount of NDB income. Margins continued to contract this year by some 60bps given the falling renting rates but partly fixed funding costs.
Going forward we anticipate that NDB margins will be squeezed further in 2000, in line with our expectations of declining interest rates. However strong asset growth supported by the latest funding agreement with Kfw In Germany and expected involvement of the IFC, ample potential to grow other income and exposure into new areas such as Housing Finance will provide a substantial offset. Also taking into account the relatively low base in 1999, we expect good growth going forward. Despite the knee jerk reaction to last weeks 1 for 2-bonus announcement resulting in a 20% jump, NDB is sill 22% below market on a two-year relative performance basis. Stock remains a buy.
Bartleet’s Weekly Market Commentary
This week’s trading was fully fledged with both market indices showing borderline gains on Monday and declining on Tuesday. On Wednesday the ASPI remained virtually unchanged were as the sensitive MPI showed a gain of 4.8 points for the day. Thursday and Friday witnessed a drop in the ASPI while the MPI showed a marginal gain on Friday. Overall the ASPI & MPI sheded 4 points and 0.7 points respectively, when compared with a decline of 6.9 points and 17.9 points the previous week. The week closed with the ASPI on 557.8 and MPI on 924.6. Total equity turnover was Rs. 283.3 Mn, which could be attributed mainly towards Tuesdays contribution which amounted to 45.5 % of the total weekly turnover. The average daily turnover for the week rested at Rs. 56.66 Mn per day, when compared with Rs. 102 Mn per day the previous week.
Although the foreign activity was net buying at the beginning of the week, it stepped down to net selling and practically non existing on some days. The foreign purchases amounted to 4.6 % and sales amounted to 14.7 % of the total equity turnover. The Market capitalization at the end of the week was Rs. 110.2 Bn, a loss of Rs. 0.83 Bn. The market PER stands currently at 6.4.
The crown jewel for the week was Sampath Bank which accounted for 90 % of the market turnover of Tuesday & a significant percentage on Wednesday as well. Among the other heavily traded stocks James Finlay, Merchant Bank, ACL Cables, NTB, Talawakelle Plantations, Distilleries, Kelani Tyres & Lanka Tiles were perceptible.
Out of the 16 sectors, the Investments trusts showed an impressive increase of 50.6 points (4.65%), when compared with the other marginal gains in Services, Construction & Engineering, Plantation and Banking & finance sectors. The top three sectors declined were Trading (7.91%), Diversified (3.7%) and Manufacturing (3.4%).