The Bourse ended the week on a negative note as the ASPI decreased by 61.51 points (or -1.14%) to close at 5,320.87 points, while the S&P SL20 Index also decreased by 33.80 points (or -1.41%) to close at 2,360.38 points.
Turnover & Market Capitalization
Commercial Bank was the highest contributor to the week’s turnover value, contributing LKR 1.71Bn or 19.67% of the total turnover value. JKH followed suit, accounting for 14.58% of turnover (value of LKR 1.27Bn) while DFCC Bank contributed LKR 0.83Bn to account for 9.49% of the week’s turnover. Total turnover value amounted to LKR 8.72Bn (cf. last week’s value of LKR 11.06Bn), while the daily average turnover value amounted to LKR 1.74Bn (-21.22% W-o-W) compared to last week’s average of LKR 2.21Bn. Market capitalization meanwhile, decreased by 8.71% W-o-W (or LKR 220.63Mn) to LKR 2,312.51Bn cf. LKR 2,533.14Bn last week.
Liquidity (in Value Terms)
The Banks Industry Group was the highest contributor to the week’s total turnover value, accounting for 39.60% (or LKR 3.45Bn) of market turnover. Industry Group’s turnover was driven primarily by Commercial Bank, DFCC Bank, Sampath & HNB which accounted for 89.85% of the sector’s total turnover. The Capital Goods Industry Group meanwhile accounted for 24.98% (or LKR 2.18Bn) of the total turnover value, with turnover driven primarily by JKH & Access Engineering which accounted for 87.72% of the sector turnover. The Food, Beverage & Tobacco Industry Group was also amongst the top sectorial contributors, contributing 11.38% (or LKR 0.99Bn) to the total turnover, with turnover driven primarily by Melstacorp & LMF accounting for 72.64% of the total turnover.
Liquidity (in Volume Terms)
The Food Beverage & Tobacco Industry Group dominated the market in terms of share volume, accounting for 16.45% (or 46.30Mn shares) of total volume, with a value contribution of LKR 0.99Bn.
The Capital Good Industry Group followed suit, adding 14.90% to total turnover volume as 41.96Mn shares were exchanged. The Industry Group’s volume accounted for LKR 2.18Bn of total market turnover value. The Banks Industry Group meanwhile, contributed 39.89Mn shares (or 14.17%), amounting to LKR 3.45Bn.
Top Gainers & Losers
Laxapana was the week’s highest price gainer; increasing 28.2% W-o-W from LKR11.70 to LKR15.00 while Kelsey (+21.3% W-o-W), Trade Finance (+17.3% W-o-W) and Horana Plantations (+16.9% W-o-W) were also amongst the top gainers.
Tess Agro was the week’s highest price loser; declining 20.0% W-o-W to close at LKR0.40. Serendib Hotels[NV] (-12.8% W-o-W), LOLC Holdings (-12.6% W-o-W), and LOLC Dev Finance (-12.2% 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 2.37Bn relative to last week’s total net outflow of LKR 1.50Bn (-58.2% W-o-W). Total foreign purchases decreased by 85.7% W-o-W to LKR 0.09Bn from last week’s value of LKR 0.67Bn, while total foreign sales amounted to LKR 2.47Bn relative to LKR 2.17Bn recorded last week (+13.6% W-o-W). In terms of volume, Browns Investments & Distilleries foreign purchases while Access Engineering & Melstacorp led foreign sales. In terms of value, Aitken Spence & Distilleries led foreign purchases while JKH & DFCC Bank led foreign sales.
Dividend Announcements
Company DPS (Rs.) Type XD Date RENUKA HOLDINGS(V & NV) 0.25 First & Final 29-09-2020 ACL CABLES 1.50 Interim 03-09-2020 RENUKA FOODS(V & NV) 0.35 First & Final 29-09-2020 CHEMANEX PLC 2.00 Final 02-10-2020.
Key Economic Indicators July: Prime Lending Rate of 7.79%, Ave. Wtd. Deposit Rates 7.16%, Ave. Wtd. Fixed Dep. Rates 8.69%, CCPI Inflation Y-o-Y % (Base 2013) 4.2%.
