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.