ACUITY STOCKBROKERS RESEARCH | EQUITIES

Weekly Market Review 18 Sep 2020

ASPI Hits 7-Month High Amid Retail Driven th th Momentum… Trade Deficit Narrows in Jul’20 Indices vs. Turnover (14 Sep – 18 Sep)

6,000 ASPI 2,700 ASPI ^ 5.18% | S&P SL20 ^ 6.49% S&P SL20

5,850 2,600 S&P SL20

5,700 2,500 ASPI The Bourse ended the week… Cont. P2 5,550 2,400 5,400 2,300 5,250 2,200 Foreign investors closed the week... Cont. P3 14-Sep 15-Sep 16-Sep 17-Sep 18-Sep 4.00 Domestic equities jumped ….… Cont. P4 3.20 2.40

1.60 LKR Bn) LKR

(Turnover 0.80 Economic Snapshot………… P5 0.00 14-Sep 15-Sep 16-Sep 17-Sep 18-Sep

KEY STATISTICS

Week ending 18-Sep 11-Sep +/- ASPI 5,720.67 5,438.91 5.18% S&P SL20 2,512.40 2,359.24 6.49%

Banks 595.59 559.68 6.42%

Capital Goods 805.12 771.59 4.35% Food, Beverage & Tobacco 796.71 764.76 4.18% Consumer Durables & Apparel 932.82 824.37 13.16% Materials 874.94 789.47 10.83% Diversified Financials 801.38 783.76 2.25% Turnover (LKR Bn) 15.98 9.45 69.05% Foreign Buying (LKR Mn) 958.88 348.54 175.11% Foreign Selling (LKR Mn) 3,038.98 2,312.77 31.40% Daily Average Turnover (LKR Bn) 3.20 1.89 69.05% Daily Average Foreign Buying (LKR Mn) 191.78 69.71 175.11% Daily Average Foreign Selling (LKR Mn) 607.80 462.55 31.40%

TOP 10 GAINERS TOP 10 LOSERS

Opening Closing WoW % Opening Closing WoW % Company Code Company Code Price Price Change Price Price Change EXPON 6.9 9.8 42.0% BLUE DIAMONDS[NV] BLUEX 0.3 0.2 -33.3% RENUKA AGRI RAL N 3.1 4.1 32.3% KELSEY KDL N 34.8 29.7 -14.7% FABRIC MGT N 16.8 22.1 31.5% BLUE DIAMONDS BLUEN 0.7 0.6 -14.3% HNB FINANCE HNBFN 5.4 7.1 31.5% ARPICO ARPIN 124.9 116.3 -6.9% LANKA IOC LIOCN 17.7 23.0 29.9% EQUITY TWO PLC ETWON 55.9 52.1 -6.8% LAUGFS POWER[NV] LPLX 3.4 4.4 29.4% AMANA LIFE ATLLN 9.7 9.1 -6.2% CIT CITN 62.0 80.0 29.0% PDL PDL N 149.7 142.9 -4.5% RENUKA FOODS[NV] COCOX 11.0 14.1 28.2% MILLENNIUM HOUSE MHDLN 7.0 6.7 -4.3% LAUGFS POWER LPLN 4.5 5.7 26.7% LOTUS HYDRO HPFLN 7.2 6.9 -4.2% S M B LEASING SEMBN 0.4 0.5 25.0% LANKEM DEV. LDEVN 5.0 4.8 -4.0%

