Stockbrokers say Colombo share market is on the rise this week
COLOMBO: Sri Lanka’s main stock index hit a fresh record high for a fifth straight session on Friday (27) as the market was driven by market heavyweight Expolanka on speculation of a new deal with a US freight firm, brokers said.
Expolanka, 291.8 billion rupees worth market heavyweight, after the market closed on Friday in a disclosure to the bourse, said two of its subsidiaries – EFL Global Logistics (Pte.) Ltd (Singapore) and EFL Global LLC (USA) – has acquired 100% equity interest of IDEA Logistics LLC and its Group of Companies on August 10 at 9.7 million US dollars.
Share price in Expolanka has doubled to around 150 rupees due to the speculation that it was going to acquire the US firm.
“High share price does not necessarily mean the stock is value for that price,” a stockbroker said asking not to be named.
“Now the company has to perform and prove that the share is valuable for that price. It is not an easy task especially in this global pandemic environment.”
The index touched 9,042 points, its new record intraday high, before retreating to an all-time high close of 8,931.33 with 0.12 percent or 10.62 points gain for the day.
The S&P SL20 index of more liquid stocks gained a marginal 0.84 percent or 28.01 points to close at 3,355.09.
“Now the market is overheated. That’s why we see only a few stocks are being pushed up through some media stories with no fundamentals,” a stock analyst told EconomyNext on condition of anonymity because he is not authorized to talk to media.
“The way things are going and with the latest S&P sovereign downgrade to a default level, Sri Lanka will be forced to go for IMF help. And then we will see interest rates rising and sharp depreciation in the currency. So, we are up for a market correction sooner than later.”
Stocks have been on the rise partly due to record low-interest rates, excess liquidity in money markets, and some businesses being disrupted due to import controls triggered by money printing, Economhy Next reported.
The trend of net foreign selling has been continuing since early last year.
Analysts expect a market correction by December when the central bank’s tightening measures start to bite.
The central bank raised its key policy rates by 50 basis points last week. It also has raised commercial banks’ Statutory Reserve Ratio (SRR) by 2 percent with effect from Sept. 1
The day’s turnover was 16.4 billion rupees, well over this year’s average daily turnover of 3.9 billion rupees.
Stockbrokers have said the market is on the rise this week with heavy turnover mainly because investors hardly have other options during a 10-day lockdown which has been imposed through August 30.
Sri Lanka’s pandemic situation has been worsening with COVID-19 daily death toll has been recording a fresh record high in most of the days in the last week. On Thursday, the island recorded over 200 deaths for the first time.
The gain was led by Browns Investment, LOLC Holdings and Hayleys Plc.
Browns Investment, a subsidiary of LOLC Holdings gained 1.8 rupees or 23.38 per cent to close at 9.50 rupees a share.
Hayleys gained 8.00 rupees or 7.57 percent to close at 113.75 rupees a share and LOLC Holdings gained 48.50 rupees or 9.26 percent to close at 572.25 rupees a share.
Foreign investors bought a net 12.3 million worth of shares on Friday, and the market has suffered a net foreign outflow of over 37.06 billion rupees so far this year.
The bourse saw 67 stocks gaining against 131 falling on Wednesday.