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First Capital upgrades ASPI fair value

24 Aug 2021

First Capital Research, in a recent report upgraded the All Share Price Index (ASPI) fair value for 2021E to a range of 7,500 to 8,000 from their previous range of 7,000 to 7,500.  The firm noted that this amounts to a market return of 18% for 2021E and recommended to hold on the equity allocation and begin exiting beyond 8,000.  First Capital showed that target range has been upgraded to between 7,500 to 8,000 due to rise in market earnings. Considering the risks related to the economy such as uncertainty and potential rise in interest rates, First Capital earlier downgraded the target PER to 12.0x-12.5x (previously 14.0x-14.5x).  The investment institution observed that the prevailing pandemic might possibly further slowdown the rise in interest rates along with its continuity of the low interest rate environment.  When it comes to the aforesaid surge in earnings, it is anticipated to continue to be the major support for equity investments while making valuations less costly. Thus, an upgrading was taken place as the ASPI fair value for 2021E to a range of 7,500 to 8,000 from the  previous range of 7,000-7,500, despite the economic uncertainty that arose with the pandemic.  The company further recommended to reduce equity exposure to 65% from the current 90%, raising cash allocation to 35% from 10% with the ASPI surging.  ASPI has been designed to measure the movements of the market of the Colombo Stock Exchange (CSE). It appears as a market index as it is calculated in real-time voting and non-voting ordinary shares that have been listed on the CSE. 


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