The Bourse ended the week on a negative note as the ASPI decreased by 10.09 points (or -0.16%) to close at 6,143.90 points, while the S&P SL20 Index also decreased by 38.12 points (or -1.13%) to close at 3,322.25 points.
Turnover and market capitalization
JKH was the highest contributor to the week’s turnover value, contributing LKR 0.22Bn or 15.30% of total turnover value. Commercial Bank followed suit, accounting for 10.05% of turnover (value of LKR 0.15Bn) while Nestle Lanka contributed LKR 0.14Bn to account for 9.88% of the week’s turnover.
Total turnover value amounted to LKR 1.45Bn (cf. last week’s value of LKR 1.10Bn), while daily average turnover value amounted to LKR 0.29Bn (+5.28% W-o-W) compared to last week’s average of LKR 0.28Bn.
Market capitalization meanwhile, decreased by 0.16% W-o-W (or LKR 4.73Bn) to LKR 2,877.01Bn cf. LKR 2,881.71Bn last week.
Liquidity (in value terms)
The Banks, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 39.40% (or LKR 0.57Bn) of market turnover. Sector turnover was driven primarily by Commercial Bank, Sampath Bank, HNB & Nations Trust which accounted for 72.05% of the sector’s total turnover.
The Diversified sector meanwhile accounted for 22.45% (or LKR 0.33Bn) of the total turnover value, with turnover driven primarily by JKH, Hemas Holdings & Softlogic Holdings which accounted for 88.97% of the sector turnover.
The Beverage, Food & Tobacco sector was also amongst the top sectorial contributors, contributing 15.29% (or LKR 0.22Bn) to the market driven by Nestle Lanka which accounted for 64.60% of the sector turnover.
Liquidity (in volume terms)
The Banks, Finance & Insurance sector dominated the market in terms of share volume, accounting for 30.83% (or 22.54Mn shares) of total volume, with a value contribution of LKR 0.57Bn.
The Diversified sector followed suit, adding 20.27% to total turnover volume as 14.82Mn shares were exchanged.
The sector’s volume accounted for LKR 0.33Bn of total market turnover value. The Land & Property sector meanwhile, contributed 13.14Mn shares (or 17.97%), amounting to LKR 0.10Bn.
Top gainers and losers
Amana Life was the week’s highest price gainer; increasing 930.8% W-o-W from LKR1.30 to LKR13.40 while Amana Takaful (+750.0% W-o-W), O’nally Holdings (+20.2% W-o-W) and CFT (+17.6% W-o-W) were also amongst the top gainers.
Adam Investments was the week’s highest price loser; declining 33.3% W-o-W to close at LKR0.20 while SMB Leasing (-20.0% W-o-W), Adam Capital (-16.7% W-o-W) and Tess Agro [NV] (-16.7% 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 outflow amounting to LKR 0.08Bn relative to last week’s total net inflow of LKR 0.02Bn (-456.57% W-o-W).
Total foreign purchases decreased by 13.7% W-o-W to LKR 0.38Bn from last week’s value of LKR 0.44Bn, while total foreign sales amounted to LKR 0.47Bn relative to LKR 0.42Bn recorded last week (+10.7% W-o-W).
In terms of volume Dialog & Nations Trust led foreign purchases while Distilleries & Commercial Bank led foreign sales.
In terms of value Nations Trust & Dialog led foreign purchases while Hemas Holdings & Commercial Bank led foreign sales.
Point of view
Equity markets remained largely flat this week, moving within a narrow 20-point range, to close approximately 10 points lower than last week.
Weaker earnings - particularly from blue-chip conglomerate JKH which is perceived as a proxy for the overall economic health of equity markets/corporates - dampened investor sentiment, dragging the Index 25 points lower early in the week following the release of its earnings.
The Index heavy-weight wiped off ~2.82% of its value over the week to close at Rs.138 amid the 23% Y-o-Y decline in its profits for the quarter, dragging the Index lower.
The Index managed to regain some traction mid-week however, as the decline in the key blue-chip’s share price along with expectations for the CBSL to hold monetary policy rates steady helped revive some buying interest.
The ASPI consequently gained a cumulative 33 points over the week, helping pare down the 43 point loss and helping the Index recover from its lowest close in 3-weeks.
Despite the revived buying interest mid-week, local HNI and institutional interest remained weak, accounting for just 13% of the week’s total turnover to remain the lowest participation level so far this year.
Local HNI and institutional participation levels this year have averaged 40% (in line with the historical range of 35-45%) but this week’s levels remains a low for the year.
HNI and institutional buying interest remained concentrated on just four stocks, with mid-caps RIL and NTB accounting for 66% of the week’s crossings and blue-chips JKH and NEST accounting for the remainder.
Foreign investors meanwhile, reverted to net sellers from the Colombo bourse this week, reversing last week’s net buying position of Rs. 23Mn to a net selling position of Rs. 82Mn this week.
Markets in the week ahead are likely to continue looking for cues from the June quarter corporate earnings releases.
Policy rates held steady for third time
The CBSL held policy rates steady (SDFR-7.25% & SLFR-8.50%) for the third consecutive time this year, citing its goal of stabilising inflation at mid-single digits to aid a high and sustainable growth trajectory for the economy.
The Monetary authority added that recent trends in monetary and credit expansion indicate greater monetary stability that is consistent with the country’s envisaged medium term growth and highlighted that i) short-term interest rates have begun to adjust downwards in response to the surplus liquidity conditions in domestic money markets and, ii) overall monetary expansion decelerated in June 2018 as private sector credit growth has gradually declined towards desired levels and net credit to the government has reduced.
The CBSL also noted that despite the recent uptick (Y-o-Y headline inflation remained at low-single digits during Feb-June 2018 but accelerated in July 2018), inflation is expected to remain at mid-single digits by year-end amid the onset of the harvest by end-Q3’18 and well-contained aggregate demand pressures.
The CBSL also reiterated its expectation (supported by leading indicators) for a gradual pickup in GDP growth from Q2’18 led by expansion in services and industry related activities and supported by improved weather conditions favorably impacting agriculture activities and related industries.
The Bank cautioned however, that although global economic growth is likely to strengthen over 2018 and 2019, risks remain balanced to the downside due to monetary policy tightening in advanced economies, strengthening of the USD, escalating trade tensions and pressure on many emerging market currencies which has led to some of these EM responding to these risks by tightening their monetary policies and allowing their exchange rates to adjust appropriately.
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