The Bourse continued its upward momentum as the ASPI increased by 145.47 points (or +2.28%) to close at 6,514.73 points, while the S&P SL20 Index also increased by 112.21 points (or +3.06%) to close at 3,783.93 points.
Turnover and market capitalization
HNB was the highest contributor to the week’s turnover value, contributing LKR1.24Bn or 33.56% of total turnover value.
JKH followed suit, accounting for 18.80% of turnover (value of LKR0.69Bn) while Lion Brewery contributed LKR0.32Bn to account for 8.55% of the week’s turnover.
Total turnover value amounted to LKR3.69Bn (cf. last week’s value of LKR1.02Bn), while daily average turnover value amounted to LKR0.92Bn (+262.14% W-o-W) compared to last week’s average of LKR 0.25Bn.
Market capitalization meanwhile, increased by 2.55% W-o-W (or LKR 73.82Bn) to LKR 2,973.11Bn cf. LKR 2,899.29Bn last week.
Liquidity (in value terms)
The Banking, Finance & Insurance Sector was the highest contributor to the week’s total turnover value, accounting for 48.51% (or LKR 1.79Bn) of market turnover.
Sector turnover was driven primarily by HNB, Sampath Bank & Commercial Bank which accounted for 89.89% of the sector’s total turnover.
The Diversified Sector meanwhile accounted for 25.35% (or LKR 0.93Bn) of the total turnover value with turnover driven primarily by JKH & Melstacorp which accounted for 92.80% of the sector turnover.
The Beverage, Food & Tobacco Sector was also amongst the top sectorial contributors, contributing 10.33% (or LKR 0.38Bn) to the market driven by Lion Brewery which accounted for 82.83% of the sector turnover.
Liquidity (in volume terms)
The Banking, Finance & Insurance sector dominated the market in terms of share volume, accounting for 28.67% (or 15.23Mn shares) of total volume, with a value contribution of LKR 1.79Bn.
The Diversified Sector followed suit, adding 26.94% to total turnover volume as 14.31Mn shares were exchanged.
The sector’s volume accounted for LKR0.93Bn of total market turnover value. The Manufacturing Sector meanwhile, contributed 5.05Mn shares (or 9.50%), amounting to LKR0.26Bn.
Top gainers and losers
Office Equipment was the week’s highest price gainer; increasing 27.7% W-o-W from LKR 53.10 to LKR 67.80. Laugfs Gas[NV] gained 21.5% W-o-W to close at LKR24.30.
Laugfs Gas (+17.9% W-o-W) and Mahaweli Reach (+17.9% W-o-W) were also amongst the gainers.
PC Pharma finance was the week’s highest price loser, declining 50.0% W-o-W to close at LKR0.10 while Adam Capital (-14.3% Y-o-Y), Odel (-13.3% W-o-W) & Amana Takaful(-12.5% 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 1.97Bn relative to last week’s total net inflow of LKR 0.11Bn (+1732.2% W-o-W).
Total foreign purchases increased by 591.8% W-o-W to LKR 2.59Bn from last week’s value of LKR 0.37Bn, while total foreign sales amounted to LKR 0.62Bn relative to LKR 0.27Bn recorded last week (+133.2% W-o-W).
In terms of volume HNB & JKH led foreign purchases while Tokyo Cement & Lion Brewery led foreign sales.
In terms of value too HNB & JKH led foreign purchases while Lion Brewery & Tokyo Cement led foreign sales.
Point of view
Equities opened 2018 on a strongly positive note, maintaining last week’s uptrend (+46 points) to gain ~145 points W-o-W and pushing the Index past the key 6500-mark for the 1st time in 2-months.
Bullish sentiment by both foreigners and local HNI & Institutional investors helped buoy markets, and the benchmark ASPI’s 145 point gain in the 1st week of trading contrasts sharply to the 75 point loss recorded in the 1st week of trading in 2017 and the 168 point loss recorded in the 1st week of trading in 2016.
Foreign investors remained net buyers in local equities to the tune of Rs.2.0Bn this week, mirroring the general trend of continued risk appetite at the start of 2018 for EM equities which hit 6-year highs as new economic data showed the global economy expanding at a healthy pace.
Local HNI and Institutional investors meanwhile, returned to markets strongly this week, accounting for 60% of market turnover amid crossings in blue chips HNB (55% of total crossings), JKH (17% of crossings), Melstacorp (8%) and Sampath (8%).
Renewed interest in fundamentally strong counters helped drive the Index’s 145 point gain this week, with index heavyweights JKH and CTC accounting for 35 & 24.8 points respectively, of the index’s 145 point gain; Banking & Finance stocks (COMB,SAMP,LOLC & HNB) meanwhile, accounted for 25.7 index points while Telco’s DIAL and SLT accounted for 14.8 points.
The Index’s positive performance translates to a 2.3% gain in the 1st trading week of 2018, a notable contrast to the loss of 1.1% in Q4’17. Sri Lankan equities returned 2.3% in 2017 for the 1st time in 3 years (2016 =-9.7% and 2015=-5.5%) as strong gains in Q2’17 (11.3%) helped offset losses of 2.7% in Q1’17, -4.6% in Q3’17 and -1.1% in Q4’17. The positive return of 2.3% on the ASPI in 2017 however, contrasts sharply with peers in EM & FM markets, which recorded multi-year highs of 34% (MSCI EM) and 24%(MSCI FM) in 2017. Current market momentum is likely to continue in the week ahead.
CBSL forecasts lower GDP growth in 2017
At the annual presentation of its Roadmap for the year, the CBSL noted that growth in 2017 is likely to be lower than originally estimated (<4% cf. 4.5% originally) but that GDP should recover to 5-5.5% in 2018 amid ongoing legal amendments, the continuation of fiscal consolidation and stronger reforms to attract investment and boost exports1.
The Monetary Authority noted that 2017 was a challenging year due the economy-wide effects of inclement weather, noting that while the drought and floods disturbed agriculture/agro-based industrial activities, the spillover effects of these adverse weather conditions impacted the other sectors of the economy too.
The CBSL also noted that low economic growth was partly due to the tighter Monetary and Fiscal policy (aimed at restoring macroeconomic stability) which impacted public and private investment spending.
Weather-related supply disruptions, revisions to indirect taxes and increased prices of imported commodities meanwhile, impacted inflation levels making the CBSL’s efforts to anchor inflation expectations challenging.
The CBSL noted though that despite these challenges, macro-economic stability is being restored and the economy is trending in the correct direction due in large part to the significant progress in several policy measures taken by the CBSL in coordination with the GoSL.
The CBSL added that while it had implemented several proactive policy measures in 2017 to achieve the core objectives of maintaining economic and price stability and financial system stability, the GoSL has also remained committed to a revenue based fiscal consolidation programme that aims reduce budget deficits and debt levels progressively.
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