Sri Lankan recovers from early loss; sees 23.4 pct gain for year

Dec 31 (Reuters) - Sri Lankan stocks recovered from early losses on Wednesday and closed higher, led by financials, but the gains were limited by political uncertainty before a coming presidential election.

The bourse gained 23.4 percent for the year after rising 4.8 percent last year.

The main stock index closed 7.62 points higher, or 0.1 percent, at 7,298.95. It had fallen 3.5 percent after reaching its high for the year of 7,562.52 on Nov. 19, following President Mahinda Rajapaksa's decision to hold a snap presidential election on Jan. 9.

"This year was great until the election announcement came," one stockbroker said. "The next year will be challenging."

The index returned 23.1 percent for the year measured in dollar terms. Record low interest rates to boost private-sector borrowing and economic growth led investors to shift into riskier assets from fixed deposits.

Wednesday's turnover stood at 628.7 million rupees ($4.79 million), less than half of this year's daily average of 1.42 billion rupees, stock exchange data showed.

Net foreign inflows into stocks were 22.2 million rupees, extending net inflows to 22.07 billion rupees for the year, the data showed. That was a little less than last year's 22.88 billion inflow.

The index was boosted by a 4.55 percent gain for Commercial Leasing and Finance Plc and 10 percent jump in Finlays Colombo Plc. However, only 200 shares in Commercial Leasing and 10 shares in Finlays Colombo were traded, stock exchange data showed.

Analysts said turmoil in Sri Lankan politics have hurt sentiment. The latest came on Wednesday, when a deputy minister defected from Rajapaksa's ruling party to back an opposition candidate.

That made 24 lawmakers who have quit the party since Rajapaksa announced the coming election. They include former health minister Mithripala Sirisena, who is challenging Rajapaksa's bid for a third term. Two opposition legislators have joined the ruling party.

($1 = 131.1500 Sri Lankan rupees) 

(Reporting by Shihar Aneez)

Sri Lanka Treasury bill yields flat

Dec 23, 2014 (LBO) –Sri Lanka's Central Bank re-issued of 12,000 million rupees maturing Treasury bills was oversubscribed with bids amounting to 36,335 million rupees being received, data from the state debt office showed.

It was decided to accept 15,135 million rupees from the auction.

The 3-month yield was flat at 5.74 percent and 4,175 million rupees were accepted from the auction.

The 12-month yield increased at 6.01 percent from 6.00 percent at the previous auction, and 10,960 million rupees were accepted data from the state debt office showed.

Worries over rise in foreign debt

By Paneetha Ameresekere

Ceylon Finance Today: The Government of Sri Lanka (GoSL) may be exposing its vulnerability to external shocks in the backdrop of the rapid rise of its external debt profile, market sources told Ceylon FT.

As per the latest data released by Central Bank of Sri Lanka (CBSL) on Friday (26 December), it showed that external debt in the nine month period from last year end to end September of this year increased by Rs 222.5 billion (7.5%) to Rs 3182.9 billion, constituting 43.2% of GoSL's total debt profile.

Further, Sri Lanka's external debt servicing commitments, which in the 12 months ended November of this year (2014) was estimated to have had been US$ 5.7 billion according to CBSL, are however expected to increase by US$ 1.2 billion (21.1%) to US$ 6.9 billion by October of next year, causing pressure on both the exchange rate (ER) as well as on CBSL's external reserves.

These developments have to be looked at in the backdrop of two key issues that are expected to take place next year, an economist said.

Those are the possibility of sanctions being placed on the island in Geneva in March over human rights (HR) issues. This may affect export and tourism earnings as Sri Lanka's key markets for such is the West which is gunning for the island on those matters. And the other, the expected rise in international interest rates by summer, in tandem with a decision that the Federal Reserve System is expected to take, i.e. of raising its key policy rate, the reverse repo, because of the recovery of the US economy, which is making demand once more robust in the world's largest economy. That however would be to the detriment of Sri Lanka, which seeks to meet its external commitments by increased foreign borrowings because it runs a trade deficit, which in the first 10 months of the year (2014) grew by 4.3% year on year to US$ 6.79 billion.

