ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 17 March 2017

Markets Recover from 1-Year Low … Q4’16 GDP Indices vs. Turnover (13th Mar – 17th Mar)

Rebounds but Full Year Growth Lower at 4.4% 6,100 ASPI 3,500 S&P SL20 6,080 3,480 ASPI v 0.61% | S&P SL20 v 1.28% S&P SL20

6,060 3,460 ASPI 6,040 3,440 The Bourse ended in the red for the fourth … Cont. P2 6,020 3,420 6,000 3,400 Foreign Investors Closed the Week in... Cont. P3 13-Mar14-Mar15-Mar16-Mar17-Mar

1.5 Equity markets fell to a one-year of… Cont. P5 1.1 0.8

LKR Bn) LKR 0.4 Economic Snapshot………… P6 (Turnover 0.0 13-Mar 14-Mar 15-Mar 16-Mar 17-Mar

KEY STATISTICS

Week ending 17-Mar 10-Mar +/- ASPI 6,047.84 6,084.99 -0.61% S&P SL20 3,451.69 3,496.58 -1.28% Banking & Finance -1.85% 14,697.92 14,975.39 Food & Beverage 21,547.13 21,396.37 0.70% Diversified 1,520.52 1,532.23 -0.76% Hotel & Travel 2,917.73 2,935.27 -0.60% Plantations 677.69 678.38 -0.10% Manufacturing 4,115.36 4,225.32 -2.60% Turnover (LKR Bn) 2.75 3.90 -29.40% Foreign Buying (LKR Mn) 1,785.89 2,500.10 -28.57% Foreign Selling (LKR Mn) 1,408.59 1,342.46 4.93% Daily Average Turnover (LKR Bn) 0.55 0.78 -29.40% Daily Average Foreign Buying (LKR Mn) 357.18 500.02 -28.57% Daily Average Foreign Selling (LKR Mn) 281.72 268.49 4.93%

TOP 10 GAINERS TOP 10 LOSERS

Opening Closing WoW % Opening Closing WoW % Company Code Company Code Price Price Change Price Price Change KOTMALE HOLDINGS LAMBN 73.6 120.0 63.0% SWARNAMAHAL FIN SFS N 1.0 0.7 -30.0% EAST WEST EASTN 12.3 13.8 12.2% LUCKY LANKA[NV] LLMPX 1.3 1.0 -23.1% RADIANT GEMS RGEM 22.0 24.5 11.4% BLUE DIAMONDS BLUEN 0.9 0.7 -22.2% TESS AGRO TESSN 1.0 1.1 10.0% OFFICE EQUIPMENT OFEQN 60.7 50.0 -17.6% HNB ASSURANCE HASUN 62.3 67.9 9.0% ADAM INVESTMENTS AINVN 0.7 0.6 -14.3% GESTETNER GESTN 106.5 115.9 8.8% CEYLON LEATHER CLPLN 65.0 56.0 -13.8% LANKEM DEV. LDEVN 2.3 2.5 8.7% CIFL CIFLN 0.8 0.7 -12.5% ANILANA HOTELS ALHPN 1.2 1.3 8.3% AMANA TAKAFUL ATL N 0.8 0.7 -12.5% NAMUNUKULA NAMUN 77.2 83.0 7.5% PDL PDL N 82.4 73.4 -10.9% EQUITY TWO PLC ETWON 52.0 55.9 7.5% COLOMBO CITY PHARN 816.9 731.0 -10.5%

