Market begins year on negative sentiment | Daily News


Market begins year on negative sentiment

The Bourse ended the week on a negative note as the ASPI decreased by 11.36 points (or -0.19 percent) to close at 6,111.28 points, while the S&P SL20 Index also decreased by 43.59 points (or -1.47 percent) to close at 2,928.50 points.

Turnover & Market Capitalization

LOLC Holdings was the highest contributor to the week’s turnover value, contributing LKR 0.75Bn or 25.13 percent of total turnover value. Browns Investments followed suit, accounting for 21.11 percent of turnover (value of LKR 0.63Bn) while JKH contributed LKR 0.16Bn to account for 5.26 percent of the week’s turnover. Total turnover value amounted to LKR 2.97Bn (cf. last week’s value of LKR 1.42Bn), while the daily average turnover value amounted to LKR 0.74Bn (+109.93 percent W-o-W) compared to last week’s average of LKR 0.35Bn. Market capitalization meanwhile, decreased by 0.19 percent W-o-W (or LKR 5.28Bn) to LKR 2,842.97Bn cf. LKR 2,848.25Bn last week.

Liquidity (in Value Terms)

The Banks, Finance & Insurance sector was the highest contributor to the week’s total turnover value, accounting for 44.03 percent (or LKR 1.31Bn) of market turnover. Sector turnover was driven primarily by LOLC Holdings, Sampath Bank, HNB, Commercial Bank & NDB which accounted for 83.72 percent of the sector’s total turnover. The Diversified sector meanwhile accounted for 28.97 percent (or LKR 0.86Bn) of the total turnover value, with turnover driven primarily by Browns Investments, JKH & Softlogic which accounted for 97.47 percent of the sector turnover. The Manufacturing sector was also amongst the top sectorial contributors, contributing 7.57 percent (or LKR 0.23Bn) to the total turnover.

Liquidity (in Volume Terms)

The Diversified sector dominated the market in terms of share volume, accounting for 68.11 percent (or 126.78Mn shares) of total volume, with a value contribution of LKR 0.86Bn. The Banks, Finance & Insurance sector followed suit, adding 16.87 percent to total turnover volume as 31.41Mn shares were exchanged. The sector’s volume accounted for LKR 1.31Bn of total market turnover value. The Manufacturing sector meanwhile, contributed 7.92Mn shares (or 4.25 percent), amounting to LKR 0.23Bn.

Top Gainers & Losers

SMB Leasing[NV] was the week’s highest price gainer; increasing 33.3 percent W-o-W from LKR0.30 to LKR0.40 while LOLC Holdings (+16.9 percent W-o-W), Eden Hotel (+15.6 percent W-o-W) and Browns Investments (+15.0 percent W-o-W) were also amongst the top gainers.

Blue Diamonds[NV] was the week’s highest price loser; declining 25.0 percent W-o-W to close at LKR0.30 LOLC Dev Finance (-18.7 percent W-o-W), Bansei Resorts(-11.3 percent W-o-W) and Citrus Waskaduwa(-10.0 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 0.42Bn relative to last week’s total net inflow of LKR 4.91Mn (-8577.3 percent W-o-W). Total foreign purchases increased by 14.0 percent W-o-W to LKR 0.27Bn from last week’s value of LKR 0.24Bn, while total foreign sales amounted to LKR 0.69Bn relative to LKR 0.23Bn recorded last week (+193.1 percent W-o-W). In terms of volume, Union Bank & Dialog Axiata led foreign purchases while LOLC Holdings & Teejay Lanka led foreign sales. In terms of value, LB Finance & Union Bank led foreign purchases while LOLC Holdings & JKH led foreign sales.

Dividend Announcements

Company, DPS (Rs.), Type, XD Date; HAYCARB PLC, 3.00, Second Interim, 14-01-2020, HAYLEYS FIBRE, 2.00, Second Interim, 13-01-2020, HAYLEYS FABRIC, 0.20, Interim, 13-01-2020, PEOPLE’S LEASING & FINANCE, 0.70, First Interim, 13-01-2020, CEYLON TOBACCO, 20.00, Fourth Interim, 13-01-2020, DIPPED PRODUCTS, 1.50, Second Interim, 13-01-2020.

