Tuesday, 28 March 2017

Sri Lankan shares rise on foreign investor buying; turnover hits 1-mth high

Reuters: Sri Lankan shares closed slightly stronger on Tuesday, recovering from a more than one-year closing low hit in the previous session, as foreign investors bought battered stocks while block deals pushed the day's turnover to a one-month high.

The Colombo stock index closed 0.17 percent firmer at 5,985.08, closing below a key psychological level of 6,000.

It had closed at its lowest since March 15, 2016 on Monday as investors sold shares of lenders after the central bank tightened its monetary policy on Friday.

The central bank raised its benchmark interest rates by 25 basis points for the first time in eight months to contain high inflationary expectations and a possible acceleration of demand-side inflationary pressures.

"The market is up on continued foreign buying while block deals pushed the turnover up," said Atchuthan Srirangan, a senior research analyst with First Capital Equities (Pvt) Ltd.

"Retail investors are still on the sidelines as they want to see a clear picture."

Foreign investors net bought shares worth 401.2 million rupees ($2.64 million) on Tuesday, raising the year-to-date net foreign inflow to 4.29 billion rupees in equities.

Turnover stood at 2.32 billion rupees ($15.29 million), the highest since Feb. 28 and well above this year's daily average of 716.1 million rupees.

As of Monday's close, the index had lost 2.18 percent since March 7 when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The stock index moved to "neutral" territory from "oversold", with the 14-day relative strength index rising to 30.957 versus Monday's 27.488, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Shares of Dialog Axiata Plc rose 2.70 percent, while Sri Lanka Telecom Plc climbed 1.55 percent. 

($1 = 151.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Monday, 27 March 2017

Sri Lankan shares slump to one-year low as banks fall

Reuters: Sri Lankan shares fell to a more than one-year closing low on Monday in dull trade as investors sold shares of lenders after the central bank tightened monetary policy in the previous session, dealers said.

On Friday, the central bank raised its benchmark interest rates by 25 basis points for the first time in eight months to contain high inflationary expectations and a possible acceleration of demand side inflationary pressures.

The Colombo stock index closed 0.36 percent weaker at 5,974.94, its lowest close since March 15, 2016. The index broke below a key psychological barrier of 6,000 on Wednesday.

"Margins (calls) are still affecting the market. Buying interest still hasn't come back into the market," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"Investors took the rate hike as a positive as it will give some kind of stability in the economy and the hike was less than what they expected. But investors are still waiting for the market to bottom out to get in."

Turnover stood at 429 million rupees ($12.7 million), less than this year's daily average of 688.4 million rupees.

The index had lost 2.18 percent since March 7 after the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse fell to "oversold" territory from "neutral", with the 14-day relative strength index dropping to 27.488 points versus Friday's 30.480, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 76.3 million rupees on Monday, raising the year-to-date net foreign inflow to 3.89 billion rupees in equities.

Shares in Melstacorp Plc fell 3.06 percent while the biggest listed lender Commercial Bank of Ceylon Plc fell 1.59 percent. 

($1 = 151.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Friday, 24 March 2017

Sri Lankan shares edge up from 1-yr low on foreign buying

Reuters: Sri Lankan shares edged up on Friday from a more than one-year closing low as foreign investors picked up battered shares in a market that had already factored in a monetary policy tightening by the central bank, dealers said.

The central bank raised its benchmark interest rates by 25 basis points on Friday for the first time in eight months to contain high inflationary expectations and a possible acceleration of demand side inflationary pressures.

The Colombo stock index closed 0.3 percent up at 5,996.28, edging up from its lowest close since March 15, 2016 hit on Thursday. The index breached a key psychological barrier of 6,000 on Wednesday.

"Foreigners are buying in the 'oversold' market and are looking at the long term," said Yohan Samarakkody, head of research at SC Securities.

"Rate hike was already factored in," Samarakkody said, adding that some investors were expecting a larger hike.

