Financial Times

Retailers still chasing small cap stocks
With retail investors chasing the small cap and second tier stocks, while ignoring the blue chips, the Colombo bourse ended another speculative trading week last Friday, mirroring the previous week. Key movers were Nawaloka Hospitals, Acme Printing, Ceylon Glass, Tess Agro and Royal Ceramics.

Analysts said Ceylinco Group companies such as Ceylinco Seylan Development (CDS), Ceylinco Securities, Blue Diamond, Seylan Merchant and The Finance also traded heavily. "CDS and The Finance have posted high profits and this has attracted the retailers," Vajira Premawardhana, Executive Director, Lanka Orix Securities Company (Pvt) Ltd., said.

He said rare investment opportunities in the country because of the low interest rates bring in many retail investors to the stock market. "In addition, the companies are also posting healthy profits, which captivates the retailers," he added.

Market analysts said the blue chips were completely overshadowed by the small cap stocks, while the market showed volatility with new resistance and support levels. They said the same trend will spill over to this week.

"The same buying pattern by retail investors will continue next week and the market will be up," Magu Murugesu , Managing Director, Lanka Securities (Pvt) Ltd., said on Friday. Friday saw some profit taking when the market went down by 11 points and foreign activity was at a minimum. "It is healthy to see some profit taking, because it helps the market consolidate," Dimuthu Abeyesekera, CEO, Asha Phillip Securities Ltd., said.

He said that next week also the market will see profit taking, but it will not last long. The medium to long term investors were worried about the blue chips unlike the 'bargain hunters' while stockbrokers said such performances in the market send the wrong signals to foreign investors, because some shares that are not strong fundamentally have gone up.

However, some analysts said that the market does not depend on foreign transactions, unlike before. "There are vibrant investors locally and we don't depend on the foreigners so much which is a healthy sign," Abeyesekera said. The ASPI closed at 1729.68 while the MPI closed at 2330.28.

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