ACUITY STOCKBROKERS RESEARCH | EQUITIES

Weekly Market Review 21 Sep 2018

Sri Lankan Equities hit a 2-year low … 2Q’18 GDP th st Indices vs. Turnover (17 Sep – 21 Sep) growth rises to 3.7%. 6,050 3,400 ASPI

6,020 S&P SL20 3,320 S&P SL20

ASPI ˅ 2.10% | S&P SL20 ˅ 3.92% 5,990 3,240 ASPI 5,960 3,160 The Bourse ended the week… Cont. P2 5,930 3,080 5,900 3,000 Foreign investors closed the week... Cont. P3 17-Sep 18-Sep 19-Sep 20-Sep 21-Sep 1.00 0.80 Sri Lankan Equities hit a 2-year ….… Cont. P4 0.60

0.40 LKR Bn) LKR

(Turnover 0.20 Economic Snapshot………… P5 0.00 17-Sep 18-Sep 19-Sep 20-Sep 21-Sep

KEY STATISTICS

Week ending 21-Sep 14-Sep +/- ASPI 5,904.90 6,031.26 -2.10% S&P SL20 3,016.76 3,139.77 -3.92%

Banking & Finance 15,621.15 16,136.84 -3.20%

Food & Beverage 24,615.57 24,857.80 -0.97% Diversified 1,466.50 1,496.86 -2.03% Hotel & Travel 2,651.64 2,668.55 -0.63% Plantations 740.70 734.33 0.87% Manufacturing 2,791.80 2,884.97 -3.23% Turnover (LKR Bn) 3.50 4.40 -20.33% Foreign Buying (LKR Mn) 1,445.56 1,004.14 43.96% Foreign Selling (LKR Mn) 2,188.62 1,568.44 39.54% Daily Average Turnover (LKR Bn) 0.70 0.88 -20.33% Daily Average Foreign Buying (LKR Mn) 289.11 200.83 43.96% Daily Average Foreign Selling (LKR Mn) 437.72 313.69 39.54%

TOP 10 GAINERS TOP 10 LOSERS

Opening Closing WoW % Opening Closing WoW % Company Code Company Code Price Price Change Price Price Change ADAM CAPITAL PCHHN 0.4 0.5 25.0% ADAM INVESTMENTS AINVN 0.2 0.1 -50.0% BIMPUTH FINANCE BLI N 26.6 33.0 24.1% TESS AGRO TESSN 0.6 0.4 -33.3% SWADESHI SWADN 12812.5 14991.1 17.0% BLUE DIAMONDS[NV] BLUEX 0.3 0.2 -33.3% BERUWALA RESORTS BERUN 0.6 0.7 16.7% GOOD HOPE GOODN 1172.0 902.6 -23.0% CHEMANEX CHMXN 47.0 54.8 16.6% TESS AGRO[NV] TESSX 0.5 0.4 -20.0% RENUKA FOODS COCON 13.1 14.9 13.7% RENUKA HOTELS RCHN 50.0 41.0 -18.0% LAKE HOUSE PRIN. LPRTN 130.0 147.0 13.1% MTD WALKERS KAPIN 11.2 9.6 -14.3% SUNSHINE HOLDING SUN N 49.0 54.6 11.4% LUCKY LANKA[NV] LLMPX 0.7 0.6 -14.3% GESTETNER GESTN 99.0 110.0 11.1% LANKA TILES TILEN 94.7 81.4 -14.0% PEOPLE'S MERCH PMB N 11.0 12.0 9.1% ALUFAB ALUFN 19.6 16.9 -13.8%

