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Economic Outlook 2017-18 (Sri Lanka, August 2017)

  1. Track Record
  2. Factors to Consider for 2017 Outlook
  3. Political Uncertainty may rise towards 4Q2017: Negative
  4. Economic Outlook show signs of improvement: Neutral
  5. External Environment: Neutral
  6. FC Research Interest Rate View for 2H2017-1H2018
  7. FC Research Exchange Rate View for 2H2017-1H2018
  8. Recommendations
  9. Requirements to improve weaknesses

Read the full report here

First Capital is an investment bank offering independent advice and transaction execution relating to capital raising and other strategic needs including mergers and acquisitions for investment in Sri Lanka. The Company’s industry leading transactions are reflective of the ingenuity in enabling the most opportune financing processes for our clients. First Capital’s services for investment in Sri Lanka include a total service for public offers of corporate debt, acting in the capacity of managers/ financial advisors and placement agents, in addition to due diligence, pre-offer preparation, offer management, distribution strategy and after-market advisory services, initial public offerings, secondary offerings such as rights issues, corporate actions including mandatory and voluntary offers, private placements and at-market placements of listed securities.

Listed companies’ earnings up 8% in June

Published on Ceylon Today | 2017-09-03

Sri Lanka’s listed companies’ June quarter earnings grew 8% YoY to Rs 54.9 billion dominated by healthy performance in Banks sector (+23%YoY) and Food, Beverage & Tobacco sector (+54%YoY), First Capital said in its research note.

Capital Goods sector (+23%YoY), Insurance sector (+36%YoY) and Health Care Equipment & Services sector (+22%YoY) also contributed to the positive earnings growth during the quarter. However, the earnings growth was partially offset by negative earnings in Consumer Services sector (-707%YoY), Energy Sector (-129%YoY) and narrowed earnings in Materials sector (-30%) with the overall slow growth in the economy, increase in commodity and energy prices and continued impact of the flood influencing consumer spending.

Growth in earnings in Banks and Food, Beverage & Tobacco sector:

Banks sector and Food, Beverage & Tobacco sector were the largest……contributors to earnings by achieving profits of Rs 15.6 billion (+23%YoY) and Rs 12.02 billion
(+57 %YoY) respectively during the quarter.

Commercial Bank (+18%YoY), Sampath Bank (+39%YoY) and Hatton National Bank (+2%YoY) continued to jointly represent 70% of the sector earnings. One off gains in Browns Capital PLC due to disposal of an investment, loss reversal in The Lion Brewery and turnaround in plantation companies’ earnings connected to increase in tea prices led to the growth in Food, Beverage & Tobacco Sector earnings.

Market earnings growth was partially offset by Consumer services and Energy sectors posting losses of Rs 917 million (-707%YoY) and Rs 591 million (-129%YoY) respectively while Materials sector profits slowed to Rs 1,718 million (-30%YoY). Consumer services was impacted with the overall negative performance in leisure segment connected to slow growth in tourist arrivals while Energy sector earnings were influenced by surge in global LPG prices. The drop in earnings in Materials sector was caused by reduced volumes in Chevron Lubricants and increase in commodity prices including industrial metals.(IG)

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 shares end steady ahead of long weekend

FIRST CAPITAL’S HEAD OF RESEARCH DIMANTHA MATHEW SPEAKS TO REUTERS

AUGUST 31, 2017

COLOMBO, Aug 31 (Reuters) – Sri Lankan shares were flat at the close of trade on Thursday, as gains led by industrial and telecom counters were offset by losses in stocks of manufacturing companies.

The Colombo stock index edged up 0.01 percent to 6,390.74, but fell 0.3 percent during the week, its seventh straight weekly fall. It has shed more than 4 percent since July 27 up to Thursday’s close.

Sri Lanka’s stock and foreign exchange markets are closed on Friday for a religious holiday.

Diversified conglomerate Hemas Holdings Plc ended 0.9 percent higher, while Sri Lanka Telecom Plc rose 1 percent.

Knitted fabrics manufacturer Teejay Lanka Plc fell 2.2 percent, while conglomerate Richard Pieris Plc dropped 1.7 percent.

“We…see the accumulation of blue chips is continuing,” said Dimantha Mathew, head of research at First Capital Holdings. “We don’t see a big uptrend, but we see a complete slowdown in the downtrend.”

Foreign investors net sold 70.5 million rupees ($461,690) worth of shares, but they have net bought 27.5 billion rupees worth equities so far this year.

“We are yet to see big foreign inflows for the market to start a run. But we hope it will return after the tax confirmation following the Inland Revenue Bill,” Mathew said.

The bill, Sri Lanka’s major tax reform since independence from Britain in 1948, seeks to expand the tax net and stamp out evasion. It is expected to be presented in parliament on Sept. 6.