This is also in the context that Sri Lanka is expected to raise another US$ 1.5 billion (Rs 198.5 billion) by the sale of a Sovereign Bond in international markets next month. The figure Rs 198.5 billion is arrived at, on the basis that the exchange rate (ER) had deteriorated to Rs 132.35 to the US dollar in 'spot next next' trading as at Monday (29 December), a deterioration of 36 cents in a day, thereby causing pressure on interest rates as well, in the backdrop of the market's and GoSL's growing appetite for US dollars.

These foreign debt figures however may be deflated numbers, because they don't take into account proxy international borrowings made by the state through certain financial institutions. For instance last year (2013) GoSL raised $ 1.35 billion this way. Envisaged repayment commitments may however be accurate.

Meanwhile, those proxy borrowings comprised $ 500 million raised by Bank of Ceylon at a 5.3% interest rate in April, $ 750 million by NSB at a higher 8.875% interest rate in September and $ 100 million by DFCC Bank at an even higher 9.6% interest rate in October. All these three issues were of a five year tenure, each.

According to CBSL, the annual average value of the ER was Rs 129.11 last year. On that basis, $ 1.35 billion is equivalent to Rs 174.3 billion worth of proxy borrowings by GoSL last year.

Additionally, GoSL directly raised five year money of $ one billion in value at a 6% interest rate in January 2014. Three months later in April, it raised a further $ 500 million of a similar tenure at a lower, 5.125% interest rate.
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Oil hits 5-1/2-year low below $ 57 on supply glut

LONDON (Reuters): Brent crude fell to a 5-1/2-year low of less than $ 57 a barrel on Tuesday as a global supply glut outweighed concerns of lost supply from Libya where battling militias have closed ports.

The oil benchmark recovered ground later but was on track for its second weakest month since the global financial crisis of 2008, and traders said the sell-off that has halved crude prices in six months showed no sign of coming to an end.

Brent fell $ 1.14 a barrel to $ 56.74, its lowest since May 2009, before recovering to trade around $ 57.70, down 18 cents, by 1440 GMT. US crude was up 10 cents at $ 53.71 after hitting $ 52.70 – also its lowest since May 2009.

Oil markets have been heavily oversupplied this year due to increasing output of high quality, light oil from US shale and lower-than-expected consumption as a result of faltering global economic growth and competition from alternative fuels.

Several members of the Organization of the Petroleum Exporting Countries have suffered supply disruptions in recent months, but this has had little impact on prices.

In Libya, clashes between rival factions have closed oil ports and terminals this month, reducing exports from the OPEC producer, which used to sell over 1 million barrels per day of crude to world markets, to almost nothing.

OPEC, which pumps a third of the world’s oil, had been expected to trim output to try to stabilise prices, but it decided in November to keep production unchanged and let the market find its own level.

Brown Investments, Palm Garden Hotel and Eden Hotel in JV to acquire Maldives resort

Brown Investments, Palm Garden Hotel and Eden Hotel have jointly invested $ 1.5 million to acquire a beach resort in Maldives for the purpose of developing a resort hotel in the island.

Brown Investments, Palm Garden Hotel and Eden Hotel have each invested US$ 500,000 to acquire 5,000 shares of Bodufaru Beach Resort Ltd., (BBR), Maldives amounting to 33.33% of the equity of the Company for the purpose of developing a resort hotel in the Maldives.

The three companies announced in a stock market disclosure that they are in a joint investment in BBR, each investing $ 500,000 (33.33% each).

Bodufaru Beach Resort is a limited liability company incorporated in the Republic of Maldives and holds a 50-year head lease for the island of Bodufarufinolhu in Maldives.

Subsequent to the investment by Eden Hotel Lanka PLC, Palm Garden Hotels PLC, and Brown Investments PLