Foreigners return to market for first time in 5-weeks | Daily News


Foreigners return to market for first time in 5-weeks

The Bourse ended the week on a positive note as the ASPI increased by 9.58 points (or +0.16%) to close at 6,015.23 points, while the S&P SL20 Index also increased by 7.24 points (or +0.23%) to close at 3,115.42 points.

Turnover and market capitalization

Ceylinco Insurance was the highest contributor to the week’s turnover value, contributing LKR 0.77Bn or 44.37% of total turnover value.

Melstacorp followed suit, accounting for 22.89% of turnover (value of LKR 0.39Bn) while JKH contributed LKR 0.15Bn to account for 8.93% of the week’s turnover.

Total turnover value amounted to LKR 1.72Bn (cf. last week’s value of LKR 8.46Bn), while daily average turnover value amounted to LKR 0.43Bn (-74.53% W-o-W) compared to last week’s average of LKR 1.69Bn.

Market capitalization meanwhile, increased by +0.16% W-o-W (or LKR 4.50Bn) to LKR 2,822.02Bn cf. LKR 2,817.53Bn last week.

Liquidity (in value terms)

The Banks, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 54.20% (or LKR 0.93Bn) of market turnover. Sector turnover was driven primarily Ceylinco Insurance, Commercial Bank, NDB, Sampath Bank & Janashakthi Insurance which accounted for 93.42% of the sector’s total turnover.

The Diversified sector meanwhile accounted for 41.07% (or LKR 0.71Bn) of the total turnover value, with turnover driven primarily by Melstacorp, JKH, Hemas Holdings & Softlogic which accounted for 98.94% of the sector turnover.

The Manufacturing sector was also amongst the top sectorial contributors, contributing 1.30% (or LKR 0.02Bn) to the market.

Liquidity (in volume terms)

The Diversified sector dominated the market in terms of share volume, accounting for 51.01% (or 13.18Mn shares) of total volume, with a value contribution of LKR 0.71Bn.

The Banks, Finance & Insurance sector followed suit, adding 18.57% to total turnover volume as 4.80Mn shares were exchanged. The sector’s volume accounted for LKR 0.93Bn of total market turnover value. The Telecom sector meanwhile, contributed 1.65Mn shares (or 6.41%), amounting to LKR 0.02Bn.

Top gainers and losers

Tess Agro [NV] was the week’s highest price gainer; increasing 25.0% W-o-W from LKR0.40 to LKR0.50 while Amana Life (+17.6% W-o-W), Softlogic Life (+15.8% W-o-W) and BPPL Holdings (+10.6% W-o-W) were also amongst the top gainers.

Selinsing was the week’s highest price loser; declining 14.3% W-o-W to close at LKR711.40 while Lanka Ceramic (-12.4% W-o-W), Kotagala (-10.7% W-o-W), and Odel (-8.4% 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 0.26Bn relative to last week’s total net outflow of LKR 3.11Bn (+108.5% W-o-W).

Total foreign purchases decreased by 83.3% W-o-W to LKR 0.58Bn from last week’s value of LKR 3.44Bn, while total foreign sales amounted to LKR 0.31Bn relative to LKR 6.55Bn recorded last week (-95.2% W-o-W).

In terms of volume, Melstacorp & Softlogic led foreign purchases while JKH & Renuka Agri led foreign sales. In terms of value, Melstacorp & Softlogic led foreign purchases while JKH & Hemas Holdings led foreign sales.

Point of view

Sri Lankan equities gained marginally ( 9.6 index points) over the holiday-shortened week, with retail investors in particular remaining largely on the sidelines during the week.

On Monday, the benchmark index gained 19 points (+ 0.3%), but lost 10 points over the remainder of the week to end at 6,015.23 (0.16% W-o-W gain). This week’s gain (albeit marginal) was the 1st week-on-week gain in two weeks and, despite the political impasse that dominated the early part of the month, the ASPI has remained staunchly above the psychological mark of 6000 points throughout Dec’18.

However, activity levels remained subdued with average daily activity levels hitting an 11-week low of Rs.0.4Bn this week, and helping push the overall activity levels on the Colombo Bourse over 2018 down to Rs.0.8Bn (cf. average daily turnover levels of Rs.0.9Bn recorded in 2017).

With Retail investors opting to remain on the sidelines this week, Local institutions and HNIs accounted for 70% of total market activity, with buying interest focused mainly on Ceylinco Insurance (64% of crossings) and Melsta Corp (31% of crossings).

Foreign investors meanwhile returned to Sri Lankan equities for the 1st time since Mid-Nov’18, with foreign investors remaining net buyers to the tune of Rs.264Mn (cf. net buying position of Rs. 130Mn in Nov’18).

Domestic equity performance in 2018 so far has remained volatile, with the ASPI losing 5.6% over the year (cf. 2.3% gain recorded in 2017) as i) sluggish economic conditions and heightened political uncertainty domestically and, ii) volatile financial markets globally have affected equities negatively.

Markets in the week ahead are likely to look cues both from the CBSL’s roadmap of Monetary and Financial Sector Policies for 2019 & beyond and from ongoing economic and political developments.

Policy rates held steady despite subdued growth

At its final Monetary Policy Review for the year, Sri Lanka’s Central Bank held policy rates steady (SLFR –9%: SDFR-8%) noting that despite sub-par growth and subdued inflation, its decision is warranted by higher private sector credit growth and continued pressure on the country’s external reserves.

The move to maintain rates is in contrast to last month when the CBSL reduced the Statutory Reserve Ratio (SRR) by 1.50p.p to address low rupee liquidity in the system whilst simultaneously increasing the SDFR and SLFR rates (by 75 and 50 bps respectively) to neutralise the impact of the SRR reduction.

The Monetary Authority noted that economic growth continues to remain weak (Q3’18 GDP growth was 2.9% Y-o-Y cf. 3.6% Y-o-Y in Q2’18), with Q4’18 growth also expected to remain subdued, highlighting the urgency of implementing broad-based structural reforms.

However, the uptick in private sector credit growth since Sept’18 and pressure on external reserves prompted its decision to hold rates; despite the increased cost of funds and tight liquidity conditions, private sector credit growth rose to 16.2% Y-o-Y in Nov’18 (cf. 14.9% Y-o-Y in Jun’18) partially due to the private sector advancing its activities in anticipation of measures to curb excessive import growth.

The external sector meanwhile continues to face international and domestic headwinds, with the trade deficit widening further between Jan-Oct’18 while workers’ remittances have slowed and capital markets have experienced consistent net outflows amid tight liquidity conditions globally and excessive speculation domestically.

The LKR has consequently depreciated 15.8% YTD while gross official reserves have fallen to $7Bn cf. $10Bn in Apr’18, justifying the CBSL’s decision to not reduce rates despite stable inflation levels and subpar GDP growth.

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