Stock Market Forbes ABN AMRO Business Roundup
For the trading week ended Friday 10th of October 1999
• Market sentiments improving towards end of week
• Local stocks under valued compared to the sub
• Strategy
• Interest rate movementsMarket sentiments improving towards end of week: Market activity started to pickup towards end of week. Overall activity however registered a decline posting an average turnover of Rs. 67.9m recording a wow 21% decline. Foreign investor participation registered a similar improvement towards latter half recording an 81% increase from last week. Fund flows from this segment also indicated a semblance of recovery registering a total outflow of Rs. 24.7m, as against last week’s Rs. 130m Selling pressure on blue chips continued to weigh the MPI down by 1% to close at 909.6. This was again reflected in the movements of the ASPI which continued to pace down during the week to close at 561.8 registering a 1% decline for the week. Interest in DFCC, Ceylon Brewery and JKH contributed towards improved activity levels towards end of week.
Local stocks under valued compared to the sub-continent: Expectations of a stable government, economic recovery and an improved liquidity has rejuvenated investor interest in the Indian equity market. Overseas investors have been mainly lured to the market by the listing of software & computer services stocks. Benchmark BSE-30 on the Bombay Stock Exchange, has soared 65% in local currency terms since the last year.
However analysts caution the Indian market to start looking overbought at present levels. This is in direct contrast to the Sri Lankan market which has seen a continued sell down resulting the ASPI to close 4% down for the year. Given these circumstances we believe Sri Lankan stocks to be under Valued & stand attractive at present levels compared to other regional markets.
Strategy: Based on bottom up approach we expect a 29% increase in the ASPI within the next 12 months. Our positive outlook on the market is further backend by a recovering economic activity, buoyant tourism and the SRR cut which we expect will lower interest rates. In these circumstances we recommend investors to capitalise on present ell down conditions and invest in stocks like JKH, NDB, DFCC and Caltex. Further we believe stocks like Dipped Products, Richard Pieris, Maskeliya, Balangoda and Dockyard to have plenty of value, despite their smaller sizes.
Interest rate movements: 6 and 12 month-interest rates closed higher at 11.99% 12.48% compared to last weeks 11.95% and 12.43%.
Bartleet’s Mallory Market Commentary
The Colombo bourse maintained a downward momentum with both indices on a negative mode Monday through Thursday but recovered Friday with the ASI and MPI recording gains which however was insufficient to prevent a decline WoW closing at 561.8 and 909.6 levels, down 6.8 and 13.5 points respectively. Turnover this week despite being 23% below last week, remained encouraging at Rs.331.67Mn with an average daily turnover of Rs.66.3Mn.
Despite the Foreign Fund Managers Conference held this week, the net outflow of funds continued in to a 6th successive week failing to achieve the desired effect of attracting much needed foreign inflow of funds. The net foreign outflow this week however remained 38.5% lower than the previous week, at Rs.85.18Mn with foreign purchases and sales accounting for 43% and 68% of total turnover respectively.
Interest in plantation stocks remained strong with significant quantities of Udapusselawa, Kotagala, Hapugastenne, Maskeliya & Namunukula changing hands this week. Among other heavily traded stocks for the week were DFCC, Caltex, John Keells, Ceylon Brewery and United Motors.
NDB made an announcement today that it’ll be entering the housing finance market in keeping with it’s long term lending role, through NDB Housing Finance Co. Ltd. forming a strategic alliance with International Finance Corporation (IFC- part of the World Bank Group funding economic growth in developing countries) and Housing Development Finance Corporation of India (HDFC- pioneers and market leaders in retail housing finance market in India). NDB group will be holding controlling interest while IFC and HDFC are to hold 15% each of the equity stake in the proposed venture. It also believes that much potential lies in this market with only 25% of the estimated annual demand of Rs.25Bn being presently serviced by the housing finance providers.