LKR falls 1% in aftermath of Easter attacks | Daily News

ASPI dips 111 points

LKR falls 1% in aftermath of Easter attacks

Indices

The Bourse ended the week on a negative note as the ASPI decreased by 111.07 points (or -2.04%) to close at 5,327.68 points, while the S&P SL20 Index also decreased by 98.87 points (or -3.78%) to close at 2,519.08 points.

Turnover & Market Capitalization

JKH was the highest contributor to the week’s turnover value, contributing LKR 0.34Bn or 24.46% of total turnover value. Sampath Bank followed suit, accounting for 14.34% of turnover (value of LKR 0.20Bn) while East West contributed LKR 0.14Bn to account for 10.34% of the week’s turnover. Total turnover value amounted to LKR 1.38Bn (cf. last week’s value of LKR 0.62Bn), while daily average turnover value amounted to LKR 0.28Bn (+77.89% W-o-W) compared to last week’s average of LKR 0.15Bn. Market capitalization meanwhile, decreased by 2.04% W-o-W (or LKR -52.16Bn) to LKR 2,501.97Bn cf. LKR 2,554.13Bn last week.

Liquidity (in value terms)

The Diversified sector was the highest contributor to the week’s total turnover value, accounting for 36.75% (or LKR 0.51Bn) of market turnover. Sector turnover was driven primarily by JKH & Hemas Holdings which accounted for 92.76% of the sector’s total turnover. The Banks, Finance & Insurance sector meanwhile accounted for 29.80% (or LKR 0.41Bn) of the total turnover value, with turnover driven primarily by Sampath Bank, Commercial Bank & People’s Leasing which accounted for 71.19% of the sector turnover. The Land & Property sector was also amongst the top sectorial contributors, contributing 16.51%(or LKR 0.23) to the total turnover, with turnover driven primarily by East West & Cargo Boat accounting for 97.79% of the total turnover.

Liquidity (in volume terms)

The Manufacturing sector dominated the market in terms of share volume, accounting for 34.19% (or 20.86Mn shares) of total volume, with a value contribution of LKR 0.11Bn. The Banks, Finance & Insurance sector followed suit, adding 20.47% to total turnover volume as 12.49Mn shares were exchanged. The sector’s volume accounted for LKR 0.41Bn of total market turnover value. The Land & Property sector meanwhile, contributed 9.20Mn shares (or 15.08%), amounting to LKR 0.23Bn.

Top gainers & losers

E-Channeling was the week’s highest price gainer; increasing 11.4% W-o-W from LKR3.50 to LKR3.90 while Trade Finance(+7.8% W-o-W), ACL Plastics (+7.3% W-o-W) and PDL (+6.9% W-o-W) were also amongst the top gainers. SMB Leasing[NV] were the week’s highest price loser; declining 33.3% W-o-W to close at LKR0.20 while Lucky Lanka[NV](-25.0% W-o-W), Serendib Hotels (-25.0% W-o-W) and Amaya Leisure(-23.3% 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 0.02Bn relative to last week’s total net inflow of LKR 0.06Bn (-138.4% W-o-W). Total foreign purchases increased by 69.1% W-o-W to LKR 0.30Bn from last week’s value of LKR 0.18Bn, while total foreign sales amounted to LKR 0.32Bn relative to LKR 0.12Bn recorded last week (+166.2% W-o-W). In terms of volume, JKH & Piramal Glass led foreign purchases while Hemas Holdings & People’s Leasing led foreign sales. In terms of value, JKH & Commercial Bank led foreign purchases while Hemas Holdings & Sampath Bank led foreign sales.

Point of view

Equity market sentiment remained largely negative amid concerns over national security and the looming economic impact of the devastating Easter Sunday terror attacks while the government rushed to provide a relief package for the tourism industry.

The losing streak on Equities which began last Thursday continued this week as the benchmark index recorded 7-straight sessions of losses due to selling pressure in equity markets yet again. Heavy selling in blue-chip JKH (down 5.4% W-o-W) on Monday and mid-caps stocks such as Lion Brewery (-7.4% W-o-W) and Sampath Bank (-5.4% W-o-W) contributed to the 52 point dip at the beginning of the week, pushing the ASPI back to its lowest level in 61/2-years (since Dec’2012). The dampened market conditions that prevailed over the week resulted in an overall drop of 111 points (2.0% W-o-W) on the ASPI, and the Index closed at a low of 5,327.68 by the end of the week. Declines on the index this week consequently dragged the YTD loss on the ASPI to 12.0%. Activity levels on the Colombo Bourse meanwhile picked up during the start of the week, with Monday’s turnover touching Rs. 0.4Bn relative to last week’s average turnover of Rs. 0.15Bn.

As the week progressed however, depressed market sentiments continued to wear down market participation. Consequently, average daily turnover for the week amounted to Rs. 0.28Bn (78% W-o-W), well below the YTD average daily turnover of Rs. 0.56Bn. HNI and institutional participation remained largely lacklustre during the week as crossings for the week contributed a mere 7% to the week’s total market turnover of Rs. 1.4Bn (cf. YTD average of 33%).

Investor interest in Cargo Boats accounted for 80% of the crossings while a single off-market transaction in Sampath Bank accounted for the rest. Foreign investors were net sellers this week as investors sold off shares in Hemas Holdings and Sampath Bank during the week. However, some foreign buying interest led by JKH and Commercial Bank helped pare down the sell-off on domestic equities during the week. Consequently, foreign investors recorded a net foreign outflow of Rs. 21.5Mn this week cf. a net foreign inflow of ~Rs. 55.9Mn last week.

LKR falls 1% in aftermath of the Easter attacks

The initial impact to the LKR in the immediate aftermath of the Easter Terror attacks has been largely contained, with the LKR falling 1.0% against the USD in the three weeks since the attacks.

This contrasts sharply to the fallout from the attacks to risky assets such as equities and key foreign-exchange driven sectors such as Tourism. Sri Lankan equity markets have fallen a sharp 5% (ie: 276 index points) to hit a 61/2-year low, while Tourism (which accounts for 6% of GDP) has been impacted significantly with tourist arrivals plunging 60-70% and flight cancellations rising to 80%. The relatively muted impact to the LKR is partially attributable to the limited foreign exposure to Government securities.

While Foreign investor holdings of Sri Lankan G-secs was as high as 11% (of total outstanding stock of G-Sec) in 2014, this proportion has gradually fallen over the years to 7% in 2017 and last year’s notable global sell-off on EM/FM assets has resulted in the overall foreign holding of domestic G-secs falling to 3% by Jan’19. While some portfolio investment outflows from domestic G-secs was evident in the immediate aftermath of the attacks (Rs.14Bn), this amount pales in comparison to the substantial outflow of Rs. 159Bn for the full year 2018 or even the Rs. 83Bn outflow in the Q4’18 at the height of the political crisis.

But, while the initial impact to the LKR from portfolio investment outflows may have been broadly contained, the impact to the LKR over the more medium term remains to be seen as the impact of the attacks on the Tourism sector and Foreign Direct Investment is likely to be considerable. Up until the Easter Terror attacks on April 21st, the LKR was one of the better-performing EM/FM currencies this year, appreciating 5% against the USD relative to an average appreciation of 2% for most other EM countries and an average depreciation of 0.5% for most major South Asian economies.


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