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Weekly Govt Securities Market: One-year T-Bill records 12-week low

By First Capital Research

Weekly Yield Movement & Volume

Amidst the presidential election outcome, the secondary market yield curve shifted downwards across the board on the back of heavy buying interest stemming from both local and foreign counterparts.
Prior to the Presidential election, the yield curve remained broadly unchanged, as market participants remained on the sideline for a clear outcome. Activities were mainly centered on 2021, 2022, 2023, 2024, and 2034 maturities. Post-election, short tenure maturities dipped by 30-45bps, mid tenors fell by 58-71bps, and long tenors shifted downwards by 38-59bps.
At the weekly primary bill auction, three-month and six-month bill yields were accepted at weighted averages of 7.47 per cent and 7.58 per cent, with both dipping by 9bps. The benchmark one-year dipped for the first time in four weeks to be accepted at a weighted average of 8.22 per cent.
In the forex market, the rupee appreciated to close the week at Rs 179.29 from Rs 180.40 held at the beginning of the week.

Liquidity & CBSL Holdings

Volatility in the liquidity was witnessed although it remained positive during the week. The highest excess liquidity for the week was recorded on 20 November amounting to Rs 12.7 billion. Meanwhile, CBSL holdings slightly declined to close at Rs 80.1 billion.

Foreign Interest

Foreign holding in Government Securities increased by Rs 2.2 billion to record at Rs 116.5 billion, while foreign holding percentage remained unchanged at 2.1 per cent.

Maturities for next week

The Government Securities Market has to settle a Treasury bill maturity amounting to Rs 25 billion, and Treasury bond interest of Rs 19.1 billion during the week ending 29 November 2019.

Daily Summary

Thursday (14.11.19): The secondary market yield curve remained broadly unchanged, while the overall market witnessed thin volumes as investors followed a wait-and-see approach ahead of the Presidential Election. In the belly end of the yield curve, [15.09.24] traded at 10.07 per cent, while [15.10.27] saw its yield ranging between 10.31-10.32 per cent. With the buying interest, long tenor [15.09.34] changed hands at 10.72-10.70 per cent. Meanwhile, at the bond buy back held under open market operations, a total of Rs 3.0 billion was accepted with [15.03.22], [01.07.22] and [01.10.22] being accepted at weighted averages of 9.02 per cent, 9.12 per cent and 9.20 per cent.
Friday (15.11.19): The secondary market yield curve remained unchanged, while the overall market witnessed thin volumes ahead of the Presidential Election. Limited activity was seen on [15.09.24] trading at 10.07-10.05 per cent levels and [15.10.27] trading at 10.33-10.35 per cent levels.
Monday (18.11.19): With the outcome of the Presidential Election, the secondary bond market experienced a bullish sentiment, with heavy buying interest across the board resulting in the yield curve shifting downwards.

With the buying interest, in the short end of the yield curve, the one-year T bill reached 8.50 per cent, while [15.12.21] reached 8.69 per cent. Moreover, [15.03.23], [15.07.23] and [15.12.23] reached intra-day lows of 9.35 per cent, 9.50 per cent and 9.55 per cent, respectively. In the midst of heavy volumes, [15.03.24], [15.06.24] and [15.09.24] saw yields trading at intra-day lows of 9.80 per cent, 9.77 per cent and 9.80 per cent, while [15.10.27] reached the day’s low of 10.08 per cent.
Tuesday (19.11.19): In the secondary market, the positive sentiment continued for the second consecutive day after Presidential Election results, with heavy buying interest witnessed across the yield curve from both local and foreign counterparties with high volumes. The yield curve shifted downwards across the board, while the benchmark one-year was seen trading at day’s low of 8.30 per cent.

Nisansala Kuruppumudali, Research Analyst at First Capital commenting on the bond and stock market performance – 21.11.2019

Nisansala Kuruppumudali, Research Analyst at First Capital commenting on the bond and stock market performance.

“In the bond market the secondary market yield curve shifted slightly upwards with the profit taking. In the equity market bourse concluded the day in red persisting the negative sentiment for the second straight session, mainly dragged down by the price losses in CARG and MELS.”

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka.
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Atchuthan Srirangan, Assistant Manager Research at First Capital commenting on the bond and stock market performance – 20.11.2019

Atchuthan Srirangan, Assistant Manager Research at First Capital commenting on the bond and stock market performance

The secondary market continued the positive sentiment for the third consecutive day with heavy buying interest across the yield curve. Bourse concluded the day in red after three positive trading sessions, mainly dragged down by the price losses in JKH and COMB.N.

