ACUITY STOCKBROKERS RESEARCH | EQUITIES

Weekly Market Review 22 Feb 2019

th nd ASPI Closes in the Red for the 3rd Consecutive Week… Indices vs. Turnover (18 Feb – 22 Feb) CBSL Cuts SRR by 1.0% Amid Steady Policy Rates 6,000 ASPI 3,050 5,960 S&P SL20 3,030 S&P SL20

ASPI ˅ 1.21% | S&P SL20 ˅ 1.68% 5,920 3,010 ASPI 5,880 2,990 The Bourse ended the week… Cont. P2 5,840 2,970 5,800 2,950 Foreign investors closed the week... Cont. P3 18-Feb 20-Feb 21-Feb 22-Feb 1.10 0.88 0.66

Sri Lanka equities extended ….… Cont. P4 0.44 LKR Bn) LKR

(Turnover 0.22 0.00 Economic Snapshot………… P5 18-Feb 20-Feb 21-Feb 22-Feb

KEY STATISTICS

Week ending 22-Feb 15-Feb +/- ASPI 5,837.72 5,909.30 -1.21% S&P SL20 2,977.47 3,028.22 -1.68%

Banking & Finance 15,764.51 16,069.76 -1.90%

Food & Beverage 24,001.05 23,981.04 0.08% Diversified 1,514.52 1,521.69 -0.47% Hotel & Travel 2,613.98 2,639.98 -0.98% Plantations 754.39 772.69 -2.37% Manufacturing 2,647.25 2,821.66 -6.18% Turnover (LKR Bn) 2.20 5.82 -62.26% Foreign Buying (LKR Mn) 443.52 2,624.76 -83.10% Foreign Selling (LKR Mn) 676.57 4,476.29 -84.89% Daily Average Turnover (LKR Bn) 0.55 1.16 -52.82% Daily Average Foreign Buying (LKR Mn) 110.88 524.95 -78.88% Daily Average Foreign Selling (LKR Mn) 169.14 895.26 -81.11%

TOP 10 GAINERS TOP 10 LOSERS

Opening Closing WoW % Opening Closing WoW % Company Code Company Code Price Price Change Price Price Change S M B LEASING SEMBN 0.4 0.5 25.0% LIGHTHOUSE HOTEL LHL N 31.6 25.5 -19.3% RAMBODA FALLS RFL N 17.4 21.0 20.7% LANKA VENTURES LVENN 45.0 36.6 -18.7% KOTMALE HOLDINGS LAMBN 170.9 192.1 12.4% CARGO BOAT CABON 72.0 59.0 -18.1% HAPUGASTENNE HAPUN 17.0 19.0 11.8% CITRUS LEISURE REEFN 4.7 3.9 -17.0% ANILANA HOTELS ALHPN 0.9 1.0 11.1% CHEVRON LLUBN 75.5 62.9 -16.7% LANKA REALTY ASCON 20.9 22.8 9.1% SAMSON INTERNAT. SIL N 100.0 83.4 -16.6% SINGHE HOSPITALS SINH 1.3 1.4 7.7% DUNAMIS CAPITAL CSECN 34.0 28.8 -15.3% C.W.MACKIE CWM N 42.0 44.1 5.0% BERUWALA RESORTS BERUN 0.7 0.6 -14.3% BOGAWANTALAWA BOPLN 11.0 11.5 4.5% MULLERS MULLN 0.7 0.6 -14.3% LOLC DEV FINANCE NIFLN 38.0 39.6 4.2% ELPITIYA ELPLN 20.9 18.0 -13.9%

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 22 Feb 2019

Market Review

Indices | Liquidity (in Volume Terms) | The Bourse ended the week on a negative note as the The Hotels & Travels sector dominated the market in ASPI decreased by 71.58 points (or -1.21%) to close at terms of share volume, accounting for 33.85% (or 5,837.72 points, while the S&P SL20 Index also 25.70Mn shares) of total volume, with a value decreased by 50.75 points (or -1.68%) to close at contribution of LKR 0.51Bn. The Banks, Finance & 2,977.47 points. Insurance sector followed suit, adding 19.32% to total turnover volume as 14.67Mn shares were exchanged. Turnover & Market Capitalization | The sector’s volume accounted for LKR 0.81Bn of total Kingsbury was the highest contributor to the week’s market turnover value. The Manufacturing sector turnover value, contributing LKR 0.50Bn or 22.84% of meanwhile, contributed 13.28Mn shares (or 17.50%), amounting to LKR 0.31Bn. total turnover value. LOLC Holdings followed suit, accounting for 15.65% of turnover (value of LKR 0.34Bn) while contributed LKR 0.27Bn to Top Gainers & Losers | account for 12.33% of the week’s turnover. Total SMB Leasing was the week’s highest price gainer; turnover value amounted to LKR 2.20Bn (cf. last week’s increasing 25.0% W-o-W from LKR0.40 to LKR0.50 value of LKR 5.82Bn), while daily average turnover while Ramboda Falls(+20.7% W-o-W), Kotmale value amounted to LKR 0.55Bn(-52.82% W-o-W) Holdings (+12.4% W-o-W) and Hapugastenne (+11.8% W-o-W) were also amongst the top gainers. compared to last week’s average of LKR 1.16Bn. Market capitalization meanwhile, decreased by 1.21% W-o-W (or LKR 33.46Bn) to LKR 2,728.60Bn cf. LKR 2,762.05Bn The Lighthouse Hotel were the week’s highest price last week. loser; declining 19.3% W-o-W to close at LKR25.50 while Lanka Ventures(-18.7% W-o-W), Cargo Boat Liquidity (in Value Terms) | (-18.1% W-o-W) and Citrus Leisure (-17.0% W-o-W) The Banks, Finance & Insurance sector was the highest were also amongst the top losers over the week. contributor to the week’s total turnover value, accounting for 36.86% (or LKR 0.81Bn) of market TOP 10 TURNOVERS turnover. Sector turnover was driven primarily by LOLC Holdings, Sampath Bank & Central Finance which Opening Closing Value (Rs. Company Code accounted for 82.06% of the sector’s total turnover. The Price Price Mn) Hotels & Travels sector meanwhile accounted for KINGSBURY SERVN 14.2 14.3 501.63 23.23% (or LKR 0.51Bn) of the total turnover value, L O L C HOLDINGS LOLCN 91.0 89.0 343.77 with turnover driven primarily by Kingsbury which SAMPATH SAMPN 235.0 231.1 270.89 TOKYO CEMENT TKYON 22.8 23.0 185.89 accounted for 97.94% of the sector turnover. The CEYLON TOBACCO CTC N 1420.0 1420.0 151.53 Diversified sector was also amongst the top sectorial MELSN 45.9 45.0 114.94 contributors, contributing 14.05%(or LKR 0.31) of the JKH JKH N 153.1 154.5 97.39 total turnover, where sector turnover was primarily HHL N 85.1 84.0 75.67 driven by Melstacorp, JKH & Hemas Holdings which TOKYO CEMENT[NV] TKYOX 20.1 20.1 60.19 accounted for 93.30% of the sector turnover. CENTRAL FINANCE CFINN 92.0 90.0 49.67

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 22 Feb 2019

Market Review (Cont’d)

Net Foreign Sales (15 Feb-22 Feb) Net Foreign Purchases (15 Feb-22 Feb) RENUKA HOLDINGS[X] Volume Change ('000s) KOTAGALA Volume Change ('000s) HEMAS HOLDINGS LANKA IOC HNB LANKA VENTURES ROYAL CERAMIC JKH SAMPATH OVERSEAS REALTY COMMERCIAL BANK TESS AGRO COMMERCIAL BANK[X.0000] CENTRAL FINANCE KEELLS HOTELS

TOKYO CEMENT* L O L C HOLDINGS*

0 120 240 360 480 600 (1,000) (800) (600) (400) (200) - *Volume change of Tokyo Cement (7.04Mn Shares) & LOLC Holdings (3.80Mn Shares) from 15th Feb – 22nd Feb not displayed. Foreign investors closed the week in a net selling position with total net outflow amounting to LKR 0.23Bn relative to last week’s total net outflow of LKR 1.85Bn (+87.4% W-o-W). Total foreign purchases decreased by 83.10% W-o-W to LKR 0.44Bn from last week’s value of LKR 2.62Bn, while total foreign sales amounted to LKR 0.68Bn relative to LKR 4.48Bn recorded last week (-84.9% W-o-W). In terms of volume, Tokyo Cement & Keells Hotels led foreign purchases while LOLC Holdings & Amana Bank led foreign sales. In terms of value, Tokyo Cement & JKH led foreign purchases while LOLC Holdings & Central Finance 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 22/02/19 15/02/19 (LKR. Mn) 22/02/19 15/02/19 (LKR. Mn) TOKYO CEMENT 23.96% 21.33% 7,042,654 161.98 L O L C HOLDINGS 4.38% 5.18% (3,802,641) (338.44)