1

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 17 March 2017

Market Review

Indices | Liquidity (in Volume Terms) | The Bourse ended in the red for the fourth consecutive The Diversified Sector dominated the market in terms of week as the ASPI decreased by 37.15 points (or 0.61%) share volume too, accounting for 49.14% (or 68.37Mn to close at 6,047.84 points, while the S&P SL20 Index too shares) of total volume, with a value contribution of LKR decreased by 44.89 points (or 1.28%) to close at 1.53Bn. The Telecom sector followed suit, adding 3451.69 points. 14.45% to total turnover volume as 20.11Mn shares were exchanged. The sector’s volume accounted for LKR Turnover & Market Capitalization | 0.23Bn of total market turnover value. The Banks JKH was the highest contributor to the week’s turnover Finance & Insurance Sector meanwhile, contributed value, contributing LKR 0.76Bn or 27.66% of total 17.77Mn shares (or 12.77%), amounting to LKR 0.24Bn. turnover value. followed suit, accounting for 12.91% of turnover (value of LKR Top Gainers & Losers | 0.36Bn) while contributed LKR0.28Bn to Kotmale Holdings was the week’s highest price gainer; account for 9.99% of the week’s turnover. Total increasing 63.04% W-o-W from LKR 73.60 to LKR turnover value amounted to LKR 2.75Bn (cf. last week’s 120.00. East West gained 12.20% W-o-W to close at LKR value of LKR 3.90Bn), while daily average turnover 13.80 while Radiant Gems gained 11.36% W-o-W to value amounted to LKR 0.55Bn (-29.40% W-o-W) close at LKR 24.50. Tess Agro (+10.00% W-o-W) and compared to last week’s average of LKR 0.78Bn. Market HNB Assurance (+8.99% W-o-W) were also amongst the capitalization meanwhile, decreased by 0.61% W-o-W gainers. (or LKR 16.25Bn) to LKR 2,655.87Bn cf. LKR 2,672.12Bn last week. Swarnamahal Finance was the week’s highest price loser, declining 30.00% W-o-W to close at LKR 0.70. Lucky Lanka (NV) (-23.08% W-o-W), Blue Diamonds Liquidity (in Value Terms) | (-22.22% W-o-W) and Office Equipment The Diversified Sector was the highest contributor to the (-17.63% W-o-W) were also amongst the top losers over week’s total turnover value, accounting for 55.46% (or the week. LKR 1.53Bn) of market turnover. Sector turnover was TOP 10 TURNOVER driven primarily by JKH, Hemas Holdings, Melstacorp & which accounted for 94.68% of the sector’s Opening Closing Value (Rs. total turnover. The Manufacturing Sector meanwhile Company Code Price Price Mn) accounted for 11.10% (or LKR 0.31Bn) of the total JKH JKH N 139.9 138.1 761.8 turnover value with turnover driven primarily by Teejay HEMAS HOLDINGS HHL N 108.0 109.0 355.5 Lanka & Tokyo Cement which accounted for 71.06% MELSTACORP MELSN 61.9 61.8 275.1 sector turnover. The Banks, Finance & Insurance Sector DIALOG DIALN 11.1 11.3 226.1 was also amongst the top sectorial contributors, TJL N 37.5 36.0 158.4 contributing 8.86% (or LKR 0.24Bn) to the market. The ACCESS ENG SL AEL N 25.0 24.6 94.4 sector turnover was driven by Seylan Bank (NV) & SEYLAN BANK[NV] SEYBX 53.4 53.0 59.6 Commercial Bank which accounted for 46.45% of the TOKYO CEMENT TKYON 63.0 62.7 58.8 EXPOLANKA EXPON 6.0 6.0 54.0 sector turnover. COMMERCIAL BANK COMBN 138.0 134.0 53.7

2

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 17 March 2017

Market Review (Cont’d)

Net Foreign Purchases (10 Mar-17 Mar) Net Foreign Sales (10 Mar-17 Mar)

ASIA SIYAKA Volume Change ('000s) SANASA DEV. BANK Volume Change ('000s) JKH ACCESS ENG SL PIRAMAL GLASS BLUE DIAMONDS NATION LANKA THE FINANCE CO.[X.0000] TOKYO CEMENT[X.0000] KEELLS HOTELS MELSTACORP RENUKA AGRI RICHARD PIERIS OVERSEAS REALTY HEMAS HOLDINGS S M B LEASING[X.0000] SOFTLOGIC LIFE EXPOLANKA* TEEJAY LANKA* - 620 1,240 1,860 2,480 3,100 (350) (280) (210) (140) (70) - *Volume change of Expolanka (6.22 Mn shares) & Teejay Lanka (2.62 Mn Shares)not displayed between 10th Mar -17th Mar 2017.

Foreign investors closed the week in a net buying position with total net inflows amounting to LKR 0.38Bn relative to last week’s total net inflow of LKR 1.16Bn (-67.41% W-o-W). Total foreign purchases decreased by 28.57% W-o-W to LKR 1.79Bn from last week’s value of LKR 2.50Bn, while total foreign sales amounted to LKR 1.41Bn relative to LKR 1.34Bn recorded last week (+4.93% W-o-W). In terms of volume, Expolanka Holdings and SMB Leasing (X) led foreign purchases while Teejay Lanka & Softlogic Life led foreign sales. In terms of value, Hemas Holdings & Melstacorp led foreign purchases while Teejay Lanka & Aitken Spence foreign sales.