Turnover stood at 1.92 billion rupees ($12.7 million), more than double this year's daily average of 671 million rupees.

The index had lost 2.1 percent through Thursday since March 7, when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse rose to "neutral" territory from "oversold", with the 14-day relative strength index at 30.480 points versus Thursday's 24.614, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 551.1 million rupees, raising the year-to-date net foreign inflow to 3.81 billion rupees in equities.

Shares in Ceylon Tobacco Company Plc rose 3.9 percent, while Commercial leasing and Fiance Plc jumped 8 percent. 

($1 = 151.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)

Sri Lanka Monetary Policy Review – March 2017 - Policy rates increased by 25 points

As per the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy grew by 4.4 per cent in real terms during 2016 compared to the growth of 4.8 per cent in 2015. Within this annual growth, Industry related activities grew notably by 6.7 per cent driven by construction related activities, while Services related activities grew by 4.2 per cent mainly with the expansion of financial services, insurance and telecommunications. However, Agriculture related activities contracted by 4.2 per cent in 2016, impacted by supply side disruptions on account of floods in the second quarter and drought conditions during the final quarter of 2016. In spite of challenging external factors such as adverse weather conditions and global developments, an acceleration of growth was observed towards end 2016 with the last quarter of 2016 recording a growth of 5.3 per cent, partly supported by the base effect.

In the meantime, headline inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI, 2013=100), accelerated to 6.8 per cent in February 2017 from 5.5 per cent in January 2017. A similar trend was observed in the National Consumer Price Index (NCPI, 2013=100) based headline inflation, which rose to 8.2 per cent (year-on-year) in February 2017 from 6.5 per cent in January 2017. Year-on-year core inflation based on both CCPI and NCPI also remained high at 7.1 per cent in February 2017. The recent acceleration in inflation is largely due to the impact of prevailing drought conditions and adjustments to the tax structure, and it is projected that inflation would revert to the desired mid single digit levels in the period ahead and stablise thereafter, unless disrupted by adverse inflation expectations.

The earlier tightening of monetary policy and monetary conditions by the Central Bank and the resultant increase in market interest rates are likely to have impacted the growth of credit to the private sector by commercial banks to some extent. Accordingly, the year-on-year growth of private sector credit decelerated further to 20.9 per cent in January 2017 from 21.9 per cent at end 2016. Meanwhile, credit to the public sector increased noticeably, causing year-on-year broad money (M2b) growth to remain high at 17.7 per cent in January 2017, although this was a deceleration compared to 18.4 per cent in December 2016. Nevertheless, the deceleration in monetary and credit aggregates has been slower than expected.

On the external front, the deficit in the trade account of the balance of payments (BOP) was recorded at US dollars 9.1 billion in 2016 compared to US dollars 8.4 billion in 2015, with expenditure on imports increasing by 2.5 per cent and earnings from exports contracting by 2.2 per cent during the year. Provisional data for January 2017 also indicated a widening of the trade deficit. Earnings from tourism and workers’ remittances continued to cushion the adverse impact of the trade deficit on the BOP. In the meantime, outflows of foreign investments from the government securities market observed in early 2017 appear to have subsided, and marginal inflows have been experienced in spite of the increase in policy interest rates in the United States. Gross official reserves were estimated at US dollars 5.6 billion at end February 2017 compared to US dollars 6.0 billion at end 2016, while the Sri Lankan rupee depreciated by 1.2 per cent against the US dollar during the year up to 22 March 2017.

Considering the above developments, the Monetary Board, at its meeting held on 23 March 2017, was of the view that further tightening of monetary policy is necessary as a precautionary measure, in order to contain the build-up of adverse inflation expectations and the possible acceleration of demand side inflationary pressures through excessive monetary and credit expansion. The Monetary Board also took into account the notable improvements in fiscal operations, which have resulted in the overall budget deficit in 2016 declining to envisaged levels. The Board was of the view that these improvements, together with the substantial upward movements already observed in market interest rates, have reduced the required adjustment in policy interest rates. Accordingly, the Monetary Board decided to increase the key policy interest rates of the Central Bank, namely the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 25 basis points each, to 7.25 per cent and 8.75 per cent, respectively, with effect from 24 March 2017.


