Stock Market Forbes ABN AMRO Business Roundup
For the trading week ended Friday 2nd of July 1999— Gains made in blue chips drive the market slightly high
— Interest rates stabilised on the back of strong revenue
— StrategyGains made in blue chips drive the market slightly high:
ASPI closed at 522.8 at the end of a holiday shortened week, registering a 1% increase as against a 2% increase in the blue chip weighted MPI which closed at 838.9. Some of the largely traded stocks comprised of JKH, Aitken Spence & DFCC. There was a reduction in overall activity levels registering an average turnover of Rs. 27m or a 60% decline. Foreign activity though somewhat subdued compared to last week remained at moderate levels & generate an inflow of Rs. 42m.
Interest rates stabilised on the back of strong revenue:
The previous forecast of 6% the secretariat to the Treasury announced a 7.8% budget deficit on the back of a GDP growth for 99 as against the previous forecast of 6%. This was mainly due to a temporary shortfall in revenue collection from GST & enhanced borrowings in last quarter. However this trend is expected to reverse in line with improved revenues from income tax, Security levy &: excise duties which have remained strong during the last 5 months. Further GST, which is gradually being consolidated, is expected to increase its contributions due to improved tax audits, improved enforcement mechanism and adoption of a modified refund mechanism for exports. The treasury expects the sale of 10.5% stake in Telecom to contribute in closing this gap considerably as well as injecting much needed liquidity into the system.
Our forecasts currently assume a deficit of 9.1% for 99. This difference is mainly due to higher interest cost projections and a lower GDP growth estimate 2.9%. The slower GDP is mainly attributable to the significant fall in trade figures to date.
Strategy:
We believe that certain stocks are clearly oversold or would remain healthy even through tough times. Our overall view on the market, at least over the next few months, is that there is further downside from the already depressed levels, given deteriorating macro fundamentals. However, over the medium to long term, we maintain that here is money to be made especially in some selective picks like; JKH, LLUB, Dockyard, NDB & DFCC.
Bartleet’s weekly market commentary
The three-day shortened trading week witnessed both indices move on the upside Wednesday through Friday continuing the upward momentum seen during the last two days of the previous week. The ASI and MPI gained 7.1 and 17.6 points to close the week at 522.3 and 838.9 respectively. Turnover recorded for the week was Rs. 135.4Mn with an average daily turnover of Rs. 45Mn, down 31% from the previous week but remained encouraging on the back of growing foreign interest on the bourse.
Among the large parcels that changed hands were shares of DFCC 200,000 @ Rs. 98.00, DIST 117,100 @ Rs. 4.25, JKH 151,000 @ Rs. 158.00, JKH 100,000 @ Rs. 156.00, SPEN 150,500 @ 97.75 and 113,700 SAMP @ Rs. 40.00. Hayleys, keeping with its policy of shareholder wealth maximization declared a bonus of 1 for 14 during the week. With tea prices expected to see a recovery during the latter part of 1999, a progressive strengthening of investor enthusiasm on the heavily beaten plantation stocks was also witnessed during the last two weeks.
Foreigners have once again taken the lead, capitalizing on the present discount levels of the market to take positions in fundamentally sound blue chips. However local funds have been slow to follow, remaining relatively dormant for the majority of the week. Foreign participation accounted for 36% of the weeks trading with purchases leading sales recording a net foreign inflow of Rs. 42.07Mn. Market capitalization was up Rs. 1.4Bn to Rs. 103.86Bn while market P/E remained at an attractive 6.0. With renewed foreign interest we expect the local investor sentiment to improve in the coming couple of weeks leading to a gradual recovery of the bourse.
Looking at the economy in general, the rupee depreciated against all major currencies in nominal terms on a YoY comparative basis. The Yen strengthened the most, by about 26% to Rs.0.59 whilst the US$ appreciated around 9.5% to close the week at Rs. 71.47. The STG gained around 3.9% to Rs. 112.98, the DM around 5.2% to Rs. 37.95 and the FFr around 5.1% to Rs. 11.32.
Commercial Bank Prime Lending Weekly Average (PLR) closed the week at 14.2% up from 13.7% a week ago but down marginally from 14.4% an year ago. Treasury bill rates increased, with 3 month and 12 month TB’s up to 11.85% and 12.69% from 11.8% and 12.65% respectively and call money stabilized within the 10.3-12.5% range during the week.