CBSL rate cut boosts investor sentiment and activity at CSE

The Colombo stock market shot up yesterday with investor sentiment getting a boost from the Central Bank policy rate cut.

The active S&P SL20 gained by over 2% and the benchmark ASPI by 1.6%. Turnover rose to Rs. 1.3 billion involving 46.7 million shares.

Asia Securities said after several sessions of subdued investor activity, the market took a buoyant note as investors drew inspiration from the unprecedented 250bps policy rate cut announced by the CBSL. “More importantly, this move highlighted a significant shift by the CBSL, breaking away from a tight monetary stance maintained for almost two years,” Asia said.

In light of the unexpected 250 bps reduction in the policy rates Asia said it has revised forecasts for the Average Weighted Prime Lending Rate (AWPLR) and the Consumer Price Index (CPI) headline inflation for 2023. ” We now expect the AWPLR to decline to 11% by 2023, compared to our previous forecast of 15%, and the CPI headline inflation to ease to 5% by 2023, down from our previous forecast of 9.8% as the policy rate cut will help lower the cost of borrowings and stimulate domestic demand,” Asia said.

On the market front, the ASPI gained 136 points (+1.6%), recording its biggest oneday gain in over two months while the S&P SL20 index increased 48 points (+2.0%).

Front-line stocks JKH (+1.5%), LIOC (+6.2%), EXPO (+2.6%), HAYL (+3.8%), and BIL (+4.2%) led the upward momentum, further supported by price gains AEL (+5.0%), SLTL (+5.4%), FCT (+8.7%), KCAB (+14.2%), SCAP (+9.6%).

SAMP (+11 points) came in as the biggest index mover, followed by LIOC (+10 points), and VONE (+9 points). The breadth of the market was strong with 124 price gainers and 57 decliners.

Turnover reached a 7-week high driven by steady domestic buying in JKH (Rs. 543 million).

First Capital said the Index surged up during the day, gaining 136 points on the back of the relaxation of monetary policy rates by 250bps, which surpassed investors’ expectations. The entire broader market was up today with shares rising across the board on all sectors. Moreover, revitalised investor interest was visible on the retail favourite counter LIOC, during the day. Treasury shares also observed significant trading activity during the day driven by the policy rate cut.

NDB Securities said high net worth and institutional investor participation was noted in Melstacorp and John Keells Holdings. Mixed interest was observed in Lanka IOC, Expolanka Holdings and Access Engineering whilst retail interest was noted in Browns Investments, LOLC Finance and Industrial Asphalts.

The Capital Goods sector was the top contributor to the market turnover (due to John Keells Holdings and Access Engineering) whilst the sector index gained 1.68%. The share price of John Keells Holdings increased by Rs. 2 to Rs. 138. The share price of Access Engineering appreciated by 70 cents to Rs. 14.80. The Food, Beverage & Tobacco sector was the second highest contributor to the market turnover (due to Melstacorp) whilst the sector index increased by 0.71%. The share price of Melstacorp lost 10 cents to Rs. 52.90. Lanka IOC and Expolanka Holdings were also included among the top turnover contributors. The share price of Lanka IOC moved up by Rs. 8 to Rs. 136.75. The share price of Expolanka Holdings recorded a gain of Rs. 3.50 to Rs. 136.50.