Net Foreign Purchases (By Transaction Value) Net Foreign Sales (By Transaction Value)

Foreign Holding (%) Value* Foreign Holding (%) Value* Company Net Change Company Net Change 17/03/17 10/03/17 (LKR. Mn) 17/03/17 10/03/17 (LKR. Mn) HEMAS HOLDINGS 30.97% 30.68% 1,620,840 176.67 TEEJAY LANKA 45.05% 45.42% (2,616,214) (94.18) MELSTACORP 25.26% 25.17% 1,040,942 64.33 AITKEN SPENCE 31.60% 31.65% (183,525) (10.83)

COLD STORES 9.95% 9.88% 61,837 50.20 SOFTLOGIC LIFE 38.31% 38.38% (298,517) (6.57) EXPOLANKA 77.61% 77.30% 6,221,000 37.33 OVERSEAS REALTY 92.06% 92.07% (133,308) (2.73) JKH 51.33% 51.31% 262,998 36.32 SANASA DEV. BANK 6.19% 6.21% (11,148) (1.10) TOKYO CEMENT[X.0000] 34.26% 33.91% 394,893 21.52 KEELLS HOTELS 0.79% 0.79% (77,920) (0.80) CEYLON TOBACCO 97.31% 97.30% 18,189 15.19 CHEVRON 27.24% 27.24% (4,675) (0.79) RICHARD PIERIS 71.68% 71.62% 1,190,114 9.88 ACCESS ENG SL 6.21% 6.21% (29,147) (0.72) HNB ASSURANCE 0.79% 0.63% 79,810 5.42 CDB[X.0000] 3.24% 3.37% (10,136) (0.52) ROYAL CERAMIC 11.15% 11.11% 45,138 5.42 CENTRAL IND. 2.91% 2.96% (9,100) (0.41) Note: *Value based on closing price and not on actual traded price Please note that the foreign shares data displayed above include private transfers done outside of the market.

Foreign Purchases Vs. Sales Week Ending Net Position of Foreign Holdings 1,200 900 Foreign Purchases Foreign Sales

720 900

540 LKR. Mn LKR. LKR. Mn LKR. 600 360

300 180

0 0 13-Mar 14-Mar 15-Mar 16-Mar 17-Mar 23-Feb 03-Mar 10-Mar 17-Mar Source: 3

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 17 March 2017

Announcements for the Week

Dividend Announcements Company DPS (Rs.) Type XD Date

UNITED MOTORS LANKA PLC 2.50 Second Interim Dividend XD: 28.Mar.2017 NAMUNUKULA PLANTATIONS PLC 7.00 Second Interim Dividend XD: 27.Mar.2017 KEGALLE PLANTATIONS PLC 5.00 Interim Dividend XD: 27.Mar.2017 RICHARD PIERIS EXPORTS PLC 16.00 Interim Dividend XD: 30.Mar.2017 EQUITY TWO PLC 1.40 First Interim Dividend XD: 24.Mar.2017 ALLIANCE FINANCE COMPANY PLC 3.70 Interim Dividend XD: 23.Mar.2017 GESTETNER OF CEYLON PLC 10.00 Second Interim Dividend XD: 23.Mar.2017 CHEMANEX PLC 2.00 Interim Dividend XD: 23.May.2017 OVERSEAS REALTY (CEYLON) PLC 1.25 First & Final Dividend XD: 25.Apr.2017 AMAYA LEISURE PLC 2.00 Interim Dividend XD: 22.Mar.2017 TALAWAKELLE TEA ESTATES PLC 1.00 Interim Dividend XD: 22.Mar.2017 ALUMEX PLC 1.00 Interim Dividend XD: 22.Mar.2017 ASIAN HOTELS & PROPERTIES PLC 2.00 Interim Dividend XD: 22Mar.2017 ASIRI SURGICAL HOSPITAL PLC 0.35 Interim Dividend XD: 22.Mar.2017 FIBRE PLC 1.50 Interim Dividend XD: 22.Mar.2017 DIESEL & MOTOR ENGINEERING PLC 24.00 Interim Dividend XD: 22.Apr.2017