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 21 Sep 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 increased by 126.36 points (or -2.10%) to close at market in terms of share volume, accounting for 44.78% 5,904.90 points, while the S&P SL20 Index also (or 45.85Mn shares) of total volume, with a value decreased by 123.01 points (or -3.92%) to close at contribution of LKR 1.25Bn. The Diversified sector 3,016.76 points. followed suit, adding 21.92% to total turnover volume as 22.44Mn shares were exchanged. The sector’s volume Turnover & Market Capitalization | accounted for LKR 1.47Bn of total market turnover JKH was the highest contributor to the week’s turnover value. The Manufacturing sector meanwhile, contributed value, contributing LKR 1.02Bn or 29.10% of total 9.39Mn shares (or 9.17%), amounting to LKR 0.38Bn. turnover value. Sampath Bank followed suit, accounting for 11.27% of turnover (value of LKR 0.39Bn) while Top Gainers & Losers | contributed LKR 0.39Bn to account for Adam Capital was the week’s highest price gainer; 11.09% of the week’s turnover. Total turnover value increasing 25.0% W-o-W from LKR0.40 to LKR0.50 amounted to LKR 3.50Bn (cf. last week’s value of LKR while Bimputh Finance(+24.1% W-o-W), 4.40Bn), while daily average turnover value amounted Swadeshi(+17.0% W-o-W) and Beruwala Resorts to LKR 0.70Bn (-20.33% W-o-W) compared to last (+16.7% W-o-W) were also amongst the top gainers. week’s average of LKR 0.88Bn. Market capitalization meanwhile, decreased by 2.10% W-o-W (or LKR Adam Investments was the week’s highest price loser; 59.34Bn) to LKR2,773.00Bn cf. LKR2,832.34Bn last declining 50.0% W-o-W to close at LKR0.10 while Tess week. Agro (-33.3% W-o-W), Blue Diamonds[NV] (-33.3% W-o-W) and Good Hope(-23.0% W-o-W) were Liquidity (in Value Terms) | also amongst the top losers over the week. The Diversified sector was the highest contributor to the week’s total turnover value, accounting for 41.90% (or TOP 10 TURNOVERS LKR 1.47Bn) of market turnover. Sector turnover was driven primarily by JKH & Melstacorp which accounted Opening Closing Value (Rs. Company Code for 95.93% of the sector’s total turnover. The Banks, Price Price Mn) Finance & Insurance sector meanwhile accounted for JKH JKH N 133.7 129.5 1,019.68 35.55% (or LKR 1.25Bn) of the total turnover value, SAMPATH SAMPN 265.0 238.6 394.91 with turnover driven primarily by Sampath Bank, MELSTACORP MELSN 50.0 50.0 388.69 Commercial Bank, Union Assurance & CHEVRON LLUBN 71.7 68.0 327.50 which accounted for 80.46% of the sector turnover. The COMMERCIAL BANK COMBN 119.8 114.1 287.73 Manufacturing sector was also amongst the top sectorial HNB HNB N 222.4 214.0 126.56 contributors, contributing 10.81% (or LKR 0.38Bn) to UNION ASSURANCE UAL N 321.0 320.0 112.61 SEYLAN BANK SEYBN 71.0 67.8 80.55 the market driven by Chevron Lubricants which LION BREWERY LIONN 645.0 639.0 65.65 accounted for 86.44% of the sector turnover. DISTILLERIES DISTN 17.9 16.6 57.46

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 21 Sep 2018

Mar ket Review (Cont’d)

Net Foreign Sales (14 Sep-21 Sep) Net Foreign Purchases (14 Sep-21 Sep) VALLIBEL Volume Change ('000s) JANASHAKTHI INS. Volume Change ('000s) ELPITIYA HNB LION BREWERY SIERRA CABL HNB[X.0000] SAMPATH NATIONS TRUST BERUWALA RESORTS UNION ASSURANCE COMMERCIAL BANK LANKEM DEV. DIALOG RICHARD PIERIS DISTILLERIES CHEVRON* JKH - 70 140 210 280 350 (5,500) (4,400) (3,300) (2,200) (1,100) - *Volume change of Chevron Lubricants(2.58Mn shares)from 14th Sep – 21st Sep not displayed. Foreign investors closed the week in a net selling position with total net outflow amounting to LKR 0.74Bn relative to last week’s total net outflow of LKR 0.56Bn (-31.7% W-o-W). Total foreign purchases increased by 43.96% W-o-W to LKR 1.45Bn from last week’s value of LKR 1.00Bn, while total foreign sales amounted to LKR 2.19Bn relative to LKR 1.57Bn recorded last week (+39.5% W-o-W). In terms of volume, Chevron & Richard Pieris led foreign purchases while JKH & Distilleries led foreign sales. In terms of value, Chevron & Union Assurance led foreign purchases while JKH & 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 21/09/18 14/09/18 (LKR. Mn) 21/09/18 14/09/18 (LKR. Mn) CHEVRON 22.08% 21.01% 2,581,315 175.53 JKH 55.66% 56.05% (5,423,638) (702.36)

UNION ASSURANCE 0.74% 0.31% 254,719 81.51 COMMERCIAL BANK 33.73% 33.85% (1,081,646) (123.42) LION BREWERY 37.52% 37.40% 93,997 60.06 SAMPATH 22.39% 22.53% (378,502) (90.31) HNB[X.0000] 47.12% 46.99% 124,490 20.40 HNB 35.97% 36.03% (226,619) (48.50) NATIONS TRUST 24.49% 24.44% 129,902 11.44 DISTILLERIES 1.75% 1.81% (2,801,032) (46.50) RICHARD PIERIS 73.92% 73.90% 321,560 3.31 NESTLE 95.47% 95.50% (20,352) (33.58) COMMERCIAL BANK[X.0000] 24.31% 24.27% 24,046 2.21 DIALOG 94.33% 94.34% (1,560,514) (18.73) HAYCARB 6.00% 5.94% 17,254 2.07 HEMAS HOLDINGS 30.32% 30.34% (131,181) (11.69) ELPITIYA 1.48% 1.36% 86,775 1.65 ROYAL CERAMIC 11.34% 11.36% (29,398) (2.35) NAT. DEV. BANK 14.16% 14.15% 15,517 1.62 UNITED MOTORS 5.74% 5.77% (26,800) (2.29) Note: *Value based on closing price and not on actual traded price

Foreign Purchases Vs. Sales Week Ending Net Position of Foreign Holdings 100 1,000 Foreign Purchases Foreign Sales -100 800

600 -300

LKR. MnLKR. LKR. Mn LKR.

