Monday 8 June 2015

Sri Lankan shares slip to over 7-week low

Sri Lanka's stock index closed at its lowest in more than seven weeks on Monday led by market heavyweight John Keells Holdings Plc, with concerns over political uncertainty before elections to parliament denting sentiment.

President Maithripala Sirisena's government has said it would dissolve parliament once some crucial reforms including an electoral bill are passed, but is yet to fix a date for the election.

The main stock index ended down 0.62 percent at 7,078.66, slipping to its lowest close since April 15.

"If they dissolve the parliament, there would be a bit more certainty regarding the elections, whereas now it seems lot weighs on passing electoral reforms with the current minority parliament," said Danushka Samarasinghe, head of research at Softlogic Stockbrokers.

Some stockbrokers said investors are waiting for the right moment, and sellers were not ready to dispose of holdings at low prices given the lack of buying interest.

Analysts said foreign investors have been selling shares amid expectations the U.S. would hike key interest rates sooner than later. An upbeat U.S. nonfarm payrolls in May, the largest gain since December, has raised chances for a rate hike as early as September.

Foreign investors, however, bought a net 40.1 million rupees ($299,477.22) worth of shares after offloading a net 1.51 billion rupees worth of shares in the past nine sessions.

The bourse, however, has seen net inflows of 4.42 billion rupees in equities so far this year.

Political uncertainty due to the Ranil Wickremesinghe-led coalition government not having a parliament majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

Despite political uncertainty, stockbrokers said better corporate earnings would help the market gain.

Turnover was 659.7 million rupees ($4.93 million), less than this year's daily average of about 1.12 billion rupees.

Conglomerate John Keells Holdings fell 2.56 percent while Good hope Plc fell 11.42 percent. Shares in Ceylon Tobacco Company Plc eased 0.69 percent. 

($1 = 133.9000 Sri Lankan rupees) 

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

Govt. borrowings closing on Rs 1 trillion - Reserves down US$ 1.9B

By Paneetha Ameresekere

Ceylon Finance Today: The Government's financial profligacy due to an impending general election, coupled with foreign exits from the Government Securities Market (GSM) and stock market (SM) because of external and internal reasons, have made government borrowings to rise, foreign reserves to fall and inflationary pressure to increase.
Government borrowings by way of selling Treasury (T)-Bills and T-Bonds to the market, is set to increase to Rs 808,480 million or Rs 0.81 trillion by the weekend, in the calendar year to date, with a T- Bill and T- Bond auction totalling Rs 49 billion due, during the week.

This will be an increase of Rs 415,871 million or 105.92% when compared with the comparative period last year.
Meanwhile, foreign exits from the GSM and the SM in the calendar year to date have been 
Rs 6.56 billion. In contrast, these markets in the same period enjoyed a Rs 63.75 billion increase or net foreign inflow (NFI), translating to a 110.3% decline in such investments in the review period, thereby contributing to depreciating pressure on the rupee.

Meanwhile, money printing, reflected by Central Bank's T-Bill holdings, increased to Rs 12.89 billion currently. In contrast in the comparative period last year, this was a miserly 32.82 million. The current increase translates to a 39,187% hike in money printing between the two comparative periods, thereby hitting the poor and the fixed wage earner the hardest.
Further, the Government's external commercial borrowings in the two comparative periods increased by 2.3% or by US$ 38.75 million to $ 1,687 million. In other developments, Government's foreign reserves in the two review periods, ie end May 2015 vis-à-vis end May 2014, fell by $ 1921.74 million or by 21.9% to $ 6,850.92 million and its foreign currency reserves by $ 1,876.81 million or by 24.8% to $ 5,914.95 million.

Such falls have been exacerbated by the Government's defence of the rupee. According to available data, in the first four months of the year, the Government's foreign reserves in the first four months of the year experienced a net foreign outflow of $ 428.96 million due to such actions. Whereas in the comparative period last year, the Government's foreign reserves on a net basis increased by $ 504.6 million due to NFIs, before further strengthening to $ 636.1 million by May 2014, because of sustained NFIs. Data pertaining to the Government's intervention in the foreign exchange market last month has not been released thus far.
www.ceylontoday.lk

Overall market earnings slow down in 1 Q 2015

Overall market earnings growth for 1Q2015 slowed down to +2.2% Year-on-Year to Rs 53 billion, after growing 9.6% Year on Year during 4Q 2014. Trailing 12 month, market earnings grew by 19.4% Year-on-Year to Rs139 billion due to lower interest rates and improving disposable incomes (earnings declined-4% Year on Year previous year), a Capital Alliance Stockbrokers Research Report said.

In 1Q 2015, Banks, Finance & Insurance (34%), Diversified Holdings (21%) and Beverage, Food & Tobacco (13%) were the largest sector-wise contributors to market earnings. Stores and Supplies sector (+1850% Year on Year), Chemicals and Pharmaceuticals (+179% Year-on-Year) and Telecommunications (+102% Year-on-Year) had the largest growth, while Services (-746% Year-on-Year), Power and Energy (-187% Year-on-Year) and Plantations (-147% Year-on-Year) suffered the most.

The largest individual contributors to 1Q2015 earnings were John Keells Holdings (9.8%), Commercial Bank (4.8%), Ceylon Tobacco Company (4.7%) and Distilleries Company of Sri Lanka (3.9%). LIOC reported the largest absolute loss for the quarter (net loss of RS 1bn vs. net profit of RS. 723 Million in 1Q 2014) while Carsons and Bukit Darah saw net profit declines of 79% Year on Year and 80% Year on Year respectively. LIOC, Carsons and Bukit Darah's combined earnings accounted for 0.2% of market earnings in 1Q 2015 vs. 13% of market earnings in 1Q 2014. Excluding LIOC, CARS and BUKI, overall market earnings grew 17% Year on Year. The CSE currently trades on a Trading Twelve Months Price Earnings Ratio of 14.2x and a Present Book Value of 1.6x.
www.ceylontoday.lk