ASPI hits over 8-month low amid COVID-19 spread | Daily News


ASPI hits over 8-month low amid COVID-19 spread

The Bourse ended the week on a negative note as the ASPI decreased by 249.77 points (or -4.47 percent) to close at 5,343.15 points, while the S&P SL20 Index also decreased by 152.38 points (or -5.79 percent) to close at 2,479.61 points.

JKH was the highest contributor to the week’s turnover value, contributing LKR 0.52Bn or 20.12 percent of the total turnover value. Commercial Bank followed suit, accounting for 13.44 percent of turnover (value of LKR 0.34Bn) while Sampath Bank contributed LKR 0.27Bn to account for 10.53 percent of the week’s turnover. Total turnover value amounted to LKR 2.57Bn (cf. last week’s value of LKR 2.62Bn), while the daily average turnover value amounted to LKR 0.51Bn (-2.03 percent W-o-W) compared to last week’s average of LKR 0.52Bn. Market capitalization meanwhile, decreased by 4.44 percent W-o-W (or LKR 115.40Mn) to LKR 2,483.75Bn cf. LKR 2,599.15Bn last week.

Liquidity (in Value Terms)

The Banks Industry Group was the highest contributor to the week’s total turnover value, accounting for 33.51 percent (or LKR 0.86Bn) of market turnover. Industry Group’s turnover was driven primarily by Commercial Bank, Sampath Bank & Sanasa Dev. Bank & HNB which accounted for 90.07 percent of the sector’s total turnover. The Capital Goods Industry Group meanwhile accounted for 26.44 percent (or LKR 0.68Bn) of the total turnover value, with turnover driven primarily by JKH which accounted for 76.10 percent of the sector turnover. The Food Beverage & Tobacco Industry Group was also amongst the top sectorial contributors, contributing 16.88 percent (or LKR 0.43Bn) to the total turnover, with turnover driven primarily by Melstacorp, Lion Brewery & Browns Investments accounting for 84.53 percent of the total turnover.

Liquidity (in Volume Terms)

The Utilities Industry Group dominated the market in terms of share volume, accounting for 32.68 percent (or 42.79Mn shares) of total volume, with a value contribution of LKR 0.18Bn. The Food Beverage & Tobacco Industry Group followed suit, adding 25.65 percent to total turnover volume as 33.59Mn shares were exchanged. The Industry Group’s volume accounted for LKR 0.43Bn of total market turnover value. The Banks Industry Group meanwhile, contributed 10.61Mn shares (or 8.10 percent), amounting to LKR 0.86Bn.

Top Gainers & Losers

Blue Diamonds was the week’s highest price gainer; increasing 20.0 percent W-o-W from LKR0.50 to LKR0.60 while Nation Lanka (+14.3 percent W-o-W), Harischandra (+12.6 percent W-o-W) and Pegasus Hotels (+11.0 percent W-o-W) were also amongst the top gainers. Blue Diamonds[NV] was the week’s highest price loser; decreasing 33.3 percent W-o-W from LKR0.30 to LKR0.20 while Tess Agro[NV] (-25.0 percent W-o-W), Eden Hotel (-24.4 percent W-o-W) and Millenium House (-20.9 percent W-o-W) were also amongst the top gainers.

Foreign investors closed the week in a net selling position with total net outflow amounting to LKR 0.67Bn relative to last week’s total net outflow of LKR 0.18Bn (-283.82 percent W-o-W). Total foreign purchases decreased by 16.97 percent W-o-W to LKR 0.59Bn from last week’s value of LKR 0.71Bn, while total foreign sales amounted to LKR 1.26Bn relative to LKR 0.89Bn recorded last week (+42.56 percent W-o-W). In terms of volume, Teejay Lanka & Distilleries led foreign purchases while Vidullanka & Commercial Bank led foreign sales. In terms of value, Teejay Lanka & Ceylinco Insurance[NV] led foreign purchases while Commercial Bank & JKH led foreign sales.

