Tag Archives: Capital Market Research Sri Lanka

Sampath rights gave a breather to ailing CSE

SUNDAY TIMES | 22.07.2019

Sampath Bank PLC’s (Sampath) Rs.12.1 billion rights issue, now fully subscribed, is a catalyst in boosting the Colombo Stock Exchange’s (CSE) rebound after getting beaten in the past three quarters, officials said.

Colombo’s main share index, the All Share gained as much as 1 per cent last week with the bourse gaining for the seventh consecutive session on Thursday led by gains in banking stocks such as Sampath. “After the Sampath rights issue and supported by the rupee appreciation along with the policy interest rate cut by the Central Bank and the caps on bank deposits helped to move the CSE up,” Dimantha Mathew, First Capital’s Head of Research for Investments Fixed Income and Equity told the Business Times.

Similar sentiments were echoed by Nanda Fernando, Managing Director Sampath Bank to the Business Times on the sidelines of a media round table discussion by the bank on Thursday. “The recent rally was started by Sampath’s share appreciation,” he said. The share price after allotting unsubscribed shares on June 28, appreciated 10 per cent to Rs. 150 within two weeks.

The issue to boost its core capital, just a year after it raised a similar amount in another rights issue was undersubscribed (only 61.5 million rights – 69 per cent were subscribed) by June 7 when it was officially closed and later Sampath Bank allotted the unsubscribed rights at its discretion.

The bank announced on July 28 that allotments amounting to 25.4 million shares were made to investors sourced by the Board which saw the entry of a new top 10 shareholder – Prabash Subasinghe, Chairman of Global Rubber Industries (Pvt) Ltd, Managing Director at Global Sea Foods (Pvt) Ltd and Chairman at Sri Lanka Association of Manufacturers and Exporters of Rubber Products, buying 5 per cent. This will likely bring in new additions to the Sampath board and Mr. Fernando added that it will be decided by the board in due course. “We managed a successful rights issue during this low growth pace in the country.”

Indra Silva, high-net-worth investor and Sampath Bank’s second largest shareholder (9.98 per cent stake or 28 million shares) after Dhammika Perera had not subscribed to his portion of rights. Sampath has 22 per cent in foreign shareholding.

Mr. Fernando noted that in the first quarter non performing loans increased by 4.8 per cent and most of it is concentrated around the construction sector. “NPL are the biggest challenge that banks face now,” he said. He added that the expected loan growth with the now increased capital will be at a maximum of 10 per cent.

First Capital upgrades exchange rate outlook for 2019E to LKR 180 from 194

 

LANKA BUSINESS ONLINE | 13.06.2019

Investment Bank in Sri Lanka

Sri Lanka’s First Capital Research has upgraded their exchange rate outlook for 2019E to 1 USD: LKR 180 from 194 as their 65 percent base case scenario.

The firm has also introduced a 12-month target for Jun 2020E of 1 USD: LKR 185 as a 60 percent base case scenario.

“In spite of the recent rate cut, the weakness of the rupee may be limited considering the delay in consumer demand while Rupee is also likely to be supported by the weak dollar and targeted debt driven inflows,” the firm said.

Central Bank’s foreign reserve position is key in building confidence in the exchange rate.

Currently, as at May 2019, foreign reserves stood at 6.7 billion US dollars which is estimated to be above the targeted 4 months of imports.

Heavy dip in imports has reduced the overall comfortable level of foreign reserves.

“In order to maintain reserves at USD 6.5-7.0Bn range, CBSL needs to raise a further USD 2Bn for which cabinet approval has already been obtained.”

CBSL also targets an additional 2.5 billion dollars to be raised to meet payments falling due in 2020 before the election season which starts in 4Q2019 and may continue up to 2Q2020.

First Capital Research says if Sri Lanka is successful in raising the required funds via foreign debt over next couple of months, the foreign reserve position could be maintained at a reasonably comfortable level which they believe is 6.5 billion dollars considering the prevailing environment.

Following the Easter Sunday attacks, with immediate effect, the tourism sector saw heavy cancellations flowing in for 2019 while many small scale hotels and resorts decided to shut down for 6 months.

“We estimate the tourism earnings are likely to fall short by USD 1.5-2.0Bn from the original estimate,” First Capital Research said.

