The Bourse ended the week on a mixed note as the ASPI decreased by 23.20 points (or -0.39%) to close at 5,955.43 points, while the S&P SL20 Index increased by 15.29 points (or +0.49%) to close at 3,109.50 points.
Turnover and market capitalization
Odel (Strategic transfer) was the highest contributor to the week’s turnover value, contributing LKR 6.24Bn or 74.97% of total turnover value. Ceylon Tobacco followed suit, accounting for 4.86% of turnover (value of LKR 0.39Bn) while JKH contributed LKR 0.32Bn to account for 3.86% of the week’s turnover.
Total turnover value amounted to LKR 8.32Bn (cf. last week’s value of LKR 7.80Bn), while daily average turnover value amounted to LKR 1.66Bn (-14.72% W-o-W) compared to last week’s average of LKR 1.95Bn. Market capitalization meanwhile, decreased by -0.39% W-o-W (or LKR 10.88Bn) to LKR 2,793.97Bn cf. LKR 2,804.85Bn last week.
Liquidity (in value terms)
The Footwear & Textile sector was the highest contributor to the week’s total turnover value, accounting for 75.03% (or LKR 6.24Bn) of market turnover. Sector turnover was driven primarily Odel Plc which accounted for 75.03% of the sector’s total turnover.
The Banks, Finance & Insurance sector meanwhile accounted for 9.10% (or LKR 0.76Bn) of the total turnover value, with turnover driven primarily by HNB, NDB, Softlogic Life, Sampath Bank which accounted for 67.83% of the sector turnover. The Beverage, Food & Tobacco sector was also amongst the top sectorial contributors, contributing 5.96% (or LKR 0.50Bn) to the market driven by Ceylon Tobacco which accounted for 78.41% of the sector turnover.
Liquidity (in volume terms)
The Footwear & Textile sector dominated the market in terms of share volume, accounting for 75.54% (or 249.95Mn shares) of total volume, with a value contribution of LKR 6.24Bn. The Diversified sector followed suit, adding 7.90% to total turnover volume as 26.15Mn shares were exchanged.
The sector’s volume accounted for LKR 0.42Bn of total market turnover value. The Beverage, Food & Tobacco sector meanwhile, contributed 16.14Mn shares (or 4.88%), amounting to LKR 0.50Bn.
Top gainers and losers 
Lanka Ceramic was the week’s highest price gainer; increasing 19.8% W-o-W from LKR158.80 to LKR132.50 while Bimputh Finance(+15.8% W-o-W), Kotmale Holdings (+15.1% W-o-W) and Merc Shipping (+13.9% W-o-W) were also amongst the top gainers.
SMB Leasing[NV] was the week’s highest price loser; declining 33.3% W-o-W to close at LKR0.20 while Tess Agro[NV] (-20.0% W-o-W), Radient Gems (-16.0% W-o-W) and Blue Diamonds (-14.3% W-o-W) were also amongst the top losers over the week.
Foreign investors closed the week in a net purchasing position with total net inflow amounting to LKR 0.13Bn relative to last week’s total net outflow of LKR 3.92Bn (+103.3% W-o-W). Total foreign purchases decreased by 45.7% W-o-W to LKR 0.79Bn from last week’s value of LKR 1.45Bn, while total foreign sales amounted to LKR 0.66Bn relative to LKR 5.37Bn recorded last week (-87.8% W-o-W). In terms of volume, Softlogic Life & HNB led foreign purchases while Distilleries & Commercial Bank led foreign sales. In terms of value, Softlogic Life & HNB led foreign purchases while JKH & Commercial Bank led foreign sales.
Point of view
Political drama continued to influence Sri Lankan equity markets, with the President’s unexpected dissolution of the parliament last Friday (after market close), the subsequent decision by the Supreme Court and the disarray during the reconvening of parliament dominating market movement.
The broadshare ASPI remained volatile over the week, recording 3-days of positive returns and 2 days of negative returns to result in a cumulative drop of ~23 points (cf. a loss of ~114 points last week) over the week. While Index heavy-weight JKH’s announcement of a 1 for 20 share repurchase helped prop markets to some extent, markets remained broadly on a downtrend and failed to regain momentum as the country’s political deadlock progressively worsened over the week.
Although activity levels remained largely subdued over the week, Softlogic Group’s strategic transfer of Odel Plc within the Group helped total weekly turnover increase ~6.6% W-o-W as the transaction amounted to Rs.6.2Bn (or ~75%) of the week’s turnover. Crossings for the week consequently accounted for 84% of the weekly turnover cf. just ~19% last week.
Despite this week’s continued political standoff, foreign investors returned to Sri Lankan equities for the first time in 11-weeks, to record a net inflow of Rs.0.13Mn cf. an outflow of Rs.3.9Bn last week. Meanwhile, September quarter earnings of ~ 92% of corporates remained weak (-7.8% Y-o-Y to Rs.56.2Bn cf. Rs.61.0Bn reported by the total market in Sep’17) and the CBSL on Wednesday acknowledged that GDP growth for 2018 is likely to remain below envisaged levels. Markets in the week ahead are likely to look for cues from the outcome of Monday’s parliamentary session and any further political developments.
The Central Bank on Wednesday maintained a neutral monetary policy stance by simultaneously reducing the Statutory Reserve Ratio (SRR) by 1.50 p.p to 6% while increasing policy rates (SDFR by 75bps to 8% and SLFR by 50bps to 9%). The monetary authority acknowledged that the reduction in the SRR (which is expected to release a substantial amount of rupee liquidity to the banking system and thus reduce banks’ costs of funds) is aimed at addressing the large and persistent shortage in rupee liquidity in the domestic market.
Meanwhile, to neutralize the impact of this reduction, policy interest rates were raised by 50-75bps. The CBSL added that although inflation levels have decelerated (driven by the decline in volatile food prices), private credit to all major sectors up to Q3’18 showed a notable acceleration while the trade deficit has widened amid higher imports, thus prompting the increase in policy rates.
The CBSL noted though that a slowdown in imports and private credit growth is likely in period ahead given the LKR depreciation and its recent policy measures. Market rates moved higher in the aftermath of the increase in policy rates, with rates on the 3M and 1Y Government securities rising between 36-42Bps since the announcement.
Yields on G-Secs have increased sharply in the recent weeks amidst the country’s ongoing political turmoil. Since the start of the political turmoil on Oct’26, yields on T-bills have risen between 17-50Bps across all tenors, prompted by the sharp sell-off by Foreign investors who have sold ~Rs. 23Bn in the last 3 weeks as the political fallout has progressively worsened.
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