DNH Financial (Pvt) Ltd.

Daily
21st September 2011
Market Performance
ASPI MPI Turnover (bn) 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) 21.09.2011 6,793 6,138 2.0 127.6 120.6 225 18.3 2,439 22.0 1.5 2.3 20.09.2011 6,829 6,169 1.8 153.6 193.7 228 18.9 2,450 22.1 1.5 2.3 %Chg. -0.5 -0.5 11.7 -16.9 -37.7 -1.3 -3.2 -0.5 -0.5 0.0 0.0

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Market Indices
7,000 6,800 6,600 6,400 6,200 6,000 14/9/2011 15/9/2011 16/9/2011 20/9/2011 21/9/2011 ASI MPI

Market Outlook The market continued to decline with the ASPI and MPI losing 0.5% each to close at 6793 and 6138. Trading remained lackluster with turnover at LKR2.0 bn, being only marginally higher than yesterday. Amongst the losers for the day were Kalamazoo, Samson International and Metropolitan Resource which declined by 28.3%, 12.7% and 12.2% offsetting gains in Radiant Gems, The Finance Company and Softlogic Capital which advanced by 22.1%, 16.7% and 16.3% respectively. Several Asian markets meanwhile rose ahead of the U.S. Federal Reserve's policy decision. Assuaging investors' nerves was Greece's firm promise to trim its state expenditure further before a second call with international lenders (whom Athens must persuade) to extend further loans to avoid bankruptcy next month.
In corporate news, National Development Bank (NBD) has announced that it is in preliminary talks with Singapore banking giant DBS to strengthen its investment banking operations. While further details are not available, we believe that this is a highly encouraging move given the fact that the local investment banking industry appears to be still very much at a nascent stage and its development to regional or international standards is long overdue. Consequently diversifying into investment banking activities provides a strong opportunity for lenders to boost their fee based income as opposed to concentration on purely fund based income activities. In terms of market trajectory, we believe that the current price weakness in the bourse provides an excellent opportunity for medium to long-term investors to pick up attractively priced growth stocks. Although sentiment and liquidity may impact the market in the near term, we believe that Sri Lankas structural story is firmly intact and highly compelling

with a strong multiplier effect on corporate EPS growth. Consequently we advise investors to allocate funds to the bourse in an informed manner carefully selecting sectors and counters that will fully benefit from fast growing domestic economics.

Gainers /Losers (%)

Eastern Merchants Metropolitan Resource Samson International Kalamazoo The Finance Company (X) Softlogic Capital The Finance Company Radiant Gems

-11.4 -12.2 -12.7 -28.3 12.8 16.3 16.7 22.1

Significant Trades (Turnover in LKR Mn)

1400 1200 1000 800 600 400 200 0 TFC LGL REG SAMP

Global Markets
Sri Lanka - ASPI India - Sensex Pakistan - KSE 100 Taiwan Weighted Singapore - Straits Times Hong Kong - Hang Seng Index 6793 17065 11852 7536 2792 18824 %Chg. -0.52 -0.20 2.86 0.57 0.39 -1.00

Interest Rates & Currencies

Prime Lending Rate (Avg. Weighted) Deposit Rate (Avg. Weighted) Treasury Bill Rate (360 Days) Dollar Denominated Bond Rate LKR/US$ (Avg. Rate) LKR/EURO (Avg. Rate) 22.08.2011 21.09.2011 9.5% 6.4% 7.3% 6.3% 111.0 153.1

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.