A leading equity researcher, reporting Friday’s stock market gain as an investor reaction to military victories projected that ``positive investor sentiment was like to continue.

This forecast was made by Acuity, a joint venture between the DFCC and HNB Banks combining the research capabilities of the stock broking subsidiaries of both companies, in a report covering the week ending January 2.

It also said that despite the Dec. 31 rally on global oil markets, oil prices had since the biggest ever annual drop in futures trading in 2008.

Market kicked off year 2009 witnessing sharp gains in the back of the news reports on capturing the LTTE stronghold Kilinochchi by military forces, leading to a 5% gain in the ASPI on Friday. The ASPI (All Share Price Index) ended the week up by 4.8% or 72.4 points to close at 1578.5 points while the sensitive MPI (Milanka Price Index) gained 3.0% or 48.6 points to stand at 1696.8 points compared to last week.

Ceylinco Insurance (CINS) with the help of few big deals during the week managed to become the week’s largest contributor. Total contribution by the counter amounted to Rs.108.0 million after having traded 0.6 million shares within a wide price range of Rs.150 and Rs.200 per share for the week. CINS share closed at Rs.199.75 for the week, gaining a notable 9.3% WoW. The majority portion of CINS turnover occurred on Wednesday. Following closely in terms of activity was the blue chip JKH with a turnover of Rs.98.8 million generated through a trade volume of 2 million shares. The counter during the week saw few big trades going through making it the highest traded stock for the week. The high cap share, which fluctuated within the price band of Rs.48.25 & Rs.52.00 per share, slipped 1.9% WoW to close at Rs.51 per share.

The week also saw some significant quantities of Distilleries stock trading adding Rs.40.5 million to the weekly turnover with a trade volume of 0.8 million shares. Share price of Distilleries gained 4.3% to close at Rs.54.50 per share for the week.

Environmental Resources’ contribution to the weekly turnover stood at Rs.17.8 million, whilst 0.9 million of its shares changed hands during the week. The stock having traded within a broad price band of Rs.14.75 and Rs.22.25 per share closed the week up by a staggering 29.2% to close at Rs.21 per share. Bulk of the counter’s turnover came on Wednesday’s trading.

Market turnover for the week rose to Rs.451.7 million from Rs.160.1 million recorded last week experiencing a significant 182.1% increase while the average daily turnover stood at Rs.112.9 million, up by 111.6% during the 4 day trading week. Although trading volumes picked up from last week market lacked the participation of retail investors.

The week saw foreign investors becoming net buyers amounting to Rs.23.4 million, with foreign purchases standing at Rs.115.9 million (down 2.8%) and foreign sales at Rs.92.5 million (up 1645.3%). Foreign participation for the week stood at 23.1% of total activity. The most actively traded stocks during the week were JKH, Seylan Bank (Non Voting), Vallibel and Ceylinco Seylan.

Oil records the biggest annual drop despite the 31st rally

In contrary to what we expected crude oil prices managed to gain ground this week amid a late rally on 31st December, trimming a record annual decline in prices. Oil prices dropped 54% in 2008, recording the biggest ever annual decline in the history of futures trading and the first such decline since 2001.

On 31st December prices rose by more than $5 to settle at $44.60 a barrel largely amid a smaller than expected gain in gasoline stocks. According to US EIA data US gasoline inventories gained 0.5 million barrels to 318.7 million barrels while the crude stockpiles increased 0.8 million barrels to 208.1 million barrels. The market also witnessed the return of some geopolitical risks with the growing conflict between Israel and the Islamic militant group Hamas in the Gaza strip, raising concerns over supplies from the Middle East. However, oil prices remained subdued below $40 a barrel during most part of this week as the market continued to absorb negative economic news from US and elsewhere.

The ongoing global economic slowdown has caused oil to plunge by nearly 70% from the record set in July 2008. Nonetheless, the counter measures adopted by OPEC by slashing production is expected to bring some stability to prices with the start of the New Year. The group was supposed to cut production by another 2.2 million barrels a day from yesterday. However, the market participants remain skeptical whether OPEC members would actually adhere to the agreed output targets.

Although the spike in prices on 31st wasn’t adequately justified, we believe the oil prices are likely to find a bottom in the next few weeks. Over the coming week we expect oil to trade around $40 per barrel.