The Bourse ended in the red for the fourth consecutive week as the ASPI decreased by 37.15 points (or 0.61%) to close at 6,047.84 points, while the S&P SL20 Index too decreased by 44.89 points (or 1.28%) to close at 3451.69 points.
Turnover and market capitalization
JKH was the highest contributor to the week’s turnover value, contributing LKR 0.76Bn or 27.66% of total turnover value.
Hemas Holdings followed suit, accounting for 12.91% of turnover (value of LKR 0.36Bn) while Melstacorp contributed LKR0.28Bn to account for 9.99% of the week’s turnover.
Total turnover value amounted to LKR 2.75Bn (cf. last week’s value of LKR 3.90Bn), while daily average turnover value amounted to LKR 0.55Bn (-29.40% W-o-W) compared to last week’s average of LKR 0.78Bn. Market capitalization meanwhile, decreased by 0.61% W-o-W (or LKR 16.25Bn) to LKR 2,655.87Bn cf. LKR 2,672.12Bn last week.
Liquidity (in value terms)
The Diversified Sector was the highest contributor to the week’s total turnover value, accounting for 55.46% (or LKR 1.53Bn) of market turnover.
Sector turnover was driven primarily by JKH, Hemas Holdings, Melstacorp and Expolanka which accounted for 94.68% of the sector’s total turnover. The Manufacturing Sector meanwhile accounted for 11.10% (or LKR 0.31Bn) of the total turnover value with turnover driven primarily by Teejay Lanka & Tokyo Cement which accounted for 71.06% sector turnover.
The Banks, Finance and Insurance Sector was also amongst the top sectorial contributors, contributing 8.86% (or LKR 0.24Bn) to the market. The sector turnover was driven by Seylan Bank (NV) and Commercial Bank which accounted for 46.45% of the sector turnover.
Liquidity (in volume terms)
The Diversified Sector dominated the market in terms of share volume too, accounting for 49.14% (or 68.37Mn shares) of total volume, with a value contribution of LKR 1.53Bn.
The Telecom sector followed suit, adding 14.45% to total turnover volume as 20.11Mn shares were exchanged.
The sector’s volume accounted for LKR 0.23Bn of total market turnover value. The Banks Finance & Insurance Sector meanwhile, contributed 17.77Mn shares (or 12.77%), amounting to LKR 0.24Bn.
Top gainers and losers
Kotmale Holdings was the week’s highest price gainer; increasing 63.04% W-o-W from LKR 73.60 to LKR 120.00. East West gained 12.20% W-o-W to close at LKR 13.80 while Radiant Gems gained 11.36% W-o-W to close at LKR 24.50.
Tess Agro (+10.00% W-o-W) and HNB Assurance (+8.99% W-o-W) were also amongst the gainers.
Swarnamahal Finance was the week’s highest price loser, declining 30.00% W-o-W to close at LKR 0.70. Lucky Lanka (NV) (-23.08% W-o-W), Blue Diamonds (-22.22% W-o-W) and Office Equipment (-17.63% W-o-W) were also amongst the top losers over the week.
Foreign investors closed the week in a net buying position with total net inflows amounting to LKR 0.38Bn relative to last week’s total net inflow of LKR 1.16Bn (-67.41% W-o-W).
Total foreign purchases decreased by 28.57% W-o-W to LKR 1.79Bn from last week’s value of LKR 2.50Bn, while total foreign sales amounted to LKR 1.41Bn relative to LKR 1.34Bn recorded last week (+4.93% W-o-W).
In terms of volume, Expolanka Holdings and SMB Leasing (X) led foreign purchases while Teejay Lanka and Softlogic Life led foreign sales. In terms of value, Hemas Holdings & Melstacorp led foreign purchases while Teejay Lanka and Aitken Spence foreign sales.
Point of view
Equity markets fell to a one-year low of 6028 points this week before recovering ~19 points to close marginally stronger at 6047.8 points.
The benchmark ASPI made consecutive losses between Monday and Thursday, losing ~56 points amid weak sentiment and rate concerns to hit a low of 6028 points on Thursday.
Strong institutional and HNI interest on Friday however, helped the Index pare down some of its early losses. Friday’s crossings in Blue-Chips and mid-caps accounted for ~62% of the week’s total crossings of LKR 1.2Bn; Crossings for the week however, were notably lower than that of the last two week (44% of total market turnover cf. 52% last week and 72% the week prior) helping push the average daily turnover on the bourse ~29.4% lower to LKR 0.55Bn (cf. LKR 0.78Bn last week).
Net foreign flows to equities meanwhile continued for the 7th consecutive week, although 67% lower than last week. The net inflows were despite the US Fed’s widely anticipated decision to raise interest rates by 25 Bps (to 0.75%-1%) for the 3rd time in a decade.
Emerging market stocks reacted positively to the expected rate hike and the US Fed’s dovish outlook for the future path of US rates rising to 20-month highs1. Although average risk premiums on EM sovereign debt also tightened as markets perceived the Fed’s decision and tone positively, the normalization of US Fed rates prompted several EM central banks (China, Hong Kong, Saudi Arabia, UAE, Kuwait & Bahrain) to also increase rates.
Markets in the week ahead are likely to look to look for cue from the CBSL’s upcoming policy rate decision next week.
Q4’16 GDP rebounds but full year growth
GDP growth in Q4’16 rebounded to 5.3% Y-o-Y, up from the 2.8% Y-o-Y growth recorded in Q4’15 and 4.6% Y-o-Y recorded in the 3rd quarter of 2016. Growth over the quarter was driven by the Industry sector which grew 9.2% Y-o-Y over the quarter relative to 1.1% Y-o-Y recorded in Q4’15 with Construction sector activity continuing its recovery (15.5% Y-o-Y cf. -0.9% Y-o-Y in Q4’15) over the period.
The Services sector too grew 4.6% Y-o-Y over Q4’16 in line with performance in Q3’16 but higher than the 3.2% Y-o-Y growth recorded in the comparable period a year ago.
However, the continued impact of the drought in Q4’16 had an adverse impact on the country’s rice, vegetables and cereal production, pushing growth from the Agricultural sector sharply lower over the quarter (-8.4% Y-o-Y vs. +0.5% Y-o-Y in Q4’15).
Sri Lanka’s full year 2016 GDP growth meanwhile, fell to 4.4% Y-o-Y (cf. 4.8% Y-o-Y in 2015) in line with the CBSL, IMF and World Bank estimates of 4.5-5.0% Y-o-Y. Growth over 2016 was the country’s weakest performance since 2013 (3.4% Y-o-Y) and is primarily attributable to the impact from the combination of floods in Q2’16 and drought in the remaining quarters.
The Agricultural sector consequently recorded a slowdown of -4.2% Y-o-Y (cf. +4.8% Y-o-Y in Q4’15).
Although slower than in 2015 ((+4.2% Y-o-Y cf. +5.7% Y-o-Y in 2015), growth in Services activities remained buoyant, supported by improvements in financial services, and wholesale and retail trade activities.
Industry sector growth meanwhile, grew strongly in 2016 (+6.7% Y-o-Y cf. 2.1% Y-o-Y) with considerable contribution from the construction sector rebound and notable growth in manufacturing, and mining and quarrying activities.
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