SC Securities Research Weekly Market Update

For the Week Ended 28th May 2021

CBSL Extends Further Relief to Covid Affected Businesses

§ The Central Bank of Sri Lanka (CBSL) announced earlier this week that further credit reliefs would be given to
businesses affected by Covid as the country comes to grip with the third wave that is currently plaguing the country.
The CBSL had outlined certain concessions to affected borrowers/ customers due to requests made by certain
concerned parties and Government Authorities.
Additionally, licensed banks may offer additional concessions to individuals and businesses affected by Covid on
their request. The interest charged cannot exceed the 364 -day Treasury Bills auction rate as of 19th May 2021
(5.18%+1.00% p.a.).
§ Furthermore, the CBSL has decided to revoke the limits set for short-term foreign currency borrowings for one
year. The relaxation for the year is primarily aimed at stimulating capital formation within the real economy and
supplement the foreign currency needs of the country. Existing total foreign currency borrowing limit up to 10.0%
remains as is. The new move, however, gives banks greater flexibility.

Weekly ASPI Sees Gains Driven by Index-Heavy Counters

ASPI, 4th May – 10th May

7,233.58 7278.24 7,333.42

Up 12.86 Up 44.66 Up 55.18

S&P SL 20, 4th May – 10th May Source: CSE

2,900.61 2,925.87 2,955.71

Up 0.27 Up 25.26 Up 29.84

• The ASPI rose 1.38% over a week where there wasn’t much activity. The rise can be attributed to price gains in
index-heavy counters such as LOLC, SAMP and EXPO.
• The S&P SL 20 rose 1.90%.

Bangladesh Becomes the Third Country to Provide Bailout Aid to Sri Lanka

§ The Bangladesh Bank will provide a USD 200 Mn currency swap to debt-ridden Sri Lanka. Under the swap
agreement. Under the swap deal, the swap will be provided at an interest rate of 2.00% -which is higher than other
current global rates. The Sri Lankan Government will have to repay it by three months. Bangladesh becomes the
third nation to provide a bailout package to Sri Lanka behind China and South Korea.
§ Royal Ceramics Lanka PLC (RCL) Posted another strong quarter (4QFY21) with top line increasing 89.7% YoY to LKR
14 Bn whilst earnings came in at LKR 2.8 Bn compared to LKR 657 Mn in 4QFY20. Much of the growth can be
attributed to the ongoing import ban on ceramic products that have thus far been immensely beneficial to local
players. We maintain that this counter is an attractive one however, its performance will very much be tied to how
long the government may persist with the current import ban
 Currency and Bond Markets Remain Steady in Inactive Week

Spot Rates

Current Previous Week Change

LKR/USD 199.56 199.90 -0.34
LKR/ GBP 283.09 283.32 -0.23
LKR/EUR 243.16 244.46 -1.30
LKR/JPY 1.82 1.84 -0.02
Source: CBSL
§ Rupee slightly depreciates this week.
§ Bond yields for short and long tenure bonds remained steady this this week.

Crude Oil Prices Rise due to Potential US Recovery Partially Off-Setting Last Week’s
Decline

Current Previous Week Change

Oil, Brent (USD per Barrel) 69.29 64.93 +4.36
Gold (USD per Troy Ounce) 1,889.75 1,876.25 +13.50
Copper (USD per pound) 4.63 4.52 +0.11
Aluminium (USD per Tonne) 2,388 2,392 -4.00

Source: Gold Council, London Metal Exchange

§ US Crude futures were up 1.00% on Thursday, bolstered by strong US economic data that offset concerns by
investors on the potential rise in supplies from Iran due to the relaxation of US sanctions which caused Brent
spot and futures to fall.
§ The rally was attributable to US data showing a drop in unemployment claims signalling potential growth down
the line.
§ Concerns however, remain with India – the third largest oil consumer, we maintain that closer watch is needed
on this counter.
§ Gold and Copper witnessed increases whilst Aluminium declined.

Global Markets Wrap: European Markets Rally as US Data Boosts Recovery Hopes

§ European Markets advanced on Friday as global stocks took heart from strong economic data coming out of the
US.
§ Pan-European stocks gained 0.4% on Thursday whilst global equities look to be heading for the seventh
consecutive day of gains after first-time jobless claims in the US fell to a new pandemic low.
§ However, all was not good for Europe as the French economy contracted 0.1% to slide into a technical recession.
§ Investors will also be looking out for potential geo-political ramifications surfacing from Belarus’ forced grounding
of a Ryanair flight and the potential further sanctions arising from it.
§ Asian Stocks gained more than 2.00%.
 Notions on ASPI

Source: Investing.com

§ The daily ASPI indicates the index is trending upwards.

§ The daily RSI for the ASPI closed at 54.55 which is in the mid-range.
§ If the index manages to break the high of 19th May (7,373.92), it could test the daily resistance of 7,450-7,500.
§ Since the index is trading above the 18 &8 EMA levels, it indicates to us that there is a bullish momentum.

Hot Pick: RCL – Continues to Benefit from Import Ban on Tile Sector

Source: Investing.com

§ The daily RSI for RCL closed at 64.93, which is in the mid-range.
§ RCL is currently trading above the daily support of LKR 37.00-LKR 38.00. If the price manages to sustain above the
daily support, it could test the February 15th high of LKR 40.50, and further breaking that level, the next daily
resistance of LKR44.00-LKR 45.00 could be tested.
§ 18 & 8 EMA indicates a bullish momentum since the price is trading below both the EMA’s.
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