Wednesday 21 May 2014

Sri Lanka stocks slip from over 11-mth high on profit-taking

May 21 (Reuters) - Sri Lanka stocks ended weaker on Wednesday from a more than 11 month high hit in the previous session, as investors booked profits in blue-chips, but stockbrokers said the outlook was still positive due to multi-year low interest rates.

The main stock index ended 0.51 percent, or 32.29 points, weaker at 6,289.32, slipping from its highest close since June 10 last year.

"Profit-taking in blue-chips dragged the market down," a stockbroker said asking not to be named.

Stockbrokers expect gains due to lower interest rates after the central bank kept key rates at multi-year lows on Tuesday for the fourth straight month, as expected.

The exchange witnessed net foreign inflow of 496 million rupees ($3.80 million) worth of shares on Wednesday, extending year-to-date net foreign inflow to 1.34 billion rupees.

The day's turnover stood at 944.2 million rupees, less than this year's daily average of 1.03 billion.

Shares of leading fixed-line telephone operator Sri Lanka Telecom PLC fell 2.69 percent to 47 rupees a share, while top conglomerate John Keells Holdings PLC fell 0.17 percent to 233.60 rupees.

The market has been on a rising trend since mid-March as many investors were compelled to return to the stock market because low interest rates have made fixed-income assets less attractive, stockbrokers said.

However, analysts have raised concerns over sluggish economic growth due to lower credit growth and consumer spending.

Despite a multi-year low interest rate regime, data showed private sector credit grew 4.3 percent in March from a year earlier, the slowest expansion since May 2010, while imports in February fell 6.2 percent on the year.

On Monday, central bank Governor Ajith Nivard Cabraal said Sri Lanka's private sector credit growth would pick up to around 15 percent by the end of this year and continue to improve through 2016. 

($1 = 130.3750 Sri Lanka rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Sri Lanka Treasuries yields flat

May 21, 2014 (LBO) - Sri Lanka's Treasuries yields were flat at Wednesday's auction with the 12-month yield unchanged at 7.02 percent, data from the state debt office showed.

The 3-month yield was unchanged at 6.57 percent.

The 6-month yield eased 01 basis point to 6.75 percent.

The state debt office offered 11 billion rupees of debt for rollover and sold 11 billion rupees of bills to the market.


Fitch Affirms Hatton National Bank at 'AA-(lka)'; Outlook Stable

Fitch Ratings-Colombo/Hong Kong-20 May 2014: Fitch Ratings has affirmed Sri Lanka-based Hatton National Bank PLC's (HNB) National Long-Term Rating at 'AA-(lka)'. The Outlook is Stable.

The agency also affirmed HNB's outstanding senior unsecured debentures at 'AA-(lka)' and subordinated redeemable debentures at 'A+(lka)'.

KEY RATING DRIVERS - NATIONAL LONG-TERM RATINGS AND DEBT

HNB's National Long-Term Rating is driven by its intrinsic financial profile, which reflects its long and resilient operating history, strong deposit and lending franchise and satisfactory capitalisation. In addition the rating captures HNB's relatively higher risk appetite resulting in volatile asset quality.

The senior unsecured debentures are rated at the same level as HNB's National Long-Term Rating as they constitute direct, unconditional, unsecured and unsubordinated obligations of the bank, and will rank equally with all its other unsecured and unsubordinated obligations.


HNB's subordinated debt is rated one notch below the National Long-Term Rating to reflect its relatively lower recovery prospects in liquidation.

HNB's loan book is shifting towards larger, mid-sized corporates from its previous focus on retail and SME sectors, which, while adding to diversification, results in lower returns. Exposure to large- and medium-sized corporates increased to 35% of the loan book at end-2013 from 29% at end-2012. This was the main reason the bank's loan book expanded by 17% in 2013, outpacing the 9% loan growth in the wider banking sector. In 2012, HNB's loan growth was 18% compared with 21% in the banking sector. HNB is also reducing its pawning exposure now that quality has started to deteriorate.

The marginal improvement in HNB's regulatory non-performing-loans (NPL) ratio to 3.64% at end-2013 from 3.66% a year earlier was driven by growth in the loan book. It actually masked the 18% absolute increase in gross NPLs in 2013. HNB's loan loss provisioning improved during 2013 as the bank started providing for losses stemming from gold-backed pawning advances, but it remained lower than its domestic peers'.

Capitalisation remained comparable with domestic peers', although it declined during 2013 due to higher asset growth compared to its peers. HNB's Fitch core capital ratio normalised to 16.8% at end-2013 from 18.4% at end-2012.

Profitability declined in 2013 as a result of higher provisioning and compressed margins. The latter was driven by pawning interest write-offs, higher deposit rates and lower yielding new corporate loans. HNB's margins however, remained wider than that of peers, supported by its relatively higher exposure to retail and SME segments. HNB's efforts in centralising its processes and use of technology should further improve its high cost-to-income ratio.

HNB benefits from a large and fairly stable deposit base as a result of its strong franchise - it is the fourth-largest commercial bank in Sri Lanka by assets. Bank's loan/deposit ratio increased to 94% amid higher loan growth during 2013 (end-2012: 91%). Fitch believes that reducing this ratio would require the bank to slow down loan growth because deposit growth is unlikely to keep pace with loan growth.

RATING SENSITIVITIES - NATIONAL LONG-TERM RATING AND SENIOR DEBT

Fitch views the upside potential of HNB's ratings as limited given its higher risk appetite, which has led to weaker through-the-cycle asset quality compared with peers'. A material increase in risk taking, unless sufficiently mitigated through capital and financial performance, could result in a rating downgrade.

The ratings of senior and subordinated debt are primarily sensitive to changes in HNB's National Long-Term Rating.
http://www.fitchratings.lk/

Investrust Wealth Management Ltd. builds ties with SMB Securities

Investrust Wealth Management Ltd. (formerly known as Orient Wealth Ltd.), a burgeoning Unit Trust Management Company in Sri Lanka joined hands with SMB Securities Ltd., a leading stock broking firm, to promote unit trust funds in Sri Lanka.


Investrust Wealth Management Ltd. is a Securities Exchange Commission of Sri Lanka (SEC) regulated unit trust management company which currently manages three unit trust Funds and an accredited investment manager approved by the SEC to manage private portfolios where the trustee and the custodian for all Investrust Wealth funds is Deutsche Bank AG, Colombo. Investrust Wealth funds offer innovative investment schemes to individuals and corporate investors to enter into debt and equity market with small investment amounts. 

SMB Securities Ltd. is licensed by the Securities and Exchange Commission of Sri Lanka with over seven years of stock broking expertise. Its experienced team of investment advisors specialise in providing equity and debt trading, financial advisory services, equity research and online trading to an elite clientele of corporates, high net worth investors and retailers. The alliance between the two companies hoping to create an island wide awareness within the investor public to provide them the opportunity to invest in capital markets and make comprehensive returns.
www.ft.lk