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 18 Sep 2020

Market Review

Indices | Liquidity (in Volume Terms) | The Bourse ended the week on a positive note as the The Food Beverage & Tobacco Industry Group ASPI increased by 281.76 points (or 5.18%) to close at dominated the market in terms of share volume, 5,720.67 points, while the S&P SL20 Index also accounting for 25.76% (or 201.19Mn shares) of total increased by 153.16 points (or 6.49%) to close at volume, with a value contribution of LKR 2.42Bn. The 2,512.40 points. Transportation Industry Group followed suit, adding 20.62% to total turnover volume as 161.02Mn shares Turnover & Market Capitalization | were exchanged. The Industry Group’s volume Expolanka was the highest contributor to the week’s accounted for LKR 1.46Bn of total market turnover turnover value, contributing LKR 1.46Bn or 9.12% of value. The Capital Goods Industry Group meanwhile, total turnover value. JKH followed suit, accounting for contributed 89.75Mn shares (or 11.49%), amounting to 9.09% of turnover (value of LKR 1.45Bn) while HNB LKR 3.36Bn. contributed LKR 0.85Bn to account for 5.32% of the week’s turnover. Total turnover value amounted to LKR Top Gainers & Losers | 15.98Bn (cf. last week’s value of LKR 9.45Bn), while Expolanka was the week’s highest price gainer; daily average turnover value amounted to LKR 3.20Bn increasing 42.0% W-o-W from LKR6.90 to LKR9.80 (69.05% W-o-W) compared to last week’s average of while Renuka Agri(+32.3% W-o-W), Hayleys Fabric LKR 1.89Bn. Market capitalization meanwhile, increased (+31.5% W-o-W) and HNB Finance(+31.5% W-o-W) by 7.71% W-o-W (or LKR 177.86Mn) to LKR 2,486.27Bn were also amongst the top gainers. cf. LKR 2,308.41Bn last week. Blue Diamonds[NV] was the week’s highest price loser; Liquidity (in Value Terms) | declining 33.3% W-o-W to close at LKR0.20. Kelsey Dev. The Banks Industry Group was the highest contributor (-14.7% W-o-W), Blue Diamonds (-14.3% W-o-W) and to the week’s total turnover value, accounting for Arpico (-6.9% W-o-W) were also amongst the top losers 22.31% (or LKR 3.56Bn) of market turnover. Industry over the week. Group’s turnover was driven primarily by HNB,Commercial & which accounted for TOP 10 TURNOVERS 66.12% of the sector’s total turnover. The Capital Goods Opening Closing Value Industry Group meanwhile accounted for 21.05% (or Company Code LKR 3.36Bn) of the total turnover value, with turnover Price Price (Rs. Mn) driven primarily by JKH & which EXPOLANKA EXPON 6.9 9.8 1,457.1 JKH JKH N 135.9 137.9 1,452.2 accounted for 60.11% of the sector turnover. The HNB HNB N 119.6 130.3 850.5 Food,Beverage & Tobacco Industry Group was also COMMERCIAL BANK COMBN 79.5 82.8 757.0 amongst the top sectorial contributors, contributing SAMPATH SAMPN 124.0 137.0 749.5 15.14% (or LKR 2.42Bn) to the total turnover, with MELSN 29.5 35.0 701.8 turnover driven primarily by Melstacorp accounting for TOKYO CEMENT[NV] TKYOX 37.0 45.5 664.3 29.02% of the total turnover. TOKYO CEMENT TKYON 45.9 54.4 638.6 HAYLEYS FABRIC MGT N 16.8 22.1 628.2

HEMAS HOLDINGS HHL N 60.3 68.0 570.1

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 18 Sep 2020

Market Review (Cont’d)

Net Foreign Sales (11 Sep-18 Sep) Net Foreign Purchases (11 Sep-18 Sep) DOLPHIN HOTELS DISTILLERIES Volume Change ('000s) Volume Change ('000s) LMF BROWNS INVSTMNTS CIC[X.0000] HEMAS HOLDINGS CARGILLS EXPOLANKA WATAWALA EAST WEST PEOPLES LEASING RENUKA AGRI HNB COMMERCIAL BANK* HAYLEYS FABRIC MELSTACORP*

SAMPATH JKH*

0 200 400 600 800 1,000 (1,500) (1,200) (900) (600) (300) - *Volume change of JKH(9.00Mn share), Melstacorp (3.50Mn shares) & Commercial Bank (2.90Mn shares) from 11th Sep – 18th Sep not displayed.

