2012 - Guide to CSE


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Monday, December 10, 2012

CSE ‘Emerging Bull’ in the world of Bears!

7:38 PM 0

NDB Stockbrokers in special report says amidst gradual revival, two-year bull run on the cards; valuations attractive; corporate profit growth to bounce back in 2013 in resilient economy
NDB Stockbrokers in a special research report that is likely to move investor sentiments for the better is upbeat of a revival in the currently-bearish stock market as well as a rebound in corporate earnings from next year onwards.
Boldly titled ‘Emerging Bull in the World of Bears,’ the NDBS stated: “In view of the stabilising economic conditions, we remain positive on the profit growth prospects over the next two years.

While we estimate that currently the overall Sri Lankan market is trading at a forward P/E of 11x, we expect it to increase to 15x with the improvement in sentiment over the next two years.”
Recalling that in its previous review released in May a forecast was made that the bull run would commence from the latter part of 2012, NDBS said since then the ASI has gained 6% (from 5,048 to 5,331).
In line with the positive factors, “we maintain our ASPI target of 9,000 by end of 2014. However, the sentiment is likely to improve gradually and pick up steam by 2013H2 in view of the prevailing uncertainty in global economies and high domestic interest rates.”
Its latest report also predicted corporate profit growth to bounce back from 2013.
After two years of exceptional growth (of 75% and 25% respectively) in corporate profits, 2012 is seemingly a year of consolidation with profits remaining flat from previous year up to September.
NDBS expects the trend to continue till the rest of the year and accordingly revised downwards its previous profit growth expectation of 10% for 2012. However sectors such as banking, hotel, telecommunication and food and beverage have recorded appreciable profit growth, it noted.
“We maintain our expectation that the profits would bounce back in 2013 and 2014, to record a growth of 20% and 15% respectively. This is in view of the improving economic stability resulting from the measures taken in 2012H1,” NDBS said.
Emphasising on attractive valuations, the broking firm said Sri Lankan equities were attractively priced compared to regional emerging/frontier markets.
“While according to our estimates the Sri Lankan stocks are trading at a forward P/E of 11x, the regional markets are trading at a forward P/E of 12.8x. With the expected improvement in profitability and economic stability over the next two years, we maintain our expectation that the forward P/E would reach 15x with improving investor sentiment,” NDBS pointed out.
It implied that attractive valuations as well as future upside in relation to regional peers were key reasons for record net foreign inflow into Sri Lankan equities so far this year.
“The foreign investors have been bullish on Sri Lankan equities since early 2012, with net foreign inflows to the stock market reaching Rs. 33 billion up to October,” NDBS said.
As of last week, as reported by the Daily FT, the net inflow had crossed the Rs. 37 billion mark. This is in comparison to net foreign outflows of Rs. 26 billion and Rs. 19 billion in 2010 and 2011 respectively.
“This indicates that the value investors perceive upside potential in Sri Lankan equities in view of positive policy measures taken in 2012 and the prospects of impressive growth over the next few years,” NDBS said.
Noting that demand for equities was quietly accumulating whilst supply was slowing down, the broking firm said Initial Public Offerings (IPOs) and secondary equity issues (rights issues, etc.) by listed companies had slowed down in 2012 compared to 2010 and 2011.
As a result, NDBS said the investable funds within the economy have been accumulating and have been directed to short-term fixed income instruments to a large extent, in view of the relatively-high interest rates. In addition, with the increase in interest rates and triggering of margin calls, the utilisation of margin trading (leverage) would have reduced significantly over the last 12 months.
“We feel the equity selling pressure has been reducing substantially over the last 12 months. Simultaneously, the investable funds have been accumulating, which could flow into the equity market if the interest rates come down (including an increase in margin trading activity) or any other event occurs that could boost the sentiment of the equity market,” NDBS added.

