The Bourse ended on a negative note this week as the ASPI decreased by 18.37 points (or -0.28%) to close at 6,557.02 points, while the S&P SL20 Index also decreased by 10.76 points (or -0.29%) to close at 3,717.55 points.
Turnover and market capitalization
Nations Trust was the highest contributor to the week’s turnover value, contributing LKR1.49Bn or 21.20% of total turnover value. Sampath followed suit, accounting for 19.59% of turnover (value of LKR1.38Bn) while LOLC contributed LKR0.83Bn to account for 11.82% of the week’s turnover.
Total turnover value amounted to LKR7.04Bn (cf. last week’s value of LKR4.33Bn), while daily average turnover value amounted to LKR1.76Bn (+103.42% W-o-W) compared to last week’s average of LKR 0.87Bn.
Market capitalization meanwhile, increased by 1.17% W-o-W (or LKR 35.29Bn) to LKR 3,048.79Bn cf. LKR 3,013.50Bn last week.
Liquidity (in value terms)
The Banking, Finance & Insurance Sector was the highest contributor to the week’s total turnover value, accounting for 73.43% (or LKR 5.17Bn) of market turnover.
Sector turnover was driven primarily by Nations Trust, Sampath, LOLC, HNB, Janashakthi Insurance, Commercial Bank & CDB which accounted for 93.79% of the sector’s total turnover.
The Diversified Sector meanwhile accounted for 15.92% (or LKR 1.12Bn) of the total turnover value with turnover driven primarily by JKH &Melstacorp which accounted for 77.68% of the sector turnover.
The Power & Energy Sector was also amongst the top sectorial contributors, contributing 2.89% (or LKR 0.20Bn) to the market.
Liquidity (in volume terms)
The Banks, Finance & Insurance sector dominated the market in terms of share volume, accounting for 52.86% (or 65.30Mn shares) of total volume, with a value contribution of LKR 5.17Bn.
The Diversified Sector followed suit, adding 16.60% to total turnover volume as 20.51Mn shares were exchanged.
The sector’s volume accounted for LKR1.12Bn of total market turnover value.
The Power & Energy Sector meanwhile, contributed 13.16Mn shares (or 10.65%), amounting to LKR0.20Bn.
Top gainers and losers
PC Pharma was the week’s highest price gainer; increasing 100% W-o-W from LKR 0.10 to LKR 0.20. Adam Investments gained 50.0% W-o-W to close at LKR0.30. SMB Leasing [NV] (+50.0% W-o-W) and Blue Diamond (+25.0% W-o-W) were also amongst the gainers.
AIA Insurance was the week’s highest price loser, declining 26.2% W-o-W to close at LKR339.70 while Janashakthi Insurance (-15.4% W-o-W), Adam Capital (-14.3% W-o-W), Balangoda (-13.7% 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 0.49Bn relative to last week’s total net inflow of LKR 0.91Bn (-153.85% W-o-W).
Total foreign purchases increased by 79.6% W-o-W to LKR 3.41Bn from last week’s value of LKR 1.90Bn, while total foreign sales amounted to LKR 3.90Bn relative to LKR 0.99Bn recorded last week (+293.84% W-o-W). In terms of volume Softlogic Holdings & Dialog led foreign purchases while KelaniTyres& HNB led foreign sales.
In terms of value Softlogic Holdings & Central Finance led foreign purchases while HNB & JHK led foreign sales.
Point of view
Local Institutional and HNI investors returned strongly to markets after a one-month hiatus, helping push turnover levels on the Colombo Bourse to a new high since Sep’17. Average daily turnover levels for the week consequently amounted to Rs. 1.76Bn to not only the highest level this year but also the highest level since mid-Sept’17 when average daily turnover rose to Rs. 2.95Bn amid Hayley’s acquisition of Singer BV’s stake in Singer Sri Lanka.
Local Institutional and HNI participation which ranged at a high 60% (of total market turnover) during Jan’18, dropped notably in the run up to the LG elections to average a paltry 24% over February (participation levels of Local HNI and Institutional investors typically average ~40%). Local HNI and Institutional interest this week remained focused largely on Banks, with crossings in banking counters accounting for ~65% of the week’s total crossings.
Mid-tier banks NTB and Sampath accounted for the largest proportion of the crossings (54%) while top-tier banks COMB and HNB accounted for 12% of the week’s total crossings.
Despite the surge in turnover levels, the benchmark price Index fell ~18 points this week amid daily declines on the Index.
Nevertheless, appetite for Sri Lankan equities has remained relatively steady so far this year and despite political uncertainty clouding market sentiment and a slight risk reversal in global appetite for EM/FM assets in Feb’18, YTD returns on the ASPI have totaled 2.3%, with the benchmark Index remaining staunchly above the 6400-mark throughout the year.
Markets in the week ahead are likely to continue consolidating at the current 6500-levels.
Global financial assets faced challenging February
February remained a challenging month for global financial markets, with most asset classes recording losses for the 1st time in months. Global equities lost money for the 1st time since Oct’16 while worldwide bond markets were on track for its worst monthly performance since Nov’161.
For the 1st time since Nov’16, global investors appeared to reject EM/FM assets as net foreign portfolio flows to emerging markets fell $4.5Bn in February, ending a 14-month streak of net inflows.
Although the turn in risk appetite remains concerning as it may represent investor perception that EM/FM markets are facing stronger headwinds, the decline in short-term capital flows is more likely representative of a correction from the significant $49Bn that was pumped into financial assets in developing economies in January.
The IIF notes that while it remains cautious in its outlook for EM net capital flows due to the turbulence in February, it still estimates net flows to the 17 key markets it tracks topping $107Bn 2018, up from $62Bn in 2017.
According to the institute, most of February’s outflows were concentrated in Asia, particularly China with countries such as Turkey, India, Argentina, Brazil and Mexico by contrast recording net inflows, ranging between $3.7-$15Bn.
Net foreign flows to Sri Lankan Equity and Debt markets also tracked the general trend in global markets, with net foreign flows to equites in Feb falling to Rs.2.0Bn (down from net inflows of Rs.4.0Bn in Jan) while net foreign holdings of G-Sec’sfell 3% M-o-M to total Rs321Bn in Feb. cf. Rs.330Bn in Jan.
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