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CSE set for boom in 2013 - C T Smith

15 Jan 2013 - {{hitsCtrl.values.hits}}

Fresh after witnessing a full year of volatility and challenges in 2012 with the benchmark All Share Index (ASI) closing down 7.1% at 5643, the Colombo Stock Exchange (CSE) is now poised to make a leap, predominantly backed by budgetary proposals and further monetary easing, according to leading stock broking & research firm.

“The market seemed to have regained momentum and stabilized towards year end largely driven by high foreign investor participation. Therefore, we expect the recent upward momentum to broadly continue in the near term in 2013E and foreign investor participation to be maintained,” C T Smith Stockbrokers (Pvt) Ltd (C T Smith) stated.

The Monthly Report released by the firm for last December further foresaw the potential positive impact on CSE due to renewed interest and infusion of foreign capital into India subsequent to sweeping market and economic reforms.

Anticipating further monetary easing going forward, the report said, “We anticipate further staggered rate cuts in the range of 50-100bps in 2013E, which would likely rekindle local retail investor interest that saw a decline last year.”

As a result and also boosted by strategic market transactions as part of corporate restructurings, C T Smith expects a rise in average daily turnover to be slightly below Rs.2.2 billion, levels seen during post-conflict boom (2009-2010) from the existing level of Rs.884 million.

Drawing from the budget 2013, the firm expressed optimism over a minor revival in Initial Public Offerings (IPOs) by 2H as opposed to Rs.1.4 billion raised through only five IPOs in 2012.

Furthermore, C T Smith citing a recent statement by Deputy Finance Minister Dr. Sarath Amunugama to list several State Owned Enterprises (SOEs) said no firm details have been provided by the latter.

Whilst expecting a less challenging year for the corporates in 2013 with superior returns to shareholders, the report adds, “Companies with exposure to key growth sectors such as infrastructure, tourism and ports would stand to be at a greater advantage while selected consumer plays are also expected to do well. Furthermore, in an anticipated low interest rate environment, the banking & finance sector would be a key beneficiary, while also trading at relatively undemanding valuations.”

Meanwhile, during the year to December, the highest performing sector was Beverage, Food and Tobacco (+21.1pc) whilst the lowest performing sector was Information Technology (-56.8pc).

Amidst a forecasted market earnings growth of 7 percent Year-on-Year, the report forecasts the CSE to trade at a PE multiple of 11.1X for 2013E which is at a discount to the historically rich multiples on which the market has traded.

C T Smith however advised investors to select stocks with sound judgment as it would continue to reward investors in 2013.

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CSE set for boom in 2013 - C T Smith

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