ECONOMYNEXT – Profit growth of Sri Lanka’s listed companies is likely to be lower than anticipated in forthcoming quarters with the depreciation of the rupee to record lows and rising interest rates, a brokerage said.
The rupee depreciation and higher interest rates will gradually slowdown consumer demand, First Capital Equities said in an earnings update.
Consumer demand rose sharply this year after the government reduced fuel prices and lowered prices of other goods with reduced taxes.
“We expect consumer demand to remain high though on a marginal decelerating trend during 1H2016 amidst higher disposable income among consumers,” First Capital Equities said.
“The rupee depreciation and rising interest rate environment may affect the economy predominantly during the 2H2016 while the effect will be partially felt during the latter part of 2Q2016 as well,” the report said.
“Amidst significant forex losses wiping out the high growth rates produced via consumer demand, we would like to downgrade our earnings forecast to December 2015E /March 2016E at 9%-11% year-on-year from the previous 11%-13%,” First Capital Equities said.
With the slowdown in economic conditions the brokerage said it continues to maintain its earnings forecast for December 2016E / March 2017E at 4%-5% year-on-year.
The rupee depreciation and higher interest rates will gradually slowdown consumer demand, First Capital Equities said in an earnings update.
Consumer demand rose sharply this year after the government reduced fuel prices and lowered prices of other goods with reduced taxes.
“We expect consumer demand to remain high though on a marginal decelerating trend during 1H2016 amidst higher disposable income among consumers,” First Capital Equities said.
“The rupee depreciation and rising interest rate environment may affect the economy predominantly during the 2H2016 while the effect will be partially felt during the latter part of 2Q2016 as well,” the report said.
“Amidst significant forex losses wiping out the high growth rates produced via consumer demand, we would like to downgrade our earnings forecast to December 2015E /March 2016E at 9%-11% year-on-year from the previous 11%-13%,” First Capital Equities said.
With the slowdown in economic conditions the brokerage said it continues to maintain its earnings forecast for December 2016E / March 2017E at 4%-5% year-on-year.
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