DNH Financial (Pvt) Ltd.

Daily
10th January 2013
Market Performance
ASPI S&P SL 20 Turnover (mn) Foreign Purchases (mn) Foreign Sales (mn) Traded Companies Market PER (X) Market Cap (LKR bn) Market Cap (US$ bn) Dividend Yield (%) Price to Book (X) 10.01.2013 5,732 3,122 1,013.1 678.9 539.4 214 16.2 2,202 17.1 2.3 2.1 09.01.2013 5,745 3,121 497.2 139.3 170.7 238 16.3 2,207 17.2 2.3 2.1 %Chg. -0.2 0.0 103.8 387.5 216.0 -10.1 -0.6 -0.2 -0.2 0.0 0.0

DNH MARKET WATCH

www.dnhfinancial.com +94115700777
Market Indices
ASI 6,000 5,800 5,600 5,400 5,200 5,000 04/01/2013 07/01/2013 08/01/2013 09/01/2013 10/01/2013 ASI S&P SL20 3,100 3,120 S&P SL20 3,140

Market Outlook
The market traded largely sideways with the ASPI closing a notch down at 5732. Turnover recorded LKR1013 mn with trading in Hatton National Bank and Distilleries accounting for 44% of the days total. Losers modestly offset gainers with Taprobane Holdings, Orient Finance and George Steuart declining by 9.8%, 9.5% and 8.3% and offsetting gains in Infrastructure Developers, Ramboda Falls and Keells Food Products which advancing by 12.0%, 10.3% and 9.5% respectively. In global markets, a positive start to US corporate earnings season and a sharp improvement in Chinas monthly trade helped boost international markets today. Market Trajectory The majority of domestic investors appear to be waiting for either a short term rally to participate in or a strong correction before entering the market. We believe that neither will happen but a gradual re-rating in the market may be the most likely scenario against a solid fundamental backdrop led by a rise in quality stocks. Notwithstanding the current sideways movement, we believe that the market now offers an attractive investment opportunity for those who are willing to look beyond the short term. The bourses appeal at current levels is even more pronounced when considering its relative underperformance against major emerging and developed markets. While net foreign buying in the bourse appears to be increasing, it is likely to rise further as global macro-economic uncertainties could force foreign asset managers to square off global positions and identify new and fundamentally solid emerging markets such as Sri Lanka resulting in a flow of funds into domestic equities. Consequently, we advise investors to pro-actively seek counters that are likely to record healthy and sustainable top line growth (as a result of their strong domestic focus), firm margins and are cash generative, attributes which we believe will lead to strong positive gains and outperformance in the market.

Net Foreign Inflow(YTD)

600 500 400 YTD Net FPI 300 200 100 0 -100 -200

Millions

Source- CSE/ DNH Research

Gainers /Losers (%)

Ceylon Leather(W0013) George Steuart Orient Finance Taprobane Holdings Horana Plantations Keells Food Products Ramboda Falls Infrastructure Developers

-7.7 -8.3 -9.5 -9.8 7.6 9.5 10.3 12.0

Significant Trades (Turnover in LKR Mn)

300 250 200 150 100 50 0 HNB DIST JKH COMB

Global Markets
Sri Lanka - ASPI India - Sensex Pakistan - KSE 100 Taiwan Weighted Singapore - Straits Times Hong Kong - Hang Seng Index 5,732 19,652 16,523 7,812 3,226 23,354 %Chg. -0.22 -0.07 -1.31 0.94 0.18 0.59

Interest Rates & Currencies

Prime Lending Rate (Avg. Weighted) Deposit Rate (Avg. Weighted) Treasury Bill Rate (360 Days) Dollar Denominated Bond Rate LKR/US$ (Selling Rate) LKR/EURO (Selling Rate) 10.01.2013 14.3% 10.1% 11.4% 5.9% 128.7 168.9

Disclaimer
This Review is prepared and issued by DNH Financial (Pvt.) Ltd. (DNH) based on information in the public domain, internally developed and other sources, believed to be correct. Although all reasonable care has been taken to ensure the contents of the Review are accurate, DNH and/or its Directors, employees, are not responsible for the correctness, usefulness, reliability of same. DNH may act as a Broker in the investments which are the subject of this document or related investments and may have acted on or used the information contained in this document, or the research or analysis on which it is based, before its publication. DNH and/or its principal , their respective Directors, or Employees may also have a position or be otherwise interested in the investments referred to in this document. This is not an offer to sell or buy the investments referred to in this document. This Review may contain data which are inaccurate and unreliable. You hereby waive irrevocably any rights or remedies in law or equity you have or may have against DNH with respect to the Review and agree to indemnify and hold DNH and/or its principal, their respective directors and employees harmless to the fullest extent allowed by law regarding all matters related to your use of this Review. DNH Financial is a fully owned subsidiary of Environmental Resources Investment PLC (ERI).