The Bourse ended the week on a negative note as the ASPI decreased by 169.29 points (or -3.02%) to close at 5,437.06 points, while the S&P SL20 Index also decreased by 109.51 points (or -4.04%) to close at 2,600.76 points.
Turnover & Market Capitalization
JKH was the highest contributor to the week’s turnover value, contributing LKR 2.17Bn or 70.44% of total turnover value. Commercial Bank followed suit, accounting for 10.25% of turnover (value of LKR 0.32Bn) while Sampath Bank contributed LKR 0.14Bn to account for 4.61% of the week’s turnover. Total turnover value amounted to LKR 3.08Bn (cf. last week’s value of LKR 0.56Bn), while daily average turnover value amounted to LKR 1.03Bn (+447.97% W-o-W) compared to last week’s average of LKR 0.19Bn. Market capitalization meanwhile, decreased by 3.01% W-o-W (or LKR52.81Bn) to LKR 2,553.09Bn cf. LKR 2,632.39Bn last week.
Liquidity (in Value Terms) 
The Diversified was the highest contributor to the week’s total turnover value, accounting for 72.46% (or LKR 2.23Bn) of market turnover. Sector turnover was driven primarily by JKH, Hemas Holdings & Melstacorp which accounted for 99.43% of the sector’s total turnover. The Banks, Finance & Insurance sector meanwhile accounted for 18.16% (or LKR 0.56Bn) of the total turnover value, with turnover driven primarily by Commercial Bank, Sampath Bank & LB Finance which accounted for 86.71% of the sector turnover. The Beverage, Food & Tobacco sector was also amongst the top sectorial contributors, contributing 3.55%(or LKR 0.11) to the total turnover, with turnover driven primarily by Cargills accounting for 91.55% of the total turnover.
Liquidity (in Volume Terms)
The Diversified sector dominated the market in terms of share volume, accounting for 31.80% (or 17.54Mn shares) of total volume, with a value contribution of LKR 2.23Bn. The Banks, Finance & Insurance sector followed suit, adding 0.56Bn to total turnover volume as 16.92Mn shares were exchanged. The sector’s volume accounted for LKR 30.66% of total market turnover value. The Manufacturing sector meanwhile, contributed 5.26Mn shares (or 9.53%), amounting to LKR 0.06 Bn.
Top Gainers & Losers
Printcare PLC was the week’s highest price gainer; increasing 15.0% W-o-W from LKR30.10 to LKR34.60 while EB Creasy(+14.9% W-o-W), Sunshine Holdings (+9.6% W-o-W) and Amana Takaful (+9.6% W-o-W) were also amongst the top gainers. SMB Leasing[NV] were the week’s highest price loser; declining 33.3% W-o-W to close at LKR0.20 while Blue Diamonds[NV](-33.3% W-o-W), Beruwala Resorts (-28.6% W-o-W) and Palm Garden Hotel(-20.0% W-o-W) were also amongst the top losers over the week.
Point of View
Investor sentiment took a nosedive on the first trading day this week in the wake of a devastating terror attack on Easter Sunday. Equity markets on Tuesday fell ~204 points to close the day at a near 61/2-year low of 5,402.85 points (since Dec’12) following the attack. The shocking developments are the second major blow to equity markets in the last 6 months, the previous being the political turmoil in Oct’18. The ~3.6% drop on Tuesday in the Benchmark index was the largest daily drop since Feb’12 and was led by large-caps CTC (-6.0% W-o-W) and JKH (-5.6% W-o-W).
The ASPI however reversed gears on Wednesday and the market recorded 3-consecutive days of gains to pare down the week’s earlier losses. Gains amounting to a total of 34.5 points during the rest of the week were paltry however as the ASPI closed for the week slightly higher at 5,437.06 points (169.3 points down or -3.0% W-o-W).
Following the ~7.7% price drop in JKH on Tuesday, foreign investors sought value in the Sri Lankan blue-chip thereby pushing turnover to nearly Rs. 2.0Bn on Wednesday. Foreign investors were net buyers this week, recording the largest net inflow for the year of Rs. 1.6Bn during the week (cf. Rs. 0.1Bn). The YTD sell-off on domestic equities consequently fell to Rs. 4.3Bn (cf. Rs. 5.9Bn last week). Activity levels in the Colombo Bourse meanwhile increased considerably this week (despite trailing off on Friday) due to investor interest in JKH which accounted for ~70% of total market turnover for the week.
Hence, average daily turnover for the week increased 311% W-o-W to Rs. 0.8Bn cf. Rs. 0.2Bn last week, well above the YTD average daily turnover of Rs. 0.6Bn. Local HNI and institutional participation however remained paltry, accounting for ~14% of total market turnover for the week (cf. YTD average of ~38%). Large parcels in Commercial Bank accounted for 47% of total crossings for the week while investor interest was also focused on Cargills (24% of crossings), JKH (23% of crossings) and LB Finance (6% of crossings). Markets in the week ahead are likely to closely monitor the security situation in the country while also looking for cues in economic and political developments in the aftermath of the attack.
“Decisive policy and security measures” key to shore up confidence: IMF Following IMF’s confirmation regarding the recommencement of its EFF progam in Jan’19, the IMF stated the next tranche of the $1.5Bn facility is to be released mid-May on the basis of a positive Budget. The Group however warned that Sri Lankan authorities would need to take decisive policy measures in order to reinforce confidence despite the limited initial financial market pressure following the deadly attacks on Easter Sunday. Commenting on the current situation, the IMF added that “decisive policy and security measures” are crucial, especially for the tourism industry which accounts for 5% of GDP. The Group further stressed on the importance of shoring up market confidence given Sri Lanka’s high debt burden and refinancing requirements. The IMF meanwhile stated that the 2019 Budget strikes a “good balance” between advancing revenue-based fiscal consolidation, business friendly tax measure and capital & social spending. The Budget targets agreed with the IMF however may have to be revised given that growth is likely to slow significantly after the attack.
The Tourism industry is the 3rd largest foreign exchange earner in the country and a drastic drop in earnings could put significant pressure on the rupee amid upcoming debt repayments. The Central Bank meanwhile may likely be unable to support the currency given its low reserve balance. The Sri Lankan Government had set a target of 3.0Mn tourist arrivals (cf. 2.3 in 2018) and $5.0Bn in earnings for 2019, however local hoteliers estimate a loss of revenue amounting to $1.5Bn from the terror attacks.
The President of The Hotels Association of Sri Lanka meanwhile stated that ~20% of bookings have been affected so far.
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