Equity Analysis /
Sri Lanka

Industry Watch – July 2019

    Kavinda Perera
    Kavinda Perera

    Head of Research

    Contributors
    Isuri Munasinghe
    Naveed Majeed
    Mangalee Goonetilleke
    Lakshini Fernando
    Asia Securities
    12 July 2019
    Published by
    • ISB issuance and lower importer dollar demand in 2Q CY19 keeps YTD LKR/USD appreciation steady at 3.5%. We forecast a 2.1% YoY appreciation of the currency, at LKR 179.00 for 2019.
    • Private sector credit slowed further in 2Q CY19; AWPLR dropped faster than the AWDR, indicating that the banks’ NIMs would have narrowed slightly in 2Q CY19 sequentially.
    • Concerns about weakening global economy and oil demand growth have kept oil prices in check despite US-Iran tensions and production cuts by OPEC.
    • Brent prices reached USD 66.55/bbl and WTI USD 58.47/bbl as of end June ’19.
    • Looking ahead, Brent futures show prices weakening to cUSD 60.00/bbl levels.
    • Metal prices (aluminium and copper) have weakened in 2Q CY19. However, beyond 2019, LME futures show an upward trend.
    • While companies such as ALUM, PARQ and ACL will benefit from the weakening of prices in 2Q CY19E, we believe this will be more than offset by the depreciation of the LKR.