Sri Lanka banks trading at 10-yr low valuations: First Capital

ECONOMYNEXT- Sri Lankan banks are trading at a ten year low valuation, with upward pressure on performance after a challenging 2019, a research firm said.

“Compared to frontier and emerging markets, Sri Lankan banks have the lowest price to earnings ratios,” First Capital Senior Research Analyst Hiruni Perera said.

“Banks are still undervalued in Sri Lanka. Banking stocks are at a ten year low,” she said, speaking at the First Capital Investment Strategy 2020 Second Research Conference held on Tuesday.

Sri Lankan banks had ended 2019 at a price to earnings multiple of 5.4 and a price to book value multiple of 0.7.

The price to earnings multiple of India-based Axis Bank Ltd was 17.3 at end-December, while Bank of the Philippine was 12.3 and Malayan Banking Berhad was 11.5.

The Colombo Stock Exchange had ended the year with a price to earnings multiple of 11.6.

FC Research Assistant Manager Atchuthan Srirangan said with the government removing the Nation Building Tax and the Debt Repayment Levy, net profits at banks will rise 9 percent.

The government has also announced bank income tax will fall to 24 percent from 28 percent.

With a bullish view on banking stock Srirangan said banks with high capital and a digitization edge will outperform the sector, as digital banking growth has outpaced traditional transactions at brick and mortar branches.

Profits at banks which fell 4 percent in 2019 with constrained capital and rising bad loans, will grow at a compounded 19 percent up to 2021, he said.

Return on equity is expected to rise to 12 percent in 2021, First Capital has estimated, from 10 percent in 2019.

Credit growth is expected to pick up in the latter half of 2020 and early 2021, while bad loans will moderate with higher economic growth and the breathing room borrowers receive from loan moratoriums, he said.

Meanwhile, the capital constraints on banks will ease, as many have raised equity during the year, while larger banks such as Sampath, HNB, Seylan and NDB will face lower capital requirements due to the D-SIB rule change, which will give them room to expand, Perera said.

Annual private credit growth, which had fallen to 4.5 percent in 2019, would rise to 14 percent in 2020 and 2021 amid a low interest environment, Srirangan said. 

Sri Lankan shares post over 13-week closing high; rupee firmer

Reuters: ** Sri Lankan shares rose on Thursday to close at their highest in more than 13 weeks as investors took positions two weeks ahead of presidential polls, analysts said.

** Sajith Premadasa, the housing minister and one of the two presidential front-runners, announced his election manifesto, which is seen by analysts as a “broader policy framework”. His close rival Gotabaya Rajapaksa has pledged a tax overhaul that would reduce tax to 8% from the current 15% and abolish many taxes. 

** Many political analysts Reuters spoke to said the tight race between the two presidential candidate was still on.

** The benchmark stock index ended 0.55% firmer at 5,990.24, its highest close since July 29. The index rose 1.2% last week, but is down 1% for the year.

** Financial and telecom stocks were among the top gainers, with Hatton National Bank Plc rising 2.9%, Sri Lanka Telecom Plc ending 2.2% firmer and Dialog Axiata Plc adding 0.8%.

** The rupee ended 0.25% firmer at 181.05/30 per dollar, compared with Wednesday’s close of 181.50/60. The currency is up 0.86% so far this year.

** Foreign investors were net sellers of riskier assets for the seventh straight session on Thursday.

** They sold net 102 million rupees ($563,380) worth of shares, extending the year-to-date net foreign selling to 4.32 billion rupees of equities, according to index data.

** Equity market turnover was 1.28 million rupees ($7,069.87), well above this year’s daily average of about 667.6 million rupees. Last year’s daily average was 834.0 million rupees.

** Meanwhile, foreign investors bought government securities on a net basis for the first time in three weeks, buying a net 1.97 billion rupees worth of government securities in the week ended Oct. 23.

** Total foreign outflows from government securities through Oct. 23 stood at 53.63 billion rupees, according to central bank data.

** Sri Lanka’s central bank left its key rates unchanged on Oct. 11 after loosening policy earlier this year, although growth is likely to remain subdued as the economy faces rising global risks.

($1 = 181.0500 Sri Lankan rupees) 

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

Sri Lankan stocks end flat; rupee strengthens

Reuters: ** Sri Lankan shares closed flat on Monday, as gains in consumer staples were offset by losses in telecommunications shares, while investors also waited for policy manifestos of key presidential candidates. The rupee ended firmer. 