Foreign investors closed the week in a net selling position with total net outflow amounting to LKR 2.08Bn relative to last week’s total net outflow of LKR 1.96Bn (-5.90% W-o-W). Total foreign purchases increased by 117.1% W-o-W to LKR 0.96Bn from last week’s value of LKR 0.35Bn, while total foreign sales amounted to LKR 3.04Bn relative to LKR 2.31Bn recorded last week (31.40% W-o-W). In terms of volume, Sampath Bank & Hayleys Fabric led foreign purchases while JKH & Melstacorp led foreign sales. In terms of value, Sampath Bank & HNB led foreign purchases while JKH & Cold Stores 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 18/09/20 11/09/20 (LKR. Mn) 18/09/20 11/09/20 (LKR. Mn) SAMPATH 15.80% 15.57% 895,765 122.72 JKH 41.43% 42.11% (8,959,468) (1,236) HNB 27.18% 27.10% 339,562 44.24 COLD STORES 10.05% 10.54% (469,255) (312) CARGILLS 7.58% 7.50% 200,545 37.10 COMMERCIAL BANK 16.14% 16.44% (2,899,872) (240) HAYLEYS FABRIC 1.37% 0.97% 828,245 18.30 MELSTACORP 23.35% 23.65% (3,503,720) (123) CIC[X.0000] 6.99% 6.52% 102,814 7.32 CEYLON TOBACCO 97.04% 97.09% (84,767) (80) WATAWALA 1.00% 0.90% 205,722 6.81 HEMAS HOLDINGS 21.96% 22.11% (877,265) (60) PEOPLES LEASING 4.28% 4.26% 285,245 3.79 LMF 21.25% 22.52% (508,284) (54) NAMUNUKULA 2.44% 2.34% 23,676 3.05 C T HOLDINGS 14.36% 14.49% (269,301) (41) SANASA DEV. BANK 23.53% 23.46% 38,320 2.12 CHEVRON 17.72% 17.88% (393,256) (34) AITKEN SPENCE 21.83% 21.82% 54,200 2.10 DIPPED PRODUCTS 8.54% 8.80% (158,764) (32)

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

1,380 Foreign Purchases Foreign Sales 0 1,150

-600 920

-1,200

690

LKR. Mn LKR. LKR. Mn LKR. 460 -1,800

230 -2,400

0 -3,000 14-Sep 15-Sep 16-Sep 17-Sep 18-Sep 28-Aug 04-Sep 11-Sep 18-Sep

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 18 Sep 2020

Announcements for the Week

Dividend Announcements

Company DPS (Rs.) Type XD Date TOKYO CEMENT(V & NV) 1.50 First & Final 23-10-2020

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 18 Sep 2020

Point of View Trade Deficit Narrows in Jul’20

Domestic equities jumped by a further ~282 points or 5.2% Sri Lanka’s trade deficit continued to contract in Jul’20 to $0.2Bn W -o-W (cf. last week’s gains of 2.4%) to surpass the key from $0.7Mn last year as exports recovered (+8.7% Y-o-Y) and psychological mark of 5,500 index points. Gains on the index were imports continued to trend downwards (-24.6% Y-o-Y) during the further supported by strong retail driven momentum and positive month. Meanwhile, the country’s trade deficit also narrowed to reinforcement of Sri Lanka’s capital markets by the GoSL. $3.5Bn for the Jan – Jul’20 period (from $4.3Bn last year) Investors shrugged off weaker earnings releases from Distilleries supported by a significant decline in the fuel import bill and lower (+14% W-o-W) and its parent, Melstacorp (+19% W-o-W), for the spending on investment goods amid import restrictions on non- Jun’20 quarter as positive gains in both counters collectively essential goods sine Mar’20. contributed 39.1 points to this week’s rally. Market sentiments were further buoyed by a recovery in Sri Lanka’s Purchasing Earnings from exports in Jul’20 recorded a positive growth for the Managers’ Indices for manufacturing and service activities in first time since Feb’20 driven by an increase in earnings from Aug’20 and the narrowing trade deficit in Jul’20 while the Asian agricultural exports including tea. This coupled with a gradual Development Bank (ADB) revised up its GDP forecast for Sri recovery in both domestic and global value chains led export Lanka. Despite being the third worst performance in South Asia, earnings to increase from $1.0Bn in Jul’19 to $1.1Bn in Jul’20. ADB anticipates Sri Lanka’s GDP to contract by 5.5% in 2020 cf. a Furthermore, Textile and Garment exports recorded a marginal previous estimate of 6.1%. Consequently, the ASPI rose by ~282 decline for the month as an increase in Personal Protective points or 5.2% W-o-W to hit a 7-month high and its highest Equipment helped offset lower garment exports to the US and EU. weekly gain since May’20 at its close on Friday. The 5.2% W-o-W gain on the index has helped pare down the YTD loss on the Index Notable declines on all major import categories (consumer, to 6.3% cf. 11.0% last week. intermediate and investment goods) led import expenditure to fall from $1.7Bn in Jul’19 to $1.3Bn in Jul’20. A considerable drop in Meanwhile, activity levels on the Colombo Bourse also continued personal vehicle imports, lower expenditure on fuel (lower crude to improve this week on the back of strong retail investor oil prices), and a decline in fabric & yarn imports also supported participation as average daily turnover for the week increased the overall drop in import expenditure during the month. significantly to Rs. 3.2Bn cf. Rs. 1.9Bn last week. However, local HNI and institutional participation remained relatively on the Meanwhile, workers’ remittances declined by 5.5% Y-o-Y to side-lines as crossings for the week accounted for 14% of total $3.7Bn during 7M’20 despite an increase (12.2% Y-o-Y to $0.7Bn) market turnover cf. 28% last week. Buying interest was mainly during the month of Jul’20. In terms of financial flows, the CSE visible in JKH (51% of total crossings) and select Banking sector recorded a net outflow of $18Mn in Jul’20 as foreign investors stocks (HNB, SAMP, DFCC, & COMB accounted for 38% of total exited equity markets while the net foreign position on the crossings for the week). Despite the overall positive momentum, Colombo Bourse for 7M’20 amounted to an outflow of the foreign sell-off from domestic equities continued at a steady $129Mn. Outflows from G-Sec markets also continued over Jul’20, pace this week led by foreign selling in JKH. Consequently, with debt markets recording a net outflow of $515Mn in G-Secs foreigners were net sellers this week with a net foreign outflow of during 7M’20. During the month, Sri Lanka also received the Rs. 2.1Bn (cf. net outflow of Rs. 2.0Bn last week). Markets in the SAARCFINANCE swap facility of $400Mn from the Reserve Bank of week ahead are likely to look for cues from economic and political India. Consequently, gross official reserves at the end of Jul’20 developments. stood at $7.1Bn (cf. $6.7 in Jun’20) while the LKR depreicated~1.8% against the USD so far this year. Sources: CBSL

