The Bourse ended in red today as the ASPI decreased by 68.9 points (or -1.04%) to close at 6,552.59 points, while the S&P SL20 Index also decreased by 56.44 points (or -1.45%) to close at 3,841.97 points.
Turnover and market capitalization
United Motors was the highest contributor to the week’s turnover value, contributing LKR2.42Bn or 34.08% of total turnover value.
Dialog Axiata followed suit, accounting for 11.57% of turnover (value of LKR0.82Bn) while Hayleys contributed LKR0.71Bn to account for 10.01% of the week’s turnover.
Total turnover value amounted to LKR7.11Bn (cf. last week’s value of LKR5.25Bn), while daily average turnover value amounted to LKR1.42Bn (+8.19% W-o-W) compared to last week’s average of LKR 1.31Bn.
Market capitalization meanwhile, decreased by 1.03% W-o-W (or LKR 30.90Bn) to LKR2,979.73Bn cf. LKR3,010.62Bn last week.
Liquidity (in value terms)
The Motors Sector was the highest contributor to the week’s total turnover value, accounting for 34.12% (or LKR 2.42Bn) of market turnover.
Sector turnover was driven primarily by United Motors which accounted for 99.9% of the sector’s total turnover. The Diversified Sector meanwhile accounted for 22.00% (or LKR 1.56Bn) of the total turnover value with turnover driven primarily by Hayleys & Hemas Holdings which accounted for 64.57% of the sector turnover.
The Banking, Finance & Insurance Sector was also amongst the top sectorial contributors, contributing 16.31% (or LKR 1.16Bn) to the market driven by HNB, Sampath, Central Finance which accounted for 83.56% of the sector turnover.
Liquidity (in volume terms)
The Telecommunication sector dominated the market in terms of share volume, accounting for 28.70% (or 60.94Mn shares) of total volume, with a value contribution of LKR 0.82Bn.
The Hotels & Travels sector followed suit, adding 19.85% to total turnover volume as 42.16Mn shares were exchanged.
The sector’s volume accounted for LKR0.21Bn of total market turnover value. The Motors Sector meanwhile, contributed 31.05Mn shares (or 14.62%), amounting to LKR2.42Bn.
Top gainers and losers
PC Pharma was the week’s highest price gainer; increasing 100% W-o-W from LKR0.10 to LKR0.20. Adam Investments gained 25.0% W-o-W to close at LKR0.50. Durdans NV (+11.5% W-o-W) and Lion Brewery (+8.6% W-o-W) were also amongst the gainers.
Madulsima was the week’s highest price loser, declining 27.3% W-o-W to close at LKR13.60 while Udapussellawa (-15.9% Y-o-Y), Balangoda (-15.9% W-o-W) & Hapugastenne (-12.3% W-o-W) were also amongst the top losers over the week.
Foreign investors closed the week in a net selling position with total net outflows amounting to LKR 2.24Bn relative to last week’s total net inflow of LKR 0.73Bn (-408% W-o-W).
Total foreign purchases decreased by 20.4% W-o-W to LKR 2.57Bn from last week’s value of LKR 3.23Bn, while total foreign sales amounted to LKR 4.81Bn relative to LKR 2.50Bn recorded last week (+92.44% W-o-W).
In terms of volume, Melstacorp & Access Engineering led foreign purchases while United Motors & Dialog led foreign sales. In terms of value HNB & Melstacorp led foreign purchases while United Motors & Nestle led foreign sales.
Point of View
Markets lost momentum this week, losing 69 points W-o-W as investors waited in anticipation of the National Budget for 2018.
The CBSL’s monetary policy decision on Tuesday to hold policy rates steady for the 4th consecutive time this year (at its one before the last policy meeting for the year), was mostly priced in and the decision failed to move markets significantly in either direction.
The benchmark ASPI consequently fell below the 6600-mark for the 1st time in a week. Despite the drop in the Index, average daily turnover levels picked up 8% this week, as Institutional and HNI investors returned strongly, accounting for ~67% of the week’s total market turnover cf. just 56% last week.
In contrast to last week, when Blue-chips dominated crossings, strong activity in mid-caps such as UML (50% of total crossings), DIAL (16% of total crossings) and Hayleys (15% of total crossing) dominated market activity over the week.
Foreign investors meanwhile, turned into net sellers this week, with net outflows from the Bourse totaling Rs. 2.2Bn cf. net inflows of Rs. 0.7Bn last week and Rs. 0.5Bn the week prior. Year-to-date net flows to the CSE consequently amounted to Rs. 17.41Bn, lower than the H1’17 total of Rs. 21.5Bn. Markets in the week ahead are likely to look for cues from the continued release of corporate earnings for the Sept’17 quarter which have been relatively mixed thus far.
Budget proposals align with broader policy agenda
The GoSL unveiled Budget 2018 this week, presenting a set of proposals that are broadly aligned with the goals stated in the PM’s statement and Vision 2025 from earlier this year.
In line with this broader policy agenda, Budget 2018 included proposals to promote investment and liberalize trade while ensuring social safety nets and encouraging SMEs to ensure inclusive growth.
Notable proposals to promote investments include the removal of certain foreign land ownership laws and setting up a ‘one-stop-shop’ for business registrations while drafting new anti-competitive laws.
Proposals to liberalize trade meanwhile, include the abolishing of 1200 para-tariffs, the drafting a new Customs Ordinance Act and automating specific customs processes.
SME’s (which account for ~52% of GDP but still remains in the informal sector) got a slew of incentives under the “Enterprise Sri Lanka Credit Scheme” which falls under the GoSL’s broader theme of “Enterprise Sri Lanka”, targeted at encouraging Sri Lanka’s entrepreneurial spirit.
In terms of capital markets meanwhile, Budget 2018 proposals include the implementation of a legal framework & policy environment to further develop capital markets.
The Budget also addressed the fact that two of Sri Lanka’s systemically important state banks are facing capital pressures and that in addition to a total capital infusion of Rs.10Bn (in equal parts over 2017 and 2018) to BoC, these two entities will be allowed to raise equity capital following the GoSL’s partial divesture of its controlling stakes in these state banks.
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