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First Capital Research : Top Equity Recommendations 2018

Equity Portfolio Performance 2014-2017

As at 31st Dec 2017 at 2018, First Capital Research Top Recommendations have achieved a Capital Gain of 6.4% (Excluding Dividends) compared to the market performance of 2.3%.

Following are our current and previous top recommendations and their performances for 2014, 2015, 2016 & 2017 for your reference.


Top Recommendations for 2018

Brief Equity Outlook

Market earnings: The current tight monetary policy has slowed down the economy significantly reducing earnings growth for most companies. The situation is expected to ease off towards 2H2018. Therefore the companies are likely to have a better earnings performance in 2018E/19E compared to the weak performance we are experiencing in CY17/FY18E. We believe overall market earnings are likely to grow by a modest 5%-7% during 2018E/FY19E supported by a recovery in economic performance in the 2H2018. Earnings Growth is likely to accelerate to 10%-12% towards CY19E/FY20E backed by further improvement in economic health of the country and also easing of the monetary policy with more stability in the system.

Market Returns: Market returns are likely to be slow but positive in the 1H2018 due to attractive valuations prevailing in the economy and is likely to improve in the 2H2018 supported by expectations of a better economic outlook and earnings performance. Thereby, we expect overall market returns are likely to be 10%-12% approximately 50% above the expected earnings performance as some counters are likely to re-rate with an expected better earnings outlook in the future. In terms of the ASPI index it is only likely to reach 7000 (+10% or +650 points) towards end of 2018. Market returns are likely to accelerate towards the 2019 to about 15% with the actual earnings performance and renewed investor confidence. Index is likely reach 8000 level (+15% or +1000 points) towards 2019. These targets however are highly dependent on the current stable outlook and reform agenda continuing during 2018 as well.

Key Sectors: We believe the key sectors that are likely to outperform the market and expected provide high returns are the Banking Sector, Building Materials Sector and Apparel Sector while the energy sector also may turnaround depending on the implementation of the pricing formulas by the Government which is also a condition of the IMF.


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.

Sri Lankan shares end flat amid foreign outflows

First Capital’s Head of Research, Dimantha Mathew speaks to Reuters Mon Sep 26, 2016

COLOMBO, Sept 26 (Reuters) – Sri Lankan stocks ended steady on Monday, as gains in financial shares were offset by losses in consumer staples, amid foreign outflows and tax hike concerns.

Foreign investors sold a net 183 million rupees worth of shares on Monday extending the year-to-date net forging outflow to 3.01 billion rupees worth of equities.

The International Monetary Fund (IMF) on Friday said Sri Lanka’s government, which has failed to raise taxes as promised when it received a $1.5 billion loan from the lender in June, needs to implement a tax reform package without further delay.


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