The Bourse ended the week on a negative note as the ASPI decreased by 71.58 points (or -1.21%) to close at 5,837.72 points, while the S&P SL20 Index also decreased by 50.75 points (or -1.68%) to close at 2,977.47 points.
Kingsbury was the highest contributor to the week’s turnover value, contributing LKR 0.50Bn or 22.84% of total turnover value. LOLC Holdings followed suit, accounting for 15.65% of turnover (value of LKR 0.34Bn) while Sampath Bank contributed LKR 0.27Bn to account for 12.33% of the week’s turnover. Total turnover value amounted to LKR 2.20Bn (cf. last week’s value of LKR 5.82Bn), while daily average turnover value amounted to LKR 0.55Bn(-52.82% W-o-W) compared to last week’s average of LKR 1.16Bn. Market capitalization meanwhile, decreased by 1.21% W-o-W (or LKR 33.46Bn) to LKR 2,728.60Bn cf. LKR 2,762.05Bn last week.
Liquidity (in Value Terms)
Liquidity (in Volume Terms)
The Hotels & Travels sector dominated the market in terms of share volume, accounting for 33.85% (or 25.70Mn shares) of total volume, with a value contribution of LKR 0.51Bn. The Banks, Finance & Insurance sector followed suit, adding 19.32% to total turnover volume as 14.67Mn shares were exchanged. The sector’s volume accounted for LKR 0.81Bn of total market turnover value. The Manufacturing sector meanwhile, contributed 13.28Mn shares (or 17.50%), amounting to LKR 0.31Bn. Top Gainers & Losers | SMB Leasing was the week’s highest price gainer; increasing 25.0% W-o-W from LKR0.40 to LKR0.50 while Ramboda Falls(+20.7% W-o-W), Kotmale Holdings (+12.4% W-o-W) and Hapugastenne (+11.8% W-o-W) were also amongst the top gainers. The Lighthouse Hotel were the week’s highest price loser; declining 19.3% W-o-W to close at LKR25.50 while Lanka Ventures(-18.7% W-o-W), Cargo Boat (-18.1% W-o-W) and Citrus Leisure (-17.0% W-o-W) were also amongst the top losers over the week.
Point of View
Sri Lanka equities extended its 3-week long losing streak, with the benchmark index dropping ~72 points or 1.2% W-o-W over the week to close the at 5,837.72 points, notably below the psychological 6000-mark.
The Broad-share index fell 12 points on Monday to close below 5900 mark for the first time since October 2018, with bargain hunting on Teejay Lanka (-7.2% W-o-W), LOLC Holdings and Melstacorp contributing negatively to the index. The freefall continued for the rest of the holiday shortened week, with the ASPI recording its largest daily loss of ~41 points on Thursday to bring the index closer to 5800-levels. This week’s 72 point loss dragged the YTD loss on the ASPI to 3.5% relative to an YTD gain of 3.2% during the same period last year. Activity levels on the Colombo Bourse meanwhile retracted this week, with average daily turnover for the week dropping to Rs. 0.55Bn (-53% W-o-W) cf. Rs. 1.16Bn last week despite continued interest from Local HNI and Institutional investors.
A large parcel representing a stake of 10.33% in Kingsbury Plc changed hands from Hayleys to Hayley’s subsidary Carbotels (Pvt) Ltd, at a premium of ~41% to its previous close of Rs. 14.2. The off-market transaction contributed 32% to the total weekly crossings, while interest in LOLC Holdings (22% of crossings), Ceylon Tobacco (10% of crossings), Tokyo Cement (10% of crossings), Sampath Bank, Melstacorp and Hemas Holdings helped drive buying interest over the week. Crossings over the week consequently accounted for ~72% of the total market turnover (cf. average of 47% thus far in 2019). Foreign buying interest meanwhile was visible in Tokyo Cement (foreign holding in Tokyo increased to 24% this week from 21% last week) amid Consumer Affairs Authority’s decision to increase the price of a 50kg bag of cement by Rs. 100 to Rs. 1,095.
The Foreign equity sell-off on Sri Lankan equities however, continued over the week despite at a slower pace (Rs. 0.68Bn cf. Rs. 4.48Bn in the previous week) resulting in foreign investors recording a net outflow of Rs. 0.23Bn (cf. Rs. 1.85Bn last week) and bringing the YTD net foreign outflow to Rs. 5.5Bn from Rs. 5.2Bn last week. Markets in the week ahead are likely to continue look for cues from earnings release and progress on negotiations for foreign currency swaps by the CBSL ahead of the Budget reading on 5th March.
CBSL Cuts SRR by 1.0% Amid Steady Policy Rates Sri Lanka’s Central bank held policy rates steady (SLFR: 9%, SDFR: 8%) at its first Monetary Policy Review this year as the Monetary Board observed that the current neutral policy stance was in line with its goal of stabilizing inflation and supporting economic growth.
However, in a surprise move (and contrary to a Reuters poll of 11 economists who expected the Statutory Reserve Ratio to be kept steady), the CBSL reduced the SRR by 1.0% to 5.0% w.e.f. 1st March 2019. The move appears to be aimed at addressing the liquidity deficit in the domestic money market (rather than being a sign of monetary easing) and the CBSL justified the SRR cut by noting that some policy intervention was required to address the persistent rupee liquidity deficit.
The reduction of the SRR is anticipated to revive private sector credit growth and ease lending rates. The CBSL had previously reduced the SRR by 1.50% to 6.0% in mid-Nov 2018 but despite the move, domestic liquidity levels have remained tight over the period. Private sector credit growth meanwhile increased by 15.9% Y-o-Y in Dec 2018 but was down from 16.2% Y-o-Y in Nov 2018. The CBSL also stated that economic growth for Q4’2018 was likely to be subdued (Q3’2018 GDP growth was 2.9% Y-o-Y cf. 3.6% Y-o-Y in Q2’2018) while growth in 2019 is also expected to be modest.
The monetary authority noted however, that the country’s i) low inflation environment, ii) competitive exchange rate and, iii) policies to support investment should support GDP growth over the year. The external sector meanwhile, experienced some improvement, with the trade deficit narrowing between Nov-Dec 2018 due to policies targeted at curbing motor vehicle and non-essential imports.
Foreign buying in Government securities meanwhile have marked a turnaround from 2018, and have experienced a foreign inflow so far in 2019 as the US Fed kept rates unchanged at its first meeting for 2019 amid mounting risk to the US economy. The LKR has consequently appreciated 1.7% YTD but gross official reserves have fallen to $6.2 Bn in Jan 2019 (cf. $7.0Bn in Nov 2018) amid the Country’s debt repayments due in Q1’19.
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