Acuity Stockbrokers Research | Sri Lanka Equities

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 03 Aug 2018

ASPI Recovers from 3-Week Low… Policy Rates Held th rd Indices vs. Turnover (30 Jul – 03 Aug) Steady for 3rd Time 6,300 ASPI 3,500 S&P SL20

6,240 3,450 S&P SL20

ASPI ˅ 0.16% | S&P SL20 ˅ 1.13% 6,180 3,400 ASPI 6,120 3,350

The Bourse ended the week… Cont. P2 6,060 3,300 6,000 3,250 30-Jul 31-Jul 01-Aug02-Aug03-Aug

Foreign investors closed the week... Cont. P3 0.50 0.40 0.30

Equity markets remained….… Cont. P4 0.20 LKR Bn) LKR

(Turnover 0.10 0.00 Economic Snapshot………… P5 30-Jul 31-Jul 01-Aug 02-Aug 03-Aug

KEY STATISTICS

Week ending 03-Aug 26-Jul +/- ASPI 6,143.90 6,153.99 -0.16% S&P SL20 3,322.25 3,360.37 -1.13%

Banking & Finance 16,049.22 16,248.31 -1.23%

Food & Beverage 24,579.24 24,223.85 1.47% Diversified 1,544.94 1,558.68 -0.88% Hotel & Travel 2,705.30 2,718.26 -0.48% Plantations 766.98 764.94 0.27% Manufacturing 3,149.27 3,165.38 -0.51% Turnover (LKR Bn) 1.45 1.10 31.60% Foreign Buying (LKR Mn) 383.29 443.97 -13.67% Foreign Selling (LKR Mn) 465.78 420.84 10.68% Daily Average Turnover (LKR Bn) 0.29 0.28 5.28% Daily Average Foreign Buying (LKR Mn) 76.66 110.99 -30.93% Daily Average Foreign Selling (LKR Mn) 93.16 105.21 -11.46%

TOP 10 GAINERS TOP 10 LOSERS

Opening Closing WoW % Opening Closing WoW % Company Code Company Code Price Price Change Price Price Change AMANA LIFE ATLLN 1.3 13.4 930.8% ADAM INVESTMENTS AINVN 0.3 0.2 -33.3% AMANA TAKAFUL ATL N 1.0 8.5 750.0% S M B LEASING SEMBN 0.5 0.4 -20.0% ON'ALLY ONALN 78.9 94.8 20.2% ADAM CAPITAL PCHHN 0.6 0.5 -16.7% CFT CFT N 3.4 4.0 17.6% TESS AGRO[NV] TESSX 0.6 0.5 -16.7% SATHOSA MOTORS SMOTN 324.5 380.0 17.1% LUCKY LANKA LLMPN 1.4 1.2 -14.3% HUNAS FALLS HUNAN 70.2 80.0 14.0% THE FINANCE CO.[NV] TFC X 1.5 1.3 -13.3% KAHAWATTE KAHAN 32.5 37.0 13.8% BERUWALA RESORTS BERUN 0.8 0.7 -12.5% SINGER SRI LANKA SINSN 35.0 39.8 13.7% LUCKY LANKA[NV] LLMPX 0.8 0.7 -12.5% NATION LANKA CSF N 0.8 0.9 12.5% MULLERS MULLN 0.8 0.7 -12.5% AMAYA LEISURE CONNN 44.7 49.3 10.3% BRAC LNKA FNANCE NIFLN 44.0 39.0 -11.4%