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka.
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Shares edge down on profit taking; rupee ends higher

(Colombo) REUTERS: Sri Lankan shares ended marginally lower yesterday from their highest level in more than a year hit in the previous session, as investors booked profits after a post-election rally, while the rupee rose to a nearly three-month peak.
Former wartime defence chief Gotabaya Rajapaksa on Saturday won presidential election and assumed office on Tuesday as the seventh President of the island nation.
Prime Minister Ranil Wickremesinghe will resign this week, a spokesman from his office said yesterday, after his party’s candidate lost a presidential election.
Rajapaksa made national security his top priority after being sworn in on Monday. Majority of Sinhala Buddhists voted for him after he campaigned on promises to make the nation safer in the aftermath of the Easter bombings earlier this year.

The benchmark stock index, which rose 0.53 percent in the early trade, ended 0.07 percent weaker at 6,138.59, edging down from its highest close since August 9, 2018 hit on Tuesday. The bourse rose 1.53 percent last week, and it is up 1.42 percent for the year.
“We believe the investor sentiment is positive and it continues to be positive with the political stability on top of the low interest rate regime. Today, the market came off as investors booked profits while the local retail investors turned towards mid cap shares,” said Dimantha Mathew, Head of Research at broker First Capital Holdings.
The rupee ended 0.1 percent firmer at 179.20/40 per dollar, its highest since August 21. It closed at 179.25/50 on Tuesday and is up 1.89 percent so far this year.
Foreign investors were net sellers of riskier assets for the tenth straight session yesterday.
They sold a net Rs.624.3 million worth of shares yesterday, extending the net foreign outflow from the equities market to Rs.8.9 billion for the year, according to index data.
Equity market turnover was Rs.2.05 billion, well above this year’s daily average of about Rs.705.9 million. Last year’s daily average was Rs.834 million.
Meanwhile, foreign investors bought government securities on a net basis for the fourth time in six weeks, buying a net Rs.2.2 billion worth of government securities in the week ended November 13.
Total foreign outflows from government securities through November 13 stood at Rs.48 billion, the Central Bank data said.

 

 

Atchuthan Srirangan, Assistant Manager Research at First Capital commenting on the bond and stock market performance – 19.11.2019

Atchuthan Srirangan, Assistant Manager Research at First Capital commenting on the bond and stock market performance

In the secondary market, the positive sentiment continued for the second consecutive day after presidential election results with heavy buying interest witnessed across the yield curve. Stock  market ended in green continuing the positive sentiment witnessed in the last two trading sessions.

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka.
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Sri Lankan shares hit over 1-year high, rupee up as Rajapaksa assumes office

COLOMBO, Nov 19 (Reuters) – Sri Lankan shares hit their highest level in more than a year on Tuesday, while the rupee rose to a three-month peak, as former wartime defence chief Gotabaya Rajapaksa assumed his presidential duties.

** Rajapaksa assumed office as the seventh president of the island nation on Tuesday after he won elections over the weekend.

** Rajapaksa made national security his top priority after being sworn in on Monday. Majority of Sinhala Buddhists voted for him after he campaigned on promises to make the nation safer in the aftermath of the Easter bombings earlier this year.

** The election outcome was positive for Sri Lanka and reduced political uncertainty, which should boost economic growth, Standard Chartered Bank said in a note. But the political establishment faced twin economic challenges of boosting growth and improving debt sustainability, it added.

** The benchmark stock index, which rose 0.75% in the early trade, ended 0.22% firmer at 6,142.76, its highest close since Aug. 9, 2018. The bourse rose 1.53% last week, and it is up 1.49% for the year. ** “There were some sort of profit taking after a surge on Monday. But still we see foreigners are on the selling side in a lower volume. The index might move sideways until investors see how the new president is going to convert his manifesto into action,” said Atchuthan Srirangan, a senior research analyst at First Capital Holdings. ** The rupee ended 0.1% firmer at 179.25/50 per dollar, its highest since Aug. 21. It closed at 179.40/80 on Monday and is up 1.87% so far this year.

** Foreign investors were net sellers of riskier assets for the ninth straight session on Tuesday.

** They sold a net 255.8 million rupees ($1.43 million) worth of shares on Tuesday, extending the net foreign outflow from the equities market to 8.3 billion rupees for the year, according to index data.

** Equity market turnover was 1.4 billion rupees well above this year’s daily average of about 699.6 million rupees. Last year’s daily average was 834 million rupees.

