Stock Market The Forbes ABN AMRO Business Roundup
For the trading week ended Friday 17th March 2000
— General Market sentiment low
— In the news: Further talks between opposition and Government, and ADB funding
— Economic update
— Commercial Bank - Outperformance set to continueGeneral market sentiments low, Foreign selling in selected blue chips, especially JKH, persisted at the beginning of the week adding further pressure to an already depressed market. Some respite can be received, as we understand that the selling was largely via an index fund. This means that the disposals were not necessarily fundamentally driven. As these quantities were cleared the market did recover towards the end of the week, ending largely flat w-o-w. Clearly market sentiment is low and could pressure selective stocks in the next few weeks. However, we think a real opportunity, even on a trading perspective, has arisen from the sell-off noticed since the start of the year. Fundamentally most companies are much stronger this year along with the economy in general. Corporate results are recovering and trade figures for January have come in strongly positive. Investors should look to accumulate, bearing in mind of course selective trading patterns of the larger blue chips.
In the news; further talks between opposition and Government, and ADB funding. The Government held a second round of talks with the UNP this week in order to come to a collective agreement on solving the NorthEast conflict. Although a solution is far from reached, the fact that the two opposition parties are actually talking keeping their own difference aside is very positive. Also it was reported in the local newspapers that AOB would be providing over USD600m in funding for infrastructure development over the next few years. This much needed aid will be largely for ports’ power and roads.
Economic update: 130th exports and imports have clearly begun to move positively, with an export growth of 15% year on year and import growth of 35.6% for January. Most export sectors have recovered nicely. On the import side, the growth is distorted by the importation of an aircraft: Excluding this imports are up 12% driven by intermediate goods. The rise in intermediate goods, although partly attributable to higher fuel prices’ could also be due to higher textile imports, which would push garment exports going forward. The Sri Lankan economy is largely trade driven, and this positive momentum in trade seen at the start of the year clearly gives reasons to be optimistic. We expect growth to ke better over the next few months.
Commercial Bank - Outperformance set to continue: As expected, Commercial Bank reported a better set of results when compared to other banks under coverage for 1999. Not only was earnings growth better, asset quality likewise improved significantly and ROE: was maintained at a reasonable 16.2% despite a much higher capital adequacy level of 17%. Although earnings forecasts had to be slightly revised to take into account the decline in forex income, the earnings recovery is clearly underway and we expect 23% growth in 2000. Growth will be driven by stabilising margins, greater efficiency and strong asset growth. This is our pick among the commercial banks.
Barleet’s Weekly Market Commentary
The downward momentum witnessed at the Colombo Stock Exchange during the last few weeks changed its phase during the mid week. Both the indices saw gains throughout the week with the exception of Monday and Tuesday. For the week, the ASPI lost 1.7 points (-0.33%) to end the week at 519.8 where as the sensitive MPI gained 3.9 points (0.41%) to close the week at 850.3. However, the Equity Turnover for the week was Rs. 223.15 Mn which is an advance of Rs. 21.05 Mn when compared with the previous week’s amount of Rs. 202.1 Mn, whereas the Average Daily Turnover during the week was Rs. 44.63 Mn, as against the previous week’s figure of Rs. 40.4 Mn. The foreigners once again were net sellers, totalling to an amount of Rs. 122.45 Mn ( 54.87 % ) were as the Foreign purchases accounted for Rs. 32.44 Mn (14.5 %) of total market turnover. Market Capitalisation for the week depressed by Rs. 0.3 Bn to close at Rs. 102.8 Bn. Many stocks traded at discounted prices during the week, but saw an increase in the prices at the end of the week. The investors can look forward to take advantage over the reduced prices during the coming week.
During the week large quantities of Ocean View, JKH, Aitken Spence, BLUE, Horana, and Vanik Shares and Debentures exchanged hands.
There were declines in 9 sector indices during the week, with Chemical and Pharmaceuticals, Investment Trusts, Trading sectors leading the way. Among the sector indices that witnessed gains Plantations, Construction and Engineering, Stores and Supplies were more evident.
Sri Lanka Telecom Debentures- The issue was over subscribed and the subscription list closed on Tuesday 14th March 2000 at 4.30 p.m. As at 16th March 2000 there were 505 applications received, 2,166,625 debentures subscribed and the total amount received was Rs. 2,166,625,000.
Mercantile Investments - The company informed that the Mercantile group of companies purchased 3,054,451 shares of Ocean View Ltd. This amounts for 14.26% of the issued capital of OVL and the present holding of the MIL is increased up to 16.25%.
C.W. Mackie - The company issued a circular to the shareholders stating that as previously informed in 31st December 1999 interim report, a state of the art plant was built and commissioned during the year ended 31st March 1999, by Scan Products Manufacturing (Pvt.) Ltd. Scan Products Manufacturing is a wholly owned by Scan Products Holding Co. Ltd., which is a direct subsidiary of CWM. This plant will be used to manufacture and bottle the " Sunquick" range of products. The total capital cost of the plant was Rs. 100.8 Mn. and the capital cost was partly financed from equity funds and from a bridging loan provided by CWM and the balance by a long term loan from the banking sector. The bridging loan was provided from internal resources.