** The benchmark stock index closed 0.01% higher at 5,863.99. The index has fallen 3.11% so far this year. 

** Meanwhile, the rupee ended 0.14% firmer at 181.70/80 per dollar compared with Friday’s close of 181.95/182.10. The currency is up 0.49% so far this year. 

** Foreign investors bought riskier assets for the second time in 14 sessions as campaigning got underway for the country’s presidential election scheduled on Nov. 16. 

** They purchased a net 216.2 million rupees ($1.19 million) worth of shares on Monday, but they have been net sellers of 3.78 billion rupees of equities so far this year, according to index data. 

** The two presidential frontrunners, former wartime defence chief Gotabaya Rajapaksa and housing minister Sajith Premadasa, are yet to announce their policy framework. Analysts said investors are waiting to see policies on tax, subsidies, and private businesses. 

** Equity market turnover was 1.17 billion rupees ($6.44 million), well above this year’s daily average of about 664.9 million rupees. Last year’s daily average was 834.0 million rupees. 

** Meanwhile, foreign investors sold government securities on a net basis for the eighth time in nine weeks, selling a net 724.9 million rupees worth of government securities in the week ended Oct. 16. 

** Total foreign outflows from government securities through Oct. 16 stood at 55.6 billion rupees, as per central bank data. 

** Sri Lanka’s central bank left its key rates unchanged last week after loosening policy earlier this year, although growth is likely to remain subdued as the economy faces rising global risks. 

($1 = 181.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; editing by Uttaresh.V)

Sri Lankan stocks end higher; rupee strengthens

Reuters: ** Sri Lankan shares closed slightly higher on Friday, buoyed by telecom and diversified stocks. The rupee ended firmer. 

** The benchmark stock index closed 0.06% higher at 5,863.48. The index gained 0.49% for the week, but has fallen 3.12% so far this year. 

** Meanwhile, the rupee ended 0.03% firmer at 181.95/182.10 per dollar compared with Thursday’s close of 182.00/10. The currency is up 0.36% so far this year.

** Foreign investors bought riskier assets for the first time in 13 sessions as campaigning got underway for the country’s presidential election.

** They bought a net 145.4 million rupees worth of shares on Friday, but they have been net sellers of 3.99 billion rupees of equities so far this year, according to index data.

** One of the two presidential frontrunners, former wartime defence chief Gotabaya Rajapaksa, has won the backing of President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP), in the election scheduled for Nov. 16.

** Rajapaksa and the other strong candidate Sajith Premadasa, the housing minister who has strong backing among the rural poor, started their campaigns last week.

** Equity market turnover was 1.05 billion Sri Lankan rupees ($5.77 million), well above this year’s daily average of about 662.3 million rupees. Last year’s daily average was 834.0 million rupees. 

** Foreign investors sold government securities on a net basis for the seventh time in eight weeks, selling a net 102.8 million rupees worth of government securities in the week ended Oct. 9. 

** Total foreign outflows from government securities through Oct. 9 stood at 54.9 billion rupees, as per central bank data.

** Sri Lanka’s central bank left its key rates unchanged last week after loosening policy earlier this year, although growth is likely to remain subdued as the economy faces rising global risks.

($1 = 181.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; editing by Uttaresh.V)

Sri Lankan stocks end higher on bargain hunting; rupee weaker

Reuters: ** Sri Lankan shares snapped two sessions of losses to end higher on Thursday as investors picked up beaten down stocks. The rupee closed weaker. 

** The benchmark stock index closed 0.40% higher at 5,860.09. The index has dropped 3.18% so far this year. 

** Meanwhile, the rupee ended 0.08% weaker at 182.00/10 per dollar compared with Wednesday’s close of 181.85/95. The currency is up 0.33% so far this year.

** Foreign investors were net sellers of riskier assets for 12th straight session as campaigning got underway for the country’s presidential election.

** They sold a net 10.7 million rupees worth of shares on Thursday, extending the year-to-date net foreign outflow to 4.14 billion rupees of equities, according to index data.

** One of the two presidential frontrunners, former wartime defence chief Gotabaya Rajapaksa, has won the backing of President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP), in the election scheduled for Nov. 16.

** Rajapaksa and the other strong candidate Sajith Premadasa, the housing minister who has strong backing among the rural poor, started their campaigns last week.

** Equity market turnover was 526.4 million Sri Lankan rupees ($2.89 million), less than this year’s daily average of about 660.2 million rupees. Last year’s daily average was 834.0 million rupees. 

