The Bourse ended the week on a negative note as the ASPI decreased by 62.40 points (or -1.00 percent) to close at 6,149.57 points, while the S&P SL20 Index also decreased by 71.72 points (or -2.33 percent) to close at 3,000.43 points.
JKH was the highest contributor to the week’s turnover value, contributing LKR 0.49Bn or 11.94 percent of total turnover value. Central Finance followed suit, accounting for 7.62 percent of turnover (value of LKR 0.31Bn) while Sinhaputhra Finance contributed LKR 0.30Bn to account for 7.46 percent of the week’s turnover. Total turnover value amounted to LKR 4.07Bn (cf. last week’s value of LKR 6.97Bn), while the daily average turnover value amounted to LKR 0.81Bn (-41.58 percent W-o-W) compared to last week’s average of LKR 1.39Bn. Market capitalization meanwhile, decreased by 1.00 percent W-o-W (or LKR 29.02Bn) to LKR 2,860.77Bn cf. LKR 2,889.79Bn last week.
Liquidity (in Value Terms)
The Banks, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 32.72 percent (or LKR 1.33Bn) of market turnover. Sector turnover was driven primarily by Central Finance, Sinhaputhra Finance, Commercial Bank & Sampath Bank which accounted for 71.75 percent of the sector’s total turnover.
The Diversified sector meanwhile accounted for 17.36 percent (or LKR 0.71Bn) of the total turnover value, with turnover driven primarily by JKH which accounted for 68.77 percent of the sector turnover. The Manufacturing sector was also amongst the top sectorial contributors, contributing 17.31 percent (or LKR 0.71Bn) to the total turnover, with turnover driven primarily by Teejay Lanka & Lanka Tiles accounting for 62.72 percent of the total turnover.
Liquidity (in Volume Terms)
The Banks, Finance & Insurance sector dominated the market in terms of share volume, accounting for 44.55 percent (or 109.34Mn shares) of total volume, with a value contribution of LKR 1.33Bn. The manufacturing sector followed suit, adding 14.51 percent to total turnover volume as 35.62Mn shares were exchanged. The sector’s volume accounted for LKR 0.71Bn of total market turnover value. The Diversified sector meanwhile, contributed 18.70Mn shares (or 7.62 percent), amounting to LKR 0.71Bn.
Top Gainers & Losers
Eastern Merchant was the week’s highest price gainer; increasing 24.5 percent W-o-W from LKR5.30 to LKR6.60 while Equity Two (+22.4 percent W-o-W), CM Holdings (+22.4 percent W-o-W) and CIT (+21.5 percent W-o-W) were also amongst the top gainers.
Tess Agro was the week’s highest price loser; declining 28.6 percent W-o-W to close at LKR0.50 SMB Leasing (-25.0 percent W-o-W), Kelsey Developments (-15.6 percent W-o-W) and Blue Diamonds (-14.3 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 80Mn relative to last week’s total net outflow of LKR 1.50Bn (+94.62 percent W-o-W). Total foreign purchases decreased by 25.20 percent W-o-W to LKR 0.83Bn from last week’s value of LKR 1.11Bn, while total foreign sales amounted to LKR 0.91Bn relative to LKR 2.60Bn recorded last week (-65.12 percent W-o-W).
In terms of volume, Dialog Axiata & Central Finance led foreign purchases while Commercial Bank & Mackwoods Energy led foreign sales. In terms of value, Central Finance and JKH led foreign purchases while Commercial Bank & Sampath Bank led foreign sales.
Dividend Announcements
Company DPS (Rs.) Type XD Date; CENTRAL FINANCE 1.20 Interim 17-11-2019 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
Equity markets reversed three consecutive weeks of gains to close in the red this week as selling pressure towards the latter part of the week dragged the broad share index down by 62 points (1.0 percent W-o-W) to close at 6,149.57. Interest remained concentrated mainly on Sinhaputhra Finance and Central Finance (collectively accounting for 85 percent of total crossings this week). Ownership of Sinhaputhra Finance changed hands on Thursday as a large parcel accounting for 50.31 percent of the company was sold to Singhe Capital Investments Ltd for Rs. 9.50 per share.
Heavy selling pressure in Ceylon Cold Stores (down 2.0 percent W-o-W) contributed to the ~46 point decline on Thursday while higher taxes on cigarettes led to losses in heavy weight Ceylon Tobacco (down 2.6 percent W-o-W) on Friday which weighed on the ASPI. Furthermore, news that Sri Lanka’s budget deficit could hit 7 percent of GDP in 2019 along with the World Bank’s cautionary note regarding the Country’s fiscal situation also dampened investor sentiment.
Activity levels in the Colombo Bourse meanwhile dropped as average daily turnover for the week amounted to Rs. 0.8Bn (cf. last week’s average daily turnover of Rs. 1.4Bn). Local HNI and institutional participation were also subdued this week as crossings for the week contributed 16 percent to total turnover (cf. YTD average of 31 percent).
The foreign equity sell-off meanwhile continued for the 6th consecutive week -albeit at a slower pace - to record net foreign outflow of Rs. 0.1Bn vs. Rs. 1.5Bn last week. Markets in the week ahead are likely to take cues over policy direction about the National policy framework amid ongoing political and economic developments.
Fin. Min estimates Fiscal Deficit of 7%
In a statement regarding the implementation of the new tax regime, the Finance Ministry indicated that Sri Lanka’s budget deficit is estimated to reach 7 percent of GDP in 2019, exceeding a target of 4.4 percent due to a significant drop in revenue which is attributable to the slow growth and increased election-related spending. The Ministry added that expenditure cuts and state enterprise reforms are also expected to be implemented as a follow-on to the recent reduction in taxes.
The Ministry also noted that the low credit growth along with the slowdown in the economy gives the GoSL leeway to provide a substantial fiscal stimulus to increase aggregate demand in the economy. Commenting on the recent tax revisions
The World Bank’s Chief Economist for South Asia noted that countries in South Asia have common structural problems such as protectionism, weak regional integration, low female labor force participation etc which need to be addressed.
He opined that policymakers should also focus on building investor confidence by creating a specific policy reforms aimed at exports and underutilized resources. Meanwhile, the Central Bank Governor stated that Sri Lanka has some capacity for expansionary policy but cautioned that the fiscal stimulus should be structured within a framework so as not to lead to overheating the economy and undermine fiscal and debt sustainability.
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