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 03 Aug 2018

Market Review

Indices | Liquidity (in Volume Terms) | The Bourse ended the week on a negative note as the The Banks, Finance & Insurance sector dominated the ASPI decreased by 10.09 points (or -0.16%) to close at market in terms of share volume, accounting for 30.83% 6,143.90 points, while the S&P SL20 Index also (or 22.54Mn shares) of total volume, with a value decreased by 38.12 points (or -1.13%) to close at contribution of LKR 0.57Bn. The Diversified sector 3,322.25 points. followed suit, adding 20.27% to total turnover volume as 14.82Mn shares were exchanged. The sector’s volume Turnover & Market Capitalization | accounted for LKR 0.33Bn of total market turnover JKH was the highest contributor to the week’s turnover value. The Land & Property sector meanwhile, value, contributing LKR 0.22Bn or 15.30% of total contributed 13.14Mn shares (or 17.97%), amounting to LKR 0.10Bn. turnover value. Commercial Bank followed suit, accounting for 10.05% of turnover (value of LKR 0.15Bn) while Nestle Lanka contributed LKR 0.14Bn to Top Gainers & Losers | account for 9.88% of the week’s turnover. Total Amana Life was the week’s highest price gainer; turnover value amounted to LKR 1.45Bn (cf. last week’s increasing 930.8% W-o-W from LKR1.30 to LKR13.40 value of LKR 1.10Bn), while daily average turnover while Amana Takaful (+750.0% W-o-W), O’nally value amounted to LKR 0.29Bn (+5.28% W-o-W) Holdings (+20.2% W-o-W) and CFT (+17.6% W-o-W) were also amongst the top gainers. compared to last week’s average of LKR 0.28Bn. Market capitalization meanwhile, decreased by 0.16% W-o-W (or LKR 4.73Bn) to LKR 2,877.01Bn cf. LKR 2,881.71Bn Adam Investments was the week’s highest price loser; last week. declining 33.3% W-o-W to close at LKR0.20 while SMB Leasing (-20.0% W-o-W), Adam Capital (-16.7% W-o-W) Liquidity (in Value Terms) | and Tess Agro [NV] (-16.7% W-o-W) were also amongst The Banks, Finance & Insurance sector was the highest the top losers over the week. contributor to the week’s total turnover value, accounting for 39.40% (or LKR 0.57Bn) of market TOP 10 TURNOVERS turnover. Sector turnover was driven primarily by Commercial Bank, Sampath Bank, HNB & Nations Trust Opening Closing Value (Rs. Company Code which accounted for 72.05% of the sector’s total Price Price Mn) turnover. The Diversified sector meanwhile accounted JKH JKH N 142.0 138.0 222.39 for 22.45% (or LKR 0.33Bn) of the total turnover value, COMMERCIAL BANK COMBN 127.1 124.9 146.02 with turnover driven primarily by JKH, Hemas Holdings NESTLE NESTN 1750.0 1800.0 143.55 & Softlogic Holdings which accounted for 88.97% of the SAMPATH SAMPN 298.0 288.0 139.92 sector turnover. The Beverage, Food & Tobacco sector R I L PROPERTY RILN 7.4 7.3 94.10 was also amongst the top sectorial contributors, HNB HNB N 230.0 228.0 86.25 contributing 15.29% (or LKR 0.22Bn) to the market NATIONS TRUST NTB N 90.0 91.5 40.44 HEMAS HOLDINGS HHL N 100.2 98.8 34.12 driven by Nestle Lanka which accounted for 64.60% of SOFTLOGIC SHL N 21.0 22.6 33.86 the sector turnover. DIALOG DIALN 14.3 14.5 30.75

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 03 Aug 2018

Mar ket Review (Cont’d)

Net Foreign Sales (26 Jul-03 Aug) Net Foreign Purchases (26 Jul-03 Aug) AMANA BANK SUNSHINE HOLDING Volume Change ('000s) EXPOLANKA Volume Change ('000s) HNB RICHARD PIERIS SAMPATH JKH KEELLS HOTELS SOFTLOGIC CAP SOFTLOGIC LIFE TOKYO CEMENT [X] HEMAS HOLDINGS CENTRAL FINANCE BERUWALA RESORTS DURDANS CFT NATIONS TRUST COMMERCIAL BANK DIALOG* DISTILLERIES*

