The Bourse ended the week on a positive note as the ASPI increased by 54.13 points (or +0.98%) to close at 5,569.94 points, while the S&P SL20 Index also increased by 32.75 points (or +1.26%) to close at 2,627.19 points.
JKH was the highest contributor to the week’s turnover value, contributing LKR 0.41Bn or 19.32% of total turnover value. Lanka Hospitals followed suit, accounting for 14.48% of turnover (value of LKR 0.31Bn) while Melstacorp contributed LKR 0.23Bn to account for 10.92% of the week’s turnover.
Total turnover value amounted to LKR 2.12Bn (cf. last week’s value of LKR 2.77Bn), while daily average turnover value amounted to LKR 0.42Bn (-23.30% W-o-W) compared to last week’s average of LKR 0.55Bn. Market capitalization meanwhile, increased by 1.17% W-o-W (or LKR 30.35Bn) to LKR 2,624.86Bn cf. LKR 2,594.51Bn last week.
The Diversified sector was the highest contributor to the week’s total turnover value, accounting for 33.40% (or LKR 0.71Bn) of market turnover. Sector turnover was driven primarily by JKH which accounted for 57.85% of the sector’s total turnover. The Banks, Finance & Insurance sector meanwhile accounted for 24.58% (or LKR 0.52Bn) of the total turnover value, with turnover driven primarily by Sampath Bank and Commercial Bank which accounted for 44.17% of the sector turnover.
The Healthcare sector was also amongst the top sectorial contributors, contributing 14.55% (or LKR 0.31Bn) to the total turnover, with turnover driven primarily by Lanka Hospitals accounting for 99.48% of the total turnover.
The Diversified sector dominated the market in terms of share volume, accounting for 23.33% (or 20.24Mn shares) of total volume, with a value contribution of LKR 0.71Bn. The Banks, Finance & Insurance sector followed suit, adding 13.19% to total turnover volume as 11.44Mn shares were exchanged. The sector’s volume accounted for LKR 0.52Bn of total market turnover value. The Power & Energy sector meanwhile, contributed 9.42Mn shares (or 10.86%), amounting to LKR 0.09Bn.
Lucky Lanka was the week’s highest price gainer; increasing 27.3% W-o-W from LKR1.10 to LKR1.40 while Renuka Foods[NV](+14.4% W-o-W), Serendib Engineering(+14.3% W-o-W)and Lanka Aluminum (+13.5% 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 Singer Industries(-12.5% W-o-W), York Arcade (-10.8% W-o-W) and Eden Hotels(-10.1% 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 0.36Bn relative to last week’s total net outflow of LKR 0.59Bn (+38.1% W-o-W). Total foreign purchases increased by 38.5% W-o-W to LKR 0.50Bn from last week’s value of LKR 0.82Bn, while total foreign sales amounted to LKR 0.87Bn relative to LKR 1.41Bn recorded last week (-38.4% W-o-W). In terms of volume, Richard Pieris & Teejay Lanka led foreign purchases while Access Engineering & JKH led foreign sales. In terms of value, Ceylinco Insurance[X] & Teejay Lanka led foreign purchases while JKH & Commercial Bank led foreign sales.
Point of View
Equity markets continued its uptrend for the 2nd consecutive week as the CBSL signaled a strongly dovish monetary policy stance for the remainder of the year. The broad share ASPI gained 1% (ie: 54 index points) over the week (cf. 3% or 144 point last week) to its highest value since the Easter Sunday terror attacks, but closed 36 points shy of the Index value just prior to the attacks (ie: 5569.94 cf. 5606.35).
The Index started the week 11 points down as last week’s 3% W-o-W gain prompted investors to take-profit early in the week. However, the Index recovered 17 points ahead of the CBSL’s Monetary policy meeting on Thursday and although the Monetary Authority’s decision to hold rates was widely anticipated, the CBSL’s strongly dovish monetary policy stance for the rest of the year along with the confirmation of improved performance in the Tourism and Export sectors helped equity markets gain a notable 39.4 index within the day.
Meanwhile, the defeat of the no-confidence motion against the Government along with the decision by Muslim Ministers to reverse their mass resignation decision from June and resume their posts helped the Index gain 9 points on Friday.
Despite the broadly positive index performance, average weekly turnover levels fell 23% W-o-W to Rs.0.42Bn as Local HNI and institutional investors stayed largely on the sidelines (crossings for the week amounted to just 23% of total turnover cf. 41% last week). Foreign investors meanwhile continued to remain net sellers for the 5th consecutive week, although this week’s net selling position was lower than that of last week (Rs.363Mn vs. Rs. 587Mn).
This week’s sell-off brought the YTD foreign equity sell-off on the Colombo Bourse to Rs7.3Bn cf. a sell-off of Rs. 2.8Bn between Jan-Jul 2018. Markets in the holiday-shortened week ahead are likely to continue to look for cues from economic and political developments.
CBSL Holds Policy Rates Steady
In a widely anticipated move, the CBSL this week held policy rates steady (SDFR-7.50%; SLFR-8.5%) citing the more dovish monetary policy stance globally, the stability of the LKR and the need to ‘wait and see’ the efficacy of its policy measures to push market rates lower.
The move is in contrast to the CBSL’s last policy meeting in May’19 when it reduced the policy rates by 50Bps due to the downward rigidity of market lending rates and the effect of the Easter Sunday terror attacks on the already sub-par economic growth. In this month’s policy review though, the CBSL remained of the view that the monetary policy actions it had taken previously (policy rate cut, SRR reduction, cap on deposit rates) has provided ample space for market rates to reduce further, prompting the CBSL to “wait-and see the full effect” of the policy measure taken so far.
The CBSL Governor also noted that while it hopes it does not have to resort to imposing a cap on lending rates, it anticipates average weighted lending rates to fall by up to 200Bps while private sector credit growth (which fell to 9.2% Y-o-Y in May’19 cf. 15.1% Y-o-Y in May’19) should pick up towards the latter part of 2019 amid lower rates.
The CBSL also noted that it expects the Sri Lankan economy to recover gradually following the Easter Sunday Attacks, adding that while growth is likely to remain muted in general (GDP growth of 3% in 2019E cf. original estimate of 4%), the ongoing recovery in the tourism sector coupled with the positive performance of exports has provided some confidence of a speedier recovery than what was originally envisaged in the immediate aftermath of the attacks.
The CBSL added further that largely due to the proceeds from the ISB issuance in Jun’19, the partial contraction of the trade balance and the continuation of the IMF’s EFF program, the LKR has appreciated 4.1% YTD, helping partially correct the sharp depreciation of 2018.
0 comments: