The Bourse reversed the trend to end on a negative note as the ASPI decreased by 112.45 points (or 2.18 percent) to close at 5,050.90 points, while the S&P SL20 Index also decreased by 100.10 points (or 4.37 percent) to close at 2,190.75 points.
JKH was the highest contributor to the week’s turnover value, contributing LKR 1.65Bn or 21.54 percent of the total turnover value. Commercial Bank followed suit, accounting for 18.53 percent of turnover (value of LKR 1.42Bn) while HNB contributed LKR 1.15Bn to account for 15.00 percent of the week’s turnover.
Total turnover value amounted to LKR 7.64Bn (cf. last week’s value of LKR 6.98Bn), while the daily average turnover value amounted to LKR 1.53Bn (+9.38 percent W-o-W) compared to last week’s average of LKR 1.40Bn. Market capitalization meanwhile, decreased by 2.18 percent W-o-W (or LKR 52.51Mn) to LKR 2,358.60Bn cf. LKR 2,411.11Bn last week.
Liquidity (in Value Terms)
The Banks industry group was the highest contributor to the week’s total turnover value, accounting for 48.29 percent (or LKR 3.69Bn) of market turnover.
Industry Group’s turnover was driven primarily by Commercial Bank, HNB, Nations Trust, Sampath Bank & HNB[NV] which accounted for 97.00 percent of the industry group’s total turnover.
The Capital Goods industry group meanwhile accounted for 31.84 percent (or LKR 2.43Bn) of the total turnover value, with turnover driven primarily by JKH, Hemas Holdings & Access Engineering which accounted for 91.39 percent of the sector turnover.
The Materials industry group was also amongst the top industry group’s contributors, contributing 7.57 percent (or LKR 0.58Bn) to the total turnover, with turnover driven primarily by Tokyo Cement[NV] accounting for 49.17 percent of the total industry group’s turnover.
Liquidity (in Volume Terms)
The Banks industry group dominated the market in terms of share volume, accounting for 24.24 percent (or 45.13Mn shares) of total volume, with a value contribution of LKR 3.69Bn. The Capital Goods Industry Group followed suit, adding 20.31 percent to total turnover volume as 37.81Mn shares were exchanged. The industry group’s volume accounted for LKR 2.43Bn of total market turnover value. The Materials industry group meanwhile, contributed 37.28Mn shares (or 20.03 percent), amounting to LKR 0.58Bn.
Top Gainers & Losers
Blue Diamonds [NV] was the week’s highest price gainer; increasing 50.00 percent W-o-W from LKR00.20 to LKR0.30 while SMB LEasing (+33.3 percent W-o-W), Lake House Printers (+22.1 percent W-o-W) and Citrus Hikkaduwa (+20.5 percent W-o-W) were also amongst the top gainers.
Ceylinco Insurance [NV] was the week’s highest price loser; declining 16.0 percent W-o-W to close at LKR740.40. Ambeon Capital (-15.0 percent W-o-W), Raigam Salterns (-10.0 percent W-o-W), and JKH (-9.8 percent W-o-W) were also amongst the top losers over the week.
Foreign investors closed the week in a net selling position, with the total net outflow amounting to LKR 1.13Bn relative to a net outflow of LKR 1.48Bn recorded last week(+23.59 percent W-o-W). Total foreign purchases increased by 693.01 percent W-o-W to LKR 1.70Bn from a value of LKR 0.21Bn last week, while total foreign sales amounted to LKR 2.83Bn relative to LKR 1.69Bn recorded last week ( +67.18 percent W-o-W). In terms of volume, Commercial Bank & HNB led foreign purchases while Piramal Glass & Tokyo Cement[X] led foreign sales. In terms of value, Commercial Bank & HNB led foreign purchases while JKH & Hemas Holdings led to foreign sales.
Key Economic Indicators
Key Economic Indicators May; Prime Lending Rate-9.28 percent Ave. Wtd. Deposit Rates-7.57 percent Ave. Wtd. Fixed Dep. Rates-9.26 percent CCPI Inflation Y-o-Y percent (Base 2013)-5.2 percent.
Point of View
Equity markets snapped 3-consecutive weeks of gains to close in the red as profit-taking this week amid an ongoing foreign sell-off from domestic equities, weighed on the benchmark index. Consequently, the benchmark index fell ~112 points or -2.2 percent W-o-W by its close on Friday as investors looked to book profits from last month’s ~303 point gain (+6.2 percent M-o-M in Jun’20). Losses on the index this week was mainly attributable to selling pressure in heavyweights JKH (down 9.8 percent W-o-W) and DIAL (down 6.7 percent W-o-W) during the latter part of the week which drove the index to shed ~98 points between Thursday and Friday.
Investor sentiment on Friday was further dampened by a downgrade in Sri Lanka’s income level category to lower-middle-income status amid the news that health authorities had placed more than 150 people under quarantine after a Sea Marshall who returned from India last month tested positive for COVID-191. Despite this week’s selling pressure, activity levels on the Colombo Bourse improved with average daily turnover levels increasing by 9.4 percent W-o-W to Rs. 1.53Bn this week (cf. Rs. 1.40Bn last week).
Participation from local HNI and institutional investors also increased this week as crossings for the week accounted for 26 percent of total market turnover (cf. 11 percent last week) with investor buying interest mainly concentrated on select Banking sector stocks (68 percent of total crossings) lead by COMB and HNB after a decision by the CBSL to implement a Credit Guarantee and Interest Subsidy Scheme to enable banks to grant loans addressing working capital requirements of businesses affected by the COVID-19 pandemic.
Investor participation was also visible in HHL, JKH, AEL, and CTC. Meanwhile, the foreign sell-off on Sri Lankan continued for a 5th consecutive week, with net foreign outflow for the week totaling to Rs. 1.13Bn relative to a net outflow of Rs. 1.48Bn last week. This week’s net selling position on equities increased the YTD outflow from the Colombo Bourse to Rs. 20.9Bn. Markets in the week ahead are likely to take cues from further economic and political developments.
SL Returns to Lower-Middle-Income Status
In its latest country classification by income level for 2020 -21, the World Bank (WB) downgraded Sri Lanka from an upper-middle-income country to a lower-middle-income country, as Sri Lanka’s GNI per capita for 2019 dropped below the WB threshold of $4,046 to $4,020.
As WB’s income classifications are based on 2019 GNI per capita data, it emphasized that this year’s classification doesn’t reflect the impact of COVID-19.
The downgrade took place after the country was elevated to a higher income level category last year once Sri Lanka’s GNI per capita income reached $4,060 in 2018 cf. the WB’s threshold of $3,996.
The change in classification is influenced by factors such as economic growth, inflation, exchange rates, and population growth. On a positive note, the reclassification could provide access to concessionary funding and delay the expiration of the GSP+ concession on imports which was due to take place in 2023 in line with the upgrade to upper-middle-income status last year.
Meanwhile, urban inflation levels in Sri Lanka decelerated marginally in Jun’20 to 3.9 percent Y-o-Y from 4.0 percent Y-o-Y in May’20 largely due to a higher base effect during the corresponding period last year.
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