ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 23 Aug 2019

Indices vs. Turnover (19th Aug – 23rd Aug)

ASPI Remains Below 6000 Mark Amid Wait & See

Approach…CBSL Reduces Policy Rates by 50Bps 6,000 ASPI 3,000 S&P SL20

5,960 2,970 S&P SL20

ASPI ^ 0.07% | S&P SL20 ˅ 0.10% 5,920 2,940 ASPI 5,880 2,910 The Bourse ended the week… Cont. P2 5,840 2,880 5,800 2,850 19-Aug20-Aug21-Aug22-Aug23-Aug Foreign investors closed the week... Cont. P3 1.00 0.80 0.60

Domestic equities ….… Cont. P4 0.40 LKR Bn) LKR

(Turnover 0.20 0.00 Economic Snapshot………… P5 19-Aug 20-Aug 21-Aug 22-Aug 23-Aug

KEY STATISTICS

Week ending 23-Aug 16-Aug +/- ASPI 5,898.47 5,894.51 0.07% S&P SL20 2,902.80 2,905.81 -0.10%

Banking & Finance 15,847.79 15,859.99 -0.08%

Food & Beverage 22,674.17 22,453.23 0.98% Diversified 1,529.42 1,509.08 1.35% Hotel & Travel 2,588.83 2,616.81 -1.07% Plantations 757.88 764.02 -0.80% Manufacturing 2,918.32 2,943.51 -0.86% Turnover (LKR Bn) 2.55 4.11 -38.04% Foreign Buying (LKR Mn) 452.58 1,131.95 -60.02% Foreign Selling (LKR Mn) 423.26 2,716.01 -84.42% Daily Average Turnover (LKR Bn) 0.51 1.37 -62.82% Daily Average Foreign Buying (LKR Mn) 90.52 377.32 -76.01% Daily Average Foreign Selling (LKR Mn) 84.65 905.34 -90.65%

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[NV] SEMBX 0.2 0.3 50.0% TESS AGRO[NV] TESSX 0.5 0.4 -20.0% LANKA REALTY ASCON 28.8 34.0 18.1% LANKA ASHOK ASHON 944.0 781.2 -17.2% ASIA CAPITAL ACAPN 7.1 7.9 11.3% NATION LANKA CSF N 0.7 0.6 -14.3% BROWNS INVSTMNTS BIL N 3.1 3.4 9.7% AMANA LIFE ATLLN 7.5 6.5 -13.3% KELSEY KDL N 32.0 34.9 9.1% MULLERS MULLN 0.8 0.7 -12.5% AGALAWATTE AGALN 14.1 15.1 7.1% ON'ALLY ONALN 38.0 33.7 -11.3% AMBEON CAPITAL TAP N 4.6 4.9 6.5% ANILANA HOTELS ALHPN 1.0 0.9 -10.0% PALM GARDEN HOTL PALMN 20.5 21.8 6.3% SERENDIB ENG.GRP IDL N 7.3 6.6 -9.6% SINGER SRI LANKA SINSN 26.2 27.7 5.7% ASIA SIYAKA ASIYN 2.3 2.1 -8.7% LION BREWERY LIONN 570.0 599.4 5.2% RAMBODA FALLS RFL N 19.8 18.1 -8.6%

1

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 23 Aug 2019

Market Review

Indices | Liquidity (in Volume Terms) | The Bourse ended the week on a mixed note as the ASPI The Diversified sector dominated the market in terms of increased by 3.96 points (or 0.07%) to close at 5,898.47 share volume, accounting for 38.52% (or 47.52Mn points, while the S&P SL20 Index decreased by 3.01 shares) of total volume, with a value contribution of LKR points (or -0.10%) to close at 2,902.80 points. 0.75Bn. The Telecom sector followed suit, adding 17.79% to total turnover volume as 21.94Mn shares Turnover & Market Capitalization | were exchanged. The sector’s volume accounted for LKR Sampath was the highest contributor to the week’s 0.23Bn of total market turnover value. The Banks, turnover value, contributing LKR 0.48Bn or 18.91% of Finance & Insurance sector meanwhile, contributed total turnover value. JKH followed suit, accounting for 12.42Mn shares (or 10.07%), amounting to LKR 0.97Bn.

