Page 60 - Management Digest Udyama Vol 1 Isuue 2
P. 60
Market Valuations Spike… Aggressively reduce equity
exposure to 50%:
On 19 Aug, ASPI was around
th
8,250 mark when recommended
to reduce equity exposure to
65% on the expectation of
further upside in the market. As
at 4 Sep, the market has surged
th
passed 9,300 and continues to
be expensive even beyond the
upgraded earnings. As the risk
rises in the system supported
by an increase in rates, it
is recommended to further
reduce the portfolio to 50% or
aggressively shift the portfolio
to defensive counters. Banking
(mainly COMB, HNB, SAMP,
NDB), selected dollar income
companies (HAYC, TJL, WIND
& LVEF – others have surged in
price and cannot be highlighted
as defensive anymore, Eg: EXPO,
HAYL, MGT), dividend-yielding
counters (CTC, NEST, LLUB)
and Life Insurance companies are
the preferred defensive counters.
Reduce exposure to 50% from investments to fixed investments
65%; Cash 50% could be seen when FD rates
2 Option – Switch to Defensive reach 10.0% mark. By Oct-21,
nd
counters we are likely to witness the FD
ceiling for finance companies to
Overall Interest rates to rise; be raised to 8.0%-9.0%.
Continuous rise in interest rates is Possible tax hike:
more likely than not considering
the major deterioration of the As Sri Lanka is in the 2 year of
nd
economic indicators. With the 10%+ budget deficit, potentially
rise more risk-averse investors with an IMF program coming in
may shift their investments there is a significant possibility for Mr. Dimantha Mathew
towards fixed income instruments, tax rates to be revised upwards. Head of Research
adversely impacting the equity Historically hike in tax rates have First Capital Holdings PLC
market over the next 3-4 months. shown to be negatively correlated
with positive market returns. As
FD Ceiling to rise: a result, if implemented, it’s a big
negative for the market.
Considering the historic trend
sharp switch from equity
58 September 2021
