ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 14 Jul 2017

ASPI Bounces Back to 18M High … Slower Pace of

Indices vs. Turnover (10th Jul – 14th Jul) Fed Hikes to Benefit FX/Bond Markets

6,800 ASPI 3,950 S&P SL20

ASPI ^ 0.43% | S&P SL20 ^ 0.02% 6,770 3,930 S&P SL20 6,740 3,910

ASPI The Bourse closed on a … Cont. P2 6,710 3,890 6,680 3,870 Foreign Investors Closed the Week in... Cont. P3 6,650 3,850 10-Jul 11-Jul 12-Jul 13-Jul 14-Jul Equity markets bounced back … Cont. P5 2.0 1.6 1.2 0.8

Economic Snapshot………… P6 Bn) LKR

(Turnover 0.4 0.0 10-Jul 11-Jul 12-Jul 13-Jul 14-Jul KEY STATISTICS

Week ending 14-Jul 07-Jul +/- ASPI 6,766.14 6,737.50 0.43% S&P SL20 3,909.54 3,908.94 0.02% Banking & Finance -0.11% 16,855.35 16,874.15 Food & Beverage 23,207.36 22,980.60 0.99% Diversified 1,909.11 1,905.70 0.18% Hotel & Travel 2,988.07 2,989.93 -0.06% Plantations 941.17 891.12 5.62% Manufacturing 4,701.34 4,698.78 0.05% Turnover (LKR Bn) 3.67 3.48 5.38% Foreign Buying (LKR Mn) 1,978.39 2,054.36 -3.70% Foreign Selling (LKR Mn) 1,218.50 1,503.42 -18.95% Daily Average Turnover (LKR Bn) 0.73 0.70 5.38% Daily Average Foreign Buying (LKR Mn) 395.68 410.87 -3.70% Daily Average Foreign Selling (LKR Mn) 243.70 300.68 -18.95%

TOP 10 GAINERS TOP 10 LOSERS

Opening Closing WoW % Opening Closing WoW % Company Code Company Code Price Price Change Price Price Change MADULSIMA MADUN 7.1 9.5 33.8% RENUKA CAPITAL KZOON 552.9 5.4 -99.0% MALWATTE[NV] MAL X 3.9 5.0 28.2% EQUITY TWO PLC ETWON 55.0 45.2 -17.8% MALWATTE MAL N 4.3 5.4 25.6% LUCKY LANKA[NV] LLMPX 1.6 1.4 -12.5% AGALAWATTE AGALN 20.0 23.8 19.0% INDUSTRIAL ASPH. ASPHNN 360.0 315.0 -12.5% SERENDIB ENG.GRP IDL N 8.2 9.7 18.3% LUCKY LANKA LLMPN 2.6 2.3 -11.5% BALANGODA BALAN 16.0 18.7 16.9% MULLERS MULLN 1.2 1.1 -8.3% CEYLON INV. CINVN 53.0 61.0 15.1% PALM GARDEN HOTL PALMN 35.1 32.5 -7.4% TAPROBANE TAP N 5.5 6.3 14.5% TRANS ASIA TRANN 90.0 83.8 -6.9% CIFL CIFLN 0.7 0.8 14.3% ASIA ASSET AAF N 1.6 1.5 -6.3% HORANA HOPLN 25.3 28.6 13.0% DILMAH CEYLON CTEAN 639.0 600.0 -6.1%

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 14 Jul 2017

Market Review

Indices | Liquidity (in Volume Terms) | The Bourse closed on a positive note as the ASPI The Diversified Sector dominated the market in terms of increased by 28.64 points (or 0.43%) to close at share volume, accounting for 36.44% (or 61.79Mn 6,766.14 points, while the S&P SL20 Index also shares) of total volume, with a value contribution of LKR increased marginally by 0.60 points (or 0.02%) to close 1.37Bn. The Banking, Finance & Insurance sector at 3,909.54 points. followed suit, adding 11.10% to total turnover volume as 18.83Mn shares were exchanged. The sector’s volume Turnover & Market Capitalization | accounted for LKR 0.43Bn of total market turnover was the highest contributor to the week’s value. The Manufacturing Sector meanwhile, contributed turnover value, contributing LKR 0.57Bn or 15.68% of 18.78Mn shares (or 11.07%), amounting to LKR 0.58Bn.