4

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 17 March 2017

Point of View Q4’16 GDP Rebounds but Full Year Growth

Lower Equity markets fell to a one-year low of 6028 points this week GDP growth in Q4’16 rebounded to 5.3% Y-o-Y, up from the 2.8%

before recovering ~19 points to close marginally stronger at Y-o-Y growth recorded in Q4’15 and 4.6% Y-o-Y recorded in the 3rd 6047.8 points. The benchmark ASPI made consecutive losses quarter of 2016. Growth over the quarter was driven by the

betwee n Monday and Thursday, losing ~56 points amid weak Industry sector which grew 9.2% Y-o-Y over the quarter relative to sentiment and rate concerns to hit a low of 6028 points on 1.1% Y-o-Y recorded in Q4’15 with Construction sector activity

Thursday. Strong institutional and HNI interest on Friday however, continuing its recovery (15.5% Y-o-Y cf. -0.9% Y-o-Y in Q4’15) over helped the Index pare down some of its early losses. Friday’s the period. The Services sector too grew 4.6% Y-o-Y over Q4’16 in crossings in Blue-Chips and mid-caps accounted for ~62% of the line with performance in Q3’16 but higher than the 3.2% Y-o-Y week’s total crossings of LKR 1.2Bn; Crossings for the week growth recorded in the comparable period a year ago. However, however, were notably lower than that of the last two week (44% the continued impact of the drought in Q4’16 had an adverse of total market turnover cf. 52% last week and 72% the week impact on the country’s rice, vegetables and cereal production, prior) helping push the average daily turnover on the bourse pushing growth from the Agricultural sector sharply lower over ~29.4% lower to LKR 0.55Bn (cf. LKR 0.78Bn last week). Net the quarter (-8.4% Y-o-Y vs. +0.5% Y-o-Y in Q4’15). Sri Lanka’s full foreign flows to equities meanwhile continued for the 7th year 2016 GDP growth meanwhile, fell to 4.4% Y-o-Y (cf. 4.8% Y-o- consecutive week, although 67% lower than last week. The net Y in 2015) in line with the CBSL, IMF and World Bank estimates of inflows were despite the US Fed’s widely anticipated decision to 4.5-5.0% Y-o-Y. Growth over 2016 was the country’s weakest raise interest rates by 25 Bps (to 0.75%-1%) for the 3rd time in a performance since 2013 (3.4% Y-o-Y) and is primarily attributable decade. Emerging market stocks reacted positively to the expected to the impact from the combination of floods in Q2’16 and drought rate hike and the US Fed’s dovish outlook for the future path of US in the remaining quarters. The Agricultural sector consequently rates rising to 20-month highs1. Although average risk premiums recorded a slowdown of -4.2% Y-o-Y (cf. +4.8% Y-o-Y in Q4’15). on EM sovereign debt also tightened as markets perceived the Although slower than in 2015 ((+4.2% Y-o-Y cf. +5.7% Y-o-Y in Fed’s decision and tone positively, the normalization of US Fed 2015), growth in Services activities remained buoyant, supported rates prompted several EM central banks (China, Hong Kong, Saudi by improvements in financial services, and wholesale and retail Arabia, UAE, Kuwait & Bahrain) to also increase rates. Markets in trade activities. Industry sector growth meanwhile, grew strongly the week ahead are likely to look to look for cue from the CBSL’s in 2016 (+6.7% Y-o-Y cf. 2.1% Y-o-Y) with considerable upcoming policy rate decision next week. contribution from the construction sector rebound and notable growth in manufacturing, and mining and quarrying activities. Notes: 1. 97% of market

5

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES Weekly Market Review 17 March 2017

Economic Snapshot

Jul’16 Aug’16 Sep’16 Oct’16 Nov’16 Dec’16 Jan’17 Feb’17 Interest Rates Prime Lending Rate 10.87 11.76 12.29 12.25 11.98 11.73 11.48 11.55 Ave. Wtd. Deposit Rates 7.10 7.32 7.56 7.79 8.00 8.17 8.42 8.66 Ave. Wtd. Fixed Dep. Rates 8.99 9.31 9.67 9.95 10.25 10.46 10.84 11.15 CCPI Inflation Y-o-Y % 5.8 4.4 4.2 4.1 4.0 4.5 5.5 6.8 (Base 2013) 2012 2013 2014 2015 GDP Growth (Base 2010) 9.1% 3.4% 4.9% 4.8%

Source Central Bank

Exchange Rate, Rs. vs. US$ Inflation (CCPI-N) YoY%

155.0 10.0

149.0 8.0

143.0 6.0 CCPI

Rs /USD Rs 137.0 4.0

131.0 2.0 125.0 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 0.0 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Source: Central Bank Source: Central Bank

