• Weekly Stock Market Review August 14, 1998
• Asia Siyaka optimistic of future Low Grown market

Weekly Stock Market Review August 14, 1998

The indices took another heavy hit this week. The All Share lost 31 points for the week to close at 561. The Sensitive Index lost a staggering 81 points, which translates to a 10% drop in value in one week! It is apparent that the slide continues.

Foreign investors, on whom the Colombo bourse is heavily dependant both as investors and as a ‘yard stick’ for many local retailers, continue to liquidate their involvment in this region. Total foreign Sales amounted to Rs. 66.48 million this week, with net sales touching over Rs. 45 million showing the obvious selling trend. Friday’s indices showed a drop even though foreign involvement was only 9%. This is an indication that local investors are following the trend set by foreign investors and liquidating their portfolios.

Foreign markets all over the world are also taking a fall, however the situation seems to be aggravated by the state of emergency declared in the country. The postponement of the elections has also added to this. The indication given to the international market is one of uncertainty.

Bad to worse… but the worst is yet to come
Institutional investors seem happy to play their wait and see game. Corporate performances also don’t have an impact on the market and do little to slow the slide. Grain Elevators commenced trading on Monday, and opened at around Rs. 20. It is holding steady at around Rs. 18.

Specultative buying is highly risky. Stock gains are few and far between. However, at these prices buying the steady stocks with a long term view may be a worth while option.

MMBL Group Research
Allied Phillip Securities Ltd.

Asia Siyaka optimistic of future Low Grown market

Asia Siyaka is optimistic and predicts that the Sri Lankan Low Grown teas would continue to appreciate and move in isolation when compared against the price structure for Tea as a commodity in the global market.

Asia Siyaka Commodities (Pvt.) Ltd., Research Unit having done a market survey of the countries consurning Sri Lankan Low Grown Teas have concluded that the supply demand factor would continue to be in favour of the Producer/Celler for at least a couple of years. All factors indicate that the prices for good liquoring well made Low Grown’s would continue to appreciate by 10% to 15% in the short to medium term. It is therefore imperative that the controlling and decision making bodies of the Tea Industry implement a marketing strategy for the long term consolidation of this unique potential of Sri Lankan Low Grown teas that exists at present. We have to move expeditiously as otherwise the unpredictable price fluctuation as experienced in the past, would once again affect this primary commodity by allowing various external market forces to determine price levels. The contributing factors for the strong market are as follows:

* Sri Lankan Low Grown teas particularly with its distinct liquoring properties have a consumer preference in the Middle East and CIS countries that cannot be substituted by teas from other origins and is therefore unique in its character.

* Some key Middle East markets which were tested with a blend of high precentage of leafy orthodox teas from other origins as price reducers are now facing stiff consumer resistance and a consequent drop in market share.

* Market research indicates that most of the established brands which blended leafy orthodox teas from other origins are now reverting to 100% teas from Sri Lankan origin in order to maintain its unique Low Grown Sri Lankan character.

* The market is already reacting to this phenomenon by the best OPI’s and BOPI’s being aggerssively sought after and this trend would continue.

* The market potential of some CIS countries and embargoed Middle East countries are not fully exploited.

Recommendations for High Medium Grown Tea Factories
Asia Siyaka predicts that clean well made leafy grades would continue to appreciate in price. Therefore any factory that could produce this type of tea even in the High and Medium category should expand their manufacturing capability to produce well made leafy grades. Some manufacturing units in the High and Medium elevations who have already invested in colour sorters, ancillary machinery are producing well made leafy grades and are selling their teas at a price advantage of Rs. 20/- to Rs. 30/- per kg.

Asia Siyaka Research and Technical unit expertise would be made available to facilitate any production facility to convert their manufacture to produce leafy tea to suit the market.