** Meanwhile, foreign investors bought government securities on a net basis for the fourth time in six weeks, buying a net 2.2 billion rupees worth of government securities in the week ended Nov. 13.

** Total foreign outflows from government securities through Nov. 13 stood at 48 billion rupees, central bank data said. ** For a report on global markets, click ** For a report on major currencies, click ($1 = 179.2500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Rashmi Aich)

Dimantha Mathew, at first capital on the impact of the presidential election to the stock market and its future performance – 18.11.2019

Dimantha Mathew, Head of research at first capital commenting on the impact of the presidential election to the stock market and its future performance.

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka.
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Stocks jump to more than 1-year high, rupee up after Rajapaksa poll win

  • Gains by 1.9% in early trade
  • CSE All Share Index closes at highest since 10 August 2018
  • Bourse rose 1.53% last week and up 1.28% for the year
  • Standard Chartered Bank says election outcome positive for Sri Lanka and reduced political uncertainty
  • SL faces twin economic challenges of boosting growth and improving debt sustainability

REUTERS: Shares jumped to their highest in more than a year in heavy volume, while the rupee rose to a two-and-half month high yesterday, after former wartime Defence Secretary Gotabaya Rajapaksa won the presidency by a big margin.

The benchmark stock index, which jumped near 1.9% in early trade, ended 1.8% firmer at 6,129.56, its highest close since 10 August 2018. The Bourse rose 1.53% last week, and it is up 1.28% for the year.

The day’s gain was the biggest single-day rise since 29 July.  “Since we already have the macroeconomic stability and now got the political stability, investors will be positive with expected growth in low interest rates,” said Dimantha Mathew, head of research at broker First Capital Holdings.

The rupee ended 0.5% firmer at 179.40/80 per dollar, its highest since 30 August. It closed at 180.10/30 on Friday and is up 1.8% so far this year.

Foreign investors were net sellers of riskier assets for an eighth straight session on Monday.

They sold a net Rs. 391.6 million ($ 2.18 million) worth of shares yesterday, extending the net foreign outflow from the equities market to Rs. 8 billion for the year, according to index data.

Equity market turnover was Rs. 2.4 billion, its highest since 17 September and well above this year’s daily average of about Rs. 696 million. Last year’s daily average was Rs. 834 million.

Rajapaksa made national security his top priority after being sworn in on Monday at an ancient temple in the north-central city of Anuradhapura, where he received blessings from Buddhist monks. The majority of Sinhala Buddhists voted for him after he campaigned on promises to make the nation safer in the aftermath of the Easter bombings earlier this year.

Standard Chartered Bank (SCB), in a note to investors, said the election outcome was positive for Sri Lanka and reduced political uncertainty, which should boost economic growth.

“Sri Lanka’s political establishment faces the twin economic challenges of boosting growth and improving debt sustainability. We expect support across party lines for ongoing cooperation with the IMF to address these problems,” SCB said in the note.

It also said: “Negotiating a new IMF program is crucial to ensuring market access, in our view, given large upcoming government external refinancing needs of $ 3 billion a year over the next five years. We expect the IMF to remain supportive; it has already agreed to a slower pace of fiscal consolidation.”

Analysts before the election had raised concerns over giveaways promised by the two top presidential candidates, after officials and a credit rating agency warned that their pledges could push the country deeper into debt.

Rajapaksa has vowed to cut by half a value-added tax of 15% and abolish some taxes as a way to reignite consumption.

Meanwhile, foreign investors bought government securities on a net basis for the fourth time in six weeks, buying a net Rs. 2.2 billion worth of government securities in the week ended 13 November.

Total foreign outflows from government securities through 13 November stood at Rs. 48 billion, Central Bank data showed.

 

Bourse set to cruise with Gota’s win

President-elect Gotabaya Rajapaksa waves at his supporters as he leaves his house in Colombo. (Reuters photo)

 