Adopted from ft.lk 

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Friday, November 16, 2012

CSE says goodbye to 13-year-old Milanka

5:43 PM 0

The Colombo Stock Exchange (CSE) yesterday announced it would discontinue with the Milanka Price Index (MPI) from 1 January 2013 following the launch of the S&P SL 20 Index early this year.
The MPI was introduced in January 1999. The CSE’s benchmark is the All Share Index (ASI).
Jointly launched by the S&P Dow Jones Indices and the CSE, the S&P SL20 follows a transparent and robust construction methodology in conformity with global best practice.
CSE said constituents of the S&P SL20 include size as measured by float adjusted market capitalisation, liquidity as measured by the last six month daily average turnover and the number of days traded, in addition to financial viability.
The S&P SL20 currently represents 54% of the total market in contrast to the MPI’s comparatively lesser representation of 22% as at 12 November 2012.
Additionally, comparative advantages of the S&P SL20 counts, its ability to act as a credible, investible index for both global and domestic investors. It also forms the foundation upon which products such as Exchange Traded Funds (ETFs) can be based on, the CSE added.

Adopted from DailyFT
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Saturday, August 4, 2012

Monthly Focus - June and 2nd Quarter 2012

Thursday, April 12, 2012

සුභ උපන්දිනක්

2:45 PM 2
කාටවත් නෙමෙයි, Guide To CSE අඩවිය අද දින තමුන්ගේ දෙවන උපන්දිනය සමරනවා. වසර දෙකක් තිස්සේ මෙම අඩවිය සමඟ රැඳුනු ඔබට බොහොමත්ම ස්තුතියි.
පසුගිය මාස කිහිපයටම කිසිදු ලිපියක් ලියන්නට බැරි උනත්, අඩවියට එන සෙනඟ ප්‍රමාණයේ ලොකු අඩුවක් උනේ නෑ. නමුත් අලුත් දෙයක් බලාපොරොත්තුවෙන් බලාගෙන ඉන්න අයට මොකුත් ලබාදෙන්නට බැරි වීම ගැන මම සමාව ඉල්ලනවා. 
මම පොඩි පොත් පිංචක් හදන්නට බලාපොරොත්තුවෙන් හිටියා, ඒකත් කරගන්නට බැරි උනා. 
මේ දවස් වල මාකට් එකෙත් එතරම්ම හොඳක් නැති නිසා මමත් මේ දවස් වල ඒ පැත්ත එතරම් බලන්නෙ නෑ. ඉතින් ඒ ගැන හරි හමන් දෙයක් ලියන්න හිතෙන්නෙත් නෑ. 

කොහොම හරි, පහුගිය වසර දෙක දිහා හැරිල බැලුවම (අන්තිම මාස කිහිපය හැරුනුකොට) මට සතුටු වෙන්න දෙයක් තිබෙනව. හුඟක් දෙනා මේ බ්ලොග් එකෙන් ප්‍රයෝජන ගන්න ඇති. තමුන්ගෙ ගැටළු වලට පිළිතුරු හොයා ගන්න ඇති. ආයෝජනයට යොමු වෙන්න ඇති, ලාභ ලබා ගන්න ඇති. ඉතින් සතුටුයි මගේ උත්සාහයෙන් ප්‍රථිඵලයක් උනු එක ගැන.

ඒත් එක්කම, හැමෝටම සුභ අලුත් අවුරුද්දකුත් ප්‍රාර්ථනා කරනවා...
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Thursday, April 5, 2012

Dilith says investors getting frustrated; casts blame on Treasury

7:54 PM 0
High networth and highly networked investor Dilith Jayaweera yesterday joined the bandwagon of those who are blaming the Treasury for current economic ills claiming that investors were getting frustrated due to inconsistent policies all-round.
He said that there had been an unprecedented degree of policy inconsistency of late thereby preventing a conducive and cohesive environment which is key. This he blamed on Treasury and claimed has increasingly frustrated investors both existing and prospective.
Dilith’s outburst is surprising as he has been a champion of positivism and can do attitude especially after the Government and forces defeated terrorism that plagued the country for near 30 years.
He also qualifies to be in the top 10 league of individual as well as emerging corporate investors in post-war Sri Lanka for his investments and acquisitions both within and outside the Colombo stock market.
The private sector and the Opposition have increasingly faulted not only the Treasury but also the Central Bank for mismanaging the economy. Drawing references from the famous book “Confessions of an Economic Hit Man” by John Perkins, some even have adduced that certain officials could be having an outside agenda.

Adopted from DailyFT
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Tuesday, March 20, 2012

IMF bullish on Sri Lanka

7:04 PM 0


International Monetary Fund (IMF) Sri Lanka Resident Representative Dr. Koshy Mathai reiterated the fund’s stance on the recent policy reversals of the Central Bank regarding the exchange rate and interest rates and the government’s decision to increase domestic fuel prices, saying the policy moves were encouraging and could help the economy.

