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Daily
28th June 2013
Market Performance
S&P SL20

Market Indices
ASI

6,400 6,300

3,600 3,500 3,400 3,300

ASI 24/06/2013 26/06/2013 27/06/2013
25/06/2013

DNH MARKET WATCH

6,200 6,100 6,000

S&P SL20
28/06/2013

3,200

ASPI S&P SL 20 Turnover (mn) Foreign Purchases (mn) Foreign Sales (mn) Traded Companies Market PER (X) Market Cap (LKR bn) Market Cap (US$ bn) Dividend Yield (%) Price to Book (X)

28.06.2013 6,121 3,432 265.9 152.0 53.6 191 16.6 2,351 17.8 2.3 2.3

27.06.2013 6,111 3,426 1,310.9 451.0 947.6 226 16.5 2,347 17.9 2.3 2.3

%Chg. 0.2 0.2 -79.7 -66.3 -94.3 -15.5 0.5 0.2 -0.5 0.0 2.2

Market Outlook
Following a shortened trading session due to a technical glitch, the ASPI closed the session virtually unchanged at 6121. Turnover recorded LKR266 mn with trading in Aitken Spence Hotel and Sampath Bank accounting for 41% of the days total. Gainers matched losers with Ceylon Leather, Metropolitan Resource and Ceylinco Insurance(X) rising by 18.6%, 14.0% and 12.7% and offsetting losses in George Steuart, Commercial Development and PC House which fell by 16.5%, 12.9% and 10.5% respectively. Meanwhile, global stocks recovered towards the end of the week amid fading fears the Federal Reserve would cut its bond buying programme although while gold prices fell below $1,200 to its lowest since August 2010.
Sri Lanka is one of the most attractive bourses in the EM world on a 12 valuation basis The divergence between developed and emerging markets performance has been stark with emerging markets declining 12.9% on an YTD basis despite positive performances recorded by the bourses of many developed markets. This was mainly due to the fall in EM heavyweights such as Brazil and India, while markets such as Sri Lanka appear to have bucked the downward trend gaining 6.0% (YTD dollarized). With the notable exception of the Pakistan and Viet Nam bourses which have risen by 22.9% and 15.1% respectively YTD, Sri Lanka has outperformed against several markets such as Malaysia and Indonesia traditionally considered the darling of EM investors. On a valuation basis, while the Sri Lankan bourse is certainly not the cheapest, it is however still one of the most attractive at a PE of 12.3X (dollarized) juxtaposed against peers in the EM world including Thailand, Malaysia, India and Indonesia which are all trading at multiples of least 30% higher. Construct a robust stock portfolio before stock mispricings are corrected We expect the market to trade sideways in the coming week (with an upward bias). As such we advise investors be appropriately positioned to take advantage of the likelihood of moderate rerating in the market which may coincide with a resumption of foreign inflows. Empirical evidence strongly indicates that medium to longer term

Turnover Composition & Net Foreign Flows

17,500 15,000 12,500

43% 57%
LKR Mn

10,000 7,500 5,000

2,500 0

Foreign

Domestic

-2,500

YTD

MTD

WTD

Gainers /Losers (%)

Citizen Dev. Bank PC House Commercial Dev. Ceylon Leather(W0013) Ceylinco Insurance Metropolitan Resources Ceylon Leather

-9.1 -10.5 -12.9

George Steuart -16.5

11.5 12.7
14.0 18.6

equity investors in the Sri Lankan bourse have been rewarded significantly despite intermittent bouts of volatility. Despite the discomfort of remaining invested during a sideways or downward biased market, those with a healthy investment horizon have come out markedly ahead. Fundamental investors may be benefited even further as equity correlations peter out to more respectable levels and valuation metrics display more dispersion to appropriately reflect varying corporate growth prospects allowing investors to select and build a robust portfolio of quality stocks before mispricings are corrected and valuations rerate to market multiples.

BRICS Performance Vs ASPI (YTD dollarised)

8.0%

Market Liquidity (Turnover)

3000
LKR Mn

0.0% -8.0%
-16.0%

2250 1500 750

24/06/2013 27/06/2013 28/06/2013
25/06/2013 26/06/2013

-24.0% -32.0%

0 Brazil Russia India China South Africa Sri Lanka

Global Markets
Sri Lanka - ASPI India - Sensex Pakistan - KSE 100 Taiwan Weighted Singapore - Straits Times Hong Kong - Hang Seng S&P 500 Euro Stoxx 50 MSCI Asia Pacific

Index 6,121 19,351 20,894 8,062 3,150

20,803

1,613 2,617 128

%Chg. 0.16 2.52 -0.58 2.26 1.04 1.78 0.62 -0.10 1.63

Interest Rates & Currencies

Prime Lending Rate (Avg. Weighted) Deposit Rate (Avg. Weighted) Treasury Bill Rate (360 Days) Dollar Denominated Bond Rate Inflation Rate (Annual Average) LKR/US$ (Selling Rate) LKR/EURO (Selling Rate) Gold (USD/oz) Oil (Brent) (USD/barrel)

28.06.2013 12.4% 10.7% 10.7% 5.9% 7.3% 132.1 173.2 1,200.8 103.2

Disclaimer
This Review is prepared and issued by DNH Financial (Pvt.) Ltd. (DNH) based on information in the public domain, internally developed and other sources, believed to be correct. Although all reasonable care has been taken to ensure the contents of the Review are accurate, DNH and/or its Directors, employees, are not responsible for the correctness, usefulness, reliability of same. DNH may act as a Broker in the investments which are the subject of this document or related investments and may have acted on or used the information contained in this document, or the research or analysis on which it is based, before its publication. DNH and/or its principal , their respective Directors, or Employees may also have a position or be otherwise interested in the investments referred to in this document. This is not an offer to sell or buy the investments referred to in this document. This Review may contain data which are inaccurate and unreliable. You hereby waive irrevocably any rights or remedies in law or equity you have or may have against DNH with respect to the Review and agree to indemnify and hold DNH and/or its principal, their respective directors and employees harmless to the fullest extent allowed by law regarding all matters related to your use of this Review.