Sri Lanka stocks marginally up, bonds soar as yields fall in 2017

ECONOMYNEXT - Sri Lanka's stocks lagged the performance of bond markets in 2017, with the Colombo All Share Index up 2.2 percent while bond prices rose with the 10 year yield plunging over 200 basis points amid fiscal and monetary tightening.

The Colombo All Share Index rose ended in December at 6,228.28 points while the S&P Index of more liquid stocks rose gained 5 percent to end the year at 3,871.72 points.

The market price earnings ratio fell to 10.6 by end December 2017 on published results from 12.4 in 2016, indicating that stocks are broadly cheaper, though individual companies have made gains.

The price to book value fell to 1.31 by year end from 1.4 in 2016.

The market dividend yield rose to 3.19 percent from 2.8 percent, indicating that firms were paying higher volumes of dividends at current prices.

On the macro-economic front monetary tightening in 2016 had slowed private credit and ended central bank money printing, ending a balance of payments crisis triggered by a disastrous 2015 budget which was accommodated by rate cuts and liquidity releases by the central bank.

Fiscal tightening with higher value added taxes in 2017 and a wage freeze for two years after a steep hike in 2015 have brought state finances back to square one.

However high yield bond sold at longer tenures in 2015 and 2016 amid much controversy will continue to be a drag on the budgets for years to come. A private firm will try to borrow short when rates spike.



Bond yield fell sharply over 2017 though with private credit slowing, and inflation high with the central bank continuing to depreciate the currency, targeting a real effective exchange rate index, the effects are still not felt on companies.

Sri Lanka ended 2017 with inflation of 7.1 percent, overshooting the mid-single digit inflation target of the central bank. Historical inflation is now almost on par with current short term rates but the central bank has said inflation will ease in the first quarter.

The three month Treasury boll yield fell 1.02 basis points from 8.80 percent to 7.78 percent in the secondary market on average according to central bank data, while the 12-month yield fell 1.29 basis points to 8.99 percent.

A 2-year bond maturing on 15 November 2018 was quoted at a yield of 11.56 percent in the last week of December 2016 (94.12 rupees0. A 01 November 2019 bond was quoted at a buying yield of 9.31 percent in late December according to central bank data (97.49 rupees) indicating a fall of 205 basis points.

The 15 November 2018 bond, now 11 months to maturity was quoted at 99.16 rupee up 3.04.

The 5-year yield fell from 12.20 percent (90.22 rupees) for a 15 October 2021 bond in 2016 to 9.85 percent (100.02) for a 01 Oct 2022 bond in 2017, plunging 235 basis points.

The holder of 15 October 2021 could sell the bond at 98.75 rupees, up 8.53 rupees. The 10-year yield fell from 12.37 percent (94.13 rupees) measured by a 01 August 2026 bond in 2016 to 10.23 percent for a 15 December 2027 bond (100.29 rupees), showing a fall of 2.34 percent.

A holder of a 01 August 2016 bond could have sold it at 106.29 rupees according to central bank data up 10.23 rupees.

The central bank expects market rates to translate to lending rates, but it has not cut policy rates. Unlike in some earlier crisis where there was a fast recovery such as in 2001 and 2009, the central bank has not allowed the exchange rate to appreciate.

ASPI, S&P SL 20 index close year in positive territory

Indices recorded a turnaround during the year to end in positive territory. The ASPI gained 2.26% while the S&P SL 20 gained 5.01%.

The Colombo bourse enters 2018 at the back of a turnaround year in 2017, where the country experienced improvements in many fronts with relation to the performance of the market.

Both the All Share Price Index and the S&P SL 20 index closed the year in positive territory after a lapse of two years and saw an improvement in trading activity. 2017 also brought about a record breaking year for foreign investment and for capital raising through rights issues.

While the market is encouraged by this performance, the CSE together with its stakeholders will continue with initiatives to develop the market in key areas of strategic importance, including in market development, product diversification, governance, and market infrastructure and risk management, said Rajeeva Bandaranaike CEO of Colombo Stock Exchange.

The extensive awareness drive, which saw capital market promotions in key foreign markets and in key towns around the country which was conducted in association with the SEC in 2017 will continue this year as well.

The Stock Exchange will also see a number of new listings in the coming year, some of which would be through new avenues.

“We aspire to open the local market for foreign listings this year, at a time when business operations and capital flows are becoming increasingly globalized, and as Sri Lanka aspires to develop into a new center of economic strength and innovation. More emerging and growing businesses, especially across Asia today are considering the pros and cons of accessing public capital in a foreign market and are looking beyond their mature domestic markets.”

“This we believe, presents the CSE with an opportunity to attract such businesses to list in Sri Lanka.

We will also introduce a dedicated listing platform for our local SMEs - the core of the Sri Lankan economy. SMEs will therefore commencing this year, have the opportunity to raise capital and benefit from the Sri Lankan stock market and investors will have the opportunity to participate in this exciting and dynamic sector of the economy. “e expect to make other key development related and stakeholder focused announcements as the year progresses.”www.dailynews.lk

Vidullanka commissions hydro power plant

Vidullanka PLC, in a stock exchange filing yesterday, said that it has successfully completed the construction of the 1.40MW Udawela Mini Hydro Power Plant in Soranathota, Badulla and the plant was commissioned to the national grid on December 29.