“In addition to the loss in foreign exchange, the net impact is, however, much lower as consumer demand crashed almost immediately and is yet to recover.”

As a result imports have seen a further crash following the attacks amidst the lower consumer demand and 30 percent of tourism earnings estimated to be imports.

Amidst a further hit in imports despite the loss in revenue from tourism the Sri Lankan Rupee stands steady with a YTD appreciation of 3.5 percent up to 31 May 2019.

Meanwhile, the US Dollar is expected to weaken during the 2H2019 possibly favouring the Sri Lankan Rupee.

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.

Rupee Bond Yields Rise Ahead of Debt Auction: Inside Sri Lanka

Investment Bank in Sri Lanka

(Bloomberg) – Sri Lanka’s bonds fell ahead of an auction of 70 billion rupees ($400m) of Treasury debt Thursday.

* Rates are up ahead of the auction and amid selling after an “overreaction” to a recent drop in yields, says Dimantha Mathew, head of research at First Capital in Colombo

* Yield on 10.9% govt bonds due in March 2024 rose 6bps to 10.38% on Wednesday: data compiled by Bloomberg

* Monetary authority on Wednesday sold 17.7b rupees of Treasury bills

* USD/LKR little changed at 176.51

* Global funds sold a net $0.2m of local shares on Wednesday, taking withdrawals for the year to $31.9m: exchange data

Weekly Govt Securities Market Positive liquidity sets 1-Year bill to hit nearly 16-month low

CEYLON TODAY | 24.05.2019

Treasury Bills and Bonds Sri Lanka

By First Capital Research

Weekly yield movement and volume

The secondary market yield curve continued its downtrend on the back of heavy buying interest, primarily centred on the short to mid tenor maturities. Shorter end of the curve witnessed a decline in the range of 0-40bps while the belly-end witnessed a steep decline in the range of 45-59bps. Long tenors saw a dip in yields by nearly 30bps. The total secondary market turnover for the week from 16 May to 22 May amounted to Rs 54.4 billion. At the primary bill auction held on 22 May, the one-year bill yield was seen plunging below 9 per cent to reach 8.90 per cent levels after nearly 16 months with a steep drop of 28 basis points, followed by the six-month bill dipping by 17 basis points to 8.71 per cent. However, all bids received on the three-month bill were rejected with the total offered amount of Rs 20.0 billion being fully accepted.
Meanwhile, at the SLDB auction, out of the total offered amount of US$ 200 million, US$ 165.5 million was accepted with maturities ranging from one-year and eight-months to three-year and 11-months. In the forex market, the rupee appreciated slightly on 17 May to Rs 175.85 relative to Rs 176.04 on 16 May; thereafter, it slightly depreciated to close the week at Rs 176.59.


Liquidity and CBSL Holdings

Market liquidity remained positive throughout the week to close the week at Rs 19.75 billion, while CBSL continued to drain out liquidity by way of repo auctions during the week. CBSL holdings slightly declined to Rs 158.54 relative to Rs 160.28 held at the beginning of the week.


Foreign Interest

Foreign holding further decreased by Rs 433.1 million to record at Rs 143.3 billion. Foreign holding percentage dipped to 2.6 per cent from previous 2.7 per cent.


Maturities for next Week

The Government security market has a Treasury bill maturity amounting to Rs 14.4 billion and a coupon of Rs 23.1 billion that needs to be settled during the week ending 31 May 2019.


