While the week was limited to 3 days, the first trading day of the year commenced with a bang with both indices maintaining a steady upward trend throughout the day with the ASPI and MPI advancing 23 points and 48 points respectively. Thursday proved somewhat volatile while Friday saw a slight slump in the market.

However both indices managed to close the week on positive territory with the ASPI advancing 17.2 points (0.63%) to close at 2739.56 while the MPI moved up 31.27 points (0.84%) to finish at 3743.07. Highest trade volume wise for the week was Lanka Indian Oil Company with 2.32Mn shares mostly due to heavy interest on Friday (on news of the long awaited subsidy settlement) where on that day alone 2.19Mn shares were traded. The counter closed the week Rs.2.50 higher at Rs.30.50. Nations Trust Bank witnessed a total of 1.71Mn shares change hands out of which 0.4Mn shares were traded in a single local to foreign crossing at Rs.29.50 on Thursday. Other notable quantities that changed hands were Telecom giants Sri Lanka Teleocm with 1.66Mn shares and Dialog with 1.43Mn shares. On 2 out of the 3 days, local conglomerate John Keells Holdings contributed the most to Turnover, and for the week witnessed a total of 0.72Mn shares change hands with the counter reaching a high of Rs.196.75 and a low of Rs.194.25 before closing at Rs.194.50.

Turnover for the week stood at Rs.812.89Mn reflecting a daily average of Rs.270.96Mn. Highest contributors were John Keells Holdings with Rs.141.28Mn (17.4%), Lanka Indian Oil Company with Rs.67.92Mn (8.4%), ACL Cables with Rs.57.69Mn (7.1%), Chemical Industries (Non Voting) with Rs.56.41Mn (6.9%) and Nations Trust Bank with Rs.51.34Mn (6.3%). Foreigners were daily more prominent on the selling side bringing the net outflow to Rs.141.77Mn. They were seen divesting their stakes mostly in John Keells Holdings and Dialog. Some of the "BMS Stocks In Focus" that gained WoW were ACL Cables and Aitken Spence which strengthened by Rs.5 each, Central Finance which advanced Rs.2 and Hemas and Sri Lanka Telecom which edged up Rs.1.25 each. Losers included Hatton National Bank and Durdans which slipped Rs.1.50 each and The Finance Company which lost Rs.1. With the retail and high net worth participation still at the low end after the holiday season, BMS expects activity levels to improve next week and considering the impressive 41% return on the market for last year, we advice attention on the fundamental counters particularly the mid-cap stocks that are still trading at attractive levels.

Weekly Update: Page 2 LIOC Update For the year 2006, the Power & Energy sector performed the worst, slipping 17.95% in its sector price index mostly due to the disappointing activity on LIOC. As most investors have been burnt by the LIOC debacle, questions keep rolling in regarding the company’s current situation and a brief update is as follows: The "Settlement Agreement" between LIOC and the Government of Sri Lanka was finally signed on Friday 5th Jan 2007 and the company received the long awaited subsidy payments due to them. Out of the Rs.7.6Bn owed, the company has agreed to waive Rs.2.4Bn and hence Rs.700Mn was received in the form of cash and Rs.4.46Bn worth of 2 year bonds carrying an interest rate of 11%. The interest receivable from the bonds will in turn be used to settle interest payments on the company’s outstanding loans. With world oil prices climbing to little more than $60 per barrel, both CPC and LIOC have increased their retail prices of petroleum by Rs.5 to Rs.97 but this still fails to provide a satisfactory Gross Profit Margin.