Monday 16 June 2014

Equity Markets hit 12m high as ASPI surges past 6,300 resistance

Equity markets closed the four day trading week in the green with both indices recording W-o-W gains. The ASPI increased 58.08 points (or 0.92%) to close at 6337.22 points; the S & P SL 20 Index meanwhile, gained 0.74% (or 25.86 points) to close at 3505.03 points.

Turnover and Market Capitalization


JKH was the highest contributor to the week's turnover value as the counter's contribution of Rs. 1.63bn accounted for 36.82% of total turnover. Commercial Bank followed suit accounting for 5.60% of turnover (value of Rs 248.27mn) while Distilleries Company contributed Rs 173.90mn to account for 3.92% of the week's turnover.

The daily average turnover value over the holiday shortened week amounted to Rs 1.11bn (up 40.71% W-o-W) compared to last week's average of Rs 787.25mn.

Total turnover value for the week amounted to Rs 4.43bn relative to last week's value of Rs 3.94bn. Market capitalization meanwhile, increased 0.98% (or Rs 25.69bn) to Rs 2655.60bn relative to last week's value of Rs 2629.91bn.

Liquidity (in Value Terms)

The Diversified sector was the highest contributor to the week's total turnover value, accounting for 52.07% (or Rs 2.31bn) of market turnover. Sector turnover was driven primarily by JKH, Expolanka, Hemas Holdings and Adam Investments which cumulatively accounted for 81.70% of the sector's total contribution.

The second highest sectoral contribution stemmed from the Banking and Finance sector, which contributed 20.22%(or Rs 895.94mn).

The sector was helped by Commercial Bank and HNB (NV) which accounted for 36.63% of the sector's total turnover value.

The Manufacturing sector was also amongst the top sectoral contributors to the market, accounting for 7.84% (or Rs 347.28mn) of the week's total turnover value.

The sector was helped by Royal Ceramics which contributed 19.20% to total sector turnover.

Liquidity (in Volume Terms)

The Diversified sector dominated the market in terms of share volume too, accounting for 32.23% (or 56.14mn shares) of total volume, with a value contribution of Rs 2.31bn.The Banking and Finance sector followed suit as 40.91mn shares (or 23.48%), amounting to Rs 895.94mn changed hands.

The Manufacturing sector meanwhile, contributed 9.68% to the week's total turnover volume as 16.85mn shares changed hands.

The sector's volume accounted for Rs 347.28mn of total market turnover value.

Week's Top Gainers and Losers

Adam Investments was the week's highest price gainer, increasing 43.33% from its issue price of Rs 3.00 to close at Rs 4.30. SMB Leasing (NV) gained 25.00% W-o-W to close at Rs 0.50. Office Equipment meanwhile, gained 24.86% W-o-W to close at Rs 2,544.00.

Lankem Development and Ramboda Falls were also amongst the week's top price gainers with W-o-W gains of 22.00% and 21.61%, respectively.

Browns Investments was the week's highest price loser as the stock declined 22.73% W-o-W to close at Rs 1.70, relative to Rs 2.20 last week. PC Pharma recorded a W-o-W price decline of 13.33% to close at Rs 1.30 while Sinhaputhra Finance closed at Rs 116.20, representing a W-o-W decline of 9.64%.

Foreign investors closed the week in a net buying position, with daily average net inflows amounting to Rs 0.34bn relative to daily average foreign inflows of Rs 0.337bn recorded last week (+1.50% W-o-W). Daily average foreign purchases increased 51.23% W-o-W to Rs 0.63bn, from Rs 0.42bn recorded last week, while daily average foreign sales amounted to Rs 0.29bn, relative to last week's value of Rs 0.08bn (-260.67% W-o-W). In terms of volume meanwhile, JKH and Hemas Holdings led foreign purchases while Expo Lanka and Renuka Agri led foreign sales. In terms of value, JKH and Namal Acuity Value Fund led foreign purchases while Distilleries and Ceylon Investments led foreign sales.

Point of View

Last week's positive momentum by HNIs and foreign investors continued this week, helping push markets past the key 6300 resistance level.

The benchmark ASPI reached a 12-month high of 6337.22 points, with retail, HNIs and institutional investors showing renewed vigor ahead of the Central Bank's policy decision next week. Banking and Finance counters such as COMB, DFCC and HNB [NV] contributed significantly to volume with turnover value reaching a 4-week high of Rs 1.41bn to boost average daily turnover value (for the week) to Rs 1.11bn.

Markets in the week ahead are likely to look for direction from the Central Bank's monetary policy directive.

Still, the recent recovery in sentiment is likely to remain as foreign buying and HNIs and institutional investors continue to prop market activity. Some retail profit-taking is, nevertheless, likely.

WB Estimates Sri Lanka GDP at 7.2% In its mid-year appraisal and estimation of global economic prospects, the World Bank (WB) forecasted World GDP at 2.8% in 2014E, 40bps lower than its initial estimate in January (3.2%). The Bank added that the setbacks in early 2014 - namely US weather patterns and geopolitical tensions in Eastern Europe - are temporary and that a partial rebound is likely toward year end.

The WB projects global growth picking up to 3.4% in 2015E and 3.5% in 2016E as high-income countries gain momentum as fiscal consolidation slows, employment stabilizes and financial conditions remain accommodative.

Tailwinds from these are expected to benefit developing countries with growth projected at 5.4% in 2015E and 5.5% in 2016E.

Sri Lanka's economic growth meanwhile, is estimated at 7.2% in 2014E, significantly ahead of the rest of the South Asian region.

Sri Lanka's economic growth is expected to remain broadly stable (7.2%) in 2014E, and moderate to a more sustainable level of 6.7% by 2016E.

The World Bank added that although international financial conditions continue to add pressure on regional growth, strengthening global demand, particularly from USA and EU and increased domestic investment are likely to drive South Asia's medium-term growth. Risks to growth however exist, with upside to oil prices (due to heightened geopolitical uncertainty), and adverse weather conditions in particular likely to impact regional consumption and growth.

Source:Global Economic Prospects June 2014
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