Colombo’s Port City ready for investors

LBO - CHEC Port City Colombo (Pvt) Ltd., presented the Development Control Regulations (DCR) for the Colombo Port City project.to the authorities, Tuesday.

“This is a signal for the marketing team to sell it as real estate,” Minister of Megapolis and Western Province Development Champika Ranawaka said at the presentation ceremony in Colombo.

“The DCR will benchmark standards for the the rest of country as well.“

The DCR was prepared by Surbana Jurong, a Singaporean urban design consultancy and Atkins, a UK-based engineering consultancy.

When complete the city will have reclaimed 269 hectares with 116 hectares being handed over to China Communications Construction Company (CCCC), which is the parent company of China Harbour Engineering Company (CHEC).

The remaining land, which will be owned by the Sri Lankan Government and will be divided with 62 hectares to be used to set up a financial city and 91 hectares to be used as public spaces.

Sri Lanka to lose half a million tax payers from new law

ECONOMYNEXT - Sri Lanka will lose 500,000 employed who were pay as you earn (PAYE) tax payers under a new law that came into effect in on April 01, the finance ministry said.

The current administration lifted a tax free slab to 1.2 million rupees a year but removed 50,000 allowance for transport and also telephone allowances.

The finance ministry said as a result 500,000 out of 1.2 million PAYE tax payers will be out of the tax system.

The balance will now have to pay a higher rate of tax.

The administration however came of the promise of broadening that tax base and charging lower rates.

The finance ministry said there was no truth in claims that everyone above 18 years will be made to have a tax file.

Meanwhile state worker show get tax slashed cars will not have to pay tax on the benefits. Private citizens on the other hand have to pay rates in excess of 200 percent to buy a car.

Critics say successive administrations have used hard working people outside the state as second class citizens and tax machines.

The finance ministry said senior citizens will not have to pay any tax on interest unless they made sums in excess of 125,000 rupees as interest a month.

Sri Lanka Treasuries yield drop 20bp

ECONOMYNEXT - Sri Lanka's 12-month Treasuries yield dropped 20 basis points from a week earlier to 9.71 percent at Tuesday's auction, data from the state debt office showed.

The debt office accepted 28 billion rupees in bids from the market, after offering only 16 billion rupees of bills.

No bids were accepted after offering 5 billion rupees of 3-month bills and 7.0 billion in 6-momth bills.

Before the auction one year bills were quoted around 9.53/60 percent. After the auction 12-month paper was quoted around 9.60/70 percent, dealers said.

Sri Lanka's bill and bond yields rose amid political uncertainty from February and short term rates spiked in last week of March amid a tax change and seasonal demand for cash.

The central bank cut the ceiling policy rate by 25 basis points on April 04 to 8.50 percent and has printed money below the rate though overnight auctions to keep rates down.

Chevron Sri Lanka unit says competition increasing, margins eroding

ECONOMYNEXT – Chevron Lubricants Lanka has said profit margins were getting squeezed with intensifying competition and rising costs and the industry struggling with excess blending capacity.

Net profit at Chevron’s Sri Lanka unit fell 26% to Rs. 2.6 billion in 2017 from a year ago.

“The decline in net earnings was mainly due to margin erosion as a result of increased input costs and decline in volumes due to intense competition,” Rochna Kaul, Chevron Lankan chairperson told shareholders in the firm’s annual report.

Managing Director Kishu Gomes said Chevron Lubricants Lanka’s volumes and revenues dropped by 10% and 9%, respectively in 2017.

“The decline in volumes was primarily a result of the decline in sales in the domestic retail market, while we recorded healthy growth stemming from exports to Bangladesh,” he said.

Sri Lanka’s lubricant industry is mature and competitive with thirteen players and three blending plants operating with excess capacity, Gomes said.

“The government may issue additional licenses during the year, which will further change the competitive landscape.”

The steep rise in base oil cost, compounded by the depreciation of the rupee against the US dollar and the gradual increase in commodity prices, caused significant inflationary pressure on costs during the year, Gomes said.

To counter the mounting cost pressure, the company increased prices.

However, this strategy was not effective in the retail market, as consumer disposable income was compressed by the rise in inflation, Gomes said.

Prolonged droughts and floods affecting several districts disrupted the regular momentum of economic activities during the year, which also curtailed lubricant consumption, he added.

“The rise in consumer inflation and disruption of economic activities due to inclement weather may have also resulted in longer oil drain intervals than usual amongst a segment of consumers.”

