Macro concerns weigh down stock market

Tuesday, 23 February 2021 01:20 -     - {{hitsCtrl.values.hits}}

  • Both indices dip by over 2%; CSE sees welcome but small net foreign inflow of Rs. 42 m; YTD outflow tops Rs. 12 b

The Colombo stock market began a fresh week on a negative note with analysts pinning bearish investor sentiment to concerns over macro issues facing the country including debt repayment.

The All Share Price Index (ASPI) dipped sharply by 2.6% or over 200 points whilst the S&PSL 20 Index was down 2.2%. Turnover hit a recent low of Rs. 2.3 billion. 

Standard Chartered Bank and Barclays Bank – two global banks and managers of former International Sovereign Bonds (ISBs) – have said they are “underweight” on Sri Lanka flagging off concerns over the country's debt sustainability, repayment and external reserves. Sri Lanka also began facing a crucial session of the UN Human Rights Council in Geneva yesterday.

Despite the negativity, market saw a welcome net foreign inflow of Rs. 42.3 million as against an outflow of Rs. 284 million on Friday. Year to date net foreign outflow has crossed Rs. 12 billion mark.

First Capital said the Bourse started the week reverting the direction to negative while recording a near two-month low turnover. 

“Index experienced a gradual downtrend since the beginning of the session and closed at 7,598 losing a massive 200 points,” it added. 

Food and Beverage sector led the turnover for the session closely followed by Materials sector making a joint contribution of 48%. Parcel trades in CIC, COMB and RCL amounted to 6% of turnover. 

NDB Securities said indices closed in red as a result of price losses in counters such as LOLC Holdings (contributed 33 points to ASPI’s dip), Expolanka Holdings and John Keells Holdings (12 points each).

It said high net worth and institutional investor participation was noted in CIC Holdings, Commercial Bank and Royal Ceramics Lanka. Mixed interest was observed in Sampath Bank, Hayleys and ACL Cables, whilst retail interest was noted in Browns Investments, Expolanka Holdings and Dipped Products.

Food, Beverage and Tobacco sector was the top contributor to the market turnover (due to Browns Investments), whilst the sector index lost 1.46%. The share price of Browns Investments decreased by Rs. 0.30 (4.92%) to close at Rs. 5.80. 

Materials sector was the second highest contributor to the market turnover (due to Dipped Products), whilst the sector index decreased by 4.51%. The share price of Dipped Products recorded a loss of Rs. 4.30 (7.15%) to close at Rs. 55.80.

Expolanka Holdings, LOLC Holdings and Commercial Bank were also included amongst the top turnover contributors. The share price of Expolanka Holdings lost Rs. 2.80 (5.94%) to close at Rs. 44.30. Moreover, the share price of LOLC Holdings moved down by Rs. 30.50 (7.49%) to close at Rs. 376.75, whilst the share price of Commercial Bank declined by Rs. 1.00 (1.11%) to close at Rs. 89.00.

Though yesterday’s market performance was disappointing, Capital Trust said it believes that intermittent pullbacks do provide an opportunity for corporate earnings to catch up, thereby deflating valuation multiples. 

“Consequently, our view on the market's long term upward trajectory stays intact and we continue to advise investors to adopt a stock picking approach focusing on strong asset quality and robust earnings growth,” it added.


CSE says ASPI in double-digit YTD returns territory for 25 consecutive market days