HNB Stockbrokers’ weekly market review

Expectation of corporate earnings drive retail participation

Market was able to maintain the upward momentum this week with interest generated across a range of stocks.

Market this week saw improved investor enthusiasm, gaining almost 43.8 ASPI points during the first three days of trading, but inched downward on Friday, loosing 20.8 points on the back of few blue-chip counters loosing ground.

Overall during the week the ASPI (All Share Price Index) advanced by 0.86 per cent or 21.3 points to close at 2485.1 points while the liquid MPI (Milanka Price Index) closed up 1.25 per cent or 38.8 points at 3132.7 points.

Telecom sector stock, Dialog dominated this week’s market activity with a turnover of Rs. 379.3 million for the week.

Counter on Monday witnessed several crossings totaling to 20 million shares, contributing nearly Rs. 360 million to days’ turnover, reflecting 95 per cent of total Dialog turnover for the week.

Meanwhile the Dialog share closed Rs. 0.25 lower at Rs. 17.75 after peaking at Rs. 18.25 per share during the week.

Satisfactory 3rd quarter performance drove keen interest on Lanka Walltiles contributing Rs. 176 million to the weekly turnover. Walltile edged down Rs. 0.25 or 0.38 per cent to close at Rs. 66 per share after trading within a range of Rs. 64 and Rs. 67. The counter meanwhile traded a volume 2.7 million shares becoming one of the top traded stocks for the week.

Considerable trading was also witnessed on the high cap counter JKH, which accounted for a total turnover of Rs. 139 million, trading almost 1.2 million shares during the week. The JKH share gained 0.86 per cent on WoW to close at Rs. 117.5 per share while having traded between a price band of Rs. 115.5 and Rs. 119 per share.

Revived interest on NDB resulted in a turnover level of Rs. 117 million over the week, becoming the 4th largest contributor for the week. The counter appreciated by 0.15 per cent to stand at Rs. 163 per share at the end of the week while having traded a total volume of 0.71 million shares over the week. The banking counter over the week traded within a price range of Rs. 160 and Rs. 166 per share.

The total market turnover for the week showed a substantial growth of 156.8 per cent compared to last week’s turnover levels to stand at Rs. 1.8 billion amid improved retail participation. Meanwhile the resultant average daily turnover stood at Rs. 365.8 million, up 105.4 per cent on WoW.

This week foreign investors remained net buyers with a total net inflow of Rs. 323 million showing a notable 57 per cent increase compared to last week. Foreign purchases and foreign sales stood at Rs. 1 billion and Rs. 0.7 billion witnessing a WoW increase of 269 per cent and 890 per cent respectively. Foreign participation this week further increased to 47 per cent of total activity compared to 24 per cent of last week.

Dialog, Seylan Bank (Non Voting), Seylan Merchant (Non Voting) and Lanka Walltile were among the most traded stocks for the week.

Corporate earnings to set the tone

As expected by us the activity levels improved during the week as investors were looking to accumulate stocks that were expected to show healthy financial performance. During the week All Share Price Index (ASPI) gained by 21.3 points while Milanka Price Index (MPI) notched up 38.8 points compared to last week.

In the week ahead we expect the market to remain active with investors looking to accumulate counters that are likely to do well financially. Meanwhile we believe that trading opportunities would continue to exist in the market place especially with plantation sector counters.

Furthermore we advice investors to keep a close eye on SLT, as the Court hearing on the proposed sale of NTT’s holding in SLT to another foreign party will be taken up again on the 25th of February.

Economic update

Trade deficit widens as petroleum imports jump in December

A jump in petroleum imports by 126.5 per cent YoY caused imports to rise by 33.6 per cent and to widen the trade deficit by 80.4 per cent in December 2007 compared to the corresponding period last year.

The export earnings in December increased by a healthy 22.7 per cent YoY to stand at US$ 863.4 million in the back of strong performances in Agriculture as well as industrial exports. Agriculture exports increased by 38 per cent YoY largely due to higher tea exports.

The tea exports in December 2007 stood at US$ 104.9 million, up 41.7 per cent as a result of higher prices prevailed during the period. The Industrial exports were driven by textiles and garments that grew by 15.3 per cent YoY.

Meanwhile imports during December increased by 33.6 per cent YoY to US$ 1.16 billion, fuelled by sharp increases in intermediate and investments goods that went up by 34.6 per cent and 46.9 per cent YoY respectively. The higher intermediate goods were driven by 126.5 per cent rise in petroleum imports to stand at US$ 313.9 million in December.

Much faster increase in imports compared to exports resulted the trade deficit to widen further to stand at US$ 295.2 million, 80.4 per cent higher compared to US$ 163.6 million in December 2006.

Cumulative exports during 2007 stood at US$ 7.74 billion up 12.5 per cent while cumulative imports increased by 10.2 per cent to US$ 11.3 billion compared to the corresponding period last year.

During the year (2007) trade deficit increased by 5.6 per cent to stand at US$ 3.56 billion compared to US$ 3.37 billion in the corresponding period last year. The Balance of Payments (BOP) by end of 2007 stood at US$ 531 million, while the Gross Official Reserves stood at US$ 3.06 billion.

“This information has been compiled from sources that we believe to be reliable but we do not hold 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. All opinions views findings and conclusions included in this report constitute our judgment of this date and are subject to change without notice.