ASPI Gains ~120 Points to Hit 5-Month High

The Bourse ended the week on a positive note as the ASPI increased by 120.39 points (or +2.29%) to close at 5,382.38 points, while the S&P SL20 Index also increased by 74.08 points (or +3.19%) to close at 2,394.18 points.

Turnover & Market Capitalization

JKH was the highest contributor to the week’s turnover value, contributing LKR 2.03Bn or 18.39% of the total turnover value. Commercial Bank followed suit, accounting for 14.34% of turnover (value of LKR 1.59Bn) while Access Engineering contributed LKR 0.97Bn to account for 8.78% of the week’s turnover. Total turnover value amounted to LKR 11.06Bn (cf. last week’s value of LKR 11.43Bn), while the daily average turnover value amounted to LKR 2.21Bn (-3.18% W-o-W) compared to last week’s average of LKR 2.29Bn. Market capitalization meanwhile, increased by 2.29% W-o-W (or LKR 56.66Mn) to LKR 2,533.14Bn cf. LKR 2,476.49Bn last week.

Liquidity (in Value Terms)

The Banks Industry Group was the highest contributor to the week’s total turnover value, accounting for 30.76% (or LKR 3.40Bn) of market turnover. Industry Group’s turnover was driven primarily by Commercial Bank, DFCC Bank, Sampath & HNB which accounted for 87.53% of the sector’s total turnover. The Capital Goods Industry Group meanwhile accounted for 30.40% (or LKR 3.36Bn) of the total turnover value, with turnover driven primarily by JKH & Access Engineering which accounted for 89.38% of the sector turnover. The Diversified Financials Industry Group was also amongst the top sectorial contributors, contributing 11.56% (or LKR 1.28Bn) to the total turnover, with turnover driven primarily by LOLC Holdings accounting for 49.12% of the total turnover.

Liquidity (in Volume Terms)

The Food Beverage & Tobacco Industry Group dominated the market in terms of share volume, accounting for 28.07% (or 161.89Mn shares) of total volume, with a value contribution of LKR 1.18Bn. The Capital Good Industry Group followed suit, adding 12.82% to total turnover volume as 73.95Mn shares were exchanged. The Industry Group’s volume accounted for LKR 3.36Bn of total market turnover value. The Diversified Financials Industry Group, meanwhile, contributed 64.56Mn shares (or 11.19%), amounting to LKR 1.28Bn.

Top Gainers & Losers

Industrial Asphalt was the week’s highest price gainer; increasing 50.0% W-o-W from LKR0.20 to LKR0.30 while Tess Agro (+25.0% W-o-W), Commercial Leasing & Finance (+24.1% W-o-W) and Anilana Hotels (+22.2% W-o-W) were also amongst the top gainers.

Blue Diamond [NV] was the week’s highest price loser; declining 33.3% W-o-W to close at LKR0.20. Amana Life (-22.2% W-o-W), Softlogic Capital (-16.7% W-o-W), and Autodrome (-10.2% 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 1.50Bn relative to last week’s total net outflow of LKR 2.87Bn (47.8% W-o-W). Total foreign purchases decreased by 6.9% W-o-W to LKR 0.67Bn from last week’s value of LKR 0.72Bn, while total foreign sales amounted to LKR 2.17Bn relative to LKR 3.60Bn recorded last week (-39.6% W-o-W). In terms of volume, Sampath, Maskeliya & Distilleries foreign purchases while Dialog, Peoples Leasing & Commercial Bank led foreign sales. In terms of value, Sampath, Haycarb & Tokyo [NV] led foreign purchases while JKH, Commercial Bank & Central Finance led foreign sales.

Dividend Announcements

Company DPS (Rs.) Type XD Date RAIGAM WAYAMBA SALTERNS 0.10 Final 02-10-2020 SPEN PLANTATION MGT 2.00 Final 21-09-2020 LANKA MILK FOODS 2.50 First & Final To be notified LANKA IOC 0.75 First & Final To be notified CIC HOLDINGS 1.00 Second Interim 28-08-2020 SAMSON INTERNATIONAL 1.00 Final 27-08-2020 ELPITIYA PLANTATIONS 0.75 First & Final 21-09-2020.