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 18 Sep 2020

Economic Snapshot

Dec’19 Jan’20 Feb’20 Mar’20 Apr’20 May’20 Jun’20 Jul’20 Interest Rates Prime Lending Rate 10.00 9.68 9.51 9.35 9.38 9.28 8.78 7.79 Ave. Wtd. Deposit Rates 8.20 8.14 8.06 7.90 7.77 7.57 7.38 7.16 Ave. Wtd. Fixed Dep. Rates 10.05 9.97 9.83 9.65 9.51 9.26 9.00 8.69 CCPI Inflation Y-o-Y % (Base 2013) 4.8 5.7 6.2 5.4 5.2 4.0 3.9 4.2

2013 2014 2015 2016 2017 2018 2019 GDP Growth (Base 2010) 3.4% 5.0% 5.0% 4.5% 3.6% 3.3% 2.3% Source Central Bank

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

10.0 220.0

8.0 200.0

180.0 6.0 CCPI

Rs /USD Rs 160.0 4.0

140.0 2.0

120.0 0.0 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jan-17 Sep-17 May-18 Jan-19 Sep-19 May-20

Source: Central Bank Source: Central Bank

6 Month T-Bill Yield Tea Prices

12 700

11 640

10 580

9 520

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

- T

8 460 Rs. Per kilo(Average ) kilo(AveragePer Rs.

7 400 Sep-16 Jun-17 Mar-18 Dec-18 Sep-19 Oct-16 Jul-17 Apr-18 Jan-19 Oct-19

Source: Central Bank Source: Sri Lanka Tea Board

Export & Trade Balance Trends in Tourist Arrivals

2000 600 Trade Balance (USD Mn 300,000 70%

1600 200 240,000 40% Y

-

o

- 1200 -200 180,000 10% Y Growth

800 -600 120,000 -20% Total Arrivals Total

400 -1000 ) 60,000 -50% Exports /Imports (USD Mn) (USD /Imports Exports 0 -1400 0 -80% Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Mar-17 Dec-17 Sep-18 Jun-19 Mar-20 Exports (LHS) Imports (LHS) Trade Balance (RHS) Source: Central Bank Source: Sri Lanka Tourism Development Authority

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