Depreciation will help some equity sectors, ease uncertainty: Bartleet Religare

Sept 06, 2015 (LBO) – Sri Lanka’s depreciation last week will help export-related stocks and banks listed on the market, Bartleet Religare Securities said. From a foreign investors’ point of view, the depreciation takes away uncertainty that has been weighing on the market.

“Foreign investors saw the devaluation coming and some did exit. Others didn’t because the hit from the lack of liquidity would be higher than the hit from devaluation,” Nikita Tissera, the head of research at Bartleet Religare, said.

“The Templetons, the Aberdeens, they have been here for a couple of devaluation, so they know what it is like. That is a risk they have factored in.”

Due to pressure on the balance of payments, the central bank allowed the rupee to depreciate to 137.50/138.00 against the dollar on Friday, from 134.75 on Thursday.

The rupee was quoted at 137.50/90 at 9.15am on Monday, a dealer said.

The All Share Price Index fell 0.42 percent to 7,215.11 points on Friday. The market is off a recent high of 7,498.7 points seen on August 19, while the ASPI has dropped 1.1 percent so far this year.

“The devaluation will help export-related companies. Banks would also be winners. A lot of banks are long on dollars,” Tissera said.

Bartleet is upbeat on Textured Jersey Lanka, Richard Peiris Exports, Hayleys, Haycarb, Dipped Products and among banks and finance companies, Sampath Bank, HNB, Citizen Development Business Finance, and Central Finance.

Textured Jersey Lanka PLC achieved a 3.1 percent YoY growth in top line supported by demand for value added products. The company is in the process of finalizing the Ocean India acquisition which would be reflected partly in Q2 FY 16E, Bartleets said.

The tiles sector too is recommended and trading at a discount, Tissera said. Tiles is a protected sector due to a 35 percent import cess.

Top blue-chip John Keells Holdings has seen its price fall continuously this year to 177 rupees from 250 rupees at the beginning of the year. It is now an attractive buy, Tissera said.

Despite a jump in tourist arrivals, the tourism sector is yet to show gains in earnings. For instance, Bartleet has a ‘hold’ recommendation on Asian Hotels and Properties PLC. “AHPL’s recurring EPS for Q1 FY 16 dipped to 0.68 rupees (-10.7% YoY) with the drop in ARRs, occupancies and due to part closure of Cinnamon Lake for refurbishments,” Bartleets said in a research report.

In terms of the new government elected last month, Tissera said the market was looking for consistent policies. “The market is not so sensitive on who is appointed, as long as there are no doubts. The market needs consistent policies,” he said.

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Abdul Hameed
Abdul Hameed
7 years ago

Depreciation is Donkey’s policy. Real income of people will decline. It will increase poverty. Only few rich exporters and Financial institutions makes more money. Rich get richer and the poor gets poorer. Standard of living will go down. From independence to this day the Rupee has depreciated and never it has appreciated. Import of Coal,Gas, Crude is going to rise. We are an import dependent nation. We have people in Central bank who are stupid people running vital institution.

Lal
Lal
7 years ago
Reply to  Abdul Hameed

well you can’t artificially appreciate the rupee. All these problems started because of the election promise to provide petrol at Rs 100. Now the rupee has to take toll.

Shee Lankan
Shee Lankan
7 years ago
Reply to  Abdul Hameed

We are an import dependant nation like you said. So we do not have a choice when politicians make popular decisions like reducing prices of imported goods by reducing duty or imposing lower prices (on fuel). Sri Lanka cannot print US dollars nor can it pay for imports with Sri Lanka rupees. We need increase in exports. Manufactured goods or services to make trade deficit and BOP manageable.

Chan Wee
Chan Wee
7 years ago
Reply to  Shee Lankan

we shud increase exports – too true . BUT we can also reduce imports.
why do we keep importing 2nd hand cars? why do we keep importing high power cars? why do we keep giving out permits to encourage car imports?
we neither have the roads to accommodate these cars nor the juice to run them. why do u think the japs export used cars? becoz they are very very conscios of environmental issues. as the car gets older the performance of the engine deteriorates thus emitting more poison and using more gas. one very knowledgeable person once said the best cars made in japan are for domestic market. rest is exported.
we have no restrictions on import of cars – engine size wise. why do we need these porsches, audis, lambos?? where can we run them? by the time u change to 2nd gear its hit the max speed on our roads (72kmph) and even that is outstations. our highway allows only 100kmph. (that people do 150 on it is another matter). what people shud realize is that the juice everyone used is paid for by the hard earned forex – by those women toiling in middle east, by the women plucking the tea leaves, by the women stitching undies for victoria’s secret!!!
if those people using fancy cars can pay for their own gas in dollars its fine. but it does not happen that way. fuel prices are kept at a low rate artificially. anyway part of the cost is imported inflation. fuel is bough in forward contracts so the lower prices will have a lag effect. if the country can reduce its oil consumption we can save a lot of money. but then its the minority that matters to the politicians oncce they get power. the minority will have their fun at the cost of majority in every way.

Shee Lankan
Shee Lankan
7 years ago
Reply to  Chan Wee

Agree totally with what you say. Sri Lankans have an obsession with cars. They judge your status by what you drive. The car is considered an investment when people do not have many ways to invest. Only during the last 5 years used prices of cars have come down to an extent. But they still hold value. This is economic reason is why most look at the resale value when making a car buy decision.

Chan Wee
Chan Wee
7 years ago
Reply to  Shee Lankan

its all becoz of these rubbish politicians. why cant we behave like India? in india if u want a fancy car u need to pay a hefty tax. most of the cars in india are made in india even the toyotas and the hyundais and the suzukis….. i remember one time when sachin tendulkar won a car outside and wanted to bring it home, the customs imposed a massive fine. then the minister intervened and cancelled it – becoz he is sachin and sachin was god at that time!!!
why cant we say the max engine capacity is 2000cc for petrol and say 2500 for diesel cars. or even say dont bring diesel cars. japan dont use diesel cars there. in england if want a diesel car u have to pay extra tax. no one uses diesel cars in the middle east. a 2l car is more than enuf for anyone to get around in our country without breaking the law.
there is also the engine efficiency and speed . every car has a speed at which the engine gives highest efficiency and optimum fuel use. i recall some time back the VW was the best , but since then a lot of japanese and korean cars have improved.
why do we import used cars??? they are discarded by the original users. bring new cars and decide on a maximum use by mileage or years. some middle eastern countries have such limits – like 10 years from original production date. our country has all the garbage on our streets and a stupid eco test that is corrupt than the poisonos emissions.
no wonder we are still a 3rd world backwater. lot of countries are thinking ahead and putting in place policy to counter all the threats that vehicles bring, including oil dependency. hell, look at americans. they have the largest oil stock in the world and they are seriously promoting electric cars (TESLA) . it is a little high priced now and can be used only for a short distance (150km) but in a few years they expect it to be affordable and able to go longer distance. what have we done? imposed taxes on hybrids!!!! stupidity has no cure DUH