The market seemed to be further consolidating on selected counters whilst the indices closed mixed with the ASPI closing down 6 points and the more liquid S&P SL20 closed up 17 points on a better turnover of 1.7 billion. The increase in turnover, the slight healthy appreciation of prices is an indication that the market has absorbed most of the selling due to margin/forced sales and the uncertainty in the overall economic conditions of the country at large. The funds redeemed through the sale of shares should probably go into safe investments in gold property or hard currency and should not be retained in the form of local currency due to the continuous depreciation or the milder term “flexibility” of the rupee that seem to be heading only in one direction so far since that Monday earlier this month. The speculation of IMF conditions for the support of the economy is through higher taxes and more hawkish interest rates that are generally negative to capital markets and shifts funds away from it towards fixed income securities. However the current situation in SriLanka is somewhat similar to what Turkey and Argentina experienced, where the capital markets have initially retracted around 20% plus with the shock of devaluation but eventually shot up almost vertically towards double the depreciation as a percentage. Therefore the prudent strategy to preserve your investments in the market is to shift your funds into selected stocks that will hedge and insulate against galloping inflation, devaluation , cost escalation and the tax implications that will follow soon. The funds should transfer on in to export oriented companies with minimal imported raw material inputs, such as renewable energy companies will hold it’s value but growth will be limited. Palm oil plantations will do exceptionally well with the huge global demand and possible shortages in sunflower oil due to the situation in Ukraine. Some if the likely counters that will outperform the overall market due to all above points are probably the following stocks Expo LOLC , BIL , JKH, Hayleys, Sun,WATA, AGAL VPEL ,WIND, DIPD, HBS , while the Tile , Pipe, Tyre and Cable sector will also keep up due to regulatory action in import restrictions and control of market share in the industry and strong demand allowing the easy transfer of costs to the consumer.
There has been reports that the US $ has transacted informally in the black market at RS 325.00 plus and a little over a fortnight ago it was apparently transacting at RS 245. The official bank rates are also closing in on RS 300 and that is a 50% appreciation from February……..for the US dollar and a 50% paycut on your March rupee salary.
