Selling pressure holds ASPI below key 6,000 mark | Daily News


Selling pressure holds ASPI below key 6,000 mark

The Bourse ended the week on a mixed note as the ASPI increased by 21.81 points (or +0.37 percent) to close at 5,894.70 points, while the S&P SL20 Index decreased by 18.80 points (or -0.64 percent) to close at 2,906.68 points.

Turnover & market capitalization

JKH was the highest contributor to the week’s turnover value, contributing LKR 1.45Bn or 21.70 percent of total turnover value. Aitken Spence followed suit, accounting for 10.50 percent of turnover (value of LKR 0.70 billion) while Sampath Bank contributed LKR 0.52 billion to account for 7.82 percent of the week’s turnover. Total turnover value amounted to LKR 6.69 billion (cf. last week’s value of LKR 3.60 billion), while daily average turnover value amounted to LKR 1.34 billion (+48.54 percent W-o-W) compared to last week’s average of LKR 0.90Bn. Market capitalization meanwhile, increased by 0.39 percent W-o-W (or LKR 10.69 Bn) to LKR 2,778.75 Bn cf. LKR 2,768.06 billion last week.

Liquidity (in value terms)

The Diversified sector was the highest contributor to the week’s total turnover value, accounting for 37.73 percent (or LKR 2.52 billion) of market turnover. Sector turnover was driven primarily by JKH, Aitken Spence & Melstacorp which accounted for 91.28 percent of the sector’s total turnover. The Banks, Finance & Insurance sector meanwhile accounted for 31.71 percent (or LKR 2.12 billion) of the total turnover value, with turnover driven primarily by Sampath Bank, Commercial Bank, HNB and First Capital which accounted for 64.82 percent of the sector turnover. The Manufacturing sector was also amongst the top sectorial contributors, contributing 10.52 percent (or LKR 0.70 billion) to the total turnover, with turnover driven primarily by Tokyo Cement[NV] accounting for 21.55 percent of the total turnover.

Liquidity (in volume terms)

The Diversified sector dominated the market in terms of share volume, accounting for 26.34 percent (or 63.57 million shares) of total volume, with a value contribution of LKR 2.52 billion. The Banks, Finance & Insurance sector followed suit, adding 17.96 percent to total turnover volume as 43.35 million shares were exchanged. The sector’s volume accounted for LKR 2.12 billion of total market turnover value. The Manufacturing sector meanwhile, contributed 40.59 million shares (or 16.82 percent), amounting to LKR 0.70 billion.

Top gainers & losers

Hayleys Fabric was the week’s highest price gainer; increasing 37.5 percent W-o-W from LKR9.60 to LKR13.20 while Dankotuwa Porcelain (+23.3 percent W-o-W), Office Equipment(+21.8 W-o-W)and Browns (+20.0 percent W-o-W) were also amongst the top gainers. Kelsey Development was the week’s highest price loser; declining 25.5 percent W-o-W to close at LKR32.70 while Industrial Asphalts (-23.0 percent W-o-W), Tess Agro[NV] (-20.0 percent W-o-W) and Lucky Lanka (-18.8 percent 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 0.69 billion relative to last week’s total net outflow of LKR 0.28 billion (-142.5 percent W-o-W). Total foreign purchases increased by 114.7 percent W-o-W to LKR 1.80 billion from last week’s value of LKR 0.84 billion, while total foreign sales amounted to LKR 2.49 billion relative to LKR 1.12 billion recorded last week (+121.7 percent W-o-W). In terms of volume, JKH & Browns Investments led foreign purchases while Aitken Spence & Dialog Axiata led foreign sales. In terms of value, JKH & Central Finance led foreign purchases while Aitken Spence & Lanka Tiles led to foreign sales.

Point of view

Having gained nearly ~563 points (+10.5 percent M-o-M) during the month of July, equity markets extended its winning streak for a 6th consecutive week with the benchmark index gaining ~22 index points or 0.4 percent over the week. Gains on the index in July have consequently helped the Index trim its YTD loss to 2.6 percent, down from the 11.2 percent loss recorded during Jan-Jun’19.

The broad share index hit its highest close in 6-months on Monday, as an extended banking sector rally led to the ASPI jumping 122.3 index points while news that the EPF had invested in TJL and key banking sector stocks during the 2nd quarter also boosted market sentiment. Consequently, the ASPI closed for the day just shy of the 6,000 mark. However, profit-taking during the remainder of the week impacted the performance of equity markets and the losses stemming from selling pressure resulted in the ASPI paring down the week’s earlier gains. The Index losses were also partially due to a spate of weaker corporate earnings releases over the week and a renewed political controversy surrounding potential presidential candidates.

Led by the rebound in markets since July, activity levels on the Colombo Bourse continued to improve with weekly turnover levels totaling Rs. 6.7 billion relative to last week total of Rs. 3.6 billion amid increased participation from retail investors. Consequently, the average daily turnover for the week rose to Rs. 1.3 billion cf. Rs. 0.7 billion last week. The higher activity levels were driven mainly by retailers as Local HNI and institutional investors contributed only 17 percent to total market turnover this week with buying interest mainly focused on JKH, Commercial Bank and Aitken Spence. The heightened domestic buying interest, however, stood in contrast to foreign investor activity which increased its pace of selling over the week amid weaker global growth expectations and trade policy uncertainty which prompted the US Fed to cut interest rates for the first time since 2008. Net foreign selling over the week consequently rose to Rs. 686 millionrelative to last week’s sell-off of Rs. 283Mn. Markets in the week ahead are likely to continue taking cues from economic and political developments, amid ongoing corporate earnings releases for Q2’19.

Sri Lanka’s urban inflation falls while US Fed cuts rates

Urban inflation levels fell for the 2nd consecutive month in July, as lower Food inflation (from 1.0 percent in Jun’19 to 2.6 percent in Jul’19) offset the lack of change in non-food prices (from 6.0 percent in Jun’19 to 5.9 percent in Jul’19). Headline CCPI consequently slowed to 3.3 percent Y-o-Y in Jul’19 compared to 3.8 percent Y-o-Y in Jun’19 and 5.0 percent Y-o-Y in May’19. After three consecutive months of rising prices, overall F&B prices decreased in July amid improved supply levels. Non-food prices, however, remained broadly unchanged from levels in June.

The lower urban inflation levels in July helped improve the 12M moving average inflation level which fell to 4.0 percent Y-o-Y from 4.2 percent Y-o-Y in June. Meanwhile, as widely expected the US Fed cut its policy rates by 25Bps this week (to 2 percent to 2.25 percent) citing signs of a global slowdown, simmering U.S. trade tensions and a desire to boost too-low inflation. However, US equity markets took a sharp tumble post the rate cut as market expectations of a lengthy easing cycle waned following the Fed Chairman’s statement that the rate cut was “not the beginning of a long series of rate cuts”.

EM/FM equities meanwhile also performed weakly this week amid fresh concerns over the US-China trade war. The IMF last month said that a deepening trade war between the US and China will cost $455bn in lost output next year and the US’s weaker 2nd quarter GDP numbers indicate that the trade dispute and global slowdown are beginning to take their toll on the economy.

The US economy slowed down to 2.1 percent in Q2’19, down from the 3.1 percent growth recorded in Q1’19. In Q2’19 business investment declined for the first time since early 2016, falling to 0.6 percent from 4.4 percent in Q1’19. The weaker US GDP figures come amid strong signs of an economic slowdown in Europe. On Thursday the European Central Bank (ECB) indicated it is preparing to restart its massive bond-buying program and cut short-term interest rates for the first time since 2016.

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