The Bourse ended the week on a positive note as the ASPI increased by 96.82 points (or +1.63 percent) to close at 6,032.08 points, while the S&P SL20 Index also increased by 55.03 points (or +1.87 percent) to close at 2,990.34 points.
Turnover & Market Capitalization
JKH was the highest contributor to the week’s turnover value, contributing LKR 0.92Bn or 19.07 percent of total turnover value. Dialog followed suit, accounting for 13.08 percent of turnover (value of LKR 0.63Bn) while Seylan Bank contributed LKR 0.59Bn to account for 12.08 percent of the week’s turnover. Total turnover value amounted to LKR 4.85Bn (cf. last week’s value of LKR 3.98Bn), while the daily average turnover value amounted to LKR 0.97Bn (+21.80 percent W-o-W) compared to last week’s average of LKR 0.80Bn. Market capitalization meanwhile, increased by 1.75 percent W-o-W (or LKR 48.25Bn) to LKR 2,801.10Bn cf. LKR 2,752.85Bn last week.
Liquidity (in Value Terms)
The Bank, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 32.77 percent (or LKR 1.59Bn) of market turnover. Sector turnover was driven primarily by Seylan Bank, Commercial Bank & Sampath Bank which accounted for 73.07 percent of the sector’s total turnover. The Diversified sector meanwhile accounted for 22.83 percent (or LKR 1.11Bn) of the total turnover value, with turnover driven primarily by JKH which accounted for 0.92 percent of the sector turnover. The Manufacturing sector was also amongst the top sectorial contributors, contributing 13.54 (or LKR 0.66Bn) to the total turnover, with turnover driven primarily by Chevron, Tokyo Cement[NV], Teejay Lanka & Royal Ceramic accounting for 64.24 percent of the total turnover.
Liquidity (in Volume Terms)
The Banks, Finance & Insurance sector dominated the market in terms of share volume, accounting for 24.59 percent (or 65.45Mn shares) of total volume, with a value contribution of LKR 1.59Bn.
The Telecom sector followed suit, adding 18.87 percent to total turnover volume as 50.22Mn shares were exchanged. The sector’s volume accounted for LKR 0.64Bn of total market turnover value. The Manufacturing sector meanwhile, contributed 44.22Mn shares (or 16.61 percent), amounting to LKR 0.66Bn.
Dividend Announcements
Company DPS (Rs.) Type XD Date LANKA HOSPITALS 0.75 First Interim 06-11-2019 JOHN KEELLS HOLDINGS 1.00 First Interim 14-11-2019
Prime Lending Rate- 10.57 percent; Ave. Wtd. Deposit Rates- 8.51 percent; Ave. Wtd. Fixed Dep. Rates- 10.46 percent; CCPI Inflation Y-o-Y percent (Base 2013)- 5 percent.
Top Gainers & Losers
Abans Financial was the week’s highest price gainer; increasing 37.9 percent W-o-W from LKR19.80 to LKR27.30 while Abans (+30.3 percent W-o-W), Beruwala Resorts (+22.2 percent W-o-W) and Tess Agro (+16.7 percent W-o-W) were also amongst the top gainers. Blue Diamond [NV] was the week’s highest price loser; declining 20.0 percent W-o-W to close at LKR0.40 while Colombo City (-17.8 percent W-o-W), Serendib Hotels (-12.7 percent W-o-W) and Jetwing Symphony (-11.7 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 0.50Bn relative to last week’s total net inflow of LKR 0.03Bn (-1629.9 percent W-o-W). Total foreign purchases increased by 6.51 percent W-o-W to LKR 1.16Bn from last week’s value of LKR 1.09Bn, while total foreign sales amounted to LKR 1.64Bn relative to LKR 1.06Bn recorded last week (+55.04 percent W-o-W).
In terms of volume, Dialog Axiata & Commercial Leasing & Finance led foreign purchases while Overseas Realty & Commercial Bank led foreign sales. In terms of value, Dialog Axiata and JKH led foreign purchases while Commercial Bank & Chevron led foreign sales.