JKH 47.56% 47.54% 213,062 32.92 CENTRAL FINANCE 14.78% 15.01% (508,781) (45.79) DIPPED PRODUCTS 9.04% 8.86% 106,000 8.64 SAMPATH 22.74% 22.77% (72,075) (16.66) LANKA VENTURES 2.45% 2.05% 200,000 7.32 COMMERCIAL BANK[X.0000] 23.31% 23.54% (147,500) (13.28) AITKEN SPENCE 23.91% 23.88% 104,500 4.71 COMMERCIAL BANK 32.75% 32.76% (122,879) (13.16) KEELLS HOTELS 1.15% 1.11% 595,000 4.34 ROYAL CERAMIC 11.19% 11.24% (50,000) (3.35) OVERSEAS REALTY 92.15% 92.13% 255,376 4.09 HNB 35.63% 35.63% (13,109) (2.61) LANKA IOC 78.56% 78.52% 200,000 3.80 AMANA BANK 63.08% 63.11% (666,667) (1.93) LMF 30.81% 30.74% 29,500 3.78 HEMAS HOLDINGS 29.83% 29.83% (12,495) (1.05) HAYCARB 6.20% 6.11% 28,957 3.76 KEELLS FOOD 0.98% 1.01% (7,387) (1.03) 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 500 0 Foreign Purchases Foreign Sales 400 -400

300 -800 LKR. MnLKR.

LKR. Mn LKR. 200 -1,200

100 -1,600

0 -2,000 18-Feb 20-Feb 21-Feb 22-Feb 01-Feb 08-Feb 15-Feb 22-Feb

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 22 Feb 2019

Announcements for the Week

Dividend Announcements

Company DPS (Rs.) Type XD Date CHEVRON LUBRICANTS 1.50 Fourth Interim 28-02-2018 DFCC BANK PLC 3.50 First & Final 28-02-2018 OVERSEAS REALTY 1.25 First & Final 01-04-2018 SEYLAN DEVELOPMENTS 1.00 First & Final 29-03-2018 CEYLON COLD STORES 7.00 Interim 06-03-2018 3.50 Final 01-04-2018 NESTLE LANKA 25.00 Interim 05-03-2018 NESTLE LANKA 25.00 Final 09-05-2018 AMAYA LEISURE 2.50 Second Interim 05-03-2018 PEOPLE'S INSURANCE 1.10 Final To be notified 0.50 First & Final 29-03-2018 COMMERCIAL DEVELOPMENT 3.50 Final 16-05-2018 NATIONAL DEVELOPMENT BANK 1.50 First & Final 06-03-2018 SRI LANKA TELECOM 1.06 First & Final 29-03-2018 AIA INSURANCE 25.00 First & Final 28-03-2018