Point of View
Equity markets snapped a 5-consecutive week rally as the broad share index slipped ~62 points or 1.1% W-o-W on profit-taking amid a persistent foreign-sell off from domestic equities while the CBSL extended the debt moratorium offered to the Tourism Industry this week. Despite starting the week on a positive note with a marginal gain, profit-taking in large caps this week led the ASPI to shed ~65 points between Tuesday and Friday. Profit-taking in heavyweights JKH (-0.7% W-o-W), and COMB (-1.9% W-o-W) weighed down the index during the week while LOLC also recorded a W-o-W loss of 12.6% despite reporting an extra-ordinary gain in earnings (Rs. 37.2Bn in Q2’20 vs. Rs. 5.6Bn in Q1’19) for the June 2020 quarter, arising from the sale of its Cambodian investment in PRASAC. Of the ~79% of corporates that have released their quarterly earnings thus far, nearly 58% have reported a drop in earnings.
Meanwhile, activity levels on the Colombo Bourse also declined this week as average daily turnover for the week fell from Rs. 2.2Bn last week to Rs. 1.7Bn this week despite improved local institutional and HNI investor participation. Consequently, the contribution from crossings to total market turnover increased from 20% to 24% this week. Select Banking sector stocks (COMB, DFCC, NTB, & SAMP) accounting for 54% of total crossings while buying interest was also visible in JKH, AEL, TKYO, and LMF. Index losses were also attributable to the continued foreign equity sell-off with a net foreign outflow of Rs. 2.4Bn this week (cf. net outflow of Rs. 1.5Bn last week) amid heavy foreign selling in JKH, DFCC, MELS, and AEL. Consequently, foreign investors have sold off ~Rs. 31.8Bn this year. Markets in the week ahead are likely to look for cues from economic and political developments.
CBSL Extends Moratorium for Tourism Industry
The CBSL has extended the debt moratorium on capital and interest for the tourism industry by 6 months up to 31st March 2021, assuring that the extension will not cause any undue stress on the banking system given the low exposure levels to the tourism industry and the current capital buffers maintained by the Licensed Banks. Licensed Banks have also been requested to convert the capital and interest falling due during the moratorium period between Oct 2020 - Mar 2021 into a term loan.
According to the CBSL, the interest charged on the converted loan should be a maximum of the latest auction rate for 364-days Treasury Bills, available by 1 April 2021, plus 1% per annum while the repayment period of the loan should be a minimum of 2 years.
Meanwhile, the Monetary Board at its meeting last week also decided to extend the deadline for the 4% Working Capital Loan Scheme until the 30th of September. Loans approved under the “Subagya” Loan Scheme topped Rs. 100Bn as of 18th Aug, of which Rs. 68.6Bn was disbursed by the Licensed Banks. The Monetary Board noted that of the Rs.100Bn that was approved, 50% was provided to business in the Services sector, while business in the Industrial and Agriculture sector accounted for 34% and 16% respectively. Meanwhile, national inflation levels in July decelerated to 6.1% Y-o-Y (from 6.3% Y-o-Y in Jun’20) driven by lower food prices and a higher base effect during the same period last year. Consequently, Food inflation fell to 12.9% Y-o-Y in Jul’20 relative to 13.6% Y-o-Y in Jun’20. However, Non-food inflation over the month increased to 1.0% Y-o-Y in Jul’20 (cf. 0.8% Y-o-Y in Jun’20) as a result of price increase in ‘Education’, ‘Housing’, and ‘Restaurant & Hotels’ which were offset to an extent by lower ‘Communication’ costs (voice & internet charges).
Despite easing national headline inflation levels in July, the NCPI Core inflation (which reflects the underlying inflation in the economy by excluding volatile items such as food, energy, and transport) increased to its highest level since last December, reaching 4.5% Y-o-Y in Jul’20 relative to 4.4% Y-o-Y in Jun’20.
Despite the short term fluctuations, the CBSL expects inflation to remain broadly within the 4% - 6% in the near to medium term. Source: CBSL, Department of Consensus Sri Lanka, DailyFT
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