Dividend Announcements

Company DPS (Rs.) Type XD Date CEYLINCO INSURANCE PLC 38.00 (V&NV) First & Final 15/04/2020 TRANS ASIA HOTELS PLC 0.50 Interim 18/03/2020

Key Economic Indicators for the Month of January; Prime Lending Rate- 9.68 percent, Ave. Wtd. Deposit Rates- 8.14 percent, Ave. Wtd. Fixed Dep. Rates- 9.97 percent, CCPI Inflation Y-o-Y % (Base 2013)- 5.7 percent,

Point of View

An extended downturn in Sri Lankan equities pushed the ASPI below the 5,500 mark for the first time since Jul’19 as new COVID-19 cases soared around the world, threatening global growth. Domestic markets opened on a positive note (after last week’s heavy selling) over expectations that Central Banks worldwide would respond to the damaging economic impact of the novel coronavirus by slashing interest rates while election sentiments too kept the broad share index in the green on Monday and Tuesday.

However, the rebound on the index was short-lived as the benchmark index pared-down earlier losses to record a ~275 point drop during the rest of the week amid a surprise 50bps rate cut by the US Fed (the first emergency rate cut since the financial crisis) which further fuelled fears over the coronavirus’s widening global economic fallout. The CBSL meanwhile also maintained an accommodative monetary policy (having cut rates by 50bps in Jan’20) while downgrading Sri Lanka’s GDP growth to 3.5 percent - 4.0 percent relative to a previous estimate of 3.7 percent - 4.5 percent due to the sweeping impact of COVID-19 on the country’s external sector.

Consequently, the ASPI recorded its highest weekly loss since Jan’16, plummeting ~250 points or -4.5 percent W-o-W to close at over an 8-month low of 5,343.15 points. Turnover levels on the Bourse remained relatively unchanged (Rs. 0.51Bn cf. Rs. 0.52Bn last week) despite greater local HNI and Institutional investor participation particularly in JKH, VLL, MELS, and LION.

Meanwhile, the holding company of Candor Opportunities Fund sold its stake to Sengkadagala Finance as a parcel changed hands on Wednesday. Crossings for the week consequently accounted for 36 percent of total market turnover (cf. 20 percent last week). The foreign equity sell-off meanwhile continued for the 10th consecutive week, intensifying towards the end of the week as investors shifted to safe-haven assets (net outflow of Rs. 673Mn cf. last week’s outflow of Rs.175Mn).

Markets in the week ahead are likely to take cues from developments surrounding the global spread of COVID-19 and political development on the upcoming general elections.

Policy Rates Held Steady Amid COVID-19 Spread

At its second Monetary Policy Review for 2020, the CBSL decided to hold policy rates steady (SLFR – 7.50 percent and SDFR – 6.50 percent) in line with the dovish monetary stance of both advanced and emerging economies amid an anticipated global slowdown due to the widespread impact of the COVID-19 virus.

The Monetary Authority also observed that market lending rates have continued to decline due to its accommodative monetary policy stance and therefore noted that its decision to keep rates steady was warranted given that there is ample room for market lending rate to reduce further without an adjustment to policy rates.

Consequently, credit disbursed to the private sector by licensed commercial banks accelerated marginally in Jan’20 (from 4.3 percent Y-o-Y in Dec’19 to 4.5 percent Y-o-Y) but is expected to gradually recover as market lending rates continue to fall. Commenting on the coronavirus outbreak and its impact on Sri Lanka’s external sector, the Monetary Board noted that the country’s ties with China could lead to i) significantly lower volume of imports (consumer, intermediate & investment goods) from the country and ii) supply chain disruptions which could affect exports.

Furthermore, the global spread of the coronavirus could also affect Sri Lanka’s tourism sector which was recovering from the impact of the Easter Sunday attacks last year. Inflation levels meanwhile are estimated to have accelerated to 6.2 percent Y-o-Y in Feb’20 (cf. 5.7 percent Y-o-Y in Jan’20) driven by a rapid increase in food prices. However, the CBSL noted that inflation levels would decline in the short term and stabilize at mid-single digits over the medium term.

Domestic capital markets meanwhile have experienced a net foreign outflow so far this year as investors shifted to safe-haven assets amid the outbreak. However, the LKR remained relatively stable, depreciating -0.2 percent against the USD thus far while gross official reserves fell to $7.5Bn in Jan’20 cf. $7.6Bn at the end of 2019.

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