6 Month T-Bill Yield Tea Prices

15 620

13 540 11 460

9

Bill (6M ) Rate (%) Rate ) (6M Bill -

T 7 380 Rs. Per kilo(Unweighted) Per Rs. 5 300 Feb-13 Nov-13 Aug-14 May-15 Apr-16 Feb-17 Mar-13 Dec-13 Sep-14 Jun-15 Mar-16 Dec-16

Source: Central Bank Source: Sri Lanka Tea Board

Export & Trade Balance Trends in Tourist Arrivals

2000 600 Trade Balance (USD Mn 210,000 80.0%

1600 200

168,000 64.0% Y

-

o - 1200 -200 126,000 48.0% Y Growth

800 -600 84,000 32.0%

400 -1000 Arrivals Total ) 42,000 16.0%

Exports /Imports (USDMn) Exports /Imports 0 -1400 0 0.0% Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Dec-13 Sep-14 Jun-15 Mar-16 Dec-16 Exports (LHS) Imports (LHS) Trade Balance (RHS)

Source: Central Bank Source: Sri Lanka Tourism Development Authority 6

ACUITY Stockbrokers (Pvt) Ltd., (Company Reg: No-P.V.3310) ‘ACUITY House’, No. 53, Dharmapala Mw, Colombo 03, Sri Lanka.

TEL : (+94) 112 206 206 FAX : (+94) 112 206 298

ResearchResearch Team Team Sales Team Dhammika Wanniarachchi [email protected] Wanniarachchi Chethana Ellepola Deva Ellepola Chethana Ellepola (+94)+94 112112206 206 229 [email protected] (+94) 112 206 220/221 (+94) 112 206 256 [email protected] +94 112 206 256 [email protected] chethana @acuitystockbrokers.com

Anjula Nawarathna ShivaneThehani Wijayaratnam Weerasinghe Prashan Fernando [email protected] Nawarathna (+94)[email protected] 112 206 236 (+94) 112 206 222 (+94)+94 112 112 206 206 255 255 [email protected]+94 112206 224 [email protected] [email protected]

Aethra de Silva Sameera Rajawatte Kapila Pathirage Sharaaethra@acuitystockbrokers Kulasiri .com (+94) 112 206 279 (+94) 112 206 227/228 (+94)+94 112 112 206 206 253 253 [email protected] [email protected] [email protected] Kandy Branch Samalka Athuraliya Kumar Dias Desinghe [email protected] Naren Godamunne Maxtina Fernando (+94) 814 474 443 +94 112 206 253 (+94) 112 206 225 Kumar Dias Desinghe (+94) 112 206 251 [email protected] [email protected] [email protected] [email protected] Anouk Weerasinghe +94 814 474 443 Prasanna Semasinghe [email protected] Arjuna Dasanayake (+94)Prasanna 814 474 Semasinghe 443 +94 112 206 254 (+94) 112 206 235 [email protected] [email protected] [email protected]

+94 814 474 443 Thehani Weerasinghe Susil Fernando (+94) 112 206 224 (+94) 112 206 234 [email protected] [email protected]

Chathura Siyambalapitiya (+94) 112 206 232 [email protected]

S. Vasanthakumar (+94) 112 206 250/251 [email protected]

Disclaimer:

“Distributed in Sri Lanka and abroad by Acuity Stockbrokers (Private) Limited (ASB) and its authorized representatives. ASB is fully owned by Acuity Partners (Pvt) Ltd (APL) and APL is a joint venture of DFCC Bank and PLC. The Information contained herein has been compiled from sources that ASB (“The Research Institution”) believes to be reliable but None of the Research Institution holds itself responsible for its completeness or accuracy. It is not an offer to sell or a solicitation of an offer to buy any securities. The Research Institution and its affiliates and its officers and employees may or may not have a position in or with respect to the securities mentioned herein.

The Research Institution and its affiliates may from time to time have consulting relationship with any company, which is being reported upon. This may involve the Research Institution providing significant corporate finance services or acting as the company’s official or sponsoring broker.

All opinions and estimates included in this report constitute judgment as of this date of the Research Institution and are subject to change or amendment without notice. The Research Institution has the copyright for this report and the views herein cannot be reproduced and/or distributed in any form without the explicit (written or otherwise) permission from Research Institution.