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Weak link between CSE and global market trends hinders earnings growth: analysts

Daily Mirror | 18.04.2018

The weak link between Colombo Stock Exchange (CSE) and global market trends is keeping earnings growth of CSE indices below growth rates of competing markets.
A latest regional World Bank report indicated the correlation between global trends and stock market developments in Pakistan and Sri Lanka are weaker compared to other regional peers such as India and Bangladesh.
CSE’s main indices only recorded single digit growths in 2017 against the double digital growths across the global markets.

 

CSE’s S&P SL Index comprising of top 20 blue-chip companies only recorded a gain of 4.93 percent in 2017 while All Share Price Index (ASPI) gained in 2.39 percent, which were well below the performance of global markets such as India’s BSE Sensex, which gained 29.58 percent and the NSE Nifty that recorded a gain of 30.28 percent.

 

Similarly, Hong Kong’s HIS gained 41 percent, United States’ DOW 30.28 percent, Philippine’s Pcomp 27.15 percent and Brazil’s IBOV 28.6 percent in 2017.

 

Speaking to Mirror Business, First Capital Holdings’ Head of Research, Dimantha Mathew said CSE needs to plug itself into global markets in order to achieve high growth in earnings as Sri Lanka’s capital market is small compared to most of the global markets.

 

He added that being connected to global trends is a factor which foreign investors view positively despite increased volatility.
Stock market analysts opine that lack of political will in capital market reforms, inactivity of institutional investors and the absence of external sector listed companies in CSE were major factors for the weak link.

 
Candor Group Director, Ravi Abeysuriya said the prime reason for the weak link was due to the inactivity of institutional players in the market, which includes both state and private institutional investors.
According to both Mathew and Abeysuriya, the state institutions which make up the majority of institutional investors in the CSE have been virtually non-existent over the last 3-4 years, which had adversely impacted the market sentiment and the confidence of private institutional investors.

 
“There has been a significant slowdown of trading activities of local institutions—mainly government related institutions. EPF, Sri Lanka Insurance and NSB were virtually non-existent in the market, that’s why the activity died off in the market in terms of trading,” said Mathew.

 

Abeysuriya emphasized that Sri Lanka’s failure to attract local investors to the market was influenced by political issues and lack of political will to drive capital market reforms.
“Never-ending investigation on stock market manipulations and other complaints have been dragging on for years without a judgment and are adversely impacting the investor confidence and sentiment” Abeysuriya said.

 

Mathew said CSE remains to be an attractive market for foreign investors due to cheap valuations which are at the 10-11 times of P/E ratio at the moment. However, he added that low valuations are holding off the large export-oriented companies such as Brandix and MAS from entering into stock market.
He said that Sri Lanka’s record high foreign inflows to the CSE last year was due to “extremely low” valuations and positive sentiment of global investors on the South Asian region.

 

Mathew noted that Sri Lanka’s recent successful sovereign bond issue of US $2.5 billion will positively impact the foreign investor participation in the CSE in coming months. However, he raised concerns over the delay in government’s reform agenda, which is likely to impact the foreign investor sentiment.

 

Meanwhile, Abeysuriya noted that the delays over implementing the proposed new Securities Exchange Act could result in the country losing US $250 million loan committed by ADB to implement the Capital Market Development Programme (CMDP) in Sri Lanka.

Sri Lankan stocks extend gains, hit 5-week closing high

ATCHUTHAN SRIRANGAN, ASSISTANT  MANAGER – RESEARCH AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

April 19, 2018

COLOMBO, April 18 (Reuters) – Sri Lankan share index ended at its highest close in more than five weeks on Wednesday, gaining for a sixth straight session, but many market participants stayed away due to extended holidays after the Sinhala-Tamil New Year festival last weekend.

The Colombo stock index ended 0.12 percent higher at 6,551.83, its highest close since March 13. The index gained 0.44 percent last week.

Turnover stood at 188.3 million rupees ($1.21 million), well below this year’s daily average of 1.13 billion rupees.

“The turnover level was very low with most investors still on holiday. The index, however, is up on blue-chip buying in low volumes,” said Atchuthan Srirangan, assistant manager – research, First Capital Holdings PLC.

Shares of Ceylon Tobacco Company Plc ended 2.8 percent higher, while the biggest listed lender Commercial Bank of Ceylon Plc closed up 1.1 percent, conglomerate John Keells Holdings Plc closed 0.4 percent higher.

The market was waiting for some political stability after President Maithripala Sirisena suspended parliament until May 8, brokers said.

Foreign investors bought shares worth a net 24.3 million rupees on Wednesday, but they have net sold 1.33 billion rupees worth of equities so far this year.

The central bank unexpectedly cut its key lending rate by 25 basis points early this month, as policy makers sought to revitalise an economy growing at its weakest pace in 16 years and facing heightened political uncertainty.