16.15% of turnover (value of LKR 0.41Bn) while Dialog contributed LKR 0.23Bn to account for 9.05% of the Top Gainers & Losers | week’s turnover. Total turnover value amounted to LKR S M B Leasing [NV] was the week’s highest price gainer; 2.55Bn (cf. last week’s value of LKR 4.11Bn), while daily increasing 50.0% W-o-W from LKR0.20 to LKR0.30 average turnover value amounted to LKR 0.51Bn whil e Lanka Reality (+18.1% W-o-W), Asia Capital (-62.82% W-o-W) compared to last week’s average of (+11.3% W-o-W) and Browns Investments (+9.7% LKR 1.37Bn. Market capitalization meanwhile, W-o-W) were also amongst the top gainers. decreased by 0.07% W-o-W (or LKR 1.87Bn) to LKR 2,784.67Bn cf. LKR 2,782.80Bn last week. Tess Agro [NV] was the week’s highest price loser; declining 20.0% W-o-W to close at LKR0.40 while Lanka Liquidity (in Value Terms) | Ashok (-17.2% W-o-W), Nation Lanka (-14.3% W-o-W) The Banks, Finance & Insurance sector was the highest and Amana Life (-13.3% W-o-W) were also amongst the contributor to the week’s total turnover value, top losers over the week. accounting for 38.17% (or LKR 0.97Bn) of market turnover. Sector turnover was driven primarily by Sampath, HNB, Commercial Bank & First Capital which TOP 10 TURNOVERS accounted for 77.28% of the sector’s total turnover. The Diversified sector meanwhile accounted for 29.45% (or Opening Closing Value (Rs. Company Code LKR 0.75Bn) of the total turnover value, with turnover Price Price Mn) driven primarily by JKH, Browns Investments & SAMPATH SAMPN 163.1 166.3 481.4 Sunshine Holding which accounted for 88.50% of the JKH JKH N 150.2 153.1 411.1 sector turnover. The Telecom sector was also amongst DIALOG DIALN 10.7 10.6 230.5 HNB HNB N 175.2 170.0 145.1 the top sectorial contributors, contributing 9.07% (or ACCESS ENG SL AEL N 19.9 19.5 131.4 LKR 0.23Bn) to the total turnover, with turnover driven BROWNS INVSTMNTS BIL N 3.1 3.4 127.8 primarily by Dialog accounting for 99.83% of the total SUNSHINE HOLDING SUN N 46.0 44.0 124.7 turnover. FABRIC MGT N 14.2 14.9 98.2 COMMERCIAL BANK COMBN 106.0 106.0 68.6 FIRST CAPITAL CFVFN 50.9 53.2 55.8

2

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 23 Aug 2019

Market Review (Cont’d)

Net Foreign Sales (16 Aug-23 Aug) Net Foreign Purchases (16 Aug-23 Aug) L O L C HOLDINGS TOKYO CEMENT[X.0000] Volume Change ('000s) CEYLON TEA BRKRS Volume Change ('000s) JANASHAKTHI INS. FIRST CAPITAL HNB[X.0000] ANILANA HOTELS PANASIAN POWER HNB DOLPHIN HOTELS RENUKA CAPITAL ACCESS ENG SL TOKYO CEMENT CENTRAL FINANCE PIRAMAL GLASS JKH* LANKA IOC* BROWNS INVSTMNTS* DIALOG* 0 40 80 120 160 200 (1,000) (800) (600) (400) (200) - *Volume change of Browns Investments (2.00Mn Shares), JKH (0.79Mn Shares), (4.15Mn Shares) and Lanka IOC (2.50Mn Shares) from 16th Aug – 23rd Aug not displayed.

