Sri Lanka stocks inch higher in thin trade; rupee weaker

Reuters: ** Sri Lankan shares closed slightly higher on Wednesday, extending gains into a fourth session, but trading volume slumped to a near three-week low. 

** Traders said the Easter day bombings and aftermath violence weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters on Tuesday. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The International Monetary Fund (IMF) on May 14 approved the disbursal of a $164 million tranche of a loan programme, bringing the total disbursed to more than $1.16 billion. 

** Sri Lanka’s economy should still grow 3.5% this year and there has not been a revision yet, the IMF added on Thursday. 

** The benchmark stock index ended 0.08% firmer on Wednesday at 5,295.68. It fell 1.28% last week. 

** Turnover was 127.4 million rupees ($721,404), the lowest since May 3 and well below this year’s daily average of around 557.8 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors sold a net 30 million rupees worth of shares on Wednesday, extending the year-to-date net foreign outflow to 5.8 billion rupees worth of equities. 

** The rupee ended 0.23% weaker at 176.65/80 per dollar, compared with Tuesday’s close of 176.25/40, market sources said. 

** Analysts expect the currency to weaken as money flows out of stocks and government securities. 

** The rupee gained 0.1% last week and is up 3.4% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors sold a net 433.2 million rupees worth of government securities in the week ended May 15, extending net foreign outflow to 21.2 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

($1 = 176.6000 Sri Lankan rupees) 

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

Sri Lanka Bank of Ceylon net down 12-pct in March; balance sheet shrinks

ECONOMYNEXT - Profits at Sri Lanka's state-run Bank of Ceylon, the country's largest commercial bank fell 12 percent in the March 2019 quarter to 4,179 million rupees as credit losses picked up and loans contracted, interim accounts showed.

Interest income grew 17 percent to 54.9 billion rupees and interest expenses grew at a slower 12.6 percent to 35.7 billion rupees, helping net interest income grow 26.3 percent to 19.1 billion rupees.

Loans contracted 2.1 percent to 1,429 billion rupees from December to March.

Credit losses grew 60 percent from a year earlier to 3,916 million rupees.

From December to March gross non-performing loans grew to 4.66 percent from 3.62 percent.

Fee income grew 24.6 percent to 2,249 million rupees.

Group gross assets fell 2.5 percent to 2,254 billion rupees. At bank level gross assets fell 2.7 percent to 2,207 billion rupees.

But net assets grew 3 percent to 125 billion rupees. Capital adequacy fell to 14.21 percent from 14.58 percent over the three months.

Sri Lanka’s Teejay Lanka March quarter profit up, cotton yarn prices stabilise

ECONOMYNEXT – Teejay Lanka’s net profit rose three percent to 3.4 million US dollars in the March 2019 quarter from a year ago as the cost of its main raw material, cotton yarn, stabilised and product prices were raised.

The Sri Lankan fabric supplier’s sales in the quarter were up 15 percent to 49 million dollars, interim accounts filed with the stock exchange showed.

Growth in profits and sales were higher in Sri Lankan rupee terms, owing to currency effects. The rupee fell sharply against the dollar in 2018 but recovered somewhat this year.

March quarterly earnings per share were 86 Sri Lankan cents. Teejay Lanka’s share closed at 29.90 rupees Thursday, down 20 cents or 0.7 percent.

In rupee terms, Teejay Lanka’s net profit rose 19 percent to 606 million rupees in the March 2019 quarter from a year ago with sales up 35 percent to 8.8 billion rupees.

Stock brokers Bartleet Religare Securities said strong performance in Teejay Lanka’s Indian unit aided the top line growth which is mainly owing to the expanded capacity resulting in volume growth and on improved utilization rates.

“USD top line too witnessed an increase of 15 percent year-on-year to USD 49 million, however a three percent appreciation in the Sri Lanka rupee would have limited further growth in the group’s top line, we believe.”

In the financial year to March 2019, Teejay Lanka said EPS was 2.65 rupees with sales up 29 percent to 31.8 billion rupees and net profit up 17 percent to 1.9 billion rupees.

Teejay Lanka Chairman Bill Lam said in a statement described the year as “a very successful” one for Teejay, in which the group overcame challenging global market conditions through capacity expansion and internal measures.

“Prices of our main raw material, cotton yarn, increased in the beginning of the year and stabilised during Q4. Dyes and chemical costs increased significantly due to the challenges faced by the suppliers,” he said.

“We also saw utility prices increase during the year which was directly attributable to the global movement of fuel prices. Through process improvements and price revisions on finished goods, we were able to mitigate part of the cost escalation.”

Sri Lanka and London Stock Exchange in MOU to promote bond trading

ECONOMYNEXT - London Stock Exchange Group and Colombo Stock Exchange has signed a memorandum of understanding to help develop an offshore market for rupee and dollar bonds.

LSEG said it will help CSE with developing a debt market and an offshore market in rupee bonds and FTSE Russell guidance in capital market classification and index inclusion.

Sri Lanka this year sold 2.4 billion US dollars of sovereign bond which are also traded in London.

Nikhil Rathi, CEO, London Stock Exchange Plc and Director of International Development, LSEG the memorandum of understanding will pave the way to work with the CSE and bring greater investments to the country.

Ray Abeywardena, the Chairman of CSE said: “Our two institutions share an excellent working relationship built on trust and mutual respect, which has paved the way for successful engagements in multiple initiatives over the years. The foray that we are jointly forging today is an extension of that relationship.

"The scope of the MoU paves the way for a number of new avenues of cooperation between the CSE and LSEG along with our respective depositories and will immensely advance CSE’s visibility and connectivity to international markets," CSE chairman Ray Abeywardena said.

