“Increasing interest rates continue to haunt the bourse as it lacks buying power…’’
Posted on the August 17th, 2012 under Market Reports by Softlogic Equity Research 
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CSE Diary for 16.08.2012
Overall sentiments at the bourse remained reluctant as the ASPI dropped to a low of 4,913.96 points after touching as much as 4,938.32 points to close with a 30.9 point dip at 4,908.7 points. John Keells Holdings dominated the S&P SL20 and the MPI index performance with the heavy weight closing with a 2.0% dip after a seven day race. The S&P SL20 index closed the day with a 20.9 point dip at 2,778.9 points whilst the MPI too dipped 1.3% at 4,521.3 points.
Yesterday’s T-Bill auction resulted in a 5 bp gain in the 12-month yield rates to 13.23%. We accept that the market yield is below the short term bill rates though over the long run we expect stocks to outperform. At this point, we reiterate to hunt on the rock bottom shares whilst focusing on the defensive picks as we expect the interest rate to edge up going forward.
Earnings Talk : 198 of the 285 listed entities have published their performance for 1QFY13 to exhibit a 17% dip to a cumulative of LKR30.2 bn. The depreciating exchange rate environment is said to have had a bad hit on many companies as they eat out earnings in terms of exchange losses, wider outflow to service charge on foreign loans and higher import costs. Exporters would be a direct beneficiary in this exchange rate environment but export oriented entities listed on CSE are minimal and firms’ with overseas operations. Decline in performance in the heavy index such as Bukit Darah and Carsons Cumberbatch have weighed on the market. CSE still continues to be an attractive pick amongst the emerging markets as proved by the recent foreign interest.
Despite their dip in performance during 1QFY13, Panasian Power highlighted the trade screen after a 7.8 mn share quantity was picked on board at LKR2.5 during the opening hours of trading. Waskaduwa Beach Resorts followed the day’s heavy on-board list as two trades counting 1.5 mn shares were dealt in the market. The active foreign interest in the recent days has originated particularly from John Keells Holdings, who found foreign buying interest side heavier. The conglomerate however halted its 7day run up as it closed low at LKR195.0 (-2.0%) for the day. Lanka IOC saw most of its trade book being filled with more 25k shares each trade at LKR16.4 as it added a total 513.3 k shares being handled for the day. Lankem Ceylon went onto touch its 52-week low at LKR124.0 after it’s publish of weak earnings results for 1QFY13 (-165% YoY). Seylan Bank [Non-Voting] was taken to the top turnover list after a 291.4k share block took place on board at LKR25.6. Accumulation was evident in Distilleries Company of Sri Lanka as a 100 k share quantity was bought in the market whilst Hatton National Bank, Sampath Bank and National Development Bank were spotted amongst the active banking sector counters. Land & Property counters; Kelsey Developments and Overseas Realty also grabbed some interest for the day.
Speculative play was evident in Commercial Credit, Regnis Lanka, Seylan Merchant Leasing, HVA Foods and Swarnamahal Finance.
Asian Stocks Advance as Wen Signals More China Stimulus whilst Euro stocks remained flat: Asian stocks rose, with the region’s benchmark index erasing yesterday’s decline, after Premier Wen Jiabao said slower inflation has given China more room to adjust monetary policy. The MSCI Asia Pacific Index rose 0.5% to 120.43 as of 5:05 pm in Tokyo. The Stoxx Europe 600 Index retreated 0.1% to 270.03 at 8:28 am in London.
Oil traded near the highest close since May after US stockpiles dropped to the lowest in four months and China signaled it may take more steps to boost growth in the world’s second-biggest economy: Oil for September delivery fell 26 cents to USD94.07 a barrel in electronic trading on the New York Mercantile Exchange at 3:11 pm in Singapore.
