Sunday, June 23, 2019

Activity levels hit 4-month high to cross Rs. 2 bn

The Bourse ended the week on a negative note as the ASPI decreased by 20.22 points (or -0.38 percent) to close at 5,363.50 points, while the S&P SL20 Index also decreased by 23.70 points (or -0.94 percent) to close at 2,488.98 points.

Turnover & market capitalization

Printcare was the highest contributor to the week’s turnover value, contributing LKR 0.62Bn or 13.97 percent of total turnover value. EB Creasy followed suit, accounting for 12.53 percent of turnover (value of LKR 0.56Bn) while Access Engineering contributed LKR 0.045Bn to account for 10.14 percent of the week’s turnover. Total turnover value amounted to LKR 4.45Bn (cf. last week’s value of LKR 2.12Bn), while daily average turnover value amounted to LKR 0.89Bn (+110.26 percent W-o-W) compared to last week’s average of LKR 0.42Bn. Market capitalization meanwhile, decreased by 0.56 percent W-o-W (or LKR 14.17Bn) to LKR 2,522.78Bn cf. LKR 2,536.95Bn last week.

Liquidity (in value terms)

The Banks, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 21.89 percent (or LKR 0.97Bn) of market turnover. Sector turnover was driven primarily by Sanasa Development Bank & Commercial Bank which accounted for 60.06 percent of the sector’s total turnover. The Manufacturing sector meanwhile accounted for 20.50 percent (or LKR 0.91Bn) of the total turnover value, with turnover driven primarily by Printcare PLC & Tokyo Cement[NV] which accounted for 79.84 percent of the sector turnover. The Stores & Supplies sector was also amongst the top sectorial contributors, contributing 12.53 percent(or LKR 0.56Bn) to the total turnover, with turnover driven primarily by EB Creasy accounting for 99.99 percent of the total turnover.

Liquidity (in volume terms)

The Power & Energy sector dominated the market in terms of share volume, accounting for 17.95 percent (or 41.44Mn shares) of total volume, with a contribution of LKR 0.19Bn. The Manufacturing sector followed suit, adding 17.78 percent to total turnover volume as 41.04Mn shares were exchanged. The sector’s volume accounted for LKR 0.91Bn of total market turnover value. The Banks, Finance & Insurance sector meanwhile, contributed 38.74Mn shares (or 16.79 percent), amounting to LKR 0.97Bn.

Top Gainers and Losers

Tess Agro was the week’s highest price gainer; increasing 25.0 percent W-o-W from LKR0.40 to LKR0.50 while CM Holdings(+19.7 percent W-o-W), Lankem Ceylon(+16.8 percent W-o-W) and Blue Diamonds(+16.7 percent W-o-W) were also amongst the top gainers. SMB Leasing[NV] was the week’s highest price loser; declining 33.3 percent W-o-W to close at LKR0.20 while Radiant Gems(-19.0 percent W-o-W), Bimputh Finance(-16.9 percent W-o-W) and Beruwala Resorts(-16.7 percent 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 0.02Bn relative to last week’s total net outflow of LKR 0.39Bn (+94.5 percent W-o-W). Total foreign purchases increased by 202.5 percent W-o-W to LKR 0.49Bn from last week’s value of LKR 0.16Bn, while total foreign sales amounted to LKR 0.51Bn relative to LKR 0.55Bn recorded last week (-6.8 percent W-o-W). In terms of volume, JKH & Expolanka led foreign purchases while East-West & Dunamis Capital led foreign sales. In terms of value, JKH & Ceylinco Insurance[NV] led foreign purchases while East-West & Dunamis Capital led foreign sales.

Point of view

Market sentiments fluctuated through the week but remained largely depressed despite positive economic and political signals during the week. The market uptick on Wednesday was buoyed by local and foreign buying interest which led the broad-share index to hit a 7-week high of 5,392.30 points. Profit taking towards the latter part of the week, however, trimmed off early gains resulting in an overall drop in the benchmark index as data released on Sri Lanka’s GDP growth failed to boost investor sentiment.

Official data showed that Sri Lanka’s GDP grew 3.7 percent Y-o-Y during Q1’19 with an expansion evident in all three sectors (Agriculture, Industry & Services). On the political front, news that the President reconvened Cabinet meetings this week also failed to change market sentiment. The ASPI consequently fell ~20 points or 0.4 percent W-o-W to end the week at 5,363.50 points. Activity levels on the Colombo Bourse meanwhile surged this week as average daily turnover more than doubled from Rs. 0.42Bn last week to Rs. 0.89Bn this week, well above the YTD average turnover of Rs. 0.55Bn.

The improved activity levels were largely attributable to a single high net worth investor who began reallocating his portfolio last Friday. Subsequently, turnover levels hit a 4-month high of Rs. 2.2Bn on Monday. Total turnover for the week consequently reached ~ Rs. 4.5Bn relative to Rs.2.0 Bn last week. High local HNI and institutional investor participation led to improved activity levels during the week, with crossing accounting for 67 percent of the total weekly turnover (cf. YTD avg. of 36 percent so far this year). Single off-market transactions in Printcare (21 percent of crossings), E. B. Creasy (19 percent of crossings), Sansa Development Bank (14 percent of crossings), Access Engineering (13 percent of crossings) and C. W. Mackie (12 percent of crossings) were among the larger contributors to total crossings for the week.

Meanwhile, the foreign investor sell-off on domestic equities eased during the week, supported by foreign buying interest in JKH and Ceylinco Insurance (Non-Voting). Despite remaining net sellers for the week, the foreign outflow was pared down to Rs. 21.3Mn this week cf. a net outflow Rs. 388.4Mn last week. Markets in the week ahead are likely look for cues from ongoing economic and political developments in both domestic and global markets.

Credit Rating agency Moody’s downgraded Sri Lanka’s 2019 GDP growth forecast to 2.6 percent (from 3.4 percent prior to the Easter Sunday Terror attacks) citing the country’s large refinancing obligations and the added pressures to GDP and public finances stemming from lower tourist arrivals and consumer spending post the terrorist attacks.

The Agency estimates that Sri Lanka’s external debt refinancing requirements over the next 5 years exceed $3Bn annually. Sri Lanka has completed over half of all its 2019 public external debt servicing payments in the first four months of the year and is due to make principal payments on the external debt of around $940Mn between Jun-Dec 2019.

Next year’s external debt repayments are approx. $3Bn and includes an international sovereign bond of $1Bn in October 2020, along with concessional and bilateral debt repayments. Moody’s added that Sri Lanka’s large debt burden and weak debt affordability “weigh on Sri Lanka’s already very low fiscal strength and broader credit profile.”

Lower tourism arrivals and softer demand in other sectors such as retail and wholesale trade post the Easter Terror attacks meanwhile are expected to add further pressure on to public and external finances. Moody’s thus estimated real GDP growth of 2.6 percent in 2019 and, assuming a partial recovery in the tourism sector by 2020, a pickup in real GDP growth to 3.4 percent by 2020. Moody’s cautioned, however, that political tensions could resurface before and after the Presidential & Parliamentary elections, potentially interrupting the ongoing fiscal reforms and thereby undermining investor confidence in and demand for Sri Lankan financial assets.

The Group added that political tensions could also hurt GDP growth, especially “if social tensions rise.”

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