The share market sentiment was very much more upbeat in the second quarter of 2017 when compared to the same quarter in 2016 as indicated by the average daily turnover of LKR 1.1 billion and LKR 709 million respectively, said Ravi Amarasinghe.
In terms of foreign participation in the bourse, 2Q2017 saw an inflow of LKR 16.5 billion while 2Q2016 saw a net foreign outflow of LKR 4.2 billion. The ASPI moved up 11.30% for the quarter to close at 6,747 points on June 30, 2017 while the more liquid S&P20 Index rose by 14.38% supported by foreign purchases in blue chip companies. Overall investor sentiment was positive due to attractive market Price to Earnings ratio of 11.9 times at the beginning of the
quarter under review and the prospect of receiving the third tranche of the USD 1.5 billion International Monetary Fund’s (IMF) loan to Sri Lanka, he said.
The Central Bank of Sri Lanka held policy rates steady in the second quarter of 2017 after a 25 basis point hike in the first quarter. As such, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) as at June 30, 2017 was 7.25% and 8.75% respectively.
Meanwhile in early May, the Central Bank of Sri Lanka, successfully priced a USD 1.5 billion 10-year International Sovereign Bond. The bonds have been rated ‘B1’, ‘B+’ and ‘B+’ by Moody’s Investors Service, Standard and Poor’s and Fitch Ratings respectively. This marks Sri Lanka’s eleventh U.S. dollar benchmark offering in the international bond markets since 2007. The transaction with an initial price guidance of 6.62% area was announced during the Asia morning of May 4th, 2017, and saw strong interests from a wide range of high quality investors, allowing Sri Lanka to tighten final price guidance to 6.250% area (+/-5 basis points).
The Bonds eventually priced during New York hours at 6.20% reflecting a 42.5 basis points compression, well inside the initial price guidance for a final transaction size of
USD 1.5 billion.
Benchmark 3 month, 6 month and 12 month Treasury bill yields declined by 0.31%, 3.11% and 4.64% respectively for the three month period ending 30th June 2017; the 3 month, 6 month and 12 month Treasury bill yields at end June were 9.60%, 10.29% and 10.47% respectively. Moreover, inflation as measured by the point-to-point change in the Colombo Consumer Price Index (CCPI) dropped from 7.3% in March to 6.1% in June. Food related inflation remained high at 9.1% as measured by the point to point change CCPI in June as a result of agriculture produce shortages and crop losses due to adverse weather conditions. Non food related inflation increased as a result of higher Value Added Tax (VAT) charges as well as VAT being charged on items hitherto exempted, he said.
“In addition, the Sri Lanka Rupee depreciated by 1.16% against the US dollar in the quarter under review and ended the quarter at LKR 153.51.The Fund has out-performed the benchmark by 9.95% since inception to 30th June 2017 to return 6.10%, while the benchmark, the ASPI returned a negative 3.85%. In the 3-month period from 31st March 31 2017 to June 30 2017, the Fund returned 9.16% while the benchmark returned 11.30%,” Amarasinghe said.
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