The Bourse ended the week on a positive note as the ASPI increased by 145.20 points (or +2.61%) to close at 5,715.14 points, while the S&P SL20 Index also increased by 134.85 points (or +5.13%) to close at 2,762.04 points.
Turnover & market capitalization |
LOLC Finance was the highest contributor to the week’s turnover value, contributing LKR 8.92Bn or 78.08% of total turnover value. Dialog followed suit, accounting for 2.84% of turnover (value of LKR 0.32Bn) while Commercial Bank contributed LKR 0.29Bn to account for 2.54% of the week’s turnover. Total turnover value amounted to LKR 11.43Bn (cf. last week’s value of LKR 2.12Bn), while daily average turnover value amounted to LKR 2.86Bn (+573.02% W-o-W) compared to last week’s average of LKR 0.42Bn. Market capitalization meanwhile, increased by 2.61% W-o-W (or LKR 68.39Bn) to LKR 2,693.25Bn cf. LKR 2,624.86Bn last week.
Liquidity (in volume terms)
The Banks, Finance & Insurance sector dominated the market in terms of share volume, accounting for 94.35% (or 2.64Bn shares) of total volume, with a value contribution of LKR 9.75Bn. The Diversified sector followed suit, adding 2.47% to total turnover volume as 69.10Mn shares were exchanged. The sector’s volume accounted for LKR 0.55Bn of total market turnover value. The Telecom sector meanwhile, contributed 29.82Mn shares (or 1.07%), amounting to LKR 0.32Bn.
Top gainers &losers
SMB Leasing[NV] was the week’s highest price gainer; increasing 50.0% W-o-W from LKR0.20 to LKR0.30 while Browns Investments(+41.2% W-o-W), Asia Capital(+38.9% W-o-W)and Beruwala Resorts(+33.3% W-o-W) were also amongst the top gainers.
Equity Two were the week’s highest price loser; declining 20.7% W-o-W to close at LKR47.50 while Printcare(-15.0% W-o-W), Sinhaputhra Finance (-11.0% W-o-W) and PDL(-9.4% W-o-W) were also amongst the top losers over the week.
Liquidity (in value terms)
The Banks, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 85.30% (or LKR 9.75Bn) of market turnover. Sector turnover was driven primarily by LOLC finance, Commercial Bank, Sampath & HNB which accounted for 91.54% of the sector’s total turnover. The Diversified sector meanwhile accounted for 4.83% (or LKR 0.55Bn) of the total turnover value, with turnover driven primarily by JKH, Browns Investments & Softlogic which accounted for 70.56% of the sector turnover. The Manufacturing sector was also amongst the top sectorial contributors, contributing 3.50% (or LKR 0.40Bn) to the total turnover, with turnover driven primarily by Teejay Lanka accounting for 36.15% of the total turnover.
Foreign investors closed the week in a net selling position with total net inflow amounting to LKR 8.77Bn relative to last week’s total net outflow of LKR 0.36Bn (+2514.5% W-o-W). Total foreign purchases increased by 1769.5% W-o-W to LKR 9.40Bn from last week’s value of LKR 0.50Bn, while total foreign sales amounted to LKR 0.63Bn relative to LKR 0.87Bn recorded last week (-27.6% W-o-W). In terms of volume, LOLC Finance & Dialog led foreign purchases while Commercial Bank & Overseas Realty led foreign sales. In terms of value, LOLC Finance & Dialog led foreign purchases while Commercial Bank & Sampath led foreign sales.
Point of view
Equity markets maintained its upward trajectory for the 4th consecutive week, with the benchmark share index gaining 145 index points (or 3%) over the week. The gains come on the back of last week’s 54 point (1% gain) and the 144 point (2.7%) gain from the week prior. Markets have been gaining momentum both from positive macro-indicators (faster-than-anticipated recovery in tourist arrivals, improved trade balance, more stable LKR) and expectations for lower interest rates since the CBSL indicated its strongly dovish monetary policy stance for the remainder of the year. Lower interest rate expectations along with this week’s news that Sri Lanka has settled about 70% of its
$5.4Bn foreign debt repayments scheduled for 2019 meanwhile, boosted equity markets further this week, resulting in the ASPI pushing past the 5700-mark for the first time since Mar’19. Equity market have gained 6.4% over the 1st three weeks of July and 1.2% over June, helping the Index trim its YTD loss to 5.7%, down from the 12.8% loss recorded in the Jan-May’19 period. Average weekly turnover levels meanwhile rose to a one year high of $3Bn as a strategic one-off transaction by LOLC (amounting to Rs.8.89Bn) pushed daily turnover to a one year high of Rs.9.35Bn.
The transaction which involved LOLC Holdings selling ~62.35% of its shares in LOLC finance to its subsidiary LOLC Pvt. Ltd Singapore accounted for ~82% of the week’s total turnover and helped turn the net foreign position on the Colombo Bourse positive for the 1st time in six weeks. The transaction also helped offset the YTD net foreign selling position on the Bourse, and following the transaction, the YTD net foreign buying position totaled Rs. 1.3Bn relative to last week’s YTD net foreign selling position of Rs. 7.3Bn. Markets in the week ahead are likely to continue take cues from macro-economic developments although some profit taking is likely.
Lower vehicle imports aid trade balance
Sri-Lanka’s trade balance continued to improve in May’19 as the combined effect of higher exports and lower imports helped push the cumulative trade deficit between Jan-May’19 33% lower than that of the comparable period last year. The country’s trade deficit over Jan-May ’19 shrank to $3Bn relative to a deficit of $5Bn in Jan-May’18. The decline in the trade balance was largely due to the decline in imports, which fell 15% Y-o-Y over the Jan-May’19 period amid lower non-food consumer good imports such as motor vehicles. Exports meanwhile rose 4% Y-o- Y over the Jan-May’19, helped by greater textile and rubber exports.
Despite the positive performance on the trade balance, the overall current account deficit expanded as lower Tourism receipts and workers remittances impacted the country’s external sector. Tourism receipts over the Jan-May’19 period fell 7.1% Y-o-Y amid the Easter Terror attacks and communal violence in May’19 while worker’s remittances (Sri Lanka’s largest foreign exchange earner) fell 12% Y-o-Y as geo-political tensions and lower oil prices have contributed to a weaker economic outlook in the Middle-East.
However, solid financial flows in the form of two ISB issuances in Mar’19 and Jun’19 have helped boost Sri Lanka’s gross official reserves, helping the international reserve position amount to $6.7Bn by end-May’19 (ie: equivalent to 3.9 months of imports). The improved trade balance and stronger financial flows have supported the LKR so far this year, helping the LKR gain 4% against the USD by July’19. The LKR gained 4% against the USD during Q1’19 but lost
~0.5% of its value post the Easter Terror attacks and communal
violence during Apr-May’19. However, the LKR has regained ~0.13% of its value over the Jun-July’19 period helping the LKR record a YTD gain of 4% so far in 2019.
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