Sri Lanka's sovereign bond issue rated B+(EXP): Fitch

ECONOMYNEXT - Fitch Ratings has assigned a B+(EXP) rating to Sri Lanka's sovereign bond issue of 5 and 10 year tenors with initial price guidance of around 6 to 7 percent.
A sovereign bond has a minimum size of 500 million dollars.

Sri Lanka was planning to raise up to 1.5 billion dollars in sovereign bonds this year depending on market conditions.

Fitch Ratings' statement is as follows:

Fitch Ratings has assigned Sri Lanka's upcoming US dollar-denominated bonds an expected rating of 'B+(EXP)'.

The expected rating is in line with Sri Lanka's Long-Term Foreign-Currency Issuer Default Rating (IDR) of 'B+' with a Stable Outlook.

RATING SENSITIVITIES
The rating would be sensitive to any changes in Sri Lanka's Long-Term Foreign-Currency IDR. In February 2018, Fitch affirmed Sri Lanka's Long-Term Foreign-Currency IDR at 'B+' with a Stable Outlook. The Long-Term Local-Currency IDR is also 'B+' with a Stable Outlook.

Sri Lanka 10-year sovereign bond guidance narrowed to 6.75-pct

ECONOMYNEXT - The pricing of Sri Lanka's 10-year sovereign bond that was launched Wednesday has been narrowed to 6.75 percent and while that of a 5-year bond has been narrowed to 5.75 percent, a media report said.

Bloomberg Newswires said the sale was launched earlier Wednesday with initial guidance of around 7-prce for the 10 year and 6-percent for the 5-year.

Sri Lanka started selling 5 and 10 year sovereign bonds on Wednesday starting with Asia and the issue is expected to close with the US markets closing.

Sri Lanka last sold a 10 year bond in May 2017, at 6.2 percent, when the US 10-year Treasuries yield was 2.35 percent, indicating a risk premium of 2.85 percent.

US bond yields have been around 2.6 percent for 5-year ad and 2.79 for 10 year in recent days.

The sale is managed by Citibank, Deutsche Bank, HSBC, JPMorgan and Standard Chartered.

Sri Lanka is going to the market amid some volatility in international markets with more Fed rates hikes expected later in the year.

Sri Lanka launches 5, 10-year sovereign bonds

ECONOMYNEXT - Sri Lanka has launched a sovereign bond sale offering 5 and 10 year tenors with initial price guidance of around 6 to 7 percent.

A sovereign bond has a minimum size of 500 million dollars.

Sri Lanka was planning to raise up to 1.5 billion dollars in sovereign bonds this year depending on market conditions.

Bloomberg Newswires said the 5-year bond had an initial price guidance of around 6 percent and the 10 year about 7 percent.

Sri Lanka's 2027 sovereign bond sold last year which is now 9 years was quoted around 6.57 percent levels, on Wednesday dealers said.

Sri Lanka's 2022 bond was quoted around 5.28 percent.

US bond yields have been around 2.6 percent for 5-year ad and 2.79 for 10 year in recent days.

Sri Lankan shares end higher; foreigners sell

Reuters:Sri Lankan shares ended slightly firmer on Wednesday led by blue-chip stocks in thin trade, while foreign selling boosted turnover with most local investors on leave ahead of the Sinhala-Tamil New Year this week, brokers said.

Foreign selling accounted for 80 percent of the day’s turnover of 553 million rupees ($3.55 million), less than half of this year’s daily average of 1.17 billion rupees.

Foreign investors exited mainly by selling Softlogic Finance Plc, brokers said. Shares in Softlogic Finance, which accounted for 60 percent of the day’s turnover, however, ended 0.6 percent lower.

The Colombo stock index ended 0.18 percent higher at 6,451.17.

Foreign investors sold shares worth net 420.8 million rupees on Wednesday, extending the net foreign outflow to 1.25 billion rupees from equities.

“It was a very dull day as most local investors are on leave,” said Atchuthan Srirangan, assistant research manager, First Capital Holdings Plc.

Market sentiment improved after Prime Minister Ranil Wickremesinghe survived a no-confidence motion last week, dealers said.

Top fixed-phone line operator Sri Lanka Telecom closed 6.3 percent higher, while Hatton National Bank ended up 1.8 percent.

Dealers expect the stock market to be tepid this week ahead of the Sinhala-Tamil New Year on April 14.

The central bank unexpectedly cut its key lending rate by 25 basis points on Wednesday, as policy makers sought to revitalise an economy growing at its weakest pace in 16 years and facing heightened political uncertainty.

The index fell 0.33 percent last week and dropped 1.14 percent in March.

($1 = 155.6000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sherry Jacob-Phillips)