Wednesday 1 January 2014

Sri Lanka stocks gain amid record capital raisings in 2013

Jan 01, 2014 (LBO) – Sri Lanka’s stocks rose 4.78 percent in 2013 with companies raising over 100 billion rupees in debt and equity, as foreign investors bought into the markets for the second year in a row.

In Japan stock surged 52 percent driven by money printing and China fell 6.8 percent as largely state-led credit bubble burst.

There was a broad recovery in Western markets with the recovering US up 30 percent and even troubled Greece up 24 percent.

In Sri Lanka stock values rose 13.4 percent to 2,460 billion rupees up from 2,167 billion rupees a year earlier.

Foreign investors who dumped stocks in the bubble years are now returning to Sri Lanka being net buyers for the second year in a row.

Foreigners pumped in 34.1 billion rupees to Sri Lanka stocks in 2013, down from 40.2 billion rupees in 2012.

There was a non-market-driven surge of corporate debt triggered by a one-off state intervention where unprecedented tax breaks were given to listed bond holders. Among the largest purchasers of the tax free bonds were banks.

Listed Firms raised 68.3 billion rupees from 28 bond issues up from 12.5 billion rupees a year earlier.

Companies have raised 119.4 billion rupees from the capital market, topping last year's 29.58 billion rupees.

Sri Lanka's market gain comes amid as the island recovers from a balance of payments crisis triggered by state energy subsidies financed by bank debt which worsened a credit bubble.

In 2011 the benchmark All Share Index fell 7.1 percent on top of a 8.5 percent fall a year earlier as a credit bubble burst.

Sri Lanka's S&P SL20 index of large liquid firms which replaced two firms to rebalance the index this month reported a 5.79 percent growth.

According to stock exchange data 57 companies have showed a total return in excess of 15 percent in 2013, 26 companies have returned above 30 percent.

The beverage, food and tobacco sector has climbed up to top with 28.01 percent growth over the last year while power and energy sector recording a 19.51 percent growth.

Information technology performed worst, falling 27.33 percent. The trading sector fell 21.39 percent.

Japanese stocks rose 52 percent driven by the so-called 'Abenomics' money printing exercise, where its negative fallouts are expected to hit the economy in the future.

Already inflation is up and the currency is down hurting savings of Japan's ageing population, though the real burden of heavy state debt is falling at their expense.

Mumbai's BSE Index was up 9.0 percent, Shanghai's Composite Index was down 6.8 percent with a price earnings ratio of 8.1 times according to Bloomberg data.

China is recovering from a credit bubble, partly worsened by state-led 'stimulus' in the wake of the global financial crisis, which has increased mal-investments by state connected entities.

Germany's DAX index rose 23 percent, France's CAC index rose 18 percent, Spain's IBEX rose 21 percent.

Greek stocks rose 24 percent. America's S&P 500 rose 30 percent.

Source: www.lbo.lk

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