The Bourse ended the week on a positive note as the ASPI increased by 157.75 points (or +2.76 percent) to close at 5,872.89 points, while the S&P SL20 Index also increased by 163.44 points (or +5.92 percent) to close at 2,925.48 points.
Commercial Bank was the highest contributor to the week’s turnover value, contributing LKR 0.35Bn or 9.61 percent of total turnover value. Access Engineering followed suit, accounting for 6.81 percent of turnover (value of LKR 0.25Bn) while Sampath Bank contributed LKR 0.24Bn to account for 6.70 percent of the week’s turnover. Total turnover value amounted to LKR 3.6Bn (cf. last week’s value of LKR 11.43Bn), while daily average turnover value amounted to LKR 0.72Bn (-74.9 percent W-o-W) compared to last week’s average of LKR 2.86Bn. Market capitalization meanwhile, increased by 2.78 percent W-o-W (or LKR 74.81Bn) to LKR 2,768.06Bn cf. LKR 2,693.25Bn last week.
Liquidity (in value terms) 
The Banks, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 36.74 percent (or LKR 1.32Bn) of market turnover. Sector turnover was driven primarily by Commercial Bank, Sampath Bank & HNB which accounted for 58.12 percent of the sector’s total turnover. The Diversified sector meanwhile accounted for 24.83 percent (or LKR 0.89Bn) of the total turnover value, with turnover driven primarily by JKH, Melstacorp, Hemas Holdings & Aitken Spence which accounted for 76.52 percent of the sector turnover.
Liquidity (in volume terms)
The Manufacturing sector was also amongst the top sectorial contributors, contributing 17.07 percent (or LKR 0.61Bn) to the total turnover, with turnover driven primarily by Chevron Lubricants & Tokyo Cement[NV] accounting for 43.32 percent of the total turnover.
The Banks, Finance & Insurance sector dominated the market in terms of share volume, accounting for 29.89 percent (or 54.35Mn shares) of total volume, with a contribution of LKR 1.32Bn. The Diversified sector followed suit, adding 23.10 percent to total turnover volume as 42.00Mn shares were exchanged. The sector’s volume accounted for LKR 0.89Bn of total market turnover value. The Manufacturing sector meanwhile, contributed 27.87Mn shares (or 15.33 percent), amounting to LKR 0.61Bn.
Top Gainers & Losers
Mackwoods Energy was the week’s highest price gainer; increasing 92.3 percent W-o-W from LKR1.30 to LKR2.50 while On’ally (+58.7 percent W-o-W), Kelsey (+40.3 percent W-o-W)and First Capital (+35.6 percent W-o-W) were also amongst the top gainers. S M B Leasing[NV] was the week’s highest price loser; declining 33.3 percent W-o-W to close at LKR0.20 while Beruwala Resorts (-25.0 percent W-o-W), Morisons[NV] (-20.8 percent W-o-W) and Mullers (-12.5 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 0.28Bn relative to last week’s total net inflow of LKR 8.77Bn (-103.2 percent W-o-W). Total foreign purchases increased by 91.1 percent W-o-W to LKR 0.84Bn from last week’s value of LKR 9.40Bn, while total foreign sales amounted to LKR 1.12Bn relative to LKR 0.63Bn recorded last week (+79.1 percent W-o-W). In terms of volume, Browns Investments & Teejay Lanka led foreign purchases while Access Engineering & Softlogic Holdings led foreign sales. In terms of value, HNB & JKH led foreign purchases while Commercial Bank & Access Engineering led foreign sales.
Point of view
Equity markets continued to gain momentum this week, despite some profit-taking, to record a weekly gain of over 100+ points for a 2nd consecutive week. Fuelled by gains in the banking sector amid anticipation of lower lending rates, the benchmark index gained 158 index points or +2.8 percent W-o-W this week. Heavy interest in banking sector stocks ahead of the corporate earnings releases led Commercial Bank, HNB, Sampath, DFCC and Seylan to collectively contribute ~58 points to the change in the ASPI this week. Markets snapped 8 consecutive days of gains as profit-taking on Monday led the broad share index to lose ~55 points. However, the broad share index was quick to recover, buoyed by recent political developments with regard to potential presidential candidates and coalition parties.
The ASPI subsequently clawed back losses to record a gain of 213 index points over the rest of the week. Consequently, the ASPI touched a 5-month high to close for the week at 5,872.89 points; bringing the YTD loss down to 3.1 percent from 5.7 percent last week. Positive market sentiments meanwhile led average weekly turnover levels to remain elevated this week as average daily turnover for the week stood at Rs. 0.72Bn relative to the YTD average daily turnover of Rs. 0.62Bn. However, local HNI and institutional investors contributed only 15 percent to total market turnover this week with buying interest mainly focused on Commerical Bank (43 percent of crossings) and Melstacorp (33 percent of crossings) during the week. Meanwhile, foreign investors were net sellers this week, with a net foreign outflow of Rs. 283Mn compared to last week’s inflow of Rs. 8.8Bn. Markets in the week ahead are likely to continue taking cues from economic and political developments, although some profit-taking is likely to take place amid upcoming corporate earnings releases for Q2’19 which would reflect the impact on earnings following the Easter Sunday attacks in April.
Inflation eases to 2.1 percent Y-o-Y in June
National inflations levels decelerated during June’19 to 2.1 percent Y-o-Y (from 3.5 percent in May’19) largely due to the lower food prices during the month and a higher base effect during the corresponding period last year. Consequently, food inflation slowed to -2.9 percent Y-o-Y in June’19 from -0.4 percent Y-o-Y in May’19. Meanwhile, non-food inflation also eased during the month to 6.2 percent Y-o-Y in June’19 relative to 6.7 percent Y-o-Y in May’19, having reached its highest level in Apr’19 at 7.5 percent Y-o-Y. A decrease in expenditures on bus fares and diesel meanwhile, offset some pressure from higher transport costs (4.2 percent Y-o-Y in Jun’19 cf. 6.2 percent Y-o-Y in May’19) while communication costs also experienced a decline. Similar to headline inflation, urban inflation levels also fell to 3.8 percent Y-o-Y in Jun’19 compared to 5.0 percent Y-o-Y in May’19. In line with the decrease in national inflation, NCPI Core inflation, which reflects the underlying inflation in the economy, also decreased to 6.1 percent Y-o-Y in Jun’19 from 6.3 percent Y-o-Y in May’19.
Meanwhile, the IMF cut its global growth estimates for the 4th time since Oct’18, as US-China trade tensions remain heightened and the prospects of a no-deal Brexit have increased. The Group warned that additional US-China tariffs or a disorderly Brexit amid high debt levels in several countries could further affect growth, weaken investment and disrupt supply chains.
The IMF consequently revised global growth at 3.2 percent Y-o-Y in 2019 while next year’s growth is set to pick up to 3.5 percent Y-o-Y (0.1 percent lower than in the April projections for both years). Emerging and developing Asia is expected to grow at 6.2 percent Y-o-Y in 2019–20, largely reflecting the impact of tariffs on trade and investment amid a slowdown in activity and weaker external demand.
Meanwhile, the IMF stated that the recovery in 2020 remains ‘precarious’ and is subject to high uncertainty.
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