Financial Times

Hotel stocks take All Share Price Index to new high
The All Share Price Index (ASPI) of the Colombo Stock Exchange (CSE) reached its highest point ever last Friday --- becoming the best performing bourse in Asia this year.

The ASPI went passed the psychological 1500 point on the ASPI on Thursday and closed the week at 1,500.54. The sensitive Milanka Index closed the week at 2,148.79.

During the week, the ASPI gained 51.35 points and the sensitive Milanka gained 7.42 points respectively, SC Securities said in its weekly research report. Trading was driven largely by interest in hotels and the Carsons Group, brokers said.

They said it was mainly local buyers who sent the market to record levels. The ASPI first moved beyond 1,500 points during Thursday's trading for the first time but closed at 1492.1 points, up 13 points having started the day at 1,479.1.

"Investors were buying certain hotel stocks expecting them to go up," an analyst said, adding that hotels stocks such as Connaissance were bought heavily.

"Foreign activity has been low throughout the week, but that does not mean they are moving out of the market," he added. Many buyers were waiting for the budget in November.

Throughout the week, hotel stocks such as Reefcomber, Ruhunu Hotels, JKH, Aitken Spence, Taj and Galadari were the favourites. SC Securities said the bull-run on the hotel sector was triggered by the Connaissance group of companies, with their new strategies to identify separate niches, enhanced operational performance, completed and refurbished hotels and expansion plans in the pipeline.

"During the week average turnover levels of the CSE remained high with mainly local participation. Foreign investor activity remained modest while they refrained from showing much interest on the Colombo bourse."

Investors supported the hotel and tourism sector stocks ahead of the forthcoming winter season expecting higher revenue and profits. SC Securities said bookings for 2004 winter season were very satisfactory and some hotels have even received bookings for the winter of next year.

"Therefore revenue increases for the hotel sector are guaranteed given the continuation of the ceasefire agreement. However increasing levels of inflation, increasing fuel costs and highly probable increases in electricity rates could cut into the margins of all industries and services including hotels and tourism, resulting in only modest improvements to the bottom-line."

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