Market overview: Indices edge down on the back of thin volumes. Activity levels continued to be unexciting, with only some activity on key blue chips supporting turnover. ASI ended the week at 564.3 down 1.27%, while the MPI closed at 914.6 down 1.74%. Turnover for the week stood at SLRs 149.5 Mn down 62% from last week. Foreign activity too was low with Net foreign outflow amounting to SLRs 23.3 Mn. It should be noted that both indices moved up towards the end of the week to close on a positive note.

Overall market activity remained dull this week. However the weakening in indices was expected, as overall macro fundamentals and corporate fundamentals do not and cannot support a significant rise in the market. We believe that the lack of any significant activity from most large local funds was added to the unexciting levels of trading. However we could possibly see more proactive participation over the coming few months, once new policies and macro economic reforms come in to play, this in turn would further boost and support retail activity. We believe that most investors would be looking towards the up coming budget, which would be an indicator of the government’s policies, proposals and reform. Additionally further moves towards peace talks would help improve sentiment. We believe that most investors are being very cautious awaiting positive news on the peace front, as the country has seen similar steps such as the prevailing cease-fire been taken in the past which eventually has not resulted in lasting peace.

In order to strengthen long term investor confidence one would need to see urgency in policy implementation, significant reforms to stabilize the deteriorating macro economic. We believe that this would help boost foreign participation in the market and direct foreign investments for economic development. This in turn would help sustain longer term growth on the economic front, which would reflect positively on the equities market.