total turnover value. Access Engineering followed suit, accounting for 10.73% of turnover (value of LKR Top Gainers & Losers | 0.39Bn) while JKH contributed LKR 0.33Bn to account Madulsima was the week’s highest price gainer; for 9.08% of the week’s turnover. Total turnover value increasing 33.80% W-o-W from LKR 7.10 to LKR 9.50. amounted to LKR 3.67Bn (cf. last week’s value of LKR Malwatta[NV] gained 28.21% W-o-W to close at LKR 3.48Bn), while daily average turnover value amounted 5.00 while Malwatta gained 25.58% W-o-W to close at to LKR 0.73Bn (+5.38% W-o-W) compared to last week’s LKR 5.40. Agalawatta (+19.00% W-o-W) and Serendib Engineering Group (+18.29% W-o-W) were also average of LKR 0.70Bn. Market capitalization meanwhile, increased by 0.41% W-o-W (or LKR amongst the gainers. 12.55Bn) to LKR 3,068.34 Bn cf. LKR 3,055.79Bn last week. Renuka Capital was the week’s highest price loser, declining 99.02% W-o-W to close at LKR 5.40. Equity Liquidity (in Value Terms) | Two (-17.82% W-o-W), Lucky Lanka[NV] (-12.50% W-o- The Diversified Sector was the highest contributor to the W) & Industrial Asphalts (-12.50% W-o-W) were also week’s total turnover value, accounting for 37.49% (or amongst the top losers over the week. LKR 1.37Bn) of market turnover. Sector turnover was

driven primarily by Melstacorp, JKH, Richard Pieris & TOP 10 TURNOVERS which accounted for 91.05% of the sector’s total turnover. The Manufacturing Sector Opening Closing Value (Rs. Company Code meanwhile accounted for 15.84% (or LKR 0.58Bn) of the Price Price Mn) total turnover value with turnover driven primarily by MELSTACORP MELSN 68.0 68.5 574.85 Tokyo Cement which accounted for 43.85% of the sector ACCESS ENG SL AEL N 25.9 26.6 393.32 turnover. The Banking, Finance & Insurance Sector was JKH JKH N 178.0 177.2 332.81 also amongst the top sectorial contributors, contributing TOKYO CEMENT TKYON 75.0 75.0 254.67 RICHARD PIERIS RICHN 12.6 13.0 175.20 11.67% (or LKR 0.43Bn) to the market driven by HEMAS HOLDINGS HHL N 153.0 152.0 168.27 Commercial Bank which accounted for 25.17% of the COMMERCIAL BANK COMBN 139.8 138.5 107.62 sector turnover. FABRIC MGT N 15.7 16.6 106.68 LANKA CENTURY GREGN 13.2 14.0 79.63 NESTLE NESTN 2000.0 1998.4 67.32

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 14 Jul 2017

Market Review (Cont’d)

Net Foreign Purchases (07 Jul-14 Jul) Net Foreign Sales (07 Jul-14 Jul)

TOKYO CEMENT MERCHANT BANK Volume Change ('000s) Volume Change ('000s) CEYLON GUARDIAN ELPITIYA SOFTLOGIC S M B LEASING[X] FIRST CAPITAL ADAM INVESTMENTS PEOPLES LEASING PIRAMAL GLASS BPPL HOLDINGS JKH PAN ASIA BROWNS INVSTMNTS CHEVRON RICHARD PIERIS MELSTACORP ACCESS ENG SL* COMMERCIAL BANK - 2,250 4,500 6,750 9,000 (400) (300) (200) (100) - *Volume change of Access Engineering (13.24Mn shares) 7th Jul -14th Jul not displayed.