Turnover stood at 845.3 million rupees, slightly lower than this year’s daily average of around 858 million rupees. ($1 = 152.7000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

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 company profits grew slowly in June quarter

Sep 01, 2017 11:55 AM

ECONOMYNEXT – Profits of companies listed on Sri Lanka’s stock exchange grew by 8.2% in the June 2017 quarter from a year ago with higher commodity and energy prices and floods affecting consumer spending, a brokerage said.

Total June quarter earnings of firms on the Colombo stock exchange of Rs54.9 billion were dominated by a “healthy performance” in the banks sector, up by 23% from a year ago, the food, beverage and tobacco sector, up 54, First Capital Equities said.

The capital goods sector, whose profits rose 23%, insurance firms whose earnings rose 36% and the health care equipment and services sector, where profits grew 22% from the year before also contributed to earnings growth in the quarter, they said in a report.

“However, the earnings growth was partially offset by negative earnings in Consumer Services Sector (-707%YoY), Energy Sector (-129%YoY) and narrowed earnings in Materials Sector (-30%),” it said.

The overall slow growth in the economy, increased commodity and energy prices and continued impact of floods influenced consumer spending, First Capital Equities said.

The June 2017 quarter profit growth was slightly higher than that of the March quarter, of 7.1%, but lower than earnings growth of 10.5% in the March quarter and 26.7% in the December 2016 quarter.  (COLOMBO, Sept 01, 2017)

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 shares fall for 2nd day; bank stocks, beverages down

FIRST CAPITAL’S SENIOR RESEARCH ANALYST ATCHUTHAN SRIRANGAN SPEAKS TO REUTERS

AUGUST 30, 2017

COLOMBO, Aug 30 (Reuters) – Sri Lankan shares fell for a second session on Wednesday, ending near a more than four-month closing low hit last week, as investors sold shares of banks and beverages companies.

The Colombo stock index fell 0.13 percent to 6,390.26.

Shares of Nestle Lanka Plc fell 0.6 percent, while biggest listed lender Commercial Bank of Ceylon Plc slipped 0.7 percent and Sri Lanka Telecom Plc lost 1 percent.

The index closed at its lowest since April 18 on Thursday. It fell 0.4 percent last week, its sixth straight weekly fall, and has shed more than 4 percent since July 27 up to Wednesday’s close.

“It was totally a volatile market. Lack of retail participation is the main reason for the market to come down,” said Atchuthan Srirangan, a senior research analyst at First Capital Holdings PLC.

“Still, investors are waiting to see the outcome of the Inland Revenue Bill.”

The bill, Sri Lanka’s major tax reform since independence from Britain in 1948, seeks to expand the tax net and stamp out evasion. It is expected to be presented in parliament on Sept. 6.

Foreign investors net bought 89.5 million rupees (about $585,925) worth of shares, extending the year-to-date net foreign inflow into equities to 27.6 billion rupees.

Turnover stood at 592 million rupees, compared with this year’s daily average of around 858.1 million rupees.

$1 = 152.8000 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath

Shares of conglomerate John Keells Holdings Plc ended 0.3 percent higher, while Commercial Leasing & Fiance Plc closed 3.6 percent higher and Union Bank Plc ended 4.2 percent firmer.

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 Lanka shares hit 1-week closing high after govt drops tax plan

FIRST CAPITAL’S HEAD OF RESEARCH DIMANTHA MATHEW SPEAKS TO REUTERS

AUGUST 28, 2017

COLOMBO, Aug 28 (Reuters) – Sri Lankan shares ended slightly firmer on Monday, recovering from a more-than-four-month closing low hit last week, as investors bought battered shares after the government’s decision to drop a proposed tax on profits from share trading.

However, the day’s turnover touched its lowest in more than five months. It was 210.3 million rupees ($1.38 million), lowest since March 13, and well below this year’s daily average of around 859.2 million rupees.

Junior finance minister on Thursday said Sri Lanka will not go ahead with a proposed tax on profits from share trading that was planned as part of a major tax reform bill.

The bill is expected to be presented in the parliament on Sept. 6.

The Colombo stock index ended 0.05 percent higher at 6,412.37, its highest since Aug. 21.

The index fell 0.42 percent last week recording its sixth weekly fall.

It shed 4.3 percent since July 27 through Thursday, and has fallen in 18 of 20 sessions on lacklustre corporate earnings in the June quarter and speculation that the new reform bill may impose a tax on stock trading.

“Sentiment is improving though the turnover is low. We see an improvement in the buying interest,” said Dimantha Mathew, head of research, First Capital Holdings.

“The positive sentiment has returned after the minister cleared doubts over the taxes and also due to longer-than-expected correction.”

Foreign investors bought shares worth a net 42.1 million rupees ($275,433) on Monday, extending their year-to-date net inflows to 28 billion rupees.

Shares of conglomerate John Keells Holdings Plc ended 0.3 percent higher, while Commercial Leasing & Fiance Plc closed 3.6 percent higher and Union Bank Plc ended 4.2 percent firmer.

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.