The Bourse ended the week on a negative note as the ASPI decreased by 37.18 points (or -0.60%) to close at 6,153.99 points, while the S&P SL20 Index also decreased by 40.06 points (or -1.18%) to close at 3,360.37 points.
Turnover and market capitalization
JKH was the highest contributor to the week’s turnover value, contributing LKR 0.21Bn or 18.97% of total turnover value. Hemas Holdings followed suit, accounting for 17.42% of turnover (value of LKR 0.19Bn) while Central Finance contributed LKR 0.08Bn to account for 7.23% of the week’s turnover.
Total turnover value amounted to LKR 1.10Bn (cf. last week’s value of LKR 2.14Bn), while daily average turnover value amounted to LKR 0.28Bn (-35.63% W-o-W) compared to last week’s average of LKR 0.43Bn.
Market capitalization meanwhile, decreased by 0.60% W-o-W (or LKR 17.40Bn) to LKR 2,881.71Bn cf. LKR 2,899.15Bn last week.
Liquidity (in value terms)
Sector turnover was driven primarily by JKH, Hemas Holdings & Richard Pieris which accounted for 91.95% of the sector’s total turnover.
The Banks, Finance & Insurance sector meanwhile accounted for 28.74% (or LKR 0.32Bn) of the total turnover value, with turnover driven primarily by Central Finance, Commercial Bank and Sampath Bank which accounted for 66.89% of the sector turnover.
The Beverage, Food & Tobacco sector was also amongst the top sectorial contributors, contributing 11.84% (or LKR 0.13Bn) to the market driven by Distilleries, Lion Brewery and Nestle which accounted for 82.43% of the sector turnover.
Liquidity (in volume terms)
The Diversified sector dominated the market in terms of share volume, accounting for 30.98% (or 13.42Mn shares) of total volume, with a value contribution of LKR 0.46Bn.
The Banks, Finance & Insurance sector followed suit, adding 22.62% to total turnover volume as 9.80Mn shares were exchanged.
The sector’s volume accounted for LKR 0.32Bn of total market turnover value.
The Hotels & Travels sector meanwhile, contributed 5.47Mn shares (or 12.62%), amounting to LKR 0.01Bn.
Top gainers and losers
Adam Investments was the week’s highest price gainer; increasing 50.0% W-o-W from LKR0.20 to LKR0.30 while Blue Diamonds [NV] (+33.3% W-o-W), Tess Agro [NV] (+20.0% W-o-W) and Nation Lanka (+14.3% W-o-W) were also amongst the top gainers.
Hunas Falls was the week’s highest price loser; declining 21.9% W-o-W to close at LKR70.20 while Sathosa Motors (-18.9% W-o-W), Paragon (-17.0% W-o-W) and Horana Plantations (-15.9% 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 inflow amounting to LKR 0.02Bn relative to last week’s total net outflow of LKR 0.10Bn (+122.1% W-o-W). Total foreign purchases decreased by 51.4% W-o-W to LKR 0.44Bn from last week’s value of LKR 0.91Bn, while total foreign sales amounted to LKR 0.42Bn relative to LKR 1.02Bn recorded last week (-58.67% W-o-W).
In terms of volume Richard Pieris & Central Finance led foreign purchases while Distilleries & Hemas Holdings led foreign sales.
In terms of value Central Finance & Commercial Bank led foreign purchases while Hemas Holdings & Distilleries led foreign sales.
Point of view
Equity markets reversed two-consecutive weeks of positive momentum as the broad-share Index slipped ~37 points while average weekly market turnover declined 36% W-o-W to hit a 14-week low.
Index losses stemmed largely from greater selling pressure, but improved foreign buying helped avert steeper losses on the Index.
The foreign equity sell-off that has persisted for 6 consecutive weeks eased this week, helping stem losses on the benchmark ASPI. Net foreign inflows to the CSE totaled Rs. 23Mn this week, relative to the net outflows of Rs. 105Mn last week and Rs. 221Mn the week prior.
Despite this week’s net foreign buying, foreigners have consistently sold off domestic risky assets over the month of July, resulting in a net foreign outflow of Rs. 1.2Bn for the month.
Inflows to domestic equity markets have been volatile this year, tracking the broader global theme of waning risk appetite for EM/FM assets since Feb’18 as global financial market volatility has heightened amid worsening US-China trade tensions, the cooling Chinese economy, foreign currency volatility and tightening global market liquidity.
The YTD net foreign outflows from the Colombo bourse has consequently amounted to Rs. 2.8Bn, a stark contrast to last year when net foreign inflows for the comparable period totaled Rs. 25Bn.
Equity market performance over July meanwhile, continued to remain sluggish for the 3rd consecutive month, losing 0.7% over July to add to the loss of 4.4% recorded in Q2’18.
The losses over Q2’18 and the month of July are in contrast to the gain of 1.7% recorded over Q1’18, and the 6.6% gain recorded in the comparable Jan-July period in 2017(ASPI has lost 3.4% between Jan-Jul’18).
Markets in the week ahead are likely to look for cues both from global market developments and results from the June quarter corporate earnings releases.
National inflation rises amid fuel price increases
National inflation levels in June rose in line with urban inflation levels, with headline NCPI rising to 2.5% Y-o-Y from 2.1% Y-o-Y in May 2018.
While urban inflation levels in June (4.4% Y-o-Y in Jun’18 cf. 4.0% in May) were driven mainly by non-food inflation (5.0% Y-o-Y in Jun’18 cf. 4.2% Y-o-Y in May’18), urban food inflation levels declined 2.9% Y-o-Y from 3.3% in May’18. June inflation levels at the national level however were driven by both food and non-food inflation, with higher NCPI levels in June primarily attributable to the 0.5% Y-o-Y increase in food inflation (0% Y-o-Y in May’18).
Higher transport costs on the back of the upward administered price revisions to petrol, diesel and bus fares meanwhile, increased non-food inflation which rose 4.2% Y-o-Y in June’18 relative to 3.8% Y-o-Y in May’18.
Despite headline national inflation rising on a point to point basis, NCPI measured on an annual average basis decreased from 5.7% in May 2018 to 5.3% in June 2018.
However, NCPI Core inflation, which reflects the underlying inflation in the economy, increased marginally to 1.8% Y-o-Y in June 2018 from 1.7% Y-o-Y in May 2018.
Meanwhile, Sri Lanka’s external sector performance in May’18 was modest, with the trade deficit (although expanding over the month), expanding at a slower pace as export growth outpaced import growth.
In terms of current account service inflows meanwhile, although Tourist earnings continued to increase, workers’ remittances declined during the month.
Inflows to the financial account of the balance of payments (BOP) meanwhile moderated, with net outflows from G-sec markets and a reduction in net inflows to the Colombo Stock Exchange (CSE).
Sri Lanka’s gross official reserves at the end May 2018 consequently stood at $8.8Mn while the LKR depreciated by 3.3% by end May 2018 and 4.5% YTD.
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