Sri Lankan shares hit 5-week closing high in thin trade

DIMANTHA MATHEW, HEAD OF RESEARCH AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

APRIL 18, 2018

COLOMBO, April 17 (Reuters) – Sri Lankan shares hit a five-week closing high in thin trade on Tuesday, rising for a fifth straight session, as many market participants stayed away due to extended holidays after the Sinhala-Tamil New Year festival over the weekend, brokers said.

The Colombo stock index ended 0.74 percent higher at 6,544.25, its highest close since March 13. The index gained 0.44 percent last week.

Shares of Distilleries Company of Sri Lanka Plc rose 10.2 percent, while Melstacorp Ltd ended 1 percent higher. Ceylinco Insurance Plc rose 5.2 percent, while fixed line telephone operator Sri Lanka Telecom Plc closed 2.2 percent firmer.

Turnover stood at 315.4 million rupees ($2.02 million), less than this year’s daily average of 1.13 billion rupees.

“Market is up on low volumes. Lack of investors in the market resulted in the low volumes, most investors are on holidays and not active still,” said Dimantha Mathew, head of research, First Capital Holdings.

The market was waiting for some political stability after President Maithripala Sirisena suspended parliament until May 8, brokers said.

Foreign investors bought shares worth a net 9.5 million rupees on Tuesday, but they have net sold 1.36 billion rupees worth of equities so far this year.

The central bank unexpectedly cut its key lending rate by 25 basis points last week, as policy makers sought to revitalise an economy growing at its weakest pace in 16 years and facing heightened political uncertainty. ($1 = 156.2000 Sri Lankan rupees) (Reporting by Ranga Sirilal; Editing by Biju Dwarakanath)

Sri Lankan stocks end lower; turnover hits 15-week low

DIMANTHA MATHEW, HEAD OF RESEARCH AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

APRIL 9, 2018

COLOMBO, April 6 (Reuters) – Sri Lankan shares slipped on Friday from their highest close in a week hit in the previous session, led by blue-chip stocks with the day’s turnover slumping to a 15-week low ahead of the traditional Sinhala-Tamil New Year later next week, brokers said.

The turnover stood at 134.6 million rupees ($866,152), its lowest since Dec. 22, 2017, and well below this year’s daily average of around 1.2 billion rupees.

The Colombo stock index ended 0.3 percent down at 6,455.32, edging down from its highest close since March 29 hit on Thursday.

The central bank unexpectedly cut its key lending rate by 25 basis points on Wednesday, as policy makers sought to revitalise an economy growing at its weakest pace in 16 years and facing heightened political uncertainty.

The index fell 0.33 percent during the week and dropped 1.14 percent last month.

“Market conditions were extremely slow with the festival season ahead. Foreign outflow is also continuing,” said Dimantha Mathew, head of research, First Capital Holdings.

Foreign investors sold shares worth net 19.1 million rupees on Friday extending the year-to-date net foreign outflow to 890.7 million rupees worth of equities.

Shares in Distilleries Company of Sri Lanka Plc ended 3.2 percent lower, while Dialog Axiata Plc closed 0.7 percent down, Soflogic Holdings Plc ended 2.6 percent weaker and John Keells Holdings Plc closed 0.3 percent lower.

Sri Lankan stocks edge higher from 8-week low

DIMANTHA MATHEW, HEAD OF RESEARCH AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

MARCH 27, 2018

COLOMBO, March 26 (Reuters) – Sri Lankan shares crawled higher on Monday from their lowest close in more than eight weeks as blue chip stocks gained, but negative sentiment over the island nation’s slower economic growth weighed on the market.

The Colombo stock index closed 0.08 percent firmer at 6,448.60, edging up from its lowest close since Jan. 24 hit on Friday.

The bourse fell 1 percent last week, its fourth straight weekly drop.

Sri Lanka’s economy grew by 3.1 percent in 2017, the slowest pace in 16 years and well below the 4.5 percent seen in 2016, revised government data released last week showed.

Investors are waiting for the central bank’s interest rate decision in April, said Dimantha Mathew, head of research, First Capital Holdings.

Turnover was 1.6 billion rupees ($10.3 million), more than this year’s daily average of around 956.6 million rupees.

Shares in conglomerate John Keells Holdings Plc rose 0.8 percent, while Ceylinco Insurance Plc ended 2.3 percent firmer and biggest listed lender Commercial Bank of Ceylon Plc gained 0.1 percent.

Foreign investors sold a net 354.9 million rupees worth of shares, but they have been net buyers of 6.9 billion rupees worth of equities so far this year

Analysts said an increase in retail fuel prices also weighed on investor sentiment.

Sri Lankan fuel retailer Lanka IOC Plc raised retail prices for gasoline and diesel, the company said on Saturday, due to losses incurred after the government’s failure to implement a pricing formula. ($1 = 156.1000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Atchuthan Srirangan, Senior Research Analyst at First Capital Holdings, with the Market Review on Ada Derana – 25.03.2018

 

Share Market Sri Lanka

First Capital’s Atchuthan Srirangan with the Market Review on Ada Derana

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management, retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

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.

