The Bourse turned around to end the week on a positive note as the ASPI increased by 260.25 points (or +4.46%) to close at 6,092.21 points, while the S&P SL20 Index also increased by 211.10 points (or +7.04%) to close at 3,208.43 points.
Turnover and market capitalization
JKH was the highest contributor to the week’s turnover value, contributing LKR 4.19Bn or 42.20% of total turnover value. HNB followed suit, accounting for 12.50% of turnover (value of LKR 1.24Bn) while Commercial Bank contributed LKR 0.57Bn to account for 5.74% of the week’s turnover.
Total turnover value amounted to LKR 9.92Bn (cf. last week’s value of LKR 3.15Bn), while daily average turnover value amounted to LKR 1.98 (+152.29% W-o-W) compared to last week’s average of LKR 0.79Bn.
Market capitalization meanwhile, increased by 4.46% W-o-W (or LKR 122.10Bn) to LKR 2,858.14Bn cf. LKR 2,736.04Bn last week.
Liquidity (in value terms)
The Diversified sector was the highest contributor to the week’s total turnover value, accounting for 50.10% (or LKR 4.97Bn) of market turnover. Sector turnover was driven primarily by JKH, Melstacorp & Softlogic Holdings which accounted for 97.48% of the sector’s total turnover.
The Banks, Finance & Insurance sector meanwhile accounted for 29.20% (or LKR 2.90Bn) of the total turnover value, with turnover driven primarily by HNB, Commercial Bank, Sampath Bank & NDB which accounted for 88.86% of the sector turnover. The Manufacturing sector was also amongst the top sectorial contributors, contributing 11.16% (or LKR 1.11Bn) to the market driven by Chevron & Tokyo Cement which accounted for 79.23% of the sector turnover.
Liquidity (in volume terms)
The Diversified sector dominated the market in terms of share volume, accounting for 32.31% (or 71.87Mn shares) of total volume, with a value contribution of LKR 4.97Bn. The Banks, Finance & Insurance sector followed suit, adding 16.58% to total turnover volume as 36.87Mn shares were exchanged.
The sector’s volume accounted for LKR 2.90Bn of total market turnover value. The Manufacturing sector meanwhile, contributed 34.81Mn shares (or 15.65%), amounting to LKR 1.11Bn.
Top gainers and losers
MTD Walkers was the week’s highest price gainer; increasing 61.3% W-o-W from LKR8.00 to LKR12.90 while Blue Diamond [NV] (+50.0% W-o-W), Amana Life (+43.3% W-o-W) and Serendib Hotels [NV] (+34.8% W-o-W) were also amongst the top gainers.
Kelsey Development was the week’s highest price loser; declining 15.7% W-o-W to close at LKR29.50 while Udapussellawa (-15.4% W-o-W), Merc. Shipping (-12.6% W-o-W) and Talawakelle (-9.0% 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 3.86Bn relative to last week’s total net outflow of LKR 0.44Bn (-769.4% W-o-W). Total foreign purchases increased by 35.59% W-o-W to LKR 2.66Bn from last week’s value of LKR 1.96Bn, while total foreign sales amounted to LKR 6.52Bn relative to LKR 2.40Bn recorded last week (+171.27% W-o-W).
In terms of volume, Commercial Bank & NDB led foreign purchases while JKH & Tokyo Cement led foreign sales. In terms of value, Commercial Bank & NDB led foreign purchases while JKH & HNB led foreign sales.
Point of view
Equity market volatility rose to its highest since early 2016 as heightened political uncertainty following the sudden dismissal of and appointment of a new Prime Minister prompted sharp movements in stock prices over the week.
The broad share Index surged past the 6000-mark for the 1st time since mid-Sept supported by a record high weekly gain of ~260 points (+4.5% W-o-W) as local retailers, HNI and Institutionals returned strongly to the market despite the political upheaval. Some profit taking on Friday meanwhile, resulted in the ASPI losing ~22 points from its 8-week high of 6114.13 on Thursday. Activity levels too rose sharply over the week, with weekly turnover hitting a 6-month high of ~Rs.10Bn amid increased participation by both retail and local HNI and institutional investors (crossings for accounted for ~58% of weekly turnover cf. 41% so far this year).
The heightened local buying interest in markets however, stood in contrast to foreign investor activity which increased its pace of selling over the week as the ongoing political standoff prompted credit rating agencies to issue caution on Sri Lanka due to the impact it may have on the country’s ongoing fiscal & economic reform program and refinancing ability.
Net foreign sales over the week consequently totaled Rs.3.9Bn, the highest weekly outflow since Mar’18 when a strategic transaction in LOLC resulted in a net outflow of Rs.9.8Bn from the Colombo Bourse.
This week’s heavy foreign selling helped push the total outflow from domestic equities over October to ~Rs.7.0Bn, relative to the cumulative net outflow of Rs.6.0Bn recorded between Jan-Sep’18. The reconvening of parliament next week and subsequent political developments are likely to influence market movement in the week ahead.
LKR falls as foreign sell-off of assets increases
Sri Lanka’s currency slid 0.8% against the USD this week to hit an all-time low of Rs.175.6 as the Country’s political stalemate triggered greater foreign investor outflows from Sri Lankan capital markets and prompted greater LKR sales by importers. Government Securities held by foreigners fell 4.7% over the week to Rs. 221Bn (cf. Rs. 232 Bn at the close of markets last week), adding to the Rs.98Bn of outflows from Sri Lankan debt markets over the year so far.
Outflows from Equity markets meanwhile rose 769% over the week to Rs. 3.9Bn, helping widen the Bourse’s net outflow position to Rs. 13.6 (cf. Rs.10.3Bn last week). Although the LKR lost 1.5% of its value in the first three days following the political crisis that unfolded over the weekend and heightened over the week, greater dollar sales by the Central Bank on Thursday and Friday helped trim the loss on the LKR to 0.8%. The LKR has lost ~12% of its value so far this year amid the strengthening USD, with the bulk of the losses stemming from a heightened sell-off of the LKR in September when the LKR lost -4.5% of its value.
International Credit Agencies S&P, Moody’s & Fitch meanwhile all issued caution on Sri Lanka’s political crisis and the impact it could have on the country’s ongoing fiscal & economic reform program and ability to refinance its future debt repayments.
Fitch Ratings added that policy decisions that derail the IMF programme or lead to a loss of investor confidence could increase refinancing risk, noting further that of Sri Lanka’s external debt stock (~60% of GDP currently) almost 30% (ie: $15Bn) matures in 2019-2022 while almost 50% of public debt is foreign currency denominated.
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