MARKET REVIEW

Selling pressures drag indices lower

Markets lost ground this week with both indices recording week-on-week losses. The ASPI closed the week at 6307.43 points, down 2.41% (or 155.63 points) while the S&P, SL 20 index declined 2.63% (or 95.85 points) to close at 3550.47 points.

Commercial Bank dominated this week’s turnover value amid significant foreign interest as the counter accounted for 17.69% (or Rs. 0.86 billion) of total market turnover.

Chevron followed suit accounting for 9.84% (or LKR 0.48bn) of total turnover value while HNB contributed LKR 0.37bn (or 7.61%) to total market turnover. Total turnover value for the week amounted to LKR 4.86bn declining 10.78% . W-o-W from last week’s total of LKR 5.44bn.

The daily average turnover value was consequently lower, declining to LKR 0.97bn (cf. LKR 1.09bn last week). Market capitalization too declined W-o-W (2.41%), amounting to LKR 2422.13bn relative to LKR 2481.84bn recorded last week.

On a sectoral basis, the highest contribution to weekly turnover value stemmed from the Banking and Finance sector which contributed 34.87% (or LKR 1.69bn), amid interest in Commercial Bank and HNB, which accounted for 72.57% of the sector’s total turnover. The Manufacturing sector followed suit, adding LKR 770.49mn (or 15.87%) to the total market turnover, helped by Chevron, which accounted for 61.99% of the sector’s turnover.

The Beverage, Food and Tobacco sector meanwhile, accounted for 15.04% (or LKR 730.09mn) of market turnover value.

In terms of volume, the Banking and Finance sector recorded the highest number of shares being traded (30.70%) as 39.34mn shares changed hands over the week.

The Manufacturing sector contributed 12.62% (or 16.17mn shares) to the market, while the Diversified sector was also among the top contributors as 15.11mn shares (or 11.79%) were traded over the week.

Swadeshi was the highest price gainer during the week despite just 3 of its shares trading over the week. The counter closed at LKR 7,555.00 to represent a 51.09% gain from last week’s close of LKR 5,000.30.

Abans Electricals gained 18.54% W-o-W to close at LKR 149.00 while Kelani Cables closed at LKR 84.00, gaining 12.00% over the week.

Also amongst the week’s top price gainers were Kelsey Developments (up 11.43% W-o-W) and Kelani Tyres (up 9.45% W-o-W).

The top price loser for the week was PC Pharma which lost 22.22% to close at LKR 4.20 relative to last week’s close of LKR 5.40. Multi Finance meanwhile, declined 17.14% W-o-W to close at LKR 23.20 while Ceylon Printers lost 16.62% W-o-W to close the week at LKR 1,500.00.

Net foreign inflows to the bourse increased significantly (237.93% W-o-W) to LKR 1.94bn from LKR 0.57bn recorded last week. Daily average net inflows consequently increased to LKR 0.39bn relative to last week’s average of LKR 0.11bn.

Total foreign purchases amounted to LKR 2.53bn, a 137.19% W-o-W increase from LKR 1.07bn recorded last week while total foreign sales increased 20.10% W-o-W to LKR 0.59bn from LKR 0.49bn last week.

In terms of volume, Commercial Bank and United Motors led foreign purchases, while Dialog and Tokyo Cement led foreign sales.

In terms of transaction value meanwhile, Commercial Bank and HNB led foreign purchases, while Carsons and Dialog led foreign sales.

Point of View

Markets fell over 100 points this week as selling pressure on index heavy-weight JKH dragged the broader Indices lower. Overall, markets lacked direction as low retail participation and profit taking strained activity levels and weighed down turnover levels.

Persistent foreign buying nevertheless, helped prop markets to an extent.

Net foreign inflows to the bourse pushed Y-T-D net foreign inflows over LKR 15.0bn as significant interest in Commercial Bank and HNB helped foreign purchases increase 137.19% W-o-W. Sluggish sentiment however, is likely to prevail in the week ahead.

The Central Bank (CB) held June policy rates unchanged today, maintaining the policy corridor between 7.00% (Repurchase Rate) and 9.00% (Reverse Repo Rate).

The Monetary Authority added that last month’s 50bps policy rate cut has continued to take effect with the relevant financial institutions making the anticipated adjustments gradually. The CB added that other monetary and external sector developments also deem its policy stance as appropriate.

Broad money growth moderated further in April (15.2% vs. 15.6% in March) and is expected to make a compositional shift over the remainder of 2013 as public sector borrowing eases and the current lower rates provide private sector credit growth a boost. On the external front meanwhile, the balance of payments (BOP) has continued to be in surplus thus far with the CB absorbing approx.

USD 580mn amid increased earnings from trade in services, workers’ remittances and investment inflows. The Monetary Authority added that although headline inflation in May rose to 7.3% from 6.4% in April due to electricity price hikes, inflation levels are likely to remain at single digit levels as supply-side constraints ease and demand-side pressures remain muted.