- 80 160 240 320 400 (1,000) (800) (600) (400) (200) - *Volume change of Distilleries (1.34Mn Shares) and Dialog (1.93Mn Shares) from 26th Jul – 03rd Aug not displayed. Foreign investors closed the week in a net selling position with total net outflow amounting to LKR 0.08Bn relative to last week’s total net inflow of LKR 0.02Bn (-456.57% W-o-W). Total foreign purchases decreased by 13.7% W-o-W to LKR 0.38Bn from last week’s value of LKR 0.44Bn, while total foreign sales amounted to LKR 0.47Bn relative to LKR 0.42Bn recorded last week (+10.7% W-o-W). In terms of volume Dialog & Nations Trust led foreign purchases while Distilleries & Commercial Bank led foreign sales. In terms of value Nations Trust & Dialog led foreign purchases while Hemas Holdings & Commercial Bank led 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 03/08/18 26/07/18 (LKR. Mn) 03/08/18 26/07/18 (LKR. Mn) NATIONS TRUST 24.46% 24.30% 385,791 35.30 COMMERCIAL BANK 33.79% 33.89% (987,084) (123.29)

DIALOG 94.40% 94.38% 1,934,420 28.05 HEMAS HOLDINGS 30.69% 30.75% (324,890) (32.10) CENTRAL FINANCE 13.36% 13.26% 230,375 22.35 DISTILLERIES 1.85% 1.88% (1,342,475) (26.85) DURDANS 1.73% 0.63% 281,708 21.21 SAMPATH 22.74% 22.76% (55,269) (15.92) JKH 57.66% 57.65% 117,804 16.26 HNB 35.90% 35.91% (49,683) (11.33) LION BREWERY 37.13% 37.11% 13,476 8.36 CEYLON TOBACCO 97.49% 97.50% (8,724) (10.49) TOKYO CEMENT[X.0000] 42.53% 42.37% 213,400 6.32 NESTLE 95.51% 95.51% (3,944) (7.10) CARGILLS 6.86% 6.85% 31,701 6.23 CFT 0.40% 0.99% (835,186) (3.34) CHEVRON 21.05% 21.04% 39,851 3.49 SOFTLOGIC LIFE 45.61% 45.64% (106,062) (2.65) GRAIN ELEVATORS 61.39% 61.34% 30,891 1.98 SUNSHINE HOLDING 52.66% 52.67% (26,692) (1.39) 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 50 250 Foreign Purchases Foreign Sales -30 200

150 -110

LKR. MnLKR. LKR. Mn LKR.

100 -190

50 -270

0 -350 30-Jul 31-Jul 01-Aug 02-Aug 03-Aug 13-Jul 20-Jul 26-Jul 03-Aug

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 03 Aug 2018

Announcements for the Week

Dividend Announcements

Company DPS (Rs.) Type XD Date AMAYA LEISURE 1.00 Interim 13-08-18 ABANS ELECTRICALS 2.00 Final 21-09-18 HARISCHANDRA MILLS 25.00 Final 25-09-18 LEE HEDGES PLC 1.00 Final 28-09-18

Policy Rates Held Steady for 3rd Time Point of View

Equity markets remained largely flat this week, moving within a The CBSL held policy rates steady (SDFR-7.25% & SLFR-8.50%) narrow 20-point range, to close approximately 10 points lower for the 3 rd consecutive time this year, citing its goal of stabilising than last week. Weaker earnings - particularly from blue-chip inflation at mid-single digits to aid a high and sustainable growth conglomerate JKH which is perceived as a proxy for the overall trajectory for the economy. The Monetary authority added that economic health of equity markets/corporates - dampened recent trends in monetary and credit expansion indicate greater investor sentiment, dragging the Index 25 points lower early in monetary stability that is consistent with the country’s the week following the release of its earnings. The Index heavy- envisaged medium term growth and highlighted that i) short- weight wiped off ~2.82% of its value over the week to close at term interest rates have begun to adjust downwards in response