Daily Summary

Thursday (16.05.19): Buying interest witnessed in the secondary market led to a slight downward shift in the overall yield curve. while the market witnessed moderate volumes. Foreign buying centred on [15.03.24] at 10.41 per cent and on [01.09.28] at 10.71 per cent, while activity was witnessed on two mid tenure 2023 maturities ([15.03.23] and [15.07.23]) at intraday lows of 10.30 per cent and 10.32 per cent, while two 2027 maturities ([15.01.27] and [15.06.27]) traded at 10.68 per cent and 10.76 per cent respectively. Foreign selling was witnessed on short tenure [01.10.22] at 10.15 per cent.
Friday (17.05.19): The secondary market yield curve witnessed a slight downward shift fuelled by the continued buying interest, while the overall market witnessed high volumes. In the midst of buying interest, following maturities’ yields were seen decreasing to their intra-day lows, with short tenor [01.03.21] at 9.57 per cent, [01.05.21] at 9.65 per cent, [01.08.21] at 9.60 per cent and [15.12.21] at 9.68 per cent. Mid tenors [15.03.22], [15.03.23] and [15.07.23] changed hands at intra-day lows of 9.88 per cent, 10.25 per cent and 10.23 per cent, while both foreign and local buying were centered on [15.03.24] maturity, which traded at day’s low of 10.27 per cent. Moreover, [01.08.24] was seen trading at intraday low of 10.31 per cent, while both [01.08.26] and [15.01.27] traded at 10.60 per cent. In the long end of the curve, [01.05.29] traded at 10.80 per cent. In the money market, overnight surplus liquidity in the system stood at Rs 38.2 billion, while CBSL continued to absorb excess liquidity of another Rs 57.8 billion by way of term repo auctions.
Tuesday (21.05.19): The secondary market saw aggressive buying interest in the morning session, following the CBSL Governor’s indication of a likely monetary loosening at the next policy meeting. Short-tenure maturities reached intraday low on the back of buying interest with [15.03.22] trading at 9.90 per cent, [15.05.23] at 10.10 per cent, [15.03.24] at 10.05 per cent, [01.08.26] at 10.30 per cent and [15.01.27] at 10.36 per cent.

Ahead of primary bill auction, the one-year traded at 9.03 per cent, while the overall yield curve continued to shift down amidst buying interest, while the overall market witnessed moderate volumes. Profit taking was witnessed on [15.03.24] and [15.01.27] at 10.15 per cent and 10.50 per cent respectively. CBSL has offered Rs 20 billion consisting of all three maturities at auction.

 

 

 

 

 

Weekly Govt Securities Market Steep decline of 1-Yr T-bill to 9.18%

CEYLON TODAY | 17.05.2019

Treasury Bills and Bonds in Sri Lanka

By First Capital Research

Weekly Yield movement & Volume

The secondary market yield curve was seen once again recording a parallel shift downwards, on the back of heavy buying interest primarily centred on the short to mid tenor maturities. The shorter end of the curve witnessed a steep decline in the range of 7-15bps, while the benchmark 364-day bill was seen trading at an intraday low of 9.15 per cent. In the belly-end of the curve, maturities were seen dropping by 2-15bps, while the long tenors witnessed a dip in yields by 3bps.
At the primary bill auction held on 15 May, the three-month and six-month were accepted at a weighted average of 8.52 per cent and 8.88 per cent, respectively, while the benchmark one-year witnessed a steep dip by 26bps to record at 9.18 per cent following its previous week’s dip of 37bps. Post auction, on the back of buying interest one-year bill dipped further to close the day at 9.10 per cent.
Meanwhile, in the forex market, the rupee depreciated mid-week to Rs 176.74 from opening levels of Rs 174.90/10, thereafter, the rupee slightly appreciated to close the week at Rs 176.17.


Liquidity and CBSL Holdings

Market liquidity remained positive throughout the week to close the week at Rs 25.05 billion on the back of release of long-delayed payments by the Government. CBSL continued to drain out liquidity by way of repo auctions throughout the week at weighted averages ranging between 8.38 per cent and 8.59 per cent.


Foreign Interest

Foreign holding decreased by Rs 10.8 billion to record at Rs 143.7 billion. Foreign holding percentage dipped to 2.7 per cent from a previous level of 2.9 per cent.


Maturities for next Week

The Government Security Market has a Treasury bill maturity amounting to Rs 16.1 billion that needs to be settled week ending 24 May 2019.


Daily Summary

Thursday (09.05.19): In the secondary market, shorter end of the yield curve witnessed a steep downward shift with heavy demand, while the overall market witnessed moderate volumes. The one-year bill also recorded a notable dip to close at 9.15 per cent. During the morning hours of trading there was a slight increase in yields mainly centred on [15.03.24] maturity which traded at 10.62 per cent in the midst of profit taking. However, towards the latter part of the day, with buying interest it was seen trading at intra day’s low of 10.52 per cent. Furthermore, following maturities traded at their intra-day lows as [01.07.19] traded at 8.60 per cent, [15.12.20] at 9.60 per cent, [15.03.22] at 10.00 per cent, [15.07.23] at 10.40 per cent and [01.09.23] at 10.42 per cent. In the long end of the curve, [01.05.29] changed hands at 10.95 per cent.

