Market drops with third quarter earnings | Daily News


 

Market drops with third quarter earnings

The Bourse ended the week on a negative note as the ASPI decreased by 237.59 points (or -4.07%) to close at 5,592.92 points, while the S&P SL20 Index also decreased by 156.32 points (or -5.61%) to close at 2,631.99 points.

Turnover & Market Capitalization

Ceylon Cold Stores was the highest contributor to the week’s turnover value, contributing LKR 0.32Bn or 12.24% of the total turnover value. Ceylon Tobacco followed suit, accounting for 9.81% of turnover (value of LKR 0.26Bn) while Sampath Bank contributed LKR 0.26Bn to account for 9.80% of the week’s turnover. Total turnover value amounted to LKR 2.62Bn (cf. last week’s value of LKR 1.80Bn), while the daily average turnover value amounted to LKR 0.52Bn (16.67% W-o-W) compared to last week’s average of LKR 0.45Bn. Market capitalization meanwhile, decreased by 4.28% W-o-W (or LKR 116.3Mn) to LKR 2,599.15Bn cf. LKR 2,715.49Bn last week.

Liquidity (in Value Terms)

The Food, Beverage & Tobacco Industry Group was the highest contributor to the week’s total turnover value, accounting for 32.45% (or LKR 0.85Bn) of market turnover. Industry Group’s turnover was driven primarily by Cold Stores, Ceylon Tobacco, Browns Investments & Sunshine Holdings which accounted for 87.58% of the sector’s total turnover. The Banks Industry Group meanwhile accounted for 23.34% (or LKR 0.61Bn) of the total turnover value, with turnover driven primarily by Sampath Bank & Commercial Bank which accounted for 67.20% of the sector turnover. The Capital Goods Industry Group was also amongst the top sectorial contributors, contributing 21.76% (or LKR 0.57Bn) to the total turnover, with turnover driven primarily by JKH, Aitken Spence & Access Engineering accounting for 72.35% of the total turnover.

Liquidity (in volume terms)

The Food, Beverage & Tobacco Industry Group dominated the market in terms of share volume, accounting for 33.27% (or 27.26Mn shares) of total volume, with a value contribution of LKR 0.85Bn. The Capital Goods Industry Group followed suit, adding 14.58% to total turnover volume as 11.95Mn shares were exchanged. The Industry Group’s volume accounted for LKR 0.57Bn of total market turnover value. The Banks Industry Group meanwhile, contributed 8.51Mn shares (or 10.39%), amounting to LKR 0.61Bn.

Top Gainers & Losers

Mahaweli Reach was the week’s highest price gainer; increasing 14.6% W-o-W from LKR13.00 to LKR14.90 while Palm Garden Hotel (+12.2% W-o-W), Tea Smallholder (+10.7% W-o-W) and Multi Finance (+9.0% W-o-W) were also amongst the top gainers.

SMB Leasing was the week’s highest price loser; declining 33.3% W-o-W to close at LKR0.20. Blue Diamonds (-28.6% W-o-W), HVA Foods (-25.7% W-o-W) and Nation Lanka (-22.2% 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 0.18Bn relative to last week’s total net outflow of LKR 0.12Bn (-43.15% W-o-W). Total foreign purchases increased by 193.41% W-o-W to LKR 0.71Bn from last week’s value of LKR 0.24Bn, while total foreign sales amounted to LKR 0.89Bn relative to LKR 0.36Bn recorded last week (+142.94% W-o-W). In terms of volume, Teejay Lanka & Melstacorp led foreign purchases while Dialog Axiata & JKH led foreign sales. In terms of value, Ceylon Tobacco & Cold Stores led foreign purchases while JKH & Sampath Bank led foreign sales.

Point of view

Renewed fears over Covid-19 reaching global pandemic status wreaked havoc on global stock markets, causing global shares to suffer their worst week since the global financial crisis of 2008. Markets (which were previously optimistic that Covid-19 would be contained to China) plunged this week as the acceleration of new infections outside China (particularly in South Korea, Italy & Iran) prompted the WHO to caution that the world is at ‘a decisive point’ in the spread of the virus. All three major U.S. indexes plunged >4.4% on Thursday and are on track to record their steepest weekly pullback since the global financial crisis, while EM/FM equities fell to fresh lows over the week (MSCI EM Index: -4.9%; MSCI FM: -4.8%). The CBOE volatility index (aka fear index) reached its highest level since Feb’18 as investors worried that the rapidly spreading outbreak could slow the global economy even further and potentially result in global GDP growth recording its worst year since the Great Recession of 2009.

Sri Lankan equities tracked the performance of Global stock markets to record its highest weekly loss (~238 points or 4.1% W-o-W) since Jan’16. Markets fell ~187 points (-3.2%) early in the week, leading to some profit-taking on Thursday which caused the ASPI to gain a marginal 0.4% over the day. However, the ASPI reverted to red on Friday, falling ~75 points (or 1.3%) as Covid-19 concerns were exacerbated by concerns over the economic implications of Sri Lanka’s withdrawal this week from the UNHCR agreement. Turnover levels on the Bourse nevertheless improved over the week (+17% W-o-W) amid buying interest by local HNI and Institutional investors, particularly in CCS and CTC. Crossings for the week consequently rose to 20% of total market turnover (cf. 11% last week). The foreign equity sell-off meanwhile continued for the 9th consecutive week, albeit at a slower pace than at the start of the year (outflow of Rs. 175Mn cf. weekly average outflow of Rs.656Mn in Jan’20). Markets in the week ahead are likely to take cues from developments surrounding the global spread of Covid-19.

Inflation Jumps to 7.6% Y-o-Y in Jan’20

Sri Lanka’s national inflation levels hit a record high (since Nov’17) of 7.6% Y-o-Y in Jan’20 (cf. 6.2% Y-o-Y in Dec’19), largely driven by higher Food prices which continued to increase from last month’s seasonal spike. Food prices, which tend to be volatile, rose sharply from 8.6% Y-o-Y in Dec’19 to 13.7% Y-o-Y in Jan’20, mainly due to the jump in vegetable prices amid supply disruption caused by erratic weather in early 2020. However, Non-food inflation over the month decreased to 3.0% Y-o-Y in Jan’20 (from 4.2% Y-o-Y in Dec’19) amid a drop in communication costs and LP gas while health care and transport costs increased. Similar to headline inflation, urban inflation levels also rose to 5.7% Y-o-Y in Jan’20 compared to 4.8% Y-o-Y in Dec’19. Despite the increase in national inflation, the NCPI Core inflation (which reflects the underlying inflation in the economy by excluding volatile items such as food, energy, and transport) decreased to 3.9% Y-o-Y in Jan’20 relative to 5.2% Y-o-Y in Dec’19.

Meanwhile, oil prices have plummeted significantly to hit its lowest ($51.14/bbl) since Dec’18 as a growing number of new coronavirus cases outside China deepened fears of a global economic slowdown and a subsequent decline in crude oil demand. Brent Crude Oil slumped below the $55 mark, falling ~13% W-o-W to $51.14 per barrel amid fears that the outbreak is likely to become a pandemic and that the virus may also spread in the US and Europe. The sharp decline in oil prices comes ahead of the OPEC+ meeting next week which is expected to discuss possible output cuts by the OPEC members and its allies including Russia. So far this year, oil prices have declined nearly ~23% YTD due to two major shocks: i) the Iran missile attack in Jan’20 and, ii) worries over the economic impact of the coronavirus in China in early Feb’20 and the rapid pace at which the coronavirus is currently spreading outside the country.


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