ASPI bearish despite foreign inflows

It was an overall bearish week for the Colombo Stock Exchange amidst foreign buying. The ASPI closed at 6393.87 down by 0.54% compared to the previous week with the S&P SL20 closing at 3414.39 down by 0.41%. ASPI recorded a year to date loss of 6.90% as at weekly closure.

The CBSL has increased the policy rates, the standing deposit facility and standing lending facility rate by 50bps each to 7.00% and 8.50% respectively. This is the second round of policy rate hike during 2016 amidst the higher private sector credit disbursements coupled with the looming BOP deficit. Private sector credit growth stands still at a higher pace, recording a YoY growth of 28% during May 2016 despite the weaker vehicle registrations comparatively. We expect the market interest rates to further head north amidst policy rate hike coupled with the tight excess liquidity condition.

The turnover levels for the week increased by 10% and the aggregated weekly turnover was LKR 2.35Bn. The foreigners appeared to be bullish during the week having recorded inflows of LKR 1.10Bn; resulting in a net foreign inflow of LKR 207.8Mn. Foreign interest was mainly seen on Textured Jersey Lanka PLC (TJL). The year to date net foreign outflow stands at Rs. 4.65Bn The ASPI is below its 200 day Simple Moving Average level of 6562. The key Support levels are 6360 and 6250, whereas the key resistant levels stand at 6432 and 6489.

- Candor - Wealth Catalysts