Colombo stock market in stellar take-off in 2021

Friday, 15 January 2021 01:10 -     - {{hitsCtrl.values.hits}}

  • Within first eight days of trading of New Year, achieves over 30% of activity of 2020’s full fourth quarter
  • ASPI up near 10% so far, S&P SL20 up over 5%

The Colombo stock market has got off to a stellar start in 2021 with trading activity in just eight days of the New Year already achieving over 30% of last year’s fourth quarter full performance of three months. 

In the first eight days of trading in 2021, turnover has soared to Rs. 59 billion or 33% of the Rs. 179 billion achieved in 4Q of 2020. Number of shares traded was 4.7 billion or 39% of 4Q of 2020, which was 11.86 billion. Number of trades was 20% (320,000) of 1.54 million done in 4Q of 2020. 

On Wednesday, the number of trades amounting to 52,559 was the highest in CSE’s history, whilst market capitalisation at Rs. 3.25 trillion was the highest as well. 

Turnover so far this year has been averaging over Rs. 7 billion, whilst on Wednesday it peaked to over Rs. 9 billion. 

Price indices have been positive as well with the All Share Index (ASPI) up near 10% or 9.88% and the S&P SL20 up 5.46%.

The low interest rate regime has prompted many to shift to equities, despite perceived risks due to a struggling economy. However, most broking houses have favoured investors to shift to equities on future upside and fundamentals of sound companies.

CT CLSA said it remain cautiously optimistic about the outlook of the CSE for 2021. 

“We expect the 2021 recovery story to be driven by consumption, healthcare, construction and manufacturing sectors that will be funded by a well-capitalised domestic banking system in the near term,” it added in its outlook for equities.

First Capital said market returns are likely to be stronger in 1H2021 with an ASPI target of 7,000-7,500 for 2021. As of Wednesday, ASPI was at 7,443, level with most investors vying the all-time high of 7,811 points last seen on 14 February 2011.

“We have upgraded our 2020 earnings amidst the stronger than expected recovery, which has automatically pushed our earnings expectations for 2021 as well,” First Capital said. 

“With the improved earnings outlook, we upgrade overall earnings expectations for 2020 improving to -16% on the back of stronger than expected outlook. Nevertheless, earnings growth expectations are maintained at +19% for 2021. Despite growth for 2021 being similar with upgrade of 2020E earnings absolute earnings for 2021 improves closer towards 2019 indicating strong recovery for companies,” First Capital said. 

 “Supported by the strong earnings growth especially in 1H2021, we expect the ASPI to provide a market return of 11% to reach a range of 7,000-7,500 indicating forward PER of 14.0x-14.5x 2021 earnings. However, a possible steep depreciation in the currency may dampen sentiment from 2Q2021 onwards. It is likely to have an adverse impact on banking rates towards 2H2021 with potential increase in banking rates by about 200bps during 2H2021,” First Capital added. 


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