Rs.138 amid the 23% Y-o-Y decline in its profits for the quarter, to the surplus liquidity conditions in domestic money markets dragging the Index lower. The Index managed to regain some and, ii) overall monetary expansion decelerated in June 2018 as traction mid-week however, as the decline in the key blue-chip’s private sector credit growth has gradually declined towards share price along with expectations for the CBSL to hold desired levels and net credit to the government has reduced. monetary policy rates steady helped revive some buying The CBSL also noted that despite the recent uptick (Y-o-Y interest. The ASPI consequently gained a cumulative 33 points headline inflation remained at low-single digits during Feb-June over the week, helping pare down the 43 point loss and helping 2018 but accelerated in July 2018), inflation is expected to the Index recover from its lowest close in 3-weeks. Despite the remain at mid-single digits by year-end amid the onset of the revived buying interest mid-week, local HNI and institutional harvest by end-Q3’18 and well-contained aggregate demand interest remained weak, accounting for just 13% of the week’s pressures. The CBSL also reiterated its expectation (supported total turnover to remain the lowest participation level so far this by leading indicators) for a gradual pickup in GDP growth from year. Local HNI and institutional participation levels this year Q2’18 led by expansion in services and industr y related have averaged 40% (in line with the historical range of 35-45%) activities and supported by improved weather conditions but this week’s levels remains a low for the year. HNI and favorably impacting agriculture activities and related industries. institutional buying interest remained concentrated on just four The Bank cautioned however, that although global economic stocks, with mid-caps RIL and NTB accounting for 66% of the growth is likely to strengthen over 2018 and 2019, risks remain week’s crossings and blue-chips JKH and NEST accounting for balanced to the downside due to monetary policy tightening in the remainder. Foreign investors meanwhile, reverted to net advanced economies, strengthening of the USD, escalating trade sellers from the Colombo bourse this week, reversing last week’s tensions and pressure on many emerging market currencies net buying position of Rs. 23Mn to a net selling position of Rs. which has led to some of these EM responding to these risks by

82Mn this week. Markets in the week ahead are likely to tightening their monetary policies and allowing their exchange continue looking for cues from the June quarter corporate rates to adjust appropriately. earnings releases.

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 06 July 2018

Economic Snapshot

Nov’17 Dec’17 Jan’18 Feb’18 Mar’18 Apr’18 May’18 Jun’18 Interest Rates Prime Lending Rate 11.40 11.33 11.29 11.27 11.10 11.27 11.34 11.20 Ave. Wtd. Deposit Rates 9.19 9.07 9.08 9.05 9.00 8.98 8.91 8.92 Ave. Wtd. Fixed Dep. Rates 11.69 11.48 11.54 11.45 11.41 11.38 11.23 11.26 CCPI Inflation Y-o-Y % (Base 2013) 7.6 7.1 5.8 4.5 4.2 3.8 4.0 4.4

2012 2013 2014 2015 2016 2017 Q1’18 GDP Growth (Base 2010) 9.1% 3.4% 4.9% 4.8% 4.4% 3.1% 3.2% Source Central Bank

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

10.0 165.0

157.0 8.0

149.0 6.0 CCPI

Rs /USD Rs 141.0 4.0

133.0 2.0

125.0 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 0.0 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18

Source: Central Bank Source: Central Bank

6 Month T-Bill Yield Tea Prices

13 700

11 620

9 540

7 460

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

- T

5 380 Rs. Per kilo(Unweighted)Per Rs. 3 300 Jul-15 Apr-16 Jan-17 Oct-17 Jul-18 Jul-15 Apr-16 Jan-17 Oct-17 Jul-18

Source: Central Bank Source: Sri Lanka Tea Board

Export & Trade Balance Trends in Tourist Arrivals

2000 600 Trade Balance (USD Mn 250,000 80%

1600 200 64%

200,000 Y

o -

48% Y Growth 1200 -200 150,000 32% 800 -600 100,000 16% 400 -1000 Total Arrivals ) 50,000 0% Exports /Imports (USD Mn) (USD /Imports Exports 0 -1400 0 -16% Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 May-15 Feb-16 Nov-16 Aug-17 May-18 Exports (LHS) Imports (LHS) Trade Balance (RHS) Source: Sri Lanka Tourism Development Authority Source: Central Bank 5

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