Acuity Research

We're here to share insightful and topical fundamental research on the Sri Lankan capital markets and relevant global developments.

[Acuity Research @AcuityResearch]

How Sri Lanka comes out of the present crisis will depend greatly on the ability of the government to stay the course both in terms of fiscal discipline and in terms of implementing much needed economic reforms. 7/7

[Acuity Research @AcuityResearch]

Our views on the IMF staff level agreement with Sri Lanka is as follows. As mentioned in our budget synopsis, the key measure we're focusing on in relation to debt sustainability is the primary balance. 1/7
https://t.co/XgtsoY1V84

[Acuity Research @AcuityResearch]

There's a likelihood that we may get there even without a significant haircut on foreign debt because of the impact of the high devaluation/inflation hit, which has significantly lowered the real value of the local debt and as a % of nominal GDP. 6/7

[Acuity Research @AcuityResearch]

The budget synopsis should be read in conjunction with our more detailed coverage on the impact of the revenue proposals announced in May 2022, which would be enacted through the interim budget.
https://t.co/576tWx2Wu1

[Acuity Research @AcuityResearch]

We're pleased to share our synopsis of the interim budget for 2022 which was released to our clients earlier.
https://t.co/IBOM4P2tnt

[Acuity Research @AcuityResearch]

the overall market. We have an overweight rating on MGT as one of our export oriented stock picks. Downside risks mostly emanate from continued operating disruptions in Sri Lanka from fuel/ electricity and other shortages as the economic crisis unfolds. 4/4

[Acuity Research @AcuityResearch]

MGT reported a sound quarterly performance supported by higher apparel exports which reached an ATH in June. Revenue increased 43% YoY in USD terms (158% in LKR) and 5% on a sequential QoQ basis (63% in LKR). 1/4

[Acuity Research @AcuityResearch]

We expect the revenue and earnings delta to be lower in the next quarter for most export oriented counters as the exchange rate stabilizes from the sharp depreciation in the last quarter. We expect export stocks to continue outperform... 3/4

[Acuity Research @AcuityResearch]

We're please to share our quarterly earnings review. Key takeaway; with the expected local/ global headwinds and expected volatility, investors should be very selective in their stock picks and change asset allocations to preserve their capital.
https://t.co/TPssfmdnyf

[Acuity Research @AcuityResearch]

Its still too to predict if the situation is stabilizing/ improving given the dire fiscal situation in the country with the PM alluding to the requirement for further money printing given the shortfall in government revenue and relatively inflexible government expenses. 3/3

[Acuity Research @AcuityResearch]

The T-bill auction results for 15th June continued the trend observed in the past few weeks with the auctions oversubscribed and the authorities accepting bids from the market up to the value offered. This has allowed yields to gradually decline after overshooting. 1/3

[Acuity Research @AcuityResearch]

The public debt office accepting bids from the market would contribute to curbing monetizing/ "money printing" which shows up as CBSL holdings of government securities. Record levels of money printing since early 2020 is visible in the chart below from data up to March 2022. 2/3

[Acuity Research @AcuityResearch]

The USD has appreciated in value against other currencies in the backdrop of rising US interest rates as the Fed tightens monetary policy to curb inflation. Economists expect the Fed to hike interest rates by 75 bps this week, with possibly a further 75 bps hike in July. 4/4

[Acuity Research @AcuityResearch]

Challenging times all around. Global markets are set for one of the worst years on record. The tech heavy NASDAQ 100 index is down over 30% YTD and the S&P 500 c. 20%. 1/4

[Acuity Research @AcuityResearch]

The latest polls show around 80% of fund managers are now expecting an elevated risk of stagflation in major global economies over the next 12 months. 3/4