Market continues to hinder amidst policy uncertainties

It was an overall bearish week for the Colombo Stock Exchange amidst increased concern on capital gain tax coupled with the uncertainties of post-Brexit.

The ASPI closed at 6287.09 down by 83.02 points or 1.30% compared to the previous week whilst the S&P SL20 closed at 3302.51 down by 1.17%. ASPI recorded a year to date loss of 8.45% as at weekly closure. The turnover levels for the week increased by 8% and the aggregate weekly turnover was LKR 2.71bn. Chevron Lubricants Lanka PLC was the top contributor to the weekly turnover, recording LKR 936.9Mn, supported by a off market deal worth of LKR 441.2Mn crossed at LKR 149.00- 150.00.

The foreigners appeared to be bearish during the week amidst the uncertainty on external front recording a net foreign outflow of LKR 221Mn. Foreign interest was mainly seen on Textured Jersey Lanka PLC (TJL). TJL closed the week at LKR 35.70, unchanged during the week.

The year to date net foreign outflow stands at Rs. 6.1Bn.

The top 3 positive contributors to the ASPI during the week were Ceylon Cold Stores PLC (Rs. 554.20, +3.76%), Nestle Lanka PLC (Rs.2400, + 0.84%), Asiri Hospital Holdings PLC (Rs.27.10, +3.04%). Further, the top 3 negative contributors to the ASPI were Ceylon Tobacco Company PLC (Rs. 1050.00, -4.45%) Bukit Darah PLC (Rs.298.30, -14.75%), C T Holdings PLC (Rs. 118.20, -9.08%). Further John Keells Holdings PLC's trading recommenced on Thursday after its 3 days trading suspension due to its 7 to 8 share subdivision while closing the week at LKR 135.00

Further, from a Technical perspective the ASPI indicates an oversold view where the daily RSI stands at 20.9. Currently, the ASPI is below its 200 day Simple Moving Average level at 6631. The key Support levels are 6282 and 6108, whereas the key resistant levels stand at 6360 and 6489.

The key event which influenced the market sentiment during the week was mainly the publication of inflation data by the Department of Census & Statistics. Sri Lanka inflation has surged to 6% (YoY) in June up from 4.8% in previous month, highest since October 2013. The inflation of food commodities primarily contributed for the month's inflation, recording an 8.2% (YoY) growth.

However on YOY basis core inflation slightly dropped at 6.4% from 6.6%. Going forward we expect the head-line inflation to increase further amidst the government fiscal tightening. Further the Central Bank Governor, Arjuna Mahendran informed the monetary board recently that he would not seek reappointment as governor of Central Bank of Sri Lanka when his term finishes on 30th June 2016