Mark Field UK Minister of State for Asia and the Pacific, Sri Lanka's High Commissoner in London Manisha Gunasekara, Central Bank Governor Indrajit Coomaraswamy, Governor, Ranel T. Wijesinha, Chairman, Securities and Exchange Commission of Sri Lanka and Rajiva Rajeeva Bandaranaike, CEO, Colombo Stock Exchange were at the signing.

Sri Lanka's EPF enters stock market with blood in the streets

By Chandeepa Wettasinghe


ECONOMYNEXT - Sri Lanka's 2.3 trillion rupee state-managed Employees' Provident Fund, has returned to the Colombo Stock Exchange, Central Bank Governor Indrajit Coomaraswamy said with the benchmark index hitting seven year lows.

"The EPF has bought shares in one company last week," Governor Coomaraswamy told EconomyNext.

The governor said that EPF policy does not allow him to disclose the new investment.

Coomaraswamy said one of the main reasons for the EPF to enter the secondary stock market was due to the market currently being at a seven-year low, following a market crash after Easter Sunday bombings.

On May 16, Sri Lanka's stocks were valued at a price to earnings multiple of 8.3 times on historical earnings, though banks and some other firms are taking a beating, with forward multiples set to fall, though there are value stocks to pick, analysts say.

Stocks have been hit by political unrest, liquidity shortages and a slowing economy.

Coomaraswamy declined to name the stock EPF was buying, though there was speculation that Dialog Axiata, Piramal Glass or John Keells Holdings may have been the target.

"The Monetary Board has approved the EPF Investment Committee to purchase shares in a small list of companies, which will be added to as time goes on," Coomaraswamy said.

"The investments will be made cautiously. The Monetary Board has approved the Investment Committee to invest up to 6 percent of the portfolio in equity."

At the end of 2018, around 92 percent of the 2.3 trillion rupee fund was invested in government securities, 3.3 percent in equity, 1.9 percent in corporate bonds and 1.5 percent in fixed deposits.

The fund was growing by around 300 billion rupees a year, while government borrowing requirements are shrinking, Coomaraswamy said.

"The new investment policy framework is still being finalized, and we are adding new things to it from time to time," he said.

"We can't invest more in fixed deposits, because that may interfere with our monetary policy stance," he said.

"That narrows the options we have for investment."

Coomaraswamy had in the past months described the Sri Lankan stock market as going through a 'fire sale'.

The EPF largely stayed off the market, except for some sporadic sales, after coming under fire for being a 'buyer of last resort' around 2011 in particular at peak valuations amid charges of corruption by dealers.

Sri Lanka Singer group in the red in March quarter

ECONOMYNEXT - Singer (Sri Lanka) Plc, a consumer durables group which also has a financing arm made an eight million rupee loss in the March 2019 quarter, against a profit of 153 million rupees a year earlier, amid weak sales growth and higher financing costs.

The group, a unit of Hayleys Plc, reported a loss of 0.02 cents per share for the March quarter. In the 12 months to March the group reported earning 67 cents per share on total profits of 799 million rupees.

Gross revenues grew 2.9 percent to 14.0 billion rupees in the March quarter from a year earlier, and cost of sales rose 1.4 percent to 9.7 billion rupees.

Direct interest grew 25 percent to 349 million rupees.

Gross profits grew 5.2 percent to 3.9 billion rupees.

Selling and administration expenses grew 14.9 percent to 2.9 billion rupees.

"Additional adverse impacts such as rupee devaluation, increased borrowings due to import restrictions and imposition of 100 percent Letter of Credit margins, higher impairment costs arising from new accounting standards and new levies on financial sector hampered growth potential and profit earnings," Singer said in a statement.

Impairment losses on trade receivables grew to 340 million rupees from 199 million rupees.

The group interest costs, which include its finance company unit, rose to 804 million rupees from 554 million rupees a year earlier.

But there was an exchange gain of 169 million rupees, compared to a loss of 32 million rupees last year.

Sri Lanka's Lion Beer gives profit warning on blasts, taxes

ECONOMYNEXT - Sri Lanka's Lion Beer Plc said it expected a downturn in tourism after Easter Sunday blasts to hit revenues and also warned on a change to tax policy.

In the December 2019 quarter profits were down 28 percent from a year earlier to 854.5 million rupees, with last year's profits boosted by a 492 million rupees insurance receipt.

Revenues grew 18 percent to 11.9 billion rupees in the quarter, cost of sales grew 16 percent to 9.07 billion rupees and gross profits grew at a faster 26 percent to 2.89 billion rupees.

Full year revenues were up 44 percent to 42.8 billion rupees and gross profits were up 78 percent to 6.0 billion rupees.

Sri Lanka's beer sales picked up after taxes were reduced to be based on alcohol content. In 2015 taxes were raised to benefit a hard alcohol manufacturer, critics said.

In the most recent budget, beer taxes were raised but taxes on extra special arrack, the cheapest hard alcohol was not raised.

"Once again it seems that policy consistency is being compromised, an age‐old challenge for the private sector in Sri Lanka," the firm told shareholders.

The Easter Sunday blasts on hotels and churches had led to a sharp downturn in tourism.

"Unfortunately, the economy has taken a few steps back because of these events and we are likely to see a significant drop in tourism in the months ahead," the firm said.

"Whilst this has the potential to challenge our results in the immediate future, management is taking all possible steps to continue the positive momentum achieved in the year just concluded."

Lion Beer chief Suresh Shah told EconomyNext that the firm was looking to cut costs and look at export markets.