Sri Lanka stocks dragged down by heayweights

Feb 02, 2009 (LBO) – Sri Lankan shares were dragged down Monday by losses in heavyweights over earnings concerns with Lanka Cement the most actively traded stock in anticipation of a revival in construction activity, brokers said. Commercial Bank fell 2.62 percent (2.50 rupees) to 93 rupees with investors remaining worried over suspended oil hedge payments from state-run refiner Ceylon Petroleum Corporation.

Lanka Cement was the most actively traded share with 445,200 shares changing hands but the price remaining flat at 13 rupees.

Investors are buying into the stock anticipating more sales if construction activity revives with an end to the ethnic war and its defunct plant in the north is rebuilt.

Government forces have cornered the Tamil Tigers in the island’s north-east corner and say they are about to finish off the rebels.

Brokers have said that company earnings are expected to have been poor in the last quarter and in the next few quarters as well.

But they pointed out that an end to the war could revive economic activity in the longer term.

Stocks especially in sectors like tourism might benefit if travel advisories are removed and tourists return to the island.

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The All Share Price Index ended down 0.95 percent (17.35 points) at 1,803.89 while the more liquid Milanka eased 0.77 percent (15.08 points) to close at 1,949.90.

Turnover was 131 million rupees.

Angelo Ranasinghe of Bartleet Mallory Stockbrokers said the indices were dragged down by falls in market heavyweights like John Keells Holdings, Commercial Bank and Sri Lanka Telecom.

“It could be because investors are taking profits (after last week’s rise),” he said.

“The overall level of activity is very low compared with last week’s daily average which is a surprise because everything is now in favour of the stock market.”

An end to the ethnic war and lower interest rates will help to bring investors back into the stock market, he said.

John Keells Holdings fell 2.26 percent (1.50 rupees) to 65 rupees after reporting sharply lower earnings last week and its key transportation and tourism businesses facing a downturn.