 
Friday (10.05.19): Continuing positive sentiment drives secondary market yield curve downwards across the board reinforced with net surplus liquidity in the system including term repo, recording a high of Rs 89.24 billion. Buying interest was witnessed on the following maturities trading at intraday lows with the one-year trading at 9.15 per cent with considerable volumes, while [01.05.20] traded at 9.13 per cent. Foreign buying was seen on the 2021 maturities with [01.08.21] trading at intraday lows of 9.75 per cent and [15.10.21] at 9.80 per cent. Local buying interest was seen on [15.03.22], [15.03.23], [15.07.23], [15.03.24] trading at day’s low of 9.95 per cent, 10.25 per cent, 10.30 per cent, 10.40 per cent, respectively. In addition, [15.01.27] traded at 10.72 per cent with considerable volumes, as [15.06.27] traded at 10.80 per cent, while overall market witnessed high volumes.

 
Monday (13.05.19): The secondary market yield curve remained mostly unchanged with mixed activities, while the overall market witnessed high volumes for the day. In the short end of the curve, [15.12.20] traded in the range of 9.75 per cent-9.85 per cent levels, [15.03.22] at 9.90 per cent and [15.03.23] at 10.30 per cent. Mid tenor [15.03.24] witnessed high volumes trading at 10.40-10.47 per cent levels, while on the back of foreign buying, [01.08.24] traded at 10.46 per cent. Furthermore, in the midst of buying interest, the following maturities were seen trading at their intra-day lows: [01.06.26] at 10.67 per cent, [01.08.26] at 10.65 per cent, [15.06.27] at 10.75 per cent. In the long end of the curve, [01.05.29] changed hands at 10.86 per cent.

 
Tuesday (14.05.19): With the prevailing tensed situation mixed activity was witnessed in the secondary market with a slight upward shift in the yield curve amidst high volumes. Selling pressure was witnessed during the early hours of trading on the following maturities trading at their intraday high with [01.03.21], [01.05.21], [01.08.21] and [15.12.21] trading at 9.85 per cent, 9.88 per cent, 9.92 per cent and 10.00 per cent, while [01.05.21], [01.08.21] and [15.12.21] traded at 9.85 per cent, 9.88 per cent, 9.92 per cent and 10.00 per cent, and [15.03.23] and [15.07.23] traded at day’s high of 10.50 per cent and 10.48 per cent, respectively, In addition, [15.01.27], [15.06.27], [01.05.29] all traded at 10.80 per cent, while [01.05.29] traded at 10.92 per cent. During the latter session of trading, foreign buying was seen primarily centred on [15.03.24] at 10.50 per cent, while the one-year T-bill traded at day’s high of 9.25 per cent.

 
Wednesday (15.05.19): Selected mid to long tenure maturities were seen reaching intraday low amidst the buying interest, with [15.03.23] reaching 10.35 per cent, foreign buying led [15.03.24] to the day’s lowest of 10.41 per cent and [15.01.27] traded at 10.73 per cent, while the overall yield curve shifted slightly downwards, with overall market witnessing moderate volumes. At the primary bill auction, yield of three-month crawled to 8.52 per cent, six-month yield dipped to 8.88 per cent and one-year yield dipped to 9.18 per cent, recording a near eight-month low since September 2018. Post auction, on the back of buying interest, the one-year bill dipped further to close the day at 9.10 per cent, while three short term 2021 maturities ([01.03.21], [01.08.21] and [15.10.21]) traded at 9.65 per cent, 9.75 per cent and 9.85 per cent, respectively.

Sri Lanka stocks close 0.39-pct lower, selling in banks, JKH

ECONOMY NEXT | 09.05.2019

Sri Lanka’s stocks closed 0.39 percent lower on Thursday, with selling interest on John Keells Holdings (JKH) and banks.

The benchmark All Share Price Index (ASPI) closed 20.77 points lower at 5,352.20. The ASPI had reached an intra-day high of 5374.68 in the first half hour of trading, before moving towards an intra-day low of 5,349.04 just before closing.

The more liquid stocks on the S&P SL20 Index closed 0.64 percent or 16.34 points lower at 2,535.82.

Market turnover was 228.8 million rupees, with 36 stocks gaining and 70 falling.