Foreign investors closed the week in a net buying position with total net inflows amounting to LKR 0.76Bn relative to last week’s total net inflow of LKR 0.55Bn (+37.93% W-o-W). Total foreign purchases decreased by 3.70% W-o-W to LKR 1.98Bn from last week’s value of LKR 2.05Bn, while total foreign sales amounted to LKR 1.22Bn relative to LKR 1.50Bn recorded last week (-18.95% W-o-W). In terms of volume, Access Engineering & Richard Pieris led foreign purchases while Commercial Bank and Melstacorp led foreign sales. In terms of value, Access Engineering and JKH led foreign purchases while Nestle and 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 14/07/17 07/07/17 (LKR. Mn) 14/07/17 07/07/17 (LKR. Mn) ACCESS ENG SL 8.10% 6.78% 13,235,089 352.05 NESTLE 95.94% 96.01% (35,227) (70.40) JKH 56.31% 56.20% 1,574,782 279.05 COMMERCIAL BANK 34.24% 34.28% (372,857) (51.64) RICHARD PIERIS 72.51% 72.10% 8,348,458 108.53 CHEVRON 25.53% 25.61% (189,419) (31.05) HNB 27.91% 27.85% 197,946 47.21 MELSTACORP 25.47% 25.51% (361,397) (24.76) TOKYO CEMENT 22.87% 22.76% 302,161 22.66 CEYLON GUARDIAN 8.23% 8.35% (93,263) (11.01) TEEJAY LANKA 46.62% 46.57% 348,500 14.53 SWISSTEK 3.56% 3.74% (47,899) (3.78) SAMPATH 18.88% 18.85% 44,007 12.38 FIRST CAPITAL 0.41% 0.51% (106,655) (3.53) CEYLON TOBACCO 97.40% 97.39% 11,232 11.05 DOCKYARD 53.21% 53.25% (29,710) (3.06) ELPITIYA 4.87% 4.36% 376,185 10.91 SANASA DEV. BANK 23.68% 23.74% (28,943) (3.02) COLD STORES 10.03% 10.02% 11,492 9.99 PAN ASIA 20.44% 20.48% (162,300) (3.02)

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 1,200 1,500 Foreign Purchases Foreign Sales

1,200 960

900 720

LKR. Mn LKR. LKR. Mn LKR.

600 480

300 240

0 0 10-Jul 11-Jul 12-Jul 13-Jul 14-Jul 23-Jun 30-Jun 07-Jul 14-Jul Source: Stock Exchange 3

ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 14 Jul 2017

Announcements for the Week

Dividend Announcements Company DPS (Rs.) Type XD Date

KELANI TYRES PLC Rs. 2.50 Interim Dividend 20.Jul.2017 HOLDINGS PLC Rs. 0.15 Interim Dividend 24.Jul.2017 LANKA MILK FOODS (CWE) PLC Rs. 2.50 First & Final Dividend 25.Aug.2017 ACL PLASTICS PLC Rs. 6.00 Interim Dividend 20.Jul2017 KELANI CABLES PLC Rs. 3.50 Interim Dividend 20.Jul.2017

Point of View Slower Pace of Fed Hikes Benefit FX/Bond Mkts

Equity markets bounced back over the week to close at an 18- Emerging market equities rose to 2-year highs this week as the

month high, as the benchmark price index gained ~29 points US Fed appeared to indicate a more gradual pace of rate hikes.

W-o-W to end ~66 points above the key 6700 index level. The Fed Reserve Chair’s comments to the US congress earlier

Despite a 20 point loss between Tuesday and Thu rsday, index in the week was interpreted by investors as ‘dovish’ and

gains on Monday and Friday helped pare down the losses over indicative of no interest rate hike in Sept’17 as US inflation

the week. Markets which remained largely dull till Thursday rates remain below the Fed’s inflation target of 2%. Emerging

amid thin trading, recorded average daily turnover levels of ~ market equities and currencies responded buoyantly, as a

LKR 0.51Bn before hitting a notable LKR 1.63Bn on Friday slower pace of Fed rate hikes could impact the dollar and

which helped push the average weekly turnover levels to LKR preserve the relatively wide gap between U.S. and developing-