Foreign investors closed the week in a net buying position with total net inflow amounting to LKR 0.03Bn relative to last week’s total net outflow of LKR 1.58Bn (101.9% W-o-W). Total foreign purchases decreased by 60.0% W-o-W to LKR 0.45Bn from last week’s value of LKR 1.13Bn, while total foreign sales amounted to LKR 0.42Bn relative to LKR 2.72Bn recorded last week (-84.4% W-o-W). In terms of volume, Browns Investments & JKH led foreign purchases while Dialog & Lanka IOC led foreign sales. In terms of value, JKH and Central Finance led foreign purchases while Dialog & Lanka IOC 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 23/08/19 16/08/19 (LKR. Mn) 23/08/19 16/08/19 (LKR. Mn) JKH 47.32% 47.26% 793,150 121.43 DIALOG 92.58% 92.63% (4,154,500) (44.04) CENTRAL FINANCE 14.16% 14.08% 161,474 15.32 LANKA IOC 78.06% 78.53% (2,500,000) (43.00) HNB[X.0000] 47.40% 47.32% 82,900 12.02 HNB 34.87% 34.93% (240,416) (40.87) NESTLE 95.21% 95.20% 6,017 8.12 TOKYO CEMENT 23.23% 23.34% (296,998) (9.74) BROWNS INVSTMNTS 1.39% 1.34% 2,001,469 6.80 SAMPATH 21.34% 21.35% (23,827) (3.96) L O L C HOLDINGS 4.44% 4.43% 47,363 6.06 PIRAMAL GLASS 63.98% 64.08% (1,000,000) (3.80) NAT. DEV. BANK 15.43% 15.41% 41,587 4.45 ACL PLASTICS 1.79% 2.34% (23,215) (2.83) FIRST CAPITAL 0.28% 0.22% 65,000 3.46 JANASHAKTHI INS. 0.79% 0.82% (65,915) (2.18) ACCESS ENG SL 4.83% 4.82% 155,301 3.03 TOKYO CEMENT[X.0000] 41.92% 41.97% (58,300) (1.60) DOLPHIN HOTELS 1.37% 1.10% 85,000 2.01 SEYLAN BANK[X.0000] 6.82% 6.84% (35,502) (1.42)

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 200 Foreign Purchases 400 Foreign Sales

160 0

120 -400 LKR. Mn LKR. 80 Mn LKR. -800

40 -1,200

0 -1,600 19-Aug 20-Aug 21-Aug 22-Aug 23-Aug 02-Aug 09-Aug 16-Aug 23-Aug

3

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 23 Aug 2019

Announcements for the Week

Dividend Announcements

Company DPS (Rs.) Type XD Date RAMBODA FALLS 0.50 Second Interim 06-09-2019 THE NUWARA ELIYA HOTELS 16.00 First Interim 29-08-2019 LEE HEDGES 1.00 Final 27-09-2019 ELPITIYA PLANTATIONS 1.25 First & Final 20-09-2019 AITKEN SPENCE PLANTATION 2.00 First & Final 20-09-2019 RAIGAMA WAIYAMA SALTERNS 0.05 Final 27-09-2019

Company Proportion Shares to be Issued Type

CDB(V) 1:0.027 1,575,052 Scrip CDB(NV) 1:0.034 336,188 Scrip

4

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 23 Aug 2019

Point of View CBSL Reduces Policy Rates by 50Bps

Domestic equities were relatively subdued this week, remaining The CBSL on Friday reduced policy rates by 50Bps (SDFR- 7.00% staunchly below the key 6,000 mark as investors continued to SLFR-8.00%) citing concerns that market lending rates have not adopt a wait-and-see stance ahead of the Presidential candidate declined sufficiently enough to stimulate greater credit demand nominations by the main political parties. Markets began the and economic growth. The Monetary Authority noted that week on a relatively positive note, gaining ~18 index points early although market lending rates have declined to some extent in the week before slipping ~14 points over the remainder of the following some of its prior monetary policy moves (ie: reducing week to close up a paltry 4 points at 5,898.47. A 50 basis point policy rates by 50Bps in May’19, lowering the SRR by 2.50pp), rate cut by the Central Bank on Friday was in line with the lending rates are yet to show a decline that’s commensurate to the Monetary Authority’s strongly dovish monetary policy stance, but decline experienced by deposit rates. The CBSL noted that it did little to change equity market sentiments. Furthermore, remains vital that bank and non-bank financial institutions lower overall weaker earnings releases also weighed down the broad their lending rates in response to their reduced cost of funds in share index. Of the ~93% of corporates who have released their order to boost credit flows and help revive economic activity. quarterly earnings thus far, nearly 67% have reported a drop in Credit disbursed to the private sector by licensed commercial earnings. Although market earnings over Jun’19 have in fact banks continued to decelerate during Jan-Jul’19, while GDP increased from Rs. 45.9Bn in Q2’2018 to Rs. 55.7Bn this quarter, growth in 2019 continues to be hampered by domestic and global the 21% Y-o-Y gain includes extra-ordinary gains by LOLC developments. The CBSL also noted that its decision to lower rates Holdings and its subsidiaries, arising from an acquisition. When is further supported both by the accommodative monetary policy excluding this extra-ordinary gain however, market earnings have environment globally and by the prevailing low inflation dropped ~29% Y-o-Y, representing the weaker economic environment domestically. Slowing global economic activity due conditions that have prevailed over the quarter. Although activity to uncertainties arising from trade tensions and geopolitical levels on the bourse also declined considerably, local HNI and developments has prompted many central banks in advanced and institutional buying interest regained momentum, accounting for EM economies to reduce policy interest rates to support their 35% of total market turnover (cf. 10% of total market turnover domestic economic growth. Meanwhile, inflation levels in Sri last week). Crossings for the week were mainly concentrated on Lanka have remained muted and are expected to remain at mid- JKH, and Dialog which collectively accounted for single digits over the medium term supporting the CBSL’s dovish 79% of total crossings. In contrast to the foreign equity sell-off in monetary policy stance further. The CBSL also noted that the other EM/FM markets, the sell-off off on domestic risky assets country’s external sector continues to remain resilient due to an eased this week with foreign investors being net buyers with an improving trade balance, helping the LKR appreciate 2.4% against inflow of Rs. 29Mn cf. to a weekly outflow of Rs. 1.6Bn last week. the USD so far this year. The LKR has been supported by Markets in the week ahead are likely to take cues from ongoing contracting imports, rising exports, the recovery in Tourism political developments. earnings and financial flows via ISBs.