Foreign participation was low, with net inflows of 30.8 million rupees to the market.

Hatton National Bank contributed most to the ASPI fall, closing 3.90 rupees lower at 160.10 rupees a share.

Of the 17 banking stock, 12 fell, while 4 were flat, and one gained.

JKH closed 1 rupee lower at 137 rupees a share, also pulling the ASPI down.

Market participants are continuing to sell stocks to buy at a discount later, as corporate earnings are likely to take a hit in the June quarter after the Easter bombings, said Atchuthan Srirangan, Assistant Manager Research at First Capital, an investment bank.

Piramal Glass Ceylon, Sampath Bank and Commercial Bank accounted for 62 percent of daily turnover.

Piramal Glass Ceylon gained 10 cents to close at 3.30 rupees a share.

Sampath Bank closed 1.20 rupees lower at 149.30 rupees a share, followed by Commercial Bank, which closed 80 cents lower at 90 rupees a share.

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research delivers a heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

 

First Capital’s Dimantha Mathew on the impact of the Easter Sunday Attack to the Share market – 24.04.2019

Investment in Sri Lanka

Dimantha Mathew, Head of Research, at First Capital on the impact of the Easter Sunday attack on the Share market

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research delivers a heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

Sri Lankan stocks reaching bottom of cycle

ECONOMY NEXT | 17.04.2019

Stock Brokers in Sri Lanka

Sri Lanka’s stock market is heading towards the bottom of a cycle, with opportunities for buying and potential recovery in the coming quarters, a research house said.

“With the recent stock market plunge, we believe that we inaccurately assessed the market to be at the depression stage during the December 2018 period,” the research arm of First Capital, an investment bank, said.

“Considering the reactions of the market participants it was evident that the ASPI was at the latter part of the “Anger” stage in the psychological cycle.”

“The positive developments experienced in the recent past, the upcoming election season, liquidity improvement and the possible rate cut are considered to be a number of possible trigger points for an upside in the market,” it said.

The investment bank said that the power struggle in parliament has died down following the passing of the budget in March and April, while the upcoming election season may boost economic activity and renew consumer demand.

“Thereby, we believe the ASPI (All Share Price Index) is likely to be entering the depression stage in the current market cycle with a considerable number of positive expectations over the next few quarters.”

First Capital said it has increased its portfolio to 80 percent equity holdings in April, from 60 percent in December, as the ASPI is expected to return to 6,000 levels in the next quarters.

In the 3 months from December 26 to April 02, the ASPI had dipped 7 percent with panic selling on the back of weak earnings, it said.

The ASPI closed around 5,591.83 on Wednesday.

First Capital Research said with a stabilizing rupee and a reform program with the International Monetary Fund back on track, foreign inflows to equity markets are expected to accelerate, amidst strong valuations.

Index-heavy stocks are attractive, it said.

“As we gradually turn bullish on stocks, we recommend investors to accelerate accumulation into blue chip counters which are trading at heavy discounts.”

“For investors who are already into equities, we believe this is an opportune period to increase exposure and average the existing portfolios.”

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research delivers a heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

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.

1-Yr T-bill records at single-digit 9.99 per cent

CEYLON TODAY | 12.04.2019

Treasury Bills and Bonds in Sri Lanka

Accelerate equity accumulation to 80 per cent exposure

CEYLON TODAY | 11.04.2019

Investment in Sri Lanka

In our last update on 26 December 2018, equity exposure was increased to 60 per cent (from 50 per cent) despite the risk associated in the economy and the weak outlook in the 1Q2019. During the three months (26 December – 2 April) the ASPI dipped by seven per cent, with panic selling among all fronts on the back of weak earnings.

However, the market has recovered over 130 points in the last six days, signaling a bottoming-out effect. We recommend increasing equity exposure upto 80 per cent reducing cash allocation from 40 per cent to 20 per cent, on the backdrop of the positive developments on the liquidity, external sector, possible rate cut and potential foreign inflows.

As we gradually turn BULLISH on stocks, we recommend investors to accelerate accumulation into blue chip counters, which are trading at heavy discounts. For investors who are already into equities, we believe this is an opportune period to increase exposure and average the existing portfolios. On a broader note, we expect market returns to be positive over the next few quarters, with the ASPI edging back towards the 6,000 mark with some resistance towards 5,800.