By Nishel Fernando
Capital market analysts expect the Colombo bourse to climb upward in the short to medium-term following the fairly convincing win of Sri Lanka Podujana Peramuna (SLPP) presidential candidate Gotabaya Rajapaksa, who appeared to be the preferred choice of the country’s business and investment community.
However, for the long-term sustainability of such an upward momentum, in particular to lure in foreign institutional investors, they opined that expediting capital market reforms, including the Securities and Exchange Commission (SEC) Act, which has been stalled during past few years, remains vital.
“There will be an initial spike in the market, and as the week progresses we feel there will be bit of profit taking as well. We are expecting the All Share Price Index (ASPI) to rise to 6, 500 index points by mid next year and to 7, 000 index points by year-end, mainly based on the lower interest rate environment, picking up of consumer demand coupled with political stability coming into the picture after a long time,” First Capital Head of Research Dimantha Mathew said.
ASPI closed at 6, 023.02, 0.72 percent or 43 points up on Friday.
Softlogic Capital Markets Chief Executive Officer Danushka Samarasinghe noted that a 1, 000 point gain in ASPI is quite possible during short-term. In the short-term, market activities are likely to be driven by retail investors while local high net worth investors are expected to join the rally in 3-6 months, according to Mathew.
With an anticipated recovery in consumer spending, buying into stocks of consumer related firms are expected to increase.

Further, banking stocks also set to become attractive due to smart valuations and anticipated credit growth.
However, Samarasinghe opined that there will be a broad market-wide recovery, pointing out that the outcome of the presidential election provides the much needed trigger point for market players.
Some analysts opined that foreign investors would start entering into the bourse from the first quarter next year, as they may adopt a ‘wait and see’ approach until the parliamentary election is concluded next year and the new government presents its policy framework formally.
The CFA Advocacy Chair/ Director Ravi Abeysuriya stressed that structural reforms are required to sustain these short to medium-term gains while attracting foreign intuitional investors.
“The structural reforms didn’t move ahead during past 4-5 years. The new SEC Act never came in. We have to bring new products into the market. Reforms in particular are needed to attract intuitional investors.
“For example, what we were looking forward to have is a properly structured Central Depository System (CDS) addressing a major concern of foreign investors,” he elaborated.
Abeysuriya noted that both supply and demand sides of the market have to be improved to attract foreign investors.
He further said policy changes of the new government are also set to influence CSE activities.

 

Sri Lankan stocks, rupee slip ahead of presidential polls

COLOMBO, Nov 14 (Reuters) – Sri Lankan shares ended weaker on Thursday, edging lower from their near one-week high hit in the previous session, as investors sold healthcare and telecommunication shares ahead of Saturday’s presidential vote.

** Campaigning for the polls ended on Thursday.

** Though wartime defence chief Gotabaya Rajapaksa, who is backed by majority Sinhala Buddhists, had early lead in the poll, the momentum has now tilted in favour of rival Sajith Premadasa who is backed by all communities in Sri Lanka, political analysts say. There are no official opinion polls in Sri Lanka.

** The country’s main Tamil party last week announced its support for Premadasa, giving him an edge over Rajapaksa.

** There are concerns over giveaways promised by the two top presidential candidates after officials and a credit rating agency warned that their pledges could push the country deeper into debt.

** The International Monetary Fund approved the release of sixth tranche of a $1.5 billion loan programme for Sri Lanka, but asked the authorities to show fiscal discipline.

** Premadasa has promised free housing for all, free school uniforms and meals for students, and free fertilizer for farmers among other things.

** Rajapaksa has vowed to cut in half a value-added tax of 15% and abolish some taxes as a way to reignite consumption. ** “Whoever wins the election, we won’t see a huge spike … until we see proper policies of the new president,” said Dimantha Mathew, head of research at broker First Capital Holdings.

** The benchmark stock index ended 0.16% lower at 5,980.07. The bourse fell 1.3% last week, ending a four-week run of gains. The index is down 1.19% for the year.

** The rupee ended 0.06% weaker at 180.30/40 per dollar, compared with Wednesday’s close of 180.20/40. The currency is up 1.3% so far this year.

** Foreign investors were net sellers of riskier assets for a sixth straight session on Thursday.

** They sold a net 5.8 million rupees ($32,132.96) worth of shares on Thursday, extending the net foreign outflow from the equities market to 7.3 billion rupees for the year, according to index data.

** Equity market turnover was 635.5 million rupees, less than this year’s daily average of about 686.9 million rupees. Last year’s daily average was 834 million rupees.

** Meanwhile, foreign investors bought government securities on a net basis for the third time in five weeks, buying a net 1.88 billion rupees worth of government securities in the week ended Nov. 6.

** Total foreign outflows from government securities through Nov. 6 stood at 50.2 billion rupees, central bank data said.

** The central bank left its key rates unchanged on Oct. 11 after loosening its monetary policy this year. However, growth is likely to remain subdued in the face of rising global risks. ** For a report on global markets, click ** For a report on major currencies, click ($1 = 180.5000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anil D’Silva)