Sri Lanka Equity Strategy Q4 19: Position amidst seasonable sentiment
Equities’ recovery eases on short-term uncertainty; election-driven optimism to be revived in Q4. The valuation discount implies that the market continues to reflect the political and earnings risks after Easter attacks. Political risk-related premium is gradually easing, albeit foreign fund flow remains muted. Muted foreign flows to continue through CY19, but policy stability to result in improving fund flow in CY20E. While earnings headwinds in consumer sectors would clear in CY20E, the index-heavy banks will remain under pressure. Key picks portfolio comprise five stocks, with five additional counters on our watchlist.
