Stock Market The Forbes ABN AMRO Business Roundup
For the trading week ended Friday 30th of July 1999
Market lagging behind
A recovery in monthly performance
Revival in tourist arrivals
Interest rate movementsMarket lagging behind despite interest persisting on Blue Chips: Market settled back to it’s usual monotony as the local investors resumed the driving seat. Limited profit taking mainly from this segment resulted the ASPI to decline 1.3 points to close at 571.1, despite continued buying interest mainly from the foreign investors. Further buying interest in selected Blue Chips from this segment attracted an inflow amounting to Rs. 74.3m & contributed towards a 2 points increase in the MPI to close at 962.6. Foreign activity levels registered a decline accounting to 27% of average turnover compared to last week’s 40%. Overall activity levels followed suit declining 66% to record an average turnover of Rs. 62.4m.
A recovery in monthly performance; Monthly market statistics indicated a welcoming market recovery, as ASPI registered a 10.3% increase in July. Further continued buying interest from the foreign segment in some selected Blue Chips resulted in a much-needed inflow of funds accounting to Rs. 571m after a lapse of seven months. General activity levels doubled registering a total turnover of Rs. 2129.7m. Analysts account this improvement in mainly foreign interest to signs of bottoming in external trade & a buoyant tourism sector. However it’s evident that local investors remain weary of the prevailing macro conditions & political uncertainty related to forthcoming elections. Amidst this scenario we maintain our call for selective investment in counts which remain relatively cheep in comparison to regional markets & have remained resilient under trying operating conditions. Our top recommendations remain JKH, DFCC, NDB LLUB, Dipped Products & Dockyard.
Revival in tourist arrivals: Tourist arrivals during the first half of this year registered a 21% increase from the comparative figure last year. Despite the seasonal decrease in May-June, arrivals in these two months continued to register increases of 24% & 17% YOY. Analysts attribute this recovery in arrivals to successful promotional campaigns conducted by the local tourist board in our main European markets in the latter half of the year and the gradual recovery of the East Asian economies. In line with our expectations these reasons have lead Western European arrivals to increase at a higher 22% level compared to overall growth. We expect this to favourably effect JKH, Aitken Spence & Aitken Spence Holdings due to these companies higher exposure to this clientele.
Interest rate movements: 3 months & 12 months interest rates decreased from 1199% & 12.74% to 11.83% & 12.7%, whilst 6 months interest rate remained constant at 12.72%.
Bartleet’s Weekly Market Commentary
The market this week limited to four trading days on account of Wednesdays Poya holiday, fluctuated within a narrow band but by and large held on to the sharp gains witnessed the previous week on the back of renewed investor faith on the bourse. Thursdays bomb explosion in the heart of Colombo had no real impact on the market. The ASI opening the week at 572.4 witnessed a slight decline on the first two trading days but recovered during the last two days to record a marginal drop of 1.28 points or 0.2% to 571.12 while the Milanka index gained 1.98 points or 0.2% to close at 962.58 WoW. Turnover for the four days remained a moderate Rs. 248Mn with an average daily turnover of around Rs. 62Mn, down 66% from the previous week’s massive Rs. 180.6Mn. Market capitalization gained by around Rs. 2.26Bn to close the week on Rs. 113.59Bn whilst the market PER was on 6.58.
Though foreign participation has eased out somewhat, foreigners still remained more active on the buying side than selling, recording a net inflow of Rs.74.3Mn as against an inflow of Rs. 564.7Mn the previous week, with foreign purchases and sales accounting for 43% and 12.6% of total turnover respectively. Local investor sentiment, as customary, improved following the positive stance taken by foreigners and helped sustain the previous week’s recovery.
Heavily traded stocks for the week includes SPEN, DFCC, AHOT, ACAP, LLUB, HNB, LMF, DIST and HAPU. Stocks that recorded appreciable gains last week witnessed only a marginal drop in value indicating confidence in fundamentally sound stocks. With June ending interim results now being released, we expect some fluctuation in the market due to increased investor interest on company performance given the present economic environment.
Metropolitan Resource Holding (MRH) in an announcement dated 29th July has informed of a divestment of their subsidiary, Metropolitan Agro Industries (Pvt) Ltd. The loss arising on this transaction will amount to Rs.17Mn for MRH and Rs. 31Mn for the group. Other announcements include a 50% First and Final Dividend by J. L. Morison Son & Jones., thus increasing the loss per share.