Addressing a special forum convened by HSBC Sri Lanka yesterday morning, Dr. Mathai said that Sri Lanka’s economy was in strong position compared with many other economies in the world. "Right now there is not much to worry about and I have a lot of optimism. We remain bullish on Sri Lanka’s economic growth prospects. Inflation is low, the debt to GDP ratio is declining, and the government is committed to brining down the fiscal deficit."

The debt to GDP ratio which was over 108 percent several years ago had declined to 78 percent last year. The deficit which was at 9.9 percent of GDP in 2009 is expected to be brought down to 6.8 percent in 2011.

"The economy is at very credible position but it does not stand out compared to most other economies which have done much more, but nevertheless, the debt stock favours Sri Lanka, where the growth rate outstrips interest rates, so debt to GDP would eventually drop," Dr. Mathai said.

Dr. Mathai said the economy did face a problem on the external sector front which became manifest six to nine months ago. The Central Bank had sold nearly US$ 3 billion since July 2011 to keep the exchange rate stable in the face of severe import demand and also printed more than Rs. 300 billion to keep rupee interest rates stable. The IMF had not been too happy with these policy decisions and had delayed payment of a US$ 400 million tranche under the US$ 2.6 billion standby facility arrangement. However, early February 2012, the Central Bank made a U-turn, floating the exchange rate and curbing credit growth, which was extremely high and fuelling import demand, by increasing interest rates and slapping a ceiling on commercial bank credit growth.

"We are extremely happy these policy decisions were taken. It is a step in the right direction. But most importantly, we are encouraged by the fact that the Central Bank and the government implemented a comprehensive mix of policies with a commitment to remain flexible. And this is important because no single policy will bare the full burden of the necessary adjustments that would have to be made, and also if the external account does improve then the rupee would be allowed to appreciate, if it does not, then the rupee would be depreciated a little bit more and perhaps interest rates would also be further tightened," Dr. Mathai said, adding that no one could predict if and when things would improve.

But he did say that authorities shored up the foundation for strong, more sustainable, growth.

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Thursday, March 8, 2012

කොටස් වෙළඳපළ ආයෝජනයට දැනුම - වැඩමුළුව

9:30 PM 0
කොටස් වෙළඳපළ ආයෝජනයට දැනුම - වැඩමුළුව

මේ වගේ වැඩමුළු ගැන දැනගන් අපේ feed එකට එකතු වන්න.

සියළු ලිපි සඳහා ඊ මේල් ලිපිනයෙන් අප හා එක්වන්න:  
අනෙකුත් RSS පෝෂක ලබා ගැනීමට මෙතනින් යන්න.
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කොටස් වෙළඳපළ ආයෝජනයට දැක්ම - වැඩමුළුව

6:30 PM 2
මෙන්න තවත් කොටස් වෙළඳපළ ගැන වැඩමුළුවක්...

මේ වගේ වැඩමුළු ගැන දැනගන් අපේ feed එකට එකතු වන්න.

සියළු ලිපි සඳහා ඊ මේල් ලිපිනයෙන් අප හා එක්වන්න:  
අනෙකුත් RSS පෝෂක ලබා ගැනීමට මෙතනින් යන්න.
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ATS Version 7 woes: CSE passes the buck to MIT

5:54 PM 0
The Colombo Stock Brokers Association (CSBA) on Tuesday highlighted to the Colombo Stock Exchange what was an exhaustive list of woes following the introduction of Automated Trading Version 7, with the CSE passing the buck to solutions provider MillenniumIT.

The meeting, first since the introduction of the new version a fortnight ago, was convened by CSE to iron out various concerns from both investor and broker sides. Whilst CSE officials had assured some issues could be rectified by late March, it had informed brokers to take up grievances with MIT, which is now owned by world famous London Stock Exchange.
Sources claimed that a more responsible move would have been for the CSE to accept the CSBA’s written submissions and take it up directly with MIT than passing the buck.
Though trialled many times via mock sessions and improved with stakeholder inputs, the ATS Version 7 since introduction had been blamed for causing confusion among brokers and investors, especially those doing online trading. This had led to low turnover on some days, in addition to causing frictions between brokers and investors.
Others said the new version is far superior and since introduction needs extra time for all to become familiar with.

Customisation of the ticker is limited. In the existing version, individual users can customize their screens: ticker rows, history rows, ticker mode, etc.
The ticker does not indicate the intra-day change in price but the change between the current and the last traded price.
The ticker does not indicate the intra-day change.
The instruments have to be added to the ticker on a daily basis.
There is a huge delay in the ticker.

Order book
Order book depth displays only 10 price points. This is not adequate. Order book (market depth) cannot be viewed by double clicking as in the previous version.
When you have many company codes opened in the order book where you are looking for prices, the prices do not pop up quickly. There is a delay of about two to three seconds.
There is no quick order book watch.
Whenever stock is changed in the order entry window, default buy window appears.
The order books don’t indicate the buying or selling volumes during the pre-open.
Cannot add VWAP (Volume Weighted Average price) on order book.

Order placement
Drop down list gets removed if the computer restarts or a user gets disconnected and logs in again.
The buy/sell windows take a long time to generate.
The orders should appear in a sequential order according to the type of order (normal order or custodian order).
The order entry panel should have a clear screen command button.
Orders placed for the same client cannot be viewed in the order placement tab unless a share is indicated (this facility was available in the previous version).
Once done amending an order, you cannot place a new order using the same Buy / Sell window (as was done in the previous version) but need to close that window and open a fresh window even though it is for the same client and retype all details including CDS account number which is very time consuming.
Order entry panel should be more user-friendly (space for the client ID field can be reduced and included for the display of the client name which the current given length is not sufficient).
When balance inquiry page is opened from the order placing screen, the client ID in order placing screen (buy or sell window) should automatically moved to client ID field in balance inquiry screen.
When amending an order (qty) the disclosed quantity does not get adjusted automatically.
When a GTC order is entered number of days by default is set for one day, whereas in the older system it was for five days.

Order blotter
The blotter should be able to generate the client’s name (this was there in previous version).
Order count not available in order blotter/my trader.
Orders cannot be filtered by customers. More enhancements are required.

Market watch
Statistics: The previous version was far more effective and should be migrated to this system.
Stock code search option is not functioning.
Blink updates: These are not available in this system although it is a very useful feature.
Instruments list is not available in the market watch when the market is in pre-open status.
Block Trades and Normal trades should be incorporated together. This can cause misjudgement as the volumes will be separate for one stock under the block and normal trade. E.g. calculating the average price for a stock.
The turnover of a share on the market watch does not include the value of block trades.
No column for average price.
Details and summery of executed transactions for the day cannot be viewed in the manager terminal or other terminals.

Announcements window
This window should popup only when there is a new announcement to be displayed.

Market status is not displayed on the screen. The user cannot therefore see if the market is open, closed, halted, etc.
If odd lots are allowed to trade on the same system, the minimum charges should be waived off.
Profiles do not open the way it has been saved.
When you add fields to the “recent transactions” on the order entry panel, it doesn’t appear when you re-log to the system though you have saved the profile.
When you re-size the fields in the market watch and save, it doesn’t open in the manner saved.
ATS crashes several times a day
The individual turnover and executed order amount must be indicated in the main screen of each trader login.
Odd lot minimum charge of Rs. 5 for CDS fees should be removed.
Transaction text file (ats2_ttr.txt) sent by CSE at end of the day does not include contract numbers of cancelled contracts for the day.
Value in “order_id” column of transaction text file (ats2_ttr.txt) is invalid; all the recodes carry the value “0000”.

from DailyFT
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Monday, March 5, 2012

Brokers recommend buy

7:41 PM 0
Most market analysts tip the Rs. 500 million Initial Public Offering (IPO) of Access Engineering Ltd., which officially opens on Tuesday 6 March, to be comfortably fully oversubscribed, whilst several brokers too have recommended it.

