Investors turn bullish after court ruling

THE Supreme Court decision, which ruled that presidential elections should be held in 2005, boosted the market on Friday with both indices rising to new highs.

The ASPI (All Share Price Index) closed the week at 2179.1 points up by 44.2 points or 2.07% compared to last week's closing. While the MPI (Milanka Price Index) closed the week showing substantial 101.1 point or 3.67% increase compared to last week's closing level.

The week as a whole remained positive, with indices rising in most parts of trading. However the ASPI fell on Wednesday mainly due to the drop in Carsons share price, which fell by Rs. 600 to close the day at Rs. 3900 per share.

Due to this the market capitalisation of Carsons stock fell significantly to Rs. 23.8 billion from a previous Rs. 27.5 billion.

Interest on Telecom sector counters continued for a yet another week, with considerable quantities of Dialog and SLT shares exchanging hands.

Dialog remained the highest traded stock for the week with 30.7 million of its shares trading, and the counter contributed Rs. 526.7 million towards the weekly turnover.

SLT saw 7.1 million of its shares trade this week, contributing Rs.163 million towards weekly turnover. The counter closed at Rs. 23.25 per share up marginally from last week's close of Rs. 22.75 per share.

Banking sector counter NDB saw 2.65 million of its shares trading for the week. The major trade of NDB shares went through on Monday with 2.63 million shares being traded.

The counter was the second highest contributor towards turnover contributing Rs. 482.7 million towards weekly turnover.

Renewed interest was seen in Distilleries shares with a notable 3 million of its shares trading for the week. The share price appreciated by 10.1% Week on Week (WoW) to close at Rs. 43.75 per share. The counter contributed Rs.122.8 million towards weekly turnover.

Interest on Tokyo Cement non-voting and JKH remained throughout this week as well. Approximately 7 million Tokyo Cement shares traded for the week, contributing Rs. 112.5 million towards weekly turnover.

The counter closed the week at Rs. 17.50 per share. JKH saw 1.2 million of its shares trade for the week contributing Rs. 163.9 million towards the total weekly turnover.

The counter closed at Rs. 141.75 per share on Friday.

Hotel Developers saw its share price appreciate by 7.5% this week, amid investors anticipating the government stake would be put on sale soon. It closed the week at Rs. 150.75 per share, after trading at a high of Rs. 155 and a low Rs. 139 per share during the week.

The Hotel Developers contributed Rs. 99.9 million towards weekly turnover with 510,200 shares trading for the week.

The market turnover totalled to Rs. 2.6 billion, while the average daily turnover for the week stood at Rs. 513.58 million. Comparing average daily turnover levels WoW, the turnover showed a 48.7% improvement compared to last week.

Foreign purchases for the week stood at Rs. 742.7 million, while foreign sales for the week stood at Rs. 400.3 million, resulting in a net foreign inflow of Rs. 342.4 million for the week.

The foreign participation for the week stood at 22.2% of total activity, showing little change from last week' s participation level of 23.3%.

Dialog, Vanik Incorporated, SLT, Tokyo Cement (Non Voting) and Nawaloka were the most traded stock for the week.

Election fever return to the market

Market reacted positively to the Supreme Court's verdict, that Presidential elections should take place in 2005. Both indices climbed sharply as the investors turned bullish during Friday's trading, with retailers taking the center stage.

The judgment no doubt would erase at least some uncertainty with regard to the timing of the Presidential election.

Now, the next 6 years policy direction can be seen in 3 months time as oppose to 15 months, if the election was held in 2006. The investors can now look for policy documents of the candidates, which is likely to be official, presented in the next few weeks.

The government, in reply to the LTTE's suggestion to hold peace talks in Norway, announced that it is best that they be held in Sri Lanka.

The LTTE is yet to respond to this statement.

We believe that the talks should resume without any further delay and both parties should work towards strengthening the peace process and building up the lost confidence.

With the Presidential election likely to be held in November 2005, we feel that the attention could once again deviate from the peace process to the election related issues.

However we strongly believe that urgent action should be taken to avoid any further killings and misunderstanding thus peace process should be treated with top priority.

Market to return to volatility

We expect both indices to fluctuate in a wide range amid the current macro developments and the overall market performance can also be influenced by the election related news.

However the volatility would create trading opportunities for the investors, thus we advice to keep a close eye on fundamentally sound small and mid caps.

With the real negative returns expected to continue in the short to medium term, we believe that the market activity would get a boost in the present environment.

"This information has been compiled from sources that we believe to be reliable but we do nothold ourselves responsible for its completeness or accuracy. No matter published herein create any liability of any kind of HNB Stockbrokers (Private) Limited or its associates.