Sri Lankan stocks slip to over 8-week closing low; lower economic growth weighs

ATCHUTHAN SRIRANGAN, SENIOR RESEARCH ANALYST AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

FEBRUARY 26, 2018

COLOMBO, March 23 (Reuters) – Sri Lankan shares slipped to their lowest close in more than eight weeks on Friday, led by beverage and telecom stocks as investors remained worried about the island nation’s slower economic growth, brokers said.

The Colombo stock index closed 0.12 percent lower at 6,443.75, marking its fourth session of fall in five. It fell 1 percent this week, in its fourth straight weekly drop.

Sri Lanka’s economy grew by 3.1 percent in 2017, the slowest pace in 16 years and well below the 4.5 percent seen in 2016, revised government data released on Tuesday showed.

“The market is moving sideways as investors are on the sidelines due to concerns over lower growth. They are also awaiting directions from the policy interest rate decision in April,” said Atchuthan Srirangan, a senior research analyst with First Capital Holdings Plc.

Turnover was 953.9 million rupees ($6.11 million), more than this year’s daily average of around 944.8 million rupees.

Shares in Lion Brewery (Ceylon) Plc fell 3.6 percent, Nestle Lanka Plc dropped about 1 percent, Softlogic Holdings Plc slumped 5 percent and Dialog Axiata Plc ended 0.7 percent weaker.

Foreign investors sold a net 58.4 million rupees worth of shares, but they have been net buyers of 7.2 billion rupees worth of equities so far this year. ($1 = 156.0500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Amanda Lokugamage, Senior Research Analyst at First Capital Holdings, with the Market Review on Ada Derana – 18.03.2018

Share market sri lanka

First Capital’s Amanda Lokugamage with the Market Review on Ada Derana

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management, retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

Sri Lankan stocks fall to nearly 7-week closing low on growth worries

ATCHUTHAN SRIRANGAN, SENIOR RESEARCH ANALYST AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

FEBRUARY 19, 2018

COLOMBO, March 19 (Reuters) – Sri Lankan shares fell to their lowest close in nearly seven weeks on Monday, as investors sold diversified and manufacturing stocks on worries over slower economic growth, brokers said.

The statistics department withdrew its 2017 full-year and fourth-quarter GDP data on Friday, a day after saying the economy expanded 3.1 percent last year, the slowest pace in 16 years, and 1.4 percent in the fourth quarter.

The Colombo stock index fell 0.24 percent to 6,493.63, its lowest since Jan. 30. It dropped 0.6 percent last week in its third straight weekly decline.

“It’s a dull day as most of investors were on the sidelines and worried over the GDP,” said Atchuthan Srirangan, a senior research analyst with First Capital Holdings PLC.

Turnover was 396.5 million rupees ($5.29 million), the lowest since March 7 and well below this year’s daily average of around 966.8 million rupees.

Shares in Vallibel One Plc fell 1.7 percent, Carson Cumberbatch Plc ended 2.8 percent weaker, Sri Lanka Telecom Plc lost 1.4 percent.

Foreign investors bought a net 58.1 million rupees worth of shares, extending the year-to-date net foreign inflow to 7.2 billion rupees worth of equities. ($1 = 155.9500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lankan stocks recover as investors buy select blue chips

ATCHUTHAN SRIRANGAN, SENIOR RESEARCH ANALYST AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

FEBRUARY 19, 2018

COLOMBO, March 16 (Reuters) – Sri Lankan shares rose marginally on Friday, recovering from a one-and-a-half-month closing low hit in the previous session, as investors bought select blue chips in low volumes while lower economic growth weighed on the market.

The statistics department said after markets hours on Thursday that the economy grew at 3.1 percent in 2017 and 1.4 percent in the fourth quarter of last year.

The Colombo stock index rose 0.13 percent to 6,509.46, snapping two consecutive sessions of declines, and edging up from its lowest close since Feb. 1 hit on Thursday.

It dropped 0.6 percent this week in its third straight weekly decline.

“Market is up in low-volume trades in some blue chips,” said Atchuthan Srirangan, a senior research analyst with First Capital Holdings PLC, adding that investors were worried about the lower economic growth in 2017.

Turnover was 824.6 million rupees ($5.29 million), lower than this year’s daily average of around 966.8 million rupees.

Shares in conglomerate John Keells Holdings Plc rose 0.9 percent, Carson Cumberbatch Plc gained 5.3 percent, Trans Asia Hotels Plc jumped 6.9 percent and Hemas Holdings Plc edged up 1.6 percent.

Foreign investors bought a net 111.6 million rupees worth of shares, extending the year-to-date net foreign inflow to 7.1 billion rupees worth of equities.