Thursday, 23 March 2017

Sri Lankan shares fall to 1-yr closing low, rate review in focus

Reuters: Sri Lankan shares fell for a second straight session on Thursday to a more than one-year closing low as expectations of an interest rate hike continued to drag down the market ahead of the central bank's monetary policy review.

The Colombo stock index closed down 0.3 percent at 5,979.85, its lowest close since March 15, 2016. The index breached a key psychological barrier of 6,000 in the previous session.

"There are no buyers as most of the local investors are on the sidelines awaiting the outcome of the policy review," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Sri Lanka's central bank could raise its key policy rates in the coming months if it skips a chance to tighten at its second monetary policy review of the year on Friday, a Reuters poll showed, two weeks after the International Monetary Fund called for further tightening.

Analysts said investors expected a rate hike.

Turnover stood at 616.4 million rupees ($4.1 million), less than this year's daily average of 671 million rupees.

The index has lost 2.1 percent since March 7, when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse dipped further into oversold territory on Thursday, with the 14-day relative strength index at 24.614 points versus Wednesday's 26.758, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 194 million rupees, raising the year-to-date net foreign inflow to 3.26 billion rupees in equities.

The treasury bill rates have risen between 33 to 77 basis points since July 28, when the central bank last raised the key interest rates.

Shares in Asian Hotel Properties Plc fell 2.9 percent, while Lanka ORIX Leasing Company Plc fell 0.8 percent and Sri Lanka Telecom Plc 0.9 percent.

($1 = 151.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lanka's NDB ends S&P ratings

ECONOMYNEXT - Standard and Poor's said it was confirming the 'B' long-term rating of Sri Lanka's National Development Bank and withdrawing at the lender's request.

"In our view, the bank has an adequate risk position for its size and business scale. However, the bank's aggressive growth and small branch network have resulted in a below-average - albeit improved - funding profile, and its capital and earnings profile remains weak," the rating agency said.

The full statement is reproduced below:

National Development Bank PLC 'B' Rating Affirmed; Rating Then Withdrawn At The Bank's Request

SINGAPORE (S&P Global Ratings) March 20, 2017--S&P Global Ratings said today that it affirmed its 'B' long-term and 'B' short-term issuer credit ratings on National Development Bank PLC (NDB). We then withdrew all the ratings at the bank's request.

The affirmed rating at the time of withdrawal reflected our expectation that NDB would maintain its satisfactory business and revenue diversification over the next 12 months. In our view, the bank has an adequate risk position for its size and business scale. However, the bank's aggressive growth and small branch network have resulted in a below-average--albeit improved--funding profile, and its capital and earnings profile remains weak.

The outlook on the long-term issuer credit rating was stable at the time of the withdrawal. The stable outlook reflected our view that NDB is relatively insulated over the next 12 months compared to peers from potential heightening of economic risks facing all financial institutions operating in Sri Lanka.

Although we expected no rating movement in the next one year, rating upside would have outweighed downside risks over the longer term, given that the bank plans to raise capital.

Sri Lanka 03-month Treasury Bill yield rises to 9.57-pct

ECONOMYNEXT – Yields on Sri Lankan Treasury Bills rose across the board at an auction on Wednesday, with the 03-month bill yield up 10 basis points to 9.57 percent, the public debt department of the Central Bank said.

The 06-months bill yield rose 07 basis points to 10.46 percent and the one-year bill yield rose 08 basis points to 10.82 percent, a statement said.

The public debt department got bids worth 39.4 billion rupees and accepted bids worth 4 billion rupees.