Malaysia divests JKH stake to Citigroup | Daily News


Malaysia divests JKH stake to Citigroup

The Bourse ended the week on a negative note as the ASPI decreased by 123.73 points (or -2.02%) to close at 5,987.55 points, while the S&P SL20 Index also decreased by 97.74 points (or -3.34%) to close at 2,830.76 points.

Turnover & market capitalization

JKH was the highest contributor to the week’s turnover value, contributing LKR 23.23Bn or 88.84% of the total turnover value. Sampath Bank followed suit, accounting for 4.04% of turnover (value of LKR 1.06Bn) while Browns Investments contributed LKR 0.26Bn to account for 0.99% of the week’s turnover. Total turnover value amounted to LKR 26.15Bn (cf. last week’s value of LKR 2.94Bn), while the daily average turnover value amounted to LKR 6.54Bn (+780.08% W-o-W) compared to last week’s average of LKR 0.74Bn. Market capitalization meanwhile, decreased by 2.02% W-o-W (or LKR 57.56Bn) to LKR 2,785.41Bn cf. LKR 2,842.97Bn last week.

Liquidity (in value terms)

The Diversified sector was the highest contributor to the week’s total turnover value, accounting for 90.28% (or LKR 23.60Bn) of market turnover. Sector turnover was driven primarily by JKH, Browns Investments & Hemas Holdings which accounted for 99.79% of the sector’s total turnover. The Banks, Finance & Insurance sector meanwhile accounted for 5.66% (or LKR 1.48Bn) of the total turnover value, with turnover driven primarily by Sampath & LOLC Holdings which accounted for 79.42% of the sector turnover. The Manufacturing sector was also among the top sectorial contributors, contributing 1.35% (or LKR 0.35Bn) to the total turnover, with turnover primarily driven by Tokyo Cement[NV], Chevron & ACL which accounted for 66.64% of the sector turnover.

Liquidity (in volume terms)

The Diversified sector dominated the market in terms of share volume, accounting for 67.45% (or 196.03Mn shares) of total volume, with a value contribution of LKR 23.60Bn. The Banks, Finance & Insurance sector followed suit, adding 9.33% to total turnover volume as 27.11Mn shares were exchanged. The sector’s volume accounted for LKR 1.48Bn of total market turnover value. The Hotels & Travels sector meanwhile, contributed 14.75Mn shares (or 5.08%), amounting to LKR 0.04Bn.

Economic snapshot

For December; Prime Lending Rate- 10 percent, Ave. Wtd. Deposit Rates- 8.2 percent, Ave. Wtd. Fixed Dep. Rates- 10.05 percent, CCPI Inflation Y-o-Y % (Base 2013)- 4.8 percent

Top Gainers & Losers Mullers were the week’s highest price gainer; increasing 11.1% W-o-W from LKR0.90 to LKR1.00 while Kahawatte (+10.1% W-o-W), Eastern Merchants (+7.3% W-o-W) and PDL(+7.0% W-o-W) were also amongst the top gainers.

SMB[NV] was the week’s highest price loser; declining 25.0% W-o-W to close at LKR0.30 Lanka Ceramic (-20.1% W-o-W), SMB Leasing(-16.7% W-o-W) and Equity Two(-15.7% 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 19.09Mn relative to last week’s total net outflow of LKR 416.3Mn (+95.41% W-o-W). Total foreign purchases increased by 8387.79% W-o-W to LKR 23.21Bn from last week’s value of LKR 0.27Bn, while total foreign sales amounted to LKR 23.23Bn relative to LKR 0.69Bn recorded last week (+3267.26% W-o-W). In terms of volume, Dialog Axiata & Sierra Cable led foreign purchases while Chevron & Hemas Holdings led foreign sales. In terms of value, Dialog Axiata & LB Finance led foreign purchases while Chevron & Cold Stores led foreign sales.

Point of View Volatility heightened in domestic equity markets in line with global equities this week as an escalation in US-Iran tensions on Wednesday stirred up fears of a conflict in the Middle East, prompting heavy retail selling in the market. Fears over a possible conflict amid persistent selling pressure during the beginning of the week consequently led the broad share index to shed a total of 212 points by Wednesday. Retaliation by Iran led the benchmark index to record its largest single-day slump since the Easter Attacks in Apr’19 on Wednesday with the ASPI falling by 127 points over the day. However, markets snapped 3 consecutive days of heavy losses on Thursday as the U.S President’s measured comments on the Iranian missile attacks appeared to indicate that both parties were keen to de-escalate tensions. The broad share index consequently gained 89 points on Thursday to pare down earlier losses. Consequently, the ASPI closed for the week just shy of 6,000, having fallen by 124 points or 2.0% W-o-W for the week.

Despite the overall volatility in the Index, market activity levels for the week rose as turnover levels were bolstered by the sale of JKH’s 2nd largest shareholder (Malaysian Sovereign Wealth fund Broga Hill Investments) to another foreign entity. The strategic sale which represented a stake of 10.76% in JKH, pushed turnover levels past ~Rs. 23Bn on Thursday to reach an 11+ year high. Average daily turnover for the week thus shot up to Rs. 6.5Bn (cf. Rs. 0.74Bn last week). The transaction also led JKH to contribute 96% to total crossings this week with crossing for the week accounting for nearly 92% of total market turnover. HNI and institutional investor participation meanwhile were also concentrated on SAMP, DIAL, HHL, CTC, and HNB. The foreign sell-off on domestic equities eased this week despite tensions in the Middle East and total net foreign outflow amounted to of Rs. 19Mn (cf. net outflow of Rs. 416Mn last week). Markets in the week ahead are likely to look for cues from further economic and political developments.

Modest Global Rebound in 2020

In its latest report on global economic prospects, the World Bank estimates global growth to pick up by a modest 2.5% in 2020E (from 2.4% in 2019E) and 2.6-2.7% in 2021E-22E, as investment and trade gradually recover amid the stabilizing economic conditions while monetary policy is expected to remain accommodative globally1. Growth in advanced economies is expected to decelerate to 1.4% in 2020E (from 1.6% in 2019E) reflecting the continued weakness in trade and manufacturing activity while Emerging Market and Developing Economy (EMDE) growth is expected to accelerate to 4.1% in 2020E (from 3.5% in 2019E) and stabilize at 4.4% in 2021 – 22E as trade and investment improve.

However, the World Bank added that per capita growth will likely remain below long-term averages despite a recovery in EMDEs. The Bank also stated that the risk of a re-escalation of global trade tensions and trade policy uncertainty, sharp downturns in major economies, and financial turmoil in EMDEs remains elevated and this uncertainty is likely to weigh on business confidence, trade, and investment. Meanwhile, the World Bank warned about a rapid build-up of debt in emerging economies, stating that the debt accumulation which began in 2010 has been the largest, fastest and most broad-based wave of debt accumulation among EMDEs in the last 50 years with total debt increasing from 115% of GDP in

2010 to 170% of GDP in 20181 in these economies. However, the current low-interest rates which are expected to continue into the medium term could mitigate some of the risks associated with high debt.

Source: World Bank

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