Govt.’s 20A victory fails to boost stock market

• Turnover slumps to lowest in 6 weeks; price indices wary

The two-thirds victory of the Government in passing the contentious 20th Amendment (20A) on Thursday failed to boost the Colombo stock market yesterday as investor sentiment was mixed.

The benchmark All Share Price Index (ASPI) declined by near 3 points whilst the S&P SL 20 Index moved north on the same basis. Turnover was Rs. 1.74 billion, relatively low in comparison to recent weeks.

After Thursday’s late-night vote, most analysts were anticipating the stock market to gain sharply as a show of confidence over the onset of stronger political stability and firm decision-making, and swifter implementation of Government policies and projects with the passing of the 20A.

The Government had to rely on seven MPs from minorities to secure the two-thirds majority and pass the new legislation.

Other analysts linked the lacklustre sentiment to the rise in COVID-19 positive cases. Though during trading hours there were no announcements of a spike, most feared a partial lockdown of the country or curfew in Colombo district.

The staggering figure of a record 609 new COVID positive cases was announced yesterday evening.  First Capital said expansion of COVID-19 clusters overshadowed the optimism of the 20A approval, reversing the market back to negative territory. 

During the week, the ASPI and the S&P SL20 dropped by 2.97% and 3.06%, respectively, while recording an average daily turnover of Rs. 2.4 billion, according to NDB Securities. 

“The index spiked within the first few minutes of trading, and thereafter witnessed continuous downtrend for the rest of the morning session. Later, the market recorded a stagnant movement and closed at 5,769, losing 3 points,” First Capital said. It said food and beverage counters led the turnover for the session, followed by transportation counters, making a joint contribution of 46%. Moreover, parcel trades in Amana Takaful and Lion Brewery boosted turnover amounting to 24% of total. Market experienced a net foreign outflow while recording moderate participation, First Capital added. 

Asia Securities said yesterday’s turnover was the lowest recorded in the past 6 weeks.

“Positive investor sentiments following the passing of the 20th Amendment led to the indices seeing gains early in the day. However, uncertainty regarding containment measures ahead of the weekend saw retail investors selling down. Despite this, media reports post-market dismissed any likelihood of an islandwide lockdown over the weekend,” Asia Securities said. 

“HNI’s were comparatively inactive whilst institutions continued to show interest in the blue chips during the day,” it added.

NDB Securities said the ASPI edged down as a result of price losses in counters such as Browns Investments, Richard Pieris & Company, and Nestle Lanka, with the turnover crossing Rs. 1.7 billion. 

High-net-worth and institutional investor participation was noted in Amana Takaful and Lion Brewery Ceylon. Mixed interest was observed in Tokyo Cement Company non-voting and Commercial Bank, whilst retail interest was noted in R.I.L. Property, Piramal Glass, and Kelani Tyres. Furthermore, foreigners closed as net sellers.

The food, beverage and tobacco sector was the top contributor to the market turnover (due to Lion Brewery), whilst the sector index lost 0.23%. The share price of Lion Brewery closed flat at Rs. 545.

The transportation sector was the second highest contributor to the market turnover (due to Expolanka Holdings), whilst the sector index decreased by 1.19%. The share price of Expolanka Holdings decreased by Rs. 0.20 (1.11%) to close at Rs. 17.80. Amana Takaful, Tokyo Cement Company non-voting and R.I.L. Property were also included amongst the top turnover contributors. The share price of Amana Takaful closed flat at Rs. 9. 

The share price of Tokyo Cement Company non-voting recorded a loss of Rs. 1.30 (2.50%) to close at Rs. 50.70, whilst the share price of R.I.L. Property declined by Rs. 0.20 (2.74%) to close at Rs. 7.10.

Separately, Resus Energy announced an interim dividend of Rs. 0.75 per share.