      Business Editor : Eriq Dewanarayana |
Business Editor : Eriq Dewanarayana |
Nov. 27, 1998
Upward Trend with a low pace
Three consecutive interest cuts by US Fed failed to achieve the desired dream. And it won’t be a surprise, if they opt for the fourth interest rate cut in December. The present implications are that the expected international financial flows did not take place, except for wide fluctuations in international stock markets.The positive market sentiment that emerged at the Colombo bourse proved to be unsettling with retailers as well as institutional investors adopting a profit harvesting strategy within a short period. Selected stocks had a rate of return in excess of 50%, allowing a windfall gain to investors.
After months of dull trading the week witnessed a mini rally in Colombo with the All Share moving up 30 points to reach 571, at close. The Sensitive index too went on a similar drive to gain 60 points, but lost 6 points on the last two trading days to close at 875.
Above average turnover levels kept the market alive with institutions and foreign investors capitalizing on the rally to make shifts in their portfolios. Foreign investor participation was moderate with a net inflow of Rs. 130 million with total purchases amounting to Rs. 263 million. The focus of this speculative week was in Pure Beverages and Grain Elevators.
The latest statistics from the Central Bank indicate that, except for the rubber sector, the economy is on a moderate growth path with external assets and private remittances being significantly higher than previous years. Exports grew by 5.6% during the first nine months of 1998 while imports increased by only 2.1%. As a result, overall BOP has improved from US$ 118 million to US$83 million during the Jan-Jun period of 1997 and 1998.
The uncertainty on elections, both provincial and presidential, as well as the global and regional outlook, indicates that we are unlikely to see a moderate growth in 1999. However, the rapid depreciation of the Rupee is a positive sign for export competitiveness.
The current profit taking is likely to cause further fluctuations in the market while we expect the All Share to surpass 600 before the end of the year. Our picks include Tokyo Cement, Dockyard, DFCC and Commercial Bank as strong mid term buys, while Asia capital and Merchant Bank are ideal as long-term buys. Speculators could try out Vanik.
MMBL Group Research
For Allied Phillip Securities Limited
