The Bourse ended the week on a positive note as the ASPI increased by 35.40 points (or +0.67%) to close at 5,295.11 points, while the S&P SL20 Index also increased by 17.27 points (or +0.71%) to close at 2,464.17 points.
JKH was the highest contributor to the week’s turnover value, contributing LKR 0.20Bn or 24.84% of total turnover value. LOLC Holdings followed suit, accounting for 10.99% of turnover (value of LKR 0.09Bn) while Dialog Axiata contributed LKR 0.08Bn to account for 9.62% of the week’s turnover. Total turnover value amounted to LKR 0.83Bn (cf. last week’s value of LKR 3.08Bn), while daily average turnover value amounted to LKR 0.21Bn (-66.56% W-o-W) compared to last week’s average of LKR 0.62Bn. Market capitalization meanwhile, increased by 0.74% W-o-W (or LKR +18.32Bn) to LKR 2,493.67Bn cf. LKR 2,475.35Bn last week.
Liquidity (in Value Terms)
The Banks, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 34.93% (or LKR 0.29Bn) of market turnover. Sector turnover was driven primarily by LOLC Holdings, Seylan Bank[NV], Sampath Bank, Commercial Bank & HNB which accounted for 73.39% of the sector’s total turnover. The Diversified sector meanwhile accounted for 27.72% (or LKR 0.23Bn) of the total turnover value, with turnover driven primarily by JKH which accounted for 89.62% of the sector turnover.
The Manufacturing sector was also amongst the top sectorial contributors, contributing 13.38%(or LKR 0.11) to the total turnover, with turnover driven primarily by Chevron Lubricants accounting for 68.90% of the total turnover.
Liquidity (in Volume Terms)
The Banks, Finance & Insurance sector dominated the market in terms of share volume, accounting for 21.57% (or 8.89Mn shares) of total volume, with a value contribution of LKR 0.29Bn. The Telecom sector followed suit, adding 21.41% to total turnover volume as 8.83Mn shares were exchanged. The sector’s volume accounted for LKR 0.08Bn of total market turnover value. The Beverage, Food & Tobacco sector meanwhile, contributed 5.46Mn shares (or 13.24%), amounting to LKR 0.05Bn.
Top Gainers & Losers | Lucky Lanka[NV] was the week’s highest price gainer; increasing 100.0% W-o-W from LKR0.50 to LKR1.00 while Lucky Lanka(+88.9% W-o-W), Office Equipment(+19.9% W-o-W) and Lankem Ceylon (+19.3% W-o-W) were also amongst the top gainers. On’ally were the week’s highest price loser; declining 80.0% W-o-W to close at LKR20.0 while Beruwala Resorts(-16.7% W-o-W), Multi Finance (-14.1% W-o-W) and Kandy Hotels(-10.9% 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 0.15Bn relative to last week’s total net outflow of LKR 1.32Bn (+88.5% W-o-W). Total foreign purchases decreased by 86.7% W-o-W to LKR 0.10Bn from last week’s value of LKR 0.72Bn, while total foreign sales amounted to LKR 0.25Bn relative to LKR 2.04Bn recorded last week (-87.9% W-o-W). In terms of volume, LOLC Finance & Tess Agro led foreign purchases while Dialog & Chevron Lubricants led foreign sales. In terms of value, Lion Brewery & Sampath Bank led foreign purchases while Chevron Lubricants & Dialog Axiata led foreign sales.
Point of View 
Sri Lankan equity markets recovered from a last week’s almost 7-year low as investor sentiment improved amid the EPF’s return to equity markets and signs of normalization in the country’s security situation. The CBSL Governor stated last Friday that the state-run private sector pension fund, the Employees’ Provident Fund (EPF), has returned to the market due to low valuations stemming from the prevailing depressed market conditions, adding that the Monetary Board has approved the Investment Committee to invest up to 6% (cf. 3.3% at end-2018) of the Rs. 2.3trillion fund in select companies.
The positive sentiment surrounding the return of the EPF coupled with the collection of cheap stocks by local investors supported the market uptick during the week and the broadshare ASPI gained ~46 index points by the end of trading on Thursday. Selling pressure on Friday however led to the ASPI paring down some of its earlier gains, and the Index’s ~11 points on Friday, snapped 5-consecutive days of gains on the index. The gain in the benchmark index over the full week consequently reduced to ~35 points or 0.7% W-o-W. Activity levels on the Colombo Bourse meanwhile slumped during the holiday-shortened week, with turnover falling to a low of Rs. 0.08Bn on Wednesday (since Jan’19) despite the CBSL Governor’s indication that there is a “strong case for relaxing monetary policy”.
Lower market participation this week amid an anticipated economic slowdown led the average daily turnover for the week to drop to Rs. 0.21Bn (-67% W-o-W), well below the YTD average daily turnover of Rs. 0.55Bn.
HNI and Institutional investor interest in JKH (61% of crossings) and LOLC Holdings (39% of crossings) meanwhile contributed 28% to the week’s total turnover. Meanwhile the Foreign investor sell-off on domestic equities eased during the week helping reduce the net foreign outflow over the week to Rs. 0.15Bn cf. to last week’s substantial net outflow of Rs. 1.32Bn.
The YTD net foreign outflow consequently rose to Rs. 5.9Bn in sharp contrast to the net foreign outflow of Rs. 1.6Bn during the same period last year.
Markets in the week ahead are likely look for cues both from ongoing economic and politcal developments and from the incoming corporate earnings releases for Q1’19.
Inflation uptick continues in April
National inflation levels rose to its highest since January last year, increasing from 2.9% Y-o-Y in Mar’19 to 3.6% Y-o-Y in Apr’19.
The rise in headline inflation was largely driven by an increase Non-food inflation which continued upward for a fourth consecutive months while food inflation also rose over the month.
The increase in non-food inflation of 7.5% Y-o-Y in Apr’19 relative to 7.1% Y-o-Y in Mar’19 WAS due to higher prices in i) alcoholic beverages, tobacco & narcotics, and ii) transport costs including purchase of vehicles and airline fares.
Higher food prices meanwhile also led to food-inflation increasing in Apr’19. Similar to headline inflation, urban inflation levels also continued to trend upwards with CCPI rising to 4.5% Y-o-Y in Apr’19 compared to a low of 2.8% Y-o-Y in Dec’18 (lowest since Mar’16).
Meanwhile, NCPI Core inflation, which reflects the underlying inflation in the economy, also increased in line with headline inflation to 1.9% Y-o-Y in Apr’19 from 1.7% Y-o-Y in Mar’19.
The CBSL, in its second monetary policy review, stated that inflation is expected to remain in mid-single digit levels of 4-6% in 2019 despite the recent uptick in inflation.
Reinforcing the CBSL’s expectations, the IMF stated last week that inflation would rise to 4.5% by end-2019 as economic activity recovers and food prices stabilize following weather-related supply disruptions in 2018. In Apr’19, the Government decided to keep fuel prices stable by halting the fuel pricing formula for the traditional New Year despite rising global fuel prices.
An upward price revision to local fuel prices in May’19 to reflect higher global oil prices is therefore likely to exert some pressure on inflation levels this month.
However, global oil prices headed toward ~$69/bbl this week representing a 7.5% M-o-M drop from a YTD high of $74.6/bbl last month due to rising stock piles and concerns over an economic slowdown amid fears of an intensifying US-China trade war.
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