Lanka Securities, which recommended the Access Engineering IPO as Subscribe, said the forecasted EPS for FY12E is Rs. 1.7 and BVPS stood at Rs. 11.7. Accordingly, the forward PER and PBV for FY12E are 15.0x and 2.1x respectively (at IPO price of Rs. 25.0).
Heavy construction sector is currently trading at a PER of 10.2x, while close peers such as Colombo Dockyard and MTD Walkers are trading at PERs of 9.3x and 14.3x respectively.
Lanka Securities also said based on a complete valuation carried out using discounted free cash flow, the calculated total equity value for the group is Rs. 27.7 billion at the end of FY12E.
Accordingly, the derived value per share of AEL is Rs. 27.70, an upside capital gain of 11.0% over the issue price of Rs. 25.00. “Hence, for a rational investor with a long-term perspective, AEL’s IPO price is justifiable and we recommend Subscribe,” Lanka Securities said.
It is forecasting a net profit of Rs. 1.7 billion (+43.0%) and Rs. 2.1 billion (+25.2%) for FY12E and FY13E respectively. The increase in net profit is mainly driven by the accelerated infrastructure development activities in the country.
The revenue is anticipated to grow at a rate of 76.9% and 37.3% in the next two years supported by the booming construction industry. The construction industry which saw a sluggish activity in recent years is now facing a 9.3% (in 2010) upturn with the mega infrastructure projects undertaken by both government and private sector.
LSL said key risk factors would be possible inflationary economic conditions (e.g. rupee devaluation, increasing interest rates, increasing inflation, etc.) and it may affect the construction cost to increase over the period.
Given AEL’s sound business relationships and impressive track record, Arrenga Capital expects the Group to thrive on future prospects in the construction industry in line with infrastructure development in the country. “Hence, we expect AEL to record net earnings of Rs. 1.8 billion for FY13E and Rs. 2.6 billion for FY14 featuring a PER of 14.0X and 9.7X respectively,” it said.
The counter, which is in a high growth industry, is offered above market valuations at a price of Rs. 25 per share on FY13E earnings (4Q Trailing Market PER of 11.0X), Arrenga added.
Asia Wealth Management forecast AEL earnings to be Rs. 1.58 billion for FY12E whilst FY13E earnings would remain at Rs. 1.99 billion.
“We expect the company to perform much better with the upcoming construction projects in the pipeline coupled with significant potential in the high-geared construction industry in the country,” Asia Wealth said.
AEL on a forecasted net profit of Rs. 1.58 billion for FY12E, accounts to a PE multiple of 15.8X. Furthermore Asia expects 12.5X and 9.7X on its FY13E and FY14 earnings respectively.
In addition the counter currently trades on a PBV of 5.5X, which we anticipate would improve to 2.1X by the end of FY12E. As opposed to the Construction sector PE of 10.6X and PBV of 1.6X.
“It is noted that based on the financial analysis and the forecast we have done, AEL is clearly a fundamentally strong counter that we could recommend to “SUBSCRIBE”,” Asia Wealth Management said.
However, the broking firm said if gifted shares to employees are sold in the secondary market subsequent to initial trading there could be downward pressure on the share price.
Access Engineering, which made its foray into the motor business with a Rs. 846 million acquisition of a 60% stake in Sathosa Motors, is offering 20 million voting shares at Rs. 25 each.

Adopted from ft.lk 
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Tuesday, February 21, 2012

What foreigners see, locals don’t!

6:55 PM 2
As Daily FT has been emphasising the redeeming feature of Colombo Bourse is the continued foreign investor interest.

On Friday net foreign buying topped Rs. 600 million bringing the year to date total to Rs. 1.76 billion, a record level for the past three years.
Friday’s inflow was on account of Rs. 1 billion investment by Goldman Sachs funds in to Commercial Bank. Bulk of the selling from the 10.6 million shares in total was SBI Venture Holding whilst Captains had shed some stake as well. Commercial Bank saw its foreign holding increase by 8 million shares last week.
Interest by Goldman Sachs funds is midst premier blue chips JKH continuously being favoured by foreign investors. Recently a JP Morgan fund bought into Expolanka Holdings whilst in recent weeks among other stocks which had elicited non-national interests were CTC, Tokyo Cement, Softlogic Holdings, DIMO, Aitken Spence, and Chevron Lubricants.
Asia Wealth Management last week said the current exchange rate is very much attractive to potential foreign investors to enter the market. “We observed foreigners being positively responding to this stimulus, and a continuation of this would lead fresh capital flowing to the market. But we strongly believe that stability in the economic policies is vital to retain investor’s confidence,” Asia added.

Adopted from ft.lk 
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