Udawela is the 11th power project commissioned by Vidullanka PLC.

The Udawela Mini Hydro Power Plant is owned by Udawela Hydro (Pvt) Limited which is a wholly owned subsidiary of Vidullanka PLC.

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Fitch rates SLT’s debenture ‘AAA(lka) (EXP)’

Fitch Ratings has assigned Sri Lanka Telecom PLC’s (SLT, AAA(lka)/Stable) proposed senior unsecured debenture issue of up to Rs 7 billion an expected National Long-Term Rating of ‘AAA(lka)(EXP)’.

The debentures will have a tenor of 10 years and carry fixed coupons.The debentures will be listed on the Colombo Stock Exchange, with the proceeds to be used to refinance its short-term debt and fund SLT’s capex plans.

SLT’s senior unsecured debt is rated at the same level as its National Long-Term Rating, as the debentures rank equally with other senior unsecured obligations.

The final rating is subject to the receipt of final documents conforming to information already received.

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CBSL to manage ETI Finance and Swarnamahal FS

The Monetary Board of the Central Bank of Sri Lanka at its meeting held on January 1, having considered the weak financial performances of the ETI Finance Ltd. (ETIF) and Swarnamahal Financial Services PLC (SFSP) decided to take regulatory actions, as a temporary measure, under the provisions of the Finance Business Act No. 42 of 2011, with immediate effect.

This with a view to safeguard the interests of the depositors and other creditors of the two companies, and to ensure safety and soundness of the financial system.

These include the appointing a panel to manage the affairs of both companies restrict the withdrawal of maturing deposits and renew such deposits for a period of six months and thirdly the payment of interest due for deposits as per agreed terms and conditions.

In the meantime, the companies can finalize the negotiations with the prospective investors and the Central Bank will facilitate suitable investors as per the applicable laws and regulations.

The depositors of the above two companies are further informed that the Central Bank is taking further measures and closely monitoring the operations of the companies to protect the rights of the depositors and therefore, the depositors are kindly requested to cooperate with the Central Bank in its effort to ensure the stability of the ETIF and SFSP.

The depositors may contact the Department of Supervision on Non-Bank Financial Institutions of the Central Bank through the telephone numbers 011 2477258 or 011 2477229, for further clarification.

www.dailynews.lk

Sri Lankan shares firm up on large caps; lower rates boost sentiment

Reuters: Sri Lankan shares rose for a seventh straight session to hit a near five-week closing high on Tuesday as investors picked up large caps, with sentiment expected to remain positive after the central bank kept key policy rates unchanged last week.

The Colombo Stock Index ended 0.66 percent firmer at 6,411.27, its highest since Nov. 30.

Turnover stood at 194.6 million rupees ($1.27 million), less than last year’s daily average of 915.3 million rupees.

“It was a typical first day of the new year with the volumes low. But the market is positive after the central bank kept the rates lower and the market rates are coming down,” said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

The bourse rose 2.26 percent in 2017, posting the first annual increase in three years, after falling 9.7 percent in 2016.

Shares in Ceylon Tobacco Company Plc rose 5.5 percent, while Dialog Axiata Plc ended 3.1 percent firmer.

Conglomerate John Keells Holdings Plc gained 1.01 percent, while the biggest listed lender Commercial Bank of Ceylon Plc closed up 1.6 percent.

Foreign investors net bought shares worth 102.8 million rupees on Tuesday. Foreign investors net bought 18.5 billion rupees worth equities in 2017, and 633.5 million rupees worth of stocks in 2016.

The $81 billion economy grew at an annual pace of 3.7 percent in the first nine months of 2017, which followed its most severe drought in 40 years in the first quarter and the worst flooding in 14 years in May. 

($1 = 153.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lankan shares rise; up 2.3 pct in 2017

Reuters: Sri Lankan shares rose for a sixth straight session in muted trade on Friday, ending 2017 with a modest 2.3 percent gain after two consecutive annual losses.

The Colombo Stock Index edged up 0.08 percent to 6,369.26, its highest since Dec. 8 and posting the first annual increase in three years after falling 9.7 percent in 2016.

Asiri Hospitals Plc rose 24.4 percent, while Carson Cumberbatch Plc ended 0.6 percent higher and conglomerate John Keells Holdings Plc gained 0.3 percent.

Turnover stood at 379.98 million rupees ($2.48 million), less than this year’s daily average of 915.3 million rupees and last year’s 737.2 million rupees.

Foreign investors net bought shares worth 143.4 million rupees on Friday, extending the 2017 net foreign inflow to 18.5 billion rupees. They net bought 633.5 million rupees worth equities in 2016.

“We expect the market to start the next year in a positive note as the central bank held the rates and gave a clear direction on where the interest rates are going to be,” said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

“The first two months, the election fever will be there. Investors will look for policy direction after the elections and what policies to boost growth.”

Sri Lanka will hold a long-delayed local government election on Feb. 10.

The country’s central bank, which kept benchmark interest rates unchanged on Thursday, expects growth to come in below 4 percent this year, lower than its original 2017 growth forecast of 5.0 percent.

The $81 billion economy grew at an annual pace of 3.7 percent in the first nine months of 2017, which followed its most severe drought in 40 years in the first quarter and the worst flooding in 14 years in May. 

($1 = 153.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Biju Dwarakanath)