5

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 23 Aug 2019

Economic Snapshot

Dec’18 Jan’19 Feb’19 Mar’19 Apr’19 May’19 Jun’19 Jul’19 Interest Rates Prime Lending Rate 11.94 12.05 12.30 12.23 12.07 12.01 11.45 10.93 Ave. Wtd. Deposit Rates 8.81 8.85 8.88 8.98 8.97 9.00 8.94 8.88 Ave. Wtd. Fixed Dep. Rates 10.85 10.91 10.96 11.11 11.15 11.19 11.07 10.97 CCPI Inflation Y-o-Y % (Base 2013) 2.8 3.7 4.0 4.3 4.5 5.0 3.8 3.3

2012 2013 2014 2015 2016 2017 2018 GDP Growth (Base 2010) 9.1% 3.4% 5.0% 5.0% 4.5% 3.4% 3.2% 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 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Feb-16 Oct-16 Jun-17 Feb-18 Oct-18 Jun-19

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 Aug-16 May-17 Feb-18 Nov-18 Aug-19 Aug-16 May-17 Feb-18 Nov-18 Aug-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%

400 -1000 Arrivals Total ) 60,000 -50%

Exports /Imports (USDMn) Exports /Imports 0 -1400 0 -80% Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Exports (LHS) Imports (LHS) Trade Balance (RHS) Jul-16 Apr-17 Jan-18 Oct-18 Jul-19 Source: Sri Lanka Tourism Development Authority Source: Central Bank 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] Fernando Chethana Ellepola Prashan Fernando Chethana Ellepola, CFA (+94)+94 112112206 206 229234 [email protected] (+94) 112 206 222 (+94) 112 206 256 [email protected] +94 112 206 256 [email protected] chethana @acuitystockbrokers.com

Anjula Nawarathna AuburnThehani Senn Weerasinghe Kapila Pathirage [email protected] Surajdeen (+94)[email protected] 112 206 239 (+94) 112 206 227/228 (+94)+94 112 112 206 206 255 253 [email protected]+94 112206 224 [email protected] Sahrah @acuitystockbrokers.com

Aethra de Silva S. Vasanthakumar Naren Godamunne [email protected] Gunarathna (+94) 112 206 250/251 (+94) 112 206 225 (+94)+94 112 112 206 206 253 255 [email protected] [email protected] rajitha @acuitystockbrokers.com Samalka Athuraliya Kandy Branch Prasanna Semasinghe [email protected] Chathura Siyambalapitiya Maxtina Fernando (+94) 814 474 443 +94 112 206 253 (+94) 112 206 232 Kumar Dias Desinghe (+94) 112 206 251 [email protected] [email protected] [email protected] [email protected] Anouk Weerasinghe +94 814 474 443 Warana Sumanasena [email protected] Dhammika Wanniarachchi (+94) 112206 231 +94 112 206 254 (+94) 112 206 229 Prasanna Semasinghe [email protected] [email protected] [email protected]

+94 814 474 443 Dinuk Subasinghe Kumar Dias Desinghe (+94) 112206 237 (+94) 814 474 443 [email protected] [email protected]

Danuksha Koralage

(+94) 112206 233

[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.