Key Economic Indicators for November; Prime Lending Rate-10.21 percent, Ave. Wtd. Deposit Rates-8.27 percent, Ave. Wtd. Fixed Dep. Rates-10.14 percent.

Point of View

Equity markets reversed last week’s positive momentum as the benchmark index dropped 11.4 index points or -0.2 percent W-o-W during the first week of 2020 to close at 6,111.28 points for the week. Markets opened the week in the green, gaining ~33 points on Monday as the rally in LOLC (up ~17 percent W-o-W) continued this week after the announcement of a probable sale of its Cambodian subsidiary during the previous week. However, selling pressure in Banks, Finance, and Insurance sector stocks on the last trading day of the year led to a ~27 point drop, paring down earlier gains. Nonetheless, the ASPI closed for the year with a 1 percent Y-o-Y gain in 2019 (cf. 5 percent Y-o-Y loss in 2018) despite a volatile year as domestic equities were swayed by sluggish economic conditions, terror attacks in April and the Presidential election towards the tail end of the year.

Activity levels on the Colombo Bourse improved significantly this week as average daily turnover for the week more than doubled to Rs. 0.74Bn (cf. Rs. 0.35Bn last week), on the back of stronger retail-driven momentum. On the contrary, local HNI and institutional investor participation were largely muted during the week with buying interest mainly concentrated on CCS, HNB, and SHL. Consequently, crossings for the week accounted for a mere 7 percent of total market turnover for the week (cf. 34 percent of total market turnover last week). Foreign investors meanwhile were net sellers this week with a total net foreign outflow of Rs. 416Mn (cf. net inflow of Rs. 5Mn last week), thus pushing the total net outflow from the Colombo Bourse to Rs. 11.7Bn for the year (cf. an outflow of Rs. 23.2Bn in 2018). Markets in the week ahead are likely to look cues from the policy statement delivered by the President this Friday and the upcoming Roadmap of Monetary and Financial Sector Policies for 2020 to be presented by the CBSL next Monday.

Equity Markets Have Volatile Year in 2019

In contrast to most of its EM/FM peers (which recovered in 2019 from the sharp falls they experienced in 2018), domestic headwinds have dominated most of the 2019 performance of Sri Lankan equities.

The Colombo Bourse gained 1.1 percent over 2019, notably lower than the gains experienced by its regional peers (MSCI FM =+10.7 percent; MSCI EM= +15.4 percent). Gains in EM/FM equities were driven by the positive developments in the US-China trade war and the dovish monetary policy stance adopted by most advanced economies in the face of weaker growth. Sri Lankan equities started Q1’19 on a downtrend as the i) successful repayment of a portion of the country’s large debt repayments and, ii) resumption & extension of the IMF’s funding facility failed to diminish ongoing concerns about the country’s growth prospects and political uncertainties. Equity market losses subsequently worsened in Q2’19, with the Index nose-diving to a 7-year low in the aftermath of the Easter attacks & rising communal/political tensions post the attacks.

By end-May’19 therefore, Sri Lankan equities had wiped off ~12 percent of its value, sharply higher than the 5 percent loss it recorded in the full year of 2018. The increased pressure (post the Easter attacks) on already subpar economic growth prompted the CBSL to adopt a more dovish monetary policy stance in late May to stimulate the economy and markets.

The lowering of interest rates along with revived investor appetite ahead of the Nov’19 Presidential polls thus helped equity markets bottom-out and markets began to recover from Jun’19. Between end-June to Nov-19 therefore, markets gained a sharp 14 percent, wiping off the Index’s losses from earlier in the year and helping the Index record a 1 percent increase over the year. Despite the recovery in Index value, the foreign investors have remained net sellers throughout the year, selling-off nearly Rs.12Bn of domestic equities cf. Rs.23Bn sell-off in (excluding the one-off transaction in LOLC, the 2019 net sell-off is Rs.20 Bn).

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