** Foreign investors sold government securities on a net basis for the seventh time in eight weeks, selling a net 102.8 million rupees worth of government securities in the week ended Oct. 9. 

** Total foreign outflows from government securities through Oct. 9 stood at 54.9 billion rupees, as per central bank data.

** Sri Lanka’s central bank left its key rates unchanged last week after loosening policy earlier this year, although growth is likely to remain subdued as the economy faces rising global risks.

($1 = 181.9000 Sri Lankan rupees) (Reporting by Ranga Sirilal; editing by Uttaresh.V)

Sri Lankan stocks close lower for second day; rupee ends flat

Reuters: ** Sri Lankan stocks slipped for a second straight session on Wednesday, amid weakness in hotels and manufacturing shares, while the rupee ended flat. 

** The benchmark stock index ended 0.07% lower at 5,836.62. The index has dropped 3.56% so far this year. 

** Meanwhile, the rupee ended steady at 181.85/95 per dollar compared with Tuesday’s close. The currency is up 0.41% so far this year.

** Foreign investors were net sellers of riskier assets for 11th straight session as campaigning got underway for the country’s presidential election.

** They sold a net 95.6 million rupees worth of shares, extending the year-to-date net foreign outflow to 4.13 billion rupees of equities, according to index data.

** One of the two presidential frontrunners, former wartime defence chief Gotabaya Rajapaksa, has won the backing of President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP), in the election scheduled for Nov. 16.

** Rajapaksa and the other strong candidate Sajith Premadasa, the housing minister who has strong backing among the rural poor, started their campaigns last week.

** Equity market turnover was 540.2 million Sri Lankan rupees ($2.97 million), less than this year’s daily average of about 660.9 million rupees. Last year’s daily average was 834.0 million rupees. 

** Foreign investors sold government securities on a net basis for the seventh time in eight weeks, selling a net 102.8 million rupees worth of government securities in the week ended Oct. 9. 

** Total foreign outflows from government securities through Oct. 9 stood at 54.9 billion rupees, as per central bank data.

** Sri Lanka’s central bank left its key rates unchanged last week after loosening policy earlier this year, although growth is likely to remain subdued as the economy faces rising global risks.

($1 = 181.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; editing by Uttaresh.V)

Sri Lanka stocks slip from near 6-week high on profit-taking; rupee weakens

Reuters: ** Sri Lankan stocks ended weaker on Tuesday, snapping a run of seven straight gaining sessions to slip from a near six-week high hit in the previous session as investors booked profits. The rupee currency ended weaker. 

** The benchmark stock index ended down 0.5% at 5,840.48, slipping from its highest close since Sept. 3. So far this year, the index has dropped 3.50%. 

** Meanwhile, the rupee was 0.49% weaker at 181.85/95 per dollar, compared with Monday’s close of 180.90/181.10. The currency is up 0.41% so far this year.

** Foreign investors were net sellers of riskier assets as campaigning got under war in the country’s presidential election.

** Foreign investors continued selling for the 10th straight session. They sold a net 79.9 million rupees worth of shares, extending the year-to-date net foreign outflow to 4.03 billion rupees of equities, according to index data.

** One of the two presidential frontrunners, former wartime defence chief Gotabaya Rajapaksa, has won the backing of President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP), in the election scheduled for Nov. 16.

** Rajapaksa started his campaign last week, while the other strong candidate Sajith Premadasa, the housing minister who has strong backing among the rural poor, also kicked off his campaign in the previous week.

** Sri Lanka’s central bank left its key rates unchanged on Friday after loosening policy earlier this year, although growth is likely to remain subdued as the economy faces rising global risks.

** Equity market turnover was 583.4 million Sri Lankan rupees ($3.21 million), well above this year’s daily average of about 661.6 million rupees. Last year’s daily average was 834.0 million rupees. 

** Foreign investors sold government securities on a net basis for the seventh time in eight weeks, selling a net 102.8 million rupees worth of government securities in the week ended Oct. 9.

 ** Foreign outflows, which are one of the major reasons behind the rupee’s recent weakness, may not abate until after a parliamentary election in 2020, some analysts had said. 

** The central bank does not release foreign trade numbers on a daily basis, but weekly data in the past six weeks through Sept. 25 has shown a steady outflow. ** Sri Lanka has seen a net foreign outflow of 54.9 billion rupees through Oct. 9, according to central bank data. 

($1 = 181.6500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Alex Richardson)