DNH MARKET WATCH

DNH Financial (Pvt) Ltd.

www.dnhfinancial.com +94115700777

Daily
27th October 2011
Market Performance
ASPI MPI Turnover (mn) Foreign Purchases (mn) Foreign Sales (mn) Traded Companies Market PER (X) Market Cap (LKR bn) Market Cap (US$ bn) Dividend Yield (%) Price to Book (X) 27.10.2011 6,324 5,651 533.8 140.4 76.2 214 16.3 2,273 20.5 1.7 2.1 25.10.2011 6,346 5,654 700.1 97.6 72.6 220 16.3 2,279 20.5 1.7 2.1 %Chg. -0.4 -0.1 -23.8 43.8 5.0 -2.7 0.0 -0.3 -0.3 0.0 0.0

Market Indices
6,700 6,500 6,300 6,100 5,900 5,700 5,500

ASI

MPI

20/10/2011

21/10/2011

24/10/2011

Market Outlook
The market continued to slide downwards with the ASPI and MPI losing 0.35% and 0.06% respectively to close the trading session at 6,324 and 5,651. Turnover was disappointing declining to LKR534 bn with trading in John Keells Holdings, Trade Finance and HVA Foods accounting for 30% of the days total. Losers outpaced gainers with Bogala Graphite, Talawakelle Plantations and SMB Leasing (W0015) declining by 11.3%, 9.6% and 9.1% offsetting advances in Kotagala Plantations, Infrastructure Developers and Colombo Dockyard which rose by 11.9%, 10.0% and 7.7% respectively. Newly debuted Trade Finance and Investment Ltd which had an IPO issue price of LKR20/- meanwhile opened at LKR23/-, reached a high of LKR26/- before closing at LKR20/- with a total of 2.3 million shares traded. Global markets traded largely higher on expectations that European policymakers may reach an agreement on tackling the Greek debt crisis and amidst heightened speculation that China will ease monetary policies. Going into the budget season, we expect a number of themes to emerge over the next couple of weeks which will shape market trajectory; volatility in the global markets as they continue to capitulate to US and Eurozone debt tension, strong 3Q2011 corporate results releases showing a significant increase in the quality of earnings, declining PE and PEG valuations which should trigger medium term buying interest. opportunity to bottom fish across the emerging markets space as it is highly likely that the most markets have over-reacted on the downside leaving a number of extremely attractive stocks. In either case, we advise investors to build a portfolio of both core and dynamic stocks

27/10/2011

25/10/2011

Gainers /Losers (%)

Union Assurance SMB Leasing (W0015)
Talawakelle Tea Estates

-9.0

-9.1 -9.6
-11.3

Bogala Graphite Citizens Development (X)

Colombo Dockyard

6.5 7.7
10.0

Infrastructure Developers Kotagala Plantations

11.9

Significant Trades (Turnover in LKR Mn)

100

The convergence of all these factors will provide the perfect backdrop for the Sri Lanka bourse to commence its re-rating despite the fact that there could be sporadic bumps along the way as we climb an upward slope. For those investors that have a hybrid portfolio with exposure to both local and international equities, the current global market environment provides a unique

50

0 JKH TFIL HVA RCL

Global Markets
Sri Lanka - ASPI India - Sensex Pakistan - KSE 100 Taiwan Weighted Singapore - Straits Times Hong Kong - Hang Seng Index 6324 N/A 11283 7565 2848 19689 %Chg. -0.35 N/A -0.91 0.39 2.80 3.26

Interest Rates & Currencies

Prime Lending Rate (Avg. Weighted) Deposit Rate (Avg. Weighted) Treasury Bill Rate (360 Days) Dollar Denominated Bond Rate LKR/US$ (Avg. Rate) LKR/EURO (Avg. Rate) 22.08.2011 27.10.2011 9.2% 6.5% 7.3% 6.3% 111.1 156.0

Disclaimer
This Review is prepared and issued by DNH Financial (Pvt.) Ltd. (DNH) based on information in the public domain, internally developed and other sources, believed to be correct. Although all reasonable care has been taken to ensure the contents of the Review are accurate, DNH and/or its Directors, employees, are not responsible for the correctness, usefulness, reliability of same. DNH may act as a Broker in the investments which are the subject of this document or related investments and may have acted on or used the information contained in this document, or the research or analysis on which it is based, before its publication. DNH and/or its principal , their respective Directors, or Employees may also have a position or be otherwise interested in the investments referred to in this document. This is not an offer to sell or buy the investments referred to in this document. This Review may contain data which are inaccurate and unreliable. You hereby waive irrevocably any rights or remedies in law or equity you have or may have against DNH with respect to the Review and agree to indemnify and hold DNH and/or its principal, their respective directors and employees harmless to the fullest extent allowed by law regarding all matters related to your use of this Review. DNH Financial is a fully owned subsidiary of Environmental Resources Investment PLC (ERI).