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 22 Feb 2019

Point of View CBSL Cuts SRR by 1.0% Amid Steady Policy Rates

Sri Lanka equities extended its 3-week long losing streak, with the Sri Lanka’s Central bank held policy rates steady (SLFR: 9%, benchmark index dropping ~72 points or 1.2% W-o-W over the SDFR: 8%) at its first Monetary Policy Review this year as the week to close the at 5,837.72 points, notably below the Monetary Board observed that the current neutral policy stance psychological 6000-mark. The Broad-share index fell 12 points on was in line with its goal of stabilizing inflation and supporting Monday to close below 5900 mark for the first time since October economic growth. However, in a surprise move (and contrary to a 2018, with bargain hunting on Teejay Lanka (-7.2% W-o-W), Reuters poll of 11 economists who expected the Statutory Reserve LOLC Holdings and Melstacorp contributing negatively to the Ratio to be kept steady), the CBSL reduced the SRR by 1.0% to index. The freefall continued for the rest of the holiday shortened 5.0% w.e.f. 1st March 2019. The move appears to be aimed at week, with the ASPI recording its largest daily loss of ~41 points addressing the liquidity deficit in the domestic money market on Thursday to bring the index closer to 5800-levels. This week’s (rather than being a sign of monetary easing) and the CBSL 72 point loss dragged the YTD loss on the ASPI to 3.5% relative to justified the SRR cut by noting that some policy intervention was an YTD gain of 3.2% during the same period last year. Activity required to address the persistent rupee liquidity deficit. The levels on the Bourse meanwhile retracted this week, reduction of the SRR is anticipated to revive private sector credit with average daily turnover for the week dropping to Rs. 0.55Bn growth and ease lending rates. The CBSL had previously reduced (-53% W-o-W) cf. Rs. 1.16Bn last week despite continued interest the SRR by 1.50% to 6.0% in mid-Nov 2018 but despite the move, from Local HNI and Institutional investors. A large parcel domestic liquidity levels have remained tight over the period. representing a stake of 10.33% in Kingsbury Plc changed hands Private sector credit growth meanwhile increased by 15.9% Y-o-Y from to Hayley’s subsidary Carbotels (Pvt) Ltd, at a in Dec 2018 but was down from 16.2% Y-o-Y in Nov 2018. The premium of ~41% to its previous close of Rs. 14.2. The off-market CBSL also stated that economic growth for Q4’2018 was likely to transaction contributed 32% to the total weekly crossings, while be subdued (Q3’2018 GDP growth was 2.9% Y-o-Y cf. 3.6% Y-o-Y interest in LOLC Holdings (22% of crossings), Ceylon Tobacco in Q2’2018) while growth in 2019 is also expected to be modest. (10% of crossings), Tokyo Cement (10% of crossings), Sampath The monetary authority noted however, that the country’s i) low Bank, Melstacorp and Hemas Holdings helped drive buying inflation environment, ii) competitive exchange rate and, iii) interest over the week. Crossings over the week consequently policies to support investment should support GDP growth over accounted for ~72% of the total market turnover (cf. average of the year. The external sector meanwhile, experienced some 47% thus far in 2019). Foreign buying interest meanwhile was improvement, with the trade deficit narrowing between Nov-Dec visible in Tokyo Cement (foreign holding in Tokyo increased to 2018 due to policies targeted at curbing motor vehicle and non- 24% this week from 21% last week) amid Consumer Affairs essential imports. Foreign buying in Government securities Authority’s decision to increase the price of a 50kg bag of cement meanwhile have marked a turnaround from 2018, and have by Rs. 100 to Rs. 1,095. The Foreign equity sell-off on Sri Lankan experienced a foreign inflow so far in 2019 as the US Fed kept equities however, continued over the week despite at a slower rates unchanged at its first meeting for 2019 amid mounting risk pace (Rs. 0.68Bn cf. Rs. 4.48Bn in the previous week) resulting in to the US economy. The LKR has consequently appreciated 1.7% foreign investors recording a net outflow of Rs. 0.23Bn (cf. Rs. YTD but gross official reserves have fallen to $6.2 Bn in Jan 2019 1.85Bn last week) and bringing the YTD net foreign outflow to Rs. (cf. $7.0Bn in Nov 2018) amid the Country’s debt repayments due 5.5Bn from Rs. 5.2Bn last week. Markets in the week ahead are in Q1’19. likely to continue look for cues from earnings release and progress on negotiations for foreign currency swaps by the CBSL ahead of the Budget reading on 5th March. Sources: CBSL, Reuters

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 22 Feb 2019

Economic Snapshot

Jun’18 Jul’18 Aug’18 Sep’18 Oct’18 Nov’18 Dec’18 Jan’18 Interest Rates Prime Lending Rate 11.20 11.41 11.65 11.72 12.34 12.12 11.94 12.05 Ave. Wtd. Deposit Rates 8.92 8.64 8.66 8.69 8.73 8.77 8.81 8.85 Ave. Wtd. Fixed Dep. Rates 11.26 10.82 10.81 10.84 10.78 10.81 10.85 10.91 CCPI Inflation Y-o-Y % (Base 2013) 4.4 5.4 5.9 4.3 3.1 3.3 2.8 3.7

2012 2013 2014 2015 2016 2017 Q3’18 GDP Growth (Base 2010) 9.1% 3.4% 4.9% 4.8% 4.4% 3.1% 2.9% Source Central Bank

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

10.0 190.0

8.0 176.0

162.0 6.0 CCPI

Rs /USD Rs 148.0 4.0

134.0 2.0

120.0 0.0 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jul-15 Feb-16 Sep-16 Apr-17 Nov-17 Jun-18 Jan-19

Source: Central Bank Source: Central Bank

6 Month T-Bill Yield Tea Prices

12 700

10 620

9 540

7 460

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

- T

6 380 Rs. Per kilo(Unweighted)Per Rs. 4 300 Jan-16 Aug-16 Mar-17 Oct-17 May-18 Dec-18 Dec-15 Sep-16 Jun-17 Mar-18 Dec-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% Total Total Arrivals

400 -1000 )

50,000 0% Exports /Imports (USD Mn) (USD /Imports Exports 0 -1400 0 -16% Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Dec-15 Sep-16 Jun-17 Mar-18 Dec-18 Exports (LHS) Imports (LHS) Trade Balance (RHS) Source: Central Bank Source: Sri Lanka Tourism Development Authority

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