ASPI bullish amidst continued foreign interest

It was an overall bullish week at the Colombo Stock Exchange amidst foreign buying. The ASPI closed at 6422.69 up by 0.89% compared to the previous week with the S&P SL20 closing at 3363.27 up by 1.58%.

The Central Bank of Sri Lanka (CBSL), on behalf of the GOSL, successfully launched a USD 500Mn 5.5 Year and USD 1Bn 10 Year international sovereign bonds. This marks Sri Lanka's 10th US Dollar bond issuance and the first dual tranche offering. The bonds were rated 'B1', 'B+' and 'B+' by Moody's Investors Service, Standard and Poor's and Fitch Ratings, respectively. However, despite the prevailing head winds in global financial markets subsequent to the Brexit referendum in June, the Sri Lankan bonds witnessed a total bid of USD 5.5 billion, particularly from US investors. Notably Sri Lankan treasury securities also witnessed considerable foreign interest recently.

Yields were relatively high amidst the country's recent sovereign down grade, 5.5Y bond yield was at 5.750% (spread of 468bps vs the 5-year US Treasury) and 10Y bond priced at 6.825% (spread of 535bps vs the 10-year US Treasury).

The turnover levels for the week increased by 76% and the aggregate weekly turnover was Rs. 4.36 bn. The foreigners appeared to be bullish during the week having recorded inflows of Rs. 971 mn; resulting in a net foreign inflow of Rs. 580.15 mn. Foreign interest was mainly seen on John Keells Holdings PLC (JKH). JKH closed the week at Rs. 142.20, up by Rs. 1.30 during the week.

The year to date net foreign outflow stands at Rs. 5.1 bn.

The top three (03) positive contributors to the ASPI during the week were Commercial Bank of Ceylon PLC (Rs. 129.50, + 4.44%), Chevron Lubricants Lanka PLC (Rs. 167.30, +9.70%), Dialog Axiata PLC (Rs. 10.80, +2.86%). The top three negative contributors to the ASPI were Ceylon Tobacco Company (Rs. 988.90, -5.20%), Cargills Ceylon (Rs. 151.50, -4.66%), Nestle Lanka (Rs. 2,369.60, -1.27%).

Further, on a technical analysis perspective the ASPI indicates a neutral view where the daily RSI stands at 54.78. The ASPI is below its 200 day Simple Moving Average level of 6594. The key Support levels are 6360 and 6250, whereas the key resistant levels stand at 6489 and 6677.