Sunday, July 9, 2017

Concerns over tax bill dominates sentiment

The Bourse closed on a negative note as the ASPI decreased by 9.57 points (or 0.14%) to close at 6,737.50 points, while the S&P SL20 Index also decreased by 24.57 points (or 0.62%) to close at 3,908.94 points.

Turnover and market capitalization

JKH was the highest contributor to the week’s turnover value, contributing LKR 0.92Bn or 26.51% of total turnover value.

Richard Pieris Holdings followed suit, accounting for 6.19% of turnover (value of LKR 0.22Bn) while Lion Brewery contributed LKR 0.16Bn to account for 4.50% of the week’s turnover.

Total turnover value amounted to LKR 3.48Bn (cf. last week’s value of LKR 4.60Bn), while daily average turnover value amounted to LKR 0.70Bn (-39.50% W-o-W) compared to last week’s average of LKR 1.15Bn.

Market capitalization meanwhile, increased by 0.48% W-o-W (or LKR 14.56Bn) to LKR 3,055.79Bn cf. LKR 3,041.23Bn last week.

Liquidity (in value terms)

The Diversified Sector was the highest contributor to the week’s total turnover value, accounting for 43.13% (or LKR 1.50Bn) of market turnover. Sector turnover was driven primarily by JKH, Richard Peiris & Hemas Holdings which accounted for 85.94% of the sector’s total turnover. The Bev Food Tobacco Sector meanwhile accounted for 14.01% (or LKR 0.49Bn) of the total turnover value with turnover driven primarily by Lion Brewery, Ceylon Beverage & Cold Stores which accounted for 86.79% of the sector turnover.

The Banking, Finance & Insurance Sector was also amongst the top sectorial contributors, contributing 18.26% (or LKR 0.64Bn) to the market driven by HNB & Commercial Bank which accounted for 44.01% of the sector turnover.

Liquidity (in volume terms)

The Diversified Sector dominated the market in terms of share volume, accounting for 48.37% (or 71.95Mn shares) of total volume, with a value contribution of LKR 1.50Bn.

The Banking, Finance & Insurance sector followed suit, adding 16.88% to total turnover volume as 25.12Mn shares were exchanged.

The sector’s volume accounted for LKR 0.64Bn of total market turnover value. The Manufacturing Sector meanwhile, contributed 12.51Mn shares (or 8.41%), amounting to LKR 0.29Bn.

Top gainers and losers

Udapussellawa was the week’s highest price gainer; increasing 62.05% W-o-W from LKR 19.50 to LKR 31.60.

Taprobane gained 25.00% W-o-W to close at LKR 5.50 while Blue Diamonds (NV) gained 25.00% W-o-W to close at LKR 0.50. Richard Peiris (+23.53% W-o-W) and Lucky Lanka (NV) (+23.08% W-o-W) were also amongst the gainers.

Renuka Capital was the week’s highest price loser, declining 20.17% W-o-W to close at LKR 552.90. Kelsey (-14.92% W-o-W), Brac Lanka Finance (-9.07% W-o-W) & Multi Finance (-8.40% W-o-W) were also amongst the top losers over the week.

Foreign investors closed the week in a net buying position with total net inflows amounting to LKR 0.55Bn relative to last week’s total net inflow of LKR 1.06Bn (-47.98% W-o-W).

Total foreign purchases decreased by 23.45% W-o-W to LKR 2.05Bn from last week’s value of LKR 2.68Bn, while total foreign sales amounted to LKR 1.50Bn relative to LKR 1.62Bn recorded last week (-7.45% W-o-W).

In terms of volume, Richard Peiris & Browns Investments led foreign purchases while Maskeliya and Renuka Agri led foreign sales.

In terms of value, JKH and HNB led foreign purchases while Ceylon Guardian and HNB[X] led foreign sales.

Point of view

Equities ended in the red this week as the benchmark price index slipped by ~10 points to end at 6,737.50 points.

The ASPI which slipped from an 18M high on Monday (losing 14 points) fell a further ~23 points by Wednesday before it managed to wipe-off some losses on Thursday & Friday as it recovered by ~28 points.

The tabling of the new Inland Revenue Bill in Parliament contributed towards thin volumes as investors continued to remain watchful ahead of the parliament’s decision on the new bill.

The daily average turnover level was consequently lower than that of last week, falling ~40% W-o-W to end at LKR 0.70Bn, ~20% lower than 2017 daily average turnover of LKR 0.92Bn.

Crossings over the week meanwhile, accounted for ~28% of total market turnover, amid strong interest in JKH(20% of crossings), Lion Brewery (15% of crossings) and Ceylon Beverages (14% of crossings).

Foreign investors however continued to be net buyers over the week, to end at LKR 0.55bn this week (~48% lower than last week), helping push the Y-T-D net inflow position to the Colombo bourse to over LKR 22Bn. Markets in the week ahead are likely to look for clarity from the proposed new inland revenue act.

Higher revenue supports Q1’17 fiscal deficit

In its mid-year assessment of the country’s fiscal position, the Ministry of Finance noted that both tax and non-tax revenue rose over the 1st four months of 2017, helping the budget deficit remain at a sustainable level of Rs. 233.2Bn (cf. Rs. 233.4Bn in Jan-Apr 16).

Total revenue over the period rose 24.6% Y-o-Y (Rs. 589.0Bn cf. Rs.472.7Bn) as tax revenue rose 25.6% Y-o-Y and non-tax revenue rose 10.3% Y-o-Y.

Tax revenue rose on the back of higher indirect tax receipts as domestic consumption based tax rose +32.3% Y-o-Y and import-based tax rose +22.5% Y-o-Y as revenue collection from VAT rose over the period. Direct tax receipts also rose 30.2% Y-o-Y with personal and corporate income tax rising 13.3% Y-o-Y between Jan-Apr’17 particularly from the Banking and Financial services, Wholesale trade and Manufacturing sectors. Non-tax revenue over the Jan-Apr 17 period meanwhile rose 10.3% Y-o-Y as most sources of non-tax revenue (sales and charges, social security contribution and rent income) increased.

The profit and dividend contribution from State Owned Business Enterprises (SOBEs) however, declined 44.1% Y-o-Y as overall performance of the SOBE has been mixed.

Major SOBEs such as CEB and CPC for instance incurred losses over Jan-Apr’17 as drought conditions along with higher global oil prices impacted performance.

The ROI from the SOBEs over the period consequently declined to Rs. 4.4 Bn cf. Rs. 7.9Bn in the comparable period last year.

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