0.73Bn (5% higher than last week’s average turnover of LKR country bond yields. The weaker USD along with higher 0.70Bn and ~19% lower than 2017 daily average turnover of interest rates in developing nations has led to record inflows

LKR 0.91Bn). Large parcels which traded on Friday led to to emerging-market funds in H1’17. The US Fed’s signal of a overall crossings accounting for ~38% of the total market more gradual pace of hikes is positive for Sri Lankan currency turnover amid strong interest in Melstacorp (37% of crossings), and bond markets as well as it implies that net foreign inflows

Access Engineering (23% of crossings) and Hemas Holdings to G-Secs (which have been positive since Mar’17) are likely to

(10% of crossings). Foreign investors meanwhile continued to continue. Net inflows to G-sec’s in Jun’17 was Rs. 236Bn vs. Rs. be net buyers for the 24th consecutive week to end at LKR 196Bn in Mar’17. Inflows to G-Secs should help support the 0.76bn despite a marginal outflow on Wednesday this week LKR which will be vital in the context that oil imports remain (~38% higher than last week). Y-T-D Net Foreign flows (LKR high, exports relatively muted and remittances have taken a hit 22.9Bn) to the Colombo Bourse thus recorded the second as geo-political tensions in the Gulf region appear to be highest yearly inflow since 2012 (LKR 38.6Bn). Markets in the protracted. The US adopting a more dovish tone also implies week ahead are likely to retain the current momentum whilst that pressure on Sri Lanka to raise rates is lower, a positive looking for direction from greater clarity on the proposed new development in light of the fact that GDP growth has slowed inland revenue act. over Q4’16 and Q1’17.

Sources: Bloomberg & Reuters

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ACUITY STOCKBROKERS RESEARCH | SRI LANKA EQUITIES

Weekly Market Review 14 Jul 2017

Economic Snapshot

Nov’16 Dec’16 Jan’17 Feb’17 Mar’17 Apr’17 May’17 Jun’17 Interest Rates Prime Lending Rate 11.98 11.73 11.48 11.55 11.56 11.74 11.67 11.84 Ave. Wtd. Deposit Rates 8.00 8.17 8.42 8.66 8.81 8.89 8.99 9.13 Ave. Wtd. Fixed Dep. Rates 10.25 10.46 10.84 11.15 11.38 11.43 11.52 11.66 CCPI Inflation Y-o-Y % 4.0 4.5 5.5 6.8 7.3 6.9 6.0 6.1 (Base 2013) 2012 2013 2014 2015 2016 GDP Growth (Base 2010) 9.1% 3.4% 4.9% 4.8% 4.4%

Source Central Bank

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

155.0 10.0

149.0 8.0

143.0 6.0 CCPI

Rs /USD Rs 137.0 4.0

131.0 2.0

125.0 0.0 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17

Source: Central Bank Source: Central Bank

6 Month T-Bill Yield Tea Prices

15 700

13 620

11 540

9 460

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

- T

7 380 Rs. Per kilo(Unweighted)Per Rs. 5 300 Jun-13 Jan-14 Aug-14 Mar-15 Oct-15 Jul-16 Feb-17 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17

Source: Central Bank Source: Sri Lanka Tea Board

Export & Trade Balance Trends in Tourist Arrivals

2000 600 Trade Balance (USD Mn 210,000 80.0% 1600 200 64.0%

168,000 Y

-

o -

1200 -200 48.0% Y Growth 126,000 32.0% 800 -600 84,000 16.0% 400 -1000 Arrivals Total ) 42,000 0.0%

Exports /Imports (USD Mn) (USD /Imports Exports 0 -1400 Mar-13Nov-13 Jul-14 Mar-15Nov-15 Jul-16 Mar-17 0 -16.0% Jun-14 Mar-15 Dec-15 Sep-16 Jun-17 Exports (LHS) Imports (LHS) Trade Balance (RHS)

Source: Central Bank Source: Sri Lanka Tourism Development Authority 5

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