The Bourse ended the week on a negative note as the ASPI decreased by 2.35 points (or -0.04%) to close at 6,141.55 points, while the S&P SL20 Index also decreased by 5.78 points (or -0.17%) to close at 3,316.47 points.
Turnover and market capitalization
JKH was the highest contributor to the week’s turnover value, contributing LKR 1.50Bn or 35.04% of total turnover value. Ceylinco Insurance followed suit, accounting for 29.98% of turnover (value of LKR 1.28Bn) while Sampath Bank contributed LKR 0.25Bn to account for 5.92% of the week’s turnover.
Total turnover value amounted to LKR 4.28Bn (cf. last week’s value of LKR 1.45Bn), while daily average turnover value amounted to LKR 0.86Bn (+194.23% W-o-W) compared to last week’s average of LKR 0.29Bn.
Market capitalization meanwhile, decreased by 0.04% W-o-W (or LKR 1.10Bn) to LKR 2,875.91Bn cf. LKR 2,877.01Bn last week.
Liquidity (in value terms)
The Banks, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 43.66% (or LKR 1.87Bn) of market turnover.
Sector turnover was driven primarily by Ceylinco Insurance, Sampath Bank & Commercial Bank which accounted for 88.29% of the sector’s total turnover.
The Diversified sector meanwhile accounted for 37.37% (or LKR 1.60Bn) of the total turnover value, with turnover driven primarily by JKH & Melstacorp which accounted for 96.80% of the sector turnover. The Beverage, Food & Tobacco sector was also amongst the top sectorial contributors, contributing 12.05% (or LKR 0.52bn) to the market driven by Cold Stores, Ceylon Tobacco, LMF & Lion Brewery which accounted for 91.93% of the sector turnover.
Liquidity (in Volume Terms)
The Banks, Finance & Insurance sector dominated the market in terms of share volume, accounting for 28.91% (or 20.13mn shares) of total volume, with a value contribution of LKR 1.87bn.
The Diversified sector followed suit, adding 26.52% to total turnover volume as 18.46mn shares were exchanged.
The sector’s volume accounted for LKR 1.60bn of total market turnover value. The Trading sector meanwhile, contributed 7.22mn shares (or 10.37%), amounting to LKR 0.01bn.
Top gainers and losers
Singer Industries was the week’s highest price gainer; increasing 20.4% W-o-W from LKR137.00 to LKR165.00 while Paragon (+17.6% W-o-W), Brac Lanka Finance (+15.1% W-o-W) and Ceylon Investment (+14.3% W-o-W) were also amongst the top gainers.
Huejay was the week’s highest price loser; declining 23.7% W-o-W to close at LKR24.10 while Tess Agro (-16.7% W-o-W), Blue diamonds (-16.7% W-o-W) and Tokyo Cement [NV] (-15.9% 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 0.17bn relative to last week’s total net outflow of LKR 0.08Bn (-109.32% W-o-W). Total foreign purchases increased by 484.97% W-o-W to LKR 2.24bn from last week’s value of LKR 0.38bn, while total foreign sales amounted to LKR 2.41bn relative to LKR 0.47bn recorded last week (+418.45% W-o-W).
In terms of volume Melstacorp & Chevron led foreign purchases while JKH & Dialog Axiata led foreign sales. In terms of value Ceylinco Insurance & Cold Stores led foreign purchases while JKH & Commercial Bank led foreign sales.
Point of view
Bargain hunting on Sri Lanka’s key blue-chip JKH pushed daily market turnover to a high since May (Rs.2.3bn), pushing average daily turnover levels to 10-week highs amid large crossings in the battered blue-chip. Due to generally sluggish market conditions and weaker corporate earnings, JKH had wiped off ~8% of its value YTD (Rs.138 cf. Rs.150 in Jan’18) by last week, prompting large block purchases by local HNI and Institutionals as Foreign investors sold down ~0.49% (6Mn shares) of their ownership in JKH.
JKH consequently accounted for 45% of the week’s total crossings of Rs.2bn (24% of the market’s total turnover) while large blocks in Ceylinco Insurance (48% of the week’s total crossings and 25% of total market turnover) also helped revive the week’s average daily market turnover to Rs.0.85bn (avg. daily turnover has ranged between Rs.0.28bn-Rs.0.74bn since June’18).
The revived market activity in JKH helped its price (which hit a one year low on Tuesday to register a 9% loss YTD) recover 6% over the remainder of the week, and the stock consequently closed up at Rs. 144.9 helping wipe off some of the losses made during the year.
The YTD loss on JKH by the end of this week consequently reduced to 3.4% cf. YTD loss of 8% last week. The Index-heavy weight’s price recovery also helped the benchmark ASPI offset some of its losses from earlier in the week, and the broad-share Index consequently ended the week on a flat note (-0.04% W-o-W).
Meanwhile, ~27% of corporates have reported June quarter results so far, with 56% of the companies who have reported earnings recording Y-o-Y gains in quarterly earnings.
Markets in the week ahead are likely to continue looking for cues from the June quarter corporate earnings releases.
Pace of industrial production slows in Q2’18
Sri Lanka’s Industrial Production (IP) in the manufacturing sector in Q2’18 rose a marginal 0.6% Y-o-Y, as manufactured volumes of Coke and refined petroleum products (15.0%) and Chemicals (8.5%) rose over the period.
Productions volumes of Wood products (10.5%), fabricated Metal products (9.5%), Beverages (5.3%), and Basic Metals (4.2%) also rose over the quarter but showed declines in the pace of growth compared to Q1’18.
The IP index is a leading economic indicator representing production volumes in the Industrial sector for a given period of time and can be used to identify the turning points in economic development at an early stage.
Thus, while the 0.6% Y-o-Y growth in the overall index in Q2’18 is positive, the fact that industrial production has slowed compared to Q1’18 (when the Index rose 1.6%) indicates a slowing pace of growth over Q2’18. Indeed, on a Q-o-Q basis between Q1 and Q2 2018, the Index has declined 4.6% relative to a 3.7% decline in the comparable period last year. In line with this, the CBSL Governor last week downgraded the CBSL’s full year GDP growth forecast for Sri Lanka down to 4% from its earlier forecast of 4.5%.
At its latest monetary policy review last week, the CBSL cautioned that the downside risks to global economic growth remains high due to monetary policy tightening in advanced economies, strengthening of the USD and escalating trade tensions.
The CBSL added that these developments have added pressure on many emerging market currencies, prompting some of these EM’s to respond to these risks by tightening their monetary policies and allowing their exchange rates to adjust appropriately.
The Bank added that while some pressure on the LKR was evident since late April 2018, some of this depreciation pressure on the LKR has eased since late July 2018.
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