Economic & Market Review

For the Month of July 2017

3Investment Banking Unit

GDP

Inflation (Year –on-Year change %)

0

500000

1000000

1500000

2000000

2016 1st Q 2016 2nd Q2016 3rd Q 2016 4th Q2017 1st Q

0

1

2

3

4

5

6

7

8

Economic Background The outlook for global growth appears to be firming according to the

latest update of the World Economic Outlook of the International

Monetary Fund (IMF) in July 2017. The Sri Lankan economy is

expected to record a modest recovery in the forthcoming quarters

following the low growth witnessed in the first quarter of 2017. The

recovery of the agriculture related activities and the positive

performance of the industry and services related activities together

with the reinstatement of GSP+ facility are expected to contribute to

economic growth.

The YoY inflation as measured by CCPI was 4.8% in July 2017 and i

nflation calculated for June 2017 was 6.1%. YOY inflation of Food

Group has decreased from 9.1% in June 4.8% in July 2017 and that

of Nonfood Group has decreased from 4.8% to 4.7% during this

period. Inflation is expected to ease further towards the end of 2017

and stabilize thereafter due to the tight monetary policy stance

maintained since the end of 2015 and the dissipation of the ‘one-off’

impact of the tax structure on inflation.

Meanwhile, private sector credit that was growing at an elevated level

during 2016 and early 2017, indicates clear signs of deceleration in

recent months, although at a slow pace. In view of high nominal and

real interest rates prevailing in the market, it is expected that growth

of monetary and credit aggregates would moderate further during the

remainder of the year. The recent decline in the yields on government

securities is expected to gradually transmit to other market interest

rates in the forthcoming period.

In the external sector, export performance continued to improve in

May 2017 led by agricultural exports. However, the continued

increase in expenditure on imports has caused a further widening of

the cumulative trade deficit. Tourist arrivals and earnings from

tourism improved in June 2017, albeit at a slower pace, while

workers’ remittances continued to slow during the first half of 2017

on account of prevailing economic and geopolitical uncertainties in

the Middle East. Nevertheless, the capital market, both government

securities and the Colombo Stock Exchange (CSE), witnessed a

noticeable influx of foreign funds (on a net basis) from March 2017.

Meanwhile, Sri Lanka received the third tranche of the IMF-Extended

Fund Facility (EFF) amounting to US dollars 167.2 million. Reflecting

these developments, gross official reserves stood at US dollars 6.7

billion as at end July 2017. Renewed investor confidence and

anticipated direct investment inflows are expected to further

strengthen the external sector outlook. Meanwhile, the Sri Lankan

rupee depreciated against the US dollar by 2.6 per cent by end July

2017.

Source – Central bank of Sri Lanka

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Equity Market Overview for the Month.

Colombo equities closed the month of July on

negative note despite continuous foreign inflows. ASI

closed at 6,637.39 with a drop of 28.66 index points

(-0.4%) while S&P SL 20 index closed 11.91 index

points lower (-0.3%) at 3,811.01. Foreign investors

continued to be on the buying side with a net inflow

of LKR 3.5 bn.

INVESTMENT

BANKING UNIT

Lakmal, & Trimalie

0112 206795

0112 206787 lakmal@peoplesbank.lk trimalie@peoplesbank.lk

CONTACT US

No. 75, Sir Chittampalam A Gardiner Mw,

Colombo 02, Sri Lanka.

0112458946 – 0112458913

Fax: 0112458842

pbibu@peoplesbank.lk

Market Turnover

Market Capitalization

Foreign Buying & Selling in the Market

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Mill

ion

s

2,980.002,990.003,000.003,010.003,020.003,030.003,040.003,050.003,060.003,070.003,080.00

Bill

ion

s

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

Mill

ion

s

FBuy

FSell

ASPI

S&P 20 SL

6,550.00

6,600.00

6,650.00

6,700.00

6,750.00

6,800.00

7/3

/20

17

7/5

/20

17

7/7

/20

17

7/1

1/2

01

7

7/1

3/2

01

7

7/1

7/2

01

7

7/1

9/2

01

7

7/2

1/2

01

7

7/2

5/2

01

7

7/2

7/2

01

7

7/3

1/2

01

7

3,750.00

3,800.00

3,850.00

3,900.00

3,950.00

7/3

/20

17

7/5

/20

17

7/7

/20

17

7/1

1/2

01

7

7/1

3/2

01

7

7/1

7/2

01

7

7/1

9/2

01

7

7/2

1/2

01

7

7/2

5/2

01

7

7/2

7/2

01

7

7/3

1/2

01

7