The Bourse ended the week on a positive note as the ASPI increased by 96.25 points (or +1.60 percent) to close at 6,119.27 points, while the S&P SL20 Index also increased by 35.48 points (or +1.19 percent) to close at 3,022.00 points.
Turnover & market capitalization
JKH was the highest contributor to the week’s turnover value, contributing LKR 1.06Bn or 13.15 percent of the total turnover value. Access Engineering followed suit, accounting for 8.06 percent of turnover (value of LKR 0.65Bn) while Commercial Bank contributed LKR 0.65Bn to account for 8.05 percent of the week’s turnover. Total turnover value amounted to LKR 8.10Bn (cf. last week’s value of LKR 3.57Bn), while the daily average turnover value amounted to LKR 1.62Bn (+36.11 percent W-o-W) compared to last week’s average of LKR 1.19Bn. Market capitalization meanwhile, increased by 1.60 percent W-o-W (or LKR 44.78Bn) to LKR 2,846.67Bn cf. LKR 2,801.90Bn last week.
Liquidity (in value terms)
The Diversified sector was the highest contributor to the week’s total turnover value, accounting for 23.10 percent (or LKR 1.87Bn) of market turnover. Sector turnover was driven primarily by JKH which accounted for 56.91 percent of the sector’s total turnover. The Manufacturing sector meanwhile accounted for 19.55 percent (or LKR 1.58Bn) of the total turnover value, with turnover driven primarily by Tokyo Cement[NV], Royal Ceramic, Tokyo Cement and Teejay Lanka which accounted for 73.71 percent of the sector turnover. The Banks, Finance & Insurance sector was also amongst the top sectorial contributors, contributing 18.49 percent (or LKR 1.50Bn) to the total turnover, with turnover driven primarily by Commercial Bank & Sampath Bank accounting for 61.41 percent of the total turnover.
Liquidity (in volume terms)
The Manufacturing sector dominated the market in terms of share volume, accounting for 19.24 percent (or 75.96Mn shares) of total volume, with a value contribution of LKR 1.58Bn. The Banks, Finance & Insurance sector followed suit, adding 12.68 percent to total turnover volume as 50.08Mn shares were exchanged. The sector’s volume accounted for LKR 1.50Bn of total market turnover value. The Hotels & Travels sector meanwhile, contributed 40.67Mn shares (or 10.30 percent), amounting to LKR 0.26Bn.
Top gainers & losers
SMB Leasing [NV] was the week’s highest price gainer; increasing 33.3 percent W-o-W from LKR0.30 to LKR0.40 while Citrus Waskaduwa (+22.0 percent W-o-W), Asia Siyaka (+21.7 percent W-o-W) and Lanka IOC (+21.2 percent W-o-W) were also amongst the top gainers.
Merc Shipping was the week’s highest price loser; declining 15.8 percent W-o-W to close at LKR43.70 Abans Financial (-10.9 percent W-o-W), Equity Two (-8.6 percent W-o-W) and Seylan Bank (-8.0 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 1.62Bn relative to last week’s total net outflow of LKR 1.84Bn (+11.92 percent W-o-W). Total foreign purchases increased by 286.0 percent W-o-W to LKR 0.69Bn from last week’s value of LKR 0.18Bn, while total foreign sales amounted to LKR 2.31Bn relative to LKR 2.01Bn recorded last week (+14.55 percent W-o-W). In terms of volume, Dialog & Union Bank led foreign purchases while JKH & Melstacorp led foreign sales. In terms of value, Dialog and Aitken Spence led foreign purchases while JKH & Commercial Bank led foreign sales.
Key Economic Indicators October; Prime Lending Rate 10.42 percent, Ave. Wtd. Deposit Rates 8.37 percent,Ave. Wtd. Fixed Dep. Rates 10.27 percent, CCPI Inflation Y-o-Y percent (Base 2013) 5.4 percent.
Point of view
Markets revived further this week as the benchmark index hit a 15-month high in a rally following the conclusion of Sri Lanka’s Presidential elections. The benchmark index thus gained ~96 points or 1.6 percent W-o-W this week, despite weaker quarterly earnings released over the week. Markets began the week on a positive note, registering the highest gain of 106.5 points since Jul’19, supported by heavyweights JKH and DIST. Consequently, investor interest in DIST and diversified sector stocks (JKH, HAYL, VONE, & SHL) collectively accounted for ~45 percent of the Index’s gain over the week. However, some profit-taking towards the latter part of the week, weaker corporate earnings across several key sectors (Conglomerates -61 percent; Banks -1 percent; Hotels -1331 percent; Y-o-Y) and a statement by Fitch Ratings led the ASPI to shed 23.5 points between Wednesday and Friday to close at 6,119.27. Positive market sentiments were also reflected in higher market activity with weekly average turnover levels hitting Rs. 1.6Bn (cf. YTD average daily turnover of Rs. 0.7Bn) during the week. Despite renewed investor interest, local HNI and institutional contributions were low at 11 percent (cf. YTD average of 32 percent). Investor interest remained concentrated on bellwether stock JKH which accounted for 36 percent of the week’s total crossings while COMB, MELS, SHL, CTC, HNB, and CARG accounted for the remainder.
In contrast to overall local investor sentiments, foreign investors continued to exit domestic equities for a 4th consecutive week to record net foreign outflow of Rs. 1.6Bn vs. Rs. 1.8Bn last week thus pushing the YTD net outflow from the Colombo bourse to Rs. 9.3Bn (cf. 7.7Bn last week) as foreign outflows in Nov’19 alone totaled to Rs. 4.9Bn. Markets in the week ahead are likely to take cues from i) continued earnings releases and ii) economic and political developments amid expectations of a new political era headed by a new President.
CBSL Rebuts Fitch Rating’s View
Fitch Ratings in a statement earlier this week observed that the conclusion of the recent Sri Lankan Presidential elections “significantly increases policy uncertainty and could prompt loosening that exacerbates fiscal weakness and a rollback of reforms.” However, it noted that whether these risks come to fruition will only be ascertained once there is clear policy direction after the conclusion of the Parliamentary elections. The rating agency cautioned that there is a risk of a more expansionary fiscal stance after the Parliamentary elections even though its attempts to strengthen growth and exports are credit positive.
The Agency further added that achieving targets set in the manifesto in terms of the budget deficit, GDP growth, and inflation would require stimulus measures that could “erode fiscal headroom”. The CBSL however, refuted observations made by Fitch Ratings, stating that the foreign exchange market, as well as both debt and equity markets, have responded positively to the outcome of the Presidential elections and that it is too early to comment on the policy direction of the new Government.
Source: Central Bank of Sri Lanka & Fitch Ratings
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