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First Capital expects ASPI to hit 6,500 by 1H’20

Ceylon Today | 06.10.2019

A leading investment banking service provider expects the benchmark index of the Colombo Stock Exchange to hit 6,000 points by the end of this year, while the Sri Lankan rupee is expected to weaken to Rs 183 against the US dollar.

Though the rupee is predicted to weaken to
Rs 188 against the dollar by end-June next year, the firm believes the All Share Price Index (ASPI) would accelerate to 6,500 points.

First Capital Holdings, in its ‘Mid-Year Outlook’, said that a reversal in economic activity and upward trend in company earnings can be expected in the market, supported by stronger market multiples.

First Capital Head of Research, Dimantha Mathew said, “Stock markets usually pass through many phases.

It very rarely reaches fair value and as a result, markets either overshoot or overcorrect. The ASPI, we believe, has recovered to the ‘Disbelief’ stage from the ‘Depression’ stage, following the decline in interest rates.”

“We expect the market to adopt an upward trajectory over the next 12 months, as we expect the ASPI to reach the next stage of the market cycle – the ‘Hope’ stage – and then the ‘Optimism’ stage,” he said.

First Capital Holdings expects the lower interest regime to continue over the next 9-12 months, resulting in most companies recording lower finance costs.

The firm also expects the lower interest rate environment and the upcoming elections to boost consumer demand and economic activity, resulting in stronger topline growth for most companies.
In its report, the firms highlighted that the Sri Lankan rupee would weaken to Rs 183 against the US dollar, and further weaken to Rs 190 by end-2020.

The US dollar index was expected to remain strong with the Fed rate cut considered to be just an adjustment in the uptrend, adding that the volatile global environment was supporting the US dollar to remain strong in the mid-term, the firm said.

As the Sri Lankan economy picks up towards the fourth quarter of this year, the firm expects to witness a possible weakness in the currency, though it may be counterbalanced by possible inflows during the first quarter of 2020.

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.