Register Online

Listed company earnings to improve on consumer demand, policy stability: First Capital

ECONOMYNEXT- Earnings among listed firms are expected to grow over the next few quarters with a rise in consumer demand in the run up to elections, following which policy stability is expected, the research arm of First Capital, an investment bank, said.

“We expect… the upcoming elections to boost consumer demand and economic activity, resulting stronger topline growth for most companies,” Head of Research Dimantha Mathew said.

Political and policy uncertainty are also likely to settle following the election cycle for 2019/2020, he said.

“With Presidential Election to be held in fourth quarter 2019, we believe political uncertainty is likely to settle gradually bringing in policy certainty to the system.”

“Presidential Election may be followed by General and Provincial Elections where a similar trend is likely to follow in line with the past trends.”

Sri Lanka’s economic growth has fallen to around 2.5 percent due to long-term political and policy uncertainty, currency depreciation, as well as the Easter Sunday bombings in April 2019.

The All Share Price Index (ASPI) of the Colombo Stock Exchange fell to a seven-year low following the bombings, but recovered rapidly May through July, before correcting in August and September.

Sri Lanka extending an International Monetary Fund program, the central bank capping fixed deposit rates and the central bank-controlled pension fund buying stocks at the seven-year low contributed to the recovery in May, June and July.

A correction then occurred in August and September, before recovering further to a ten-month gain by end-October, due to the presidential elections.

Mathew said expected future earnings increases the confidence in the stock market further, and recommended to increase investments in equity.

Nisansala Kuruppumudali, Research Analyst at First Capital commenting on the bond and stock market performance – 06.11.2019

In the bond market the secondary market yield curve shifted slightly upwards while overall market witnessed moderate volumes.  Equity market continued to end in red for the third consecutive day recording a week’s low index. 

Nisansala Kuruppumudali, Research Analyst at First Capital commenting on the bond and stock market performance.

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka.
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

 

Atchuthan Srirangan , Assistant Manager – Research at First Capital commenting on the bond and stock market performance – 04.11.2019

In the bond market secondary market yield curve remained broadly unchanged while overall market witnessed limited activity amidst thin volumes. Stock market ended in red on the price losses made in JKH and CARG.

Atchuthan Srirangan , Assistant Manager – Research at First Capital commenting on the bond and stock market performance.

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka.
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Weekly Government Securities Market by First Capital

Weekly Yield
Movement and Volume

During the week, the secondary market yield curve remained broadly unchanged while overall market witnessed moderate volumes. Activities were mainly centred on 2022, 2023, 2024, 2027 and 2034 maturities. At the primary T-bond auction, 15.10.27 and 15.08.39 were accepted at weighted averages of 10.24% and 10.68%, respectively.
Ahead of the weekly T-bill auction, on Tuesday the benchmark 1-Yr T-bill traded at 8.35%, while at the primary T-bill auction held on 30 Oct, both 3M and 6M bills dipped by 1bps to 7.49% and 7.65% respectively  while  1  Yr  bill  increased  by  1bps  to 8.35%.
In   the   forex   market,   the   rupee   continued   to depreciate to close the week at Rs 181.44 from Rs 181.14 at beginning of the week.
Liquidity and CBSL Holdings
Volatility in the liquidity was witnessed although it remained positive during the week. The highest excess liquidity was recorded on 24 October amounting to Rs 23.7B, which narrowed down marginally to close the week at Rs 23.5B. Meanwhile, CBSL holdings declined during the week to close at Rs 86.1B.
Foreign Interest
Foreign holding in Government Securities increased by Rs 1.9B to record at Rs 110.8B while foreign holding percentage maintained at 2%.
Maturities for next week
The  government  security  market  has  to  settle  a Treasury  Bill  maturity  amounting  to  Rs 20.0B during the week ending 8 November 2019.

Hiruni Perera, Senior Research Analyst at First Capital commenting on the bond and stock market forecast – 03.11.2019

Bond market has been witnessing moderate activity levels during the past week. With surplus liquidity in the system, we expect some buying interest on mid to long tenor maturities.
On equity side, we expect some positivity to emerge with positive earnings results.

Hiruni Perera, Senior Research Analyst at First Capital commenting on the bond and stock market forecast.

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka.
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Our Director / CEO Dilshan Wirasekara recognize by Echelon Magazine as a thought leader of the New Establishment 100 pushing boundaries and taking Sri Lanka to the future.

Echelon Magazine

The importance of saving is ingrained into Sri Lankans at a young age. However, financial literacy is otherwise low in Sri Lanka, except in the Western Province, says Dilshan Wirasekara. Students should be taught financial literacy incrementally in school. However, as they are not, a majority of Sri Lankans reach adulthood only knowing about a bank account. As a result, Sri Lankans are biased towards saving in banks, without realising the variety and utility of other financial services.

The go-to investment vehicle for most Sri Lankans is fixed deposits, which are yielding around 9% interest currently. Another 35% or so of deposits are in even lower-yielding savings and current accounts. Meanwhile, The First Capital Money Market Fund is generating returns of approximately 13%, with the flexibility to withdraw anytime, just like a savings account.

“Some commercial banks aren’t even rated at A-, but people just don’t check this.”

 

Wirasekara, whose firm managed assets of over Rs8 billion through its wealth management arm in mid-2019, says that the money market fund, which invests in A-rated securities, is safer than even placing fixed deposits in some banks. “Some commercial banks aren’t even rated at A-, but people just don’t check this.”

Investment banks offer services to raise funds, such as corporate debt, public listings and venture capital, which again aren’t as popular as obtaining bank loans. Wirasekara suspects that banks are satisfied with the status quo, as they would lose deposit funding if investment banking gains in popularity.

First Capital provides many investment options for those with varying risk appetites. Greater financial literacy would pave the way for widespread activity and investment banking growth, says Wirasekara, who used to be a commercial banker.

First Capital isn’t sitting idly, but is making investment banking more accessible for the public. The firm will introduce an ATM card for investors in the First Capital Money Market Fund, providing greater peace of mind and facilities for funds withdrawal even outside office hours. Internet and mobile banking too will be expanded further, from the current functions of opening accounts, viewing balances and market data which is available on the First Capital Market App. Wirasekara’s ambition is for accessibility to the whole gamut of services to be easily accessible as traditional banking services over the next ten years.

Dimantha Mathew, Head of Research at First Capital commenting on the bond and stock market performance – 31.10.2019

The secondary market yield curve shifted slightly upwards while overall market witnessed moderate volumes. Stock market rebounded to positive territory recording the highest daily gain in 13 weeks, predominantly contributed by the price appreciations of HNB.N and SLTL.

Dimantha Mathew, Head of Research at First Capital commenting on the bond and stock market performance.

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka.
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.