400 -500

200 -700

0 -900 17-Sep 18-Sep 19-Sep 20-Sep 21-Sep 31-Aug 07-Sep 14-Sep 21-Sep

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 21 Sep 2018

Announcements for the Week

Dividend Announcements

No Dividend Announcements for the Week

Point of View 2Q’18 GDP growth rises to 3.7% Y-o-Y.

Sri Lankan Equities hit a 2-year low as the ASPI dropped below Sri Lanka’s GDP growth rose to 3.7% Y-o-Y in the 2nd quarter of its previous 6,000 point support level. The benchmark index 2018 (cf. 3.0% Y-o-Y in Q2’17 and 3.2% in Q1’18) which led to continued to lose ground over the week with the ASPI dipping GDP growth of 3.6% during H1’18 cf. 3.2% in H1’17. An 126 points (highest weekly drop since Mar’2016) to end the expansion was evident in all three sectors (Agriculture, Industry week at 5,904.90. Heavy losses during the week (2.1% W-o-W) & Services) with the growth momentum created in 4Q’17 dragged the YTD loss on the ASPI further to ~8.0% from 5.9% continuing on this year in the Agricultural sector (4.9% Y-o-Y in last week. Despite Japanese investment bank Nomura correcting H1’18 cf. -3.8%) while Service sector growth rose to 4.8% Y-o-Y its report on the outlook for the , the LKR hit a in H1’18 (cf. 3.5% Y-o-Y in H1’2017). Over this quarter, the new all -time low of 170.66(Selling rate) on Friday and this Agricultural sector recorded the highest growth among all higher currency depreciation during the week (3.8% W-o-W) sectors as ‘Growing of Rice’ recovered with a notable 59.3% Y-o- remained the major concern for both foreign and local investors. Y growth over the period (cf. 40.5% decline last year due to The negative sentiment surrounding the LKR depreciation was adverse weather conditions). Meanwhile, ‘Growing of Cereal’ reflected in the week’s activity levels, and weekly turnover and ‘Growing of Vegetables’ recorded a g rowth of 19.2% and during the week declined ~20.3% to Rs.3.50bn. Blue-chip JKH 9.6% respectively during the period. In the meantime, ‘Growing remained the largest contributor to the turnover with Rs.1.0Bn, of Tea’ and ‘Growing of Rubber’ reported substantial declines of while Sampath Bank and Melstacorp accounted for Rs.0.39Bn 7.1% and 11.9% respectively. Services activities which account each. Local HNI and Institutional investors were also less for ~60.5% of overall GDP was driving by ‘Telecommunication’, interested on equities as crossings for the week accounted for ‘Financial Service Activities’, and ‘Insurance, Reinsurance & only ~32% of the weekly turnover. The foreign equity sell-off on Pension Fund’ grew at 4.8% Q2’18. The Industrial sector grew the bourse meanwhile continued as foreign investors recorded a marginally in Q2’18 (2.3% Y-o-Y growth cf. 5.6% Y -o-Y in Q2’17) net outflow of Rs.743Mn cf. Rs.564Mn last week. Subsequently, as growth in ‘Construction’, ‘Manufacture of Food, Beverages & the YTD foreign outflow on the bourse increased to Tobacco’ and ‘Manufacture of Coke & Refined Petroleum

Rs.5.9Bn (cf. Rs.5.2Bn). Markets in the week ahead are likely to Products’ was offset by contractions in ‘Mining and Quarrying’ confirm if the new 5900 Index level is the ASPI’s new support and ‘Manufacture of Rubber & Plastic Products.’ The CBSL level or not. projects GDP growth to recover 4.0% - 4.5% in 2018 on the back

of recovery in Agricultural sector and continued positive

momentum in Services and Industrial sectors.

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 21 Sep 2018

Economic Snapshot

Jan’18 Feb’18 Mar’18 Apr’18 May’18 Jun’18 Jul’18 Aug’18 Interest Rates Prime Lending Rate 11.29 11.27 11.10 11.27 11.34 11.20 11.41 11.65 Ave. Wtd. Deposit Rates 9.08 9.05 9.00 8.98 8.91 8.92 8.64 8.66 Ave. Wtd. Fixed Dep. Rates 11.54 11.45 11.41 11.38 11.23 11.26 10.82 10.81 CCPI Inflation Y-o-Y % (Base 2013) 5.8 4.5 4.2 3.8 4.0 4.4 5.4 5.9

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%

10.0 170.0

8.0 162.0

154.0 6.0 CCPI

Rs /USD Rs 146.0 4.0

138.0 2.0

130.0 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-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

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 Sep-15 Jun-16 Mar-17 Dec-17 Sep-18 Sep-15 Jun-16 Mar-17 Dec-17 Sep-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 Aug-15 May-16 Feb-17 Nov-17 Aug-18 Exports (LHS) Imports (LHS) Trade Balance (RHS) Source: Sri Lanka Tourism Development Authority Source: Central Bank 5

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