Point of View
Equity markets continued to rally this week as positive earnings releases for the September quarter along with the election manifestos by main presidential candidates (which helped shed light on their future policy direction) boosted investor sentiment. The benchmark ASPI consequently gained ~97 points over the week (1.6 percent W-o-W) to cross the 6,000 mark, 2 weeks ahead of Election Day. Investor interest in CTC, DIAL, SLTL, and CARS collectively contributed 47 percent to the Index’s weekly gain, as ASPI hit a 10-month high this week to close at 6,032.08 points on Friday. This week’s rally contributed to the ~252 point (4.4 percent M-o-M) gain over October, which has subsequently pared down the YTD loss on the index to 0.3 percent cf. to 1.9 percent last week.
The positive momentum also led to a steady increase in turnover levels this week, with daily turnover touching a 6-week high of Rs. Rs.1.8Bn on Friday amid heavy local HNI and institutional buying interest in JKH and SEYB. Consequently, HNI and institutional participation improved this week, accounting for 31 percent (cf. 17 percent last week) of the market’s total turnover for the week. Crossings in banking sector stocks (SEYB, COMB, and SAMP) accounted for 44 percent of total crossings this week while heavy buying interest was also visible in JKH (38 percent of crossings), DIAL (12 percent of crossings), CINS and LION. Average daily turnover levels for the week consequently reached Rs.0.97Bn relative to last week’s average daily turnover of Rs.0.80Bn.
Meanwhile, despite the US Fed cutting rates for the 3rd time this year, foreign investors returned to a net selling position on the Colombo bourse this week as net outflows from domestic equities totaled ~Rs. 480Mn (cf. an inflow of Rs. 31Mn last week). The YTD net foreign outflow consequently increased to Rs. 4.5Bn from Rs.4.0Bn last week. Markets in the week ahead are likely to take direction both from ongoing September quarter earnings season and developments on the political front ahead of the Nov’16th Presidential elections.
Urban Inflation Edges Up
Sri Lanka’s urban inflation levels edged up slightly over October, rising to 5.4 percent Y-o-Y (cf. 5 percent Y-o-Y in Sept’19) due to the seasonality impact from food prices. Food prices (which are typically volatile) rose to 6.8 percent Y-o-Y in Oct’19, sharply higher than the 3.0 percent Y-o-Y in Sep’19.
However, Non food inflation over the month decreased to 4.8 percent Y-o-Y (from 5.7 percent Y-o-Y in Sep’19) helping keep overall inflation levels broadly in check. In a new report on Asia-Pacific (APAC) frontier market sovereigns meanwhile, Fitch ratings highlighted the rising divergence between Vietnam and its peers such as Sri Lanka, Mongolia & Pakistan.
The rating agency noted that compared to its APAC FM peers who have faced heightening external vulnerabilities, Vietnam has a ‘lengthening record of macroeconomic stability’ driven by strong FDIs (especially into the Manufacturing sector) and steady export growth.
Fitch noted further that while improving export performance would help Sri Lanka meet its heavy external debt repayments, the country’s exports as a percentage of its GDP over 2011-18 has fallen compared to peers such as Vietnam. The agency noted further that Sri Lanka’s policy environment has improved post the Oct’18 political crisis and that the recovery in tourism post the April’19 terror attacks have been faster-than-anticipated while near-term external and fiscal financing constraints have eased with the resumption of the country’s IMF program and sovereign bond issuance of $4.4Bn.
Fitch cautioned however that external debt service obligations remain high, as Sri Lanka’s external debt commitments over 2020-2023 are ~$19Bn compared to its foreign exchange reserves to $7.6Bn. Meanwhile, in a widely anticipated move, the US Fed cut policy rates for the 3rd time this year, reducing the benchmark funds rate by 25Bps to a range of 1.5-1.75 percent as growth in the world’s largest economy continues to slow amid ongoing trade disputes and weak global growth.
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