The rise in the Colombo stock market indices for most of the last two weeks is ‘irrational’ as company performances and their forecast earnings are wide apart from the share price hikes, according to some analysts.
A broker said the Commercial Bank (CB) share price increased during the past weeks but this stock does not merit one. "Their total hedging exposure to People's Bank (PB) was US$8.9 million. With the oil prices reaching US$35 a barrel, their exposure increased to US$ 22 million. But the share price increased by Rs. 15 to Rs. 73 amidst all this (exposure) which does not correspond to reason," he explained.
He said the new development where the Central Bank says all banks are not to proceed with their transactions relating to hedging contracts with Ceylon Petroleum Corporation (CPC) also creates problems for Commercial.
Explaining about share prices of plantations, another analyst said that simply because rubber has hit an increase of Rs. 12 in the local auction does not mean those plantations are not having problems. "During the past two tea auctions, tea prices have risen by about Rs. 50. Rubber has also rebounded from their recent losses, while palm oil prices have also recovered in Malaysia. Overall commodities have recovered in prices, which have helped to up the plantation stocks, but even at these prices most plantations are not making profits,” he noted.
He said that Dialog's share price increase (even if the rise was marginal) didn’t make any sense as the next quarter will see the company taking a bigger hit. “This is because most of Dialog’s revenue comes from pre-paid package owners and they will look for cheaper options such as Airtel,” he explained.