Equity Analysis /
Sri Lanka

Sri Lanka Industry Watch: October 2019

    Kavinda Perera
    Kavinda Perera

    Head of Research

    Contributors
    Isuri Munasinghe
    Naveed Majeed
    Mangalee Goonetilleke
    Lakshini Fernando
    Asia Securities
    16 October 2019
    Published by
    • Significant outflows from the government bond market in August saw LKR/USD (30-day spot avg.) YTD appreciation fall to 1.3% by September (vs. 3.5% June YTD).
    • Private sector credit slowed further in Q3 CY 19; AWPLR dropped faster than the AWDR, indicating that the banks’ NIMs would have narrowed slightly in Q2 CY 19 sequentially.
    • Prolonged US-China trade war tensions and concerns of slowing global growth led to further softening of global commodity prices.
    • Spike in global crude oil prices following Saudi Aramco attacks were short lived as both Brent and WTI recorded qoq declines in Q3 CY 19.
    • Brent prices reached US$60.78/bbl and WTI US$54.07 /bbl as of end-September 2019.
    • Looking ahead, Brent futures show prices weakening to cUS$60.00/bbl levels by December 2019.
    • Metal prices (aluminium and copper) have weakened in Q3 CY 19. However, beyond 2019, LME futures show an upward trend, albeit very gradually.
    • MGT and TJL to continue to benefit from soft cotton prices over the next two quarters.