Key Economic Indicators June; Prime Lending Rate- 8.78%, Ave. Wtd. Deposit Rates-7.38%, Ave. Wtd. Fixed Dep. Rates-9%, CCPI Inflation Y-o-Y % (Base 2013) 3.9%.

Point of View

Domestic equities maintained its upward trajectory yet again this week amid strong retail-driven momentum and better-than-expected corporate earnings results while the CBSL decided to maintain its accommodative policy stance this week. Markets began the week on a negative note, losing ~10 index points on Monday as selling pressure in DIAL, HNB and HAYL weighed on the index. However, gains on the benchmark index totaling to ~131 points over the remainder of the week helped pare down earlier losses. A notable gain of ~71 index points on Wednesday amid heavy buying interest in BIL (following the conclusion of the Group’s Rights Issue), LOLC, and JKH contributed positively to this week’s gains on the index. Consequently, the ASPI rose ~120 points W-o-W or 2.3% at its close on Friday. The positive sentiment that has dominated markets over the past 5 weeks continued to boost activity levels, resulting in the benchmark index gaining ~394 points over the 5 weeks and has helped pare down the YTD loss on the ASPI to -11.9% (cf. -18.3% on the 17th Jul). Meanwhile, corporate earnings over the Jun’20 quarter have remained relatively mixed as ~42% of the companies that have reported their quarterly results thus far recorded a Y-o-Y increase in earnings.

Activity levels in the market meanwhile remained elevated despite a marginal decline in average daily turnover for the week to Rs. 2.2Bn from Rs.2.3Bn last week amid relatively lower local institutional and HNI investor participation. Consequently, crossings for the week were reduced to Rs. 2.2Bn (cf. 3.1Bn last week) with COMB, AEL & JKH accounting for the bulk (80%) of the week’s total crossings.

Foreign investors meanwhile continued to sell-off Sri Lankan equities and net foreign outflows this week totaled to Rs. 1.5Bn (cf. Rs. 2.9Bn outflow last week) widening the YTD net foreign outflow from the Colombo Bourse to Rs.29.4Bn. Although some profit-taking is likely, markets in the week ahead are likely to continue to look for cues from the remaining corporate earnings releases for the Jun’20.

Policy Rates Held Steady in Aug’20

The CBSL on Thursday decided to hold policy rates steady (SLFR – 5.50% and SDFR – 4.50%), as market lending rates have yet to reflect rate cuts implemented so far this year. Therefore, the Monetary Board also stated that it would implement targeted measures to reduced interest rates of certain financial products believed to be excessive. Consequently, the Board decided to lower the caps of interest rates on credit cards (18% p.a.), pre-arranged temporary overdrafts (16% p.a.), and pawning facilities (10% p.a.). Meanwhile, private sector credit growth decelerated further in Jun’20 with growth falling to 4.3% Y-o-Y relative to 6.4% Y-o-Y in May’20. However, the CBSL expects private sector credit growth would begin to pick-up amid positive business sentiment, better political stability, declining market lending rates, and rising credit disbursements as a result of the concessional credit schemes offered to sectors affected by the COVID-19 pandemic.

The CBSL added that these factors would also support a rebound towards Q4’20 despite the substantial impact of the pandemic on economic activity during Q2’20. GDP growth contracted to 1.6% Y-o-Y in Q1’20 with sharp contractions in agriculture and industrial activity amid an island-wide curfew imposed during the last 2 weeks of Mar’20.

The CBSL also noted that the country’s external sector remained resilient amid the pandemic outbreak as the trade deficit narrowed in H1’20 supported by a notable contraction in imports relative to the decline in exports due to import restrictions and low global oil prices. Consequently, the trade deficit contracted to $3.3Bn during H1’20 cf. $3.6Bn in H1’19. Although workers’ remittances improved marginally during Jun’20 due to festival allowances received by workers in the Middle East, remittances for H1’20 declined by 8.9% Y-o-Y to $3.0Bn. Meanwhile, the tourism sector recorded a sizeable decline of 49.7% Y-o-Y as earnings from tourism remained at $956Mn in H1’20 (cf. $1.9Bn in H1’19). Depreciation of the LKR against the USD was limited to 1.3% so far this year despite a steep drop during Mar-Apr’20 while gross official reserves have risen to $7.1Bn in Jul’20 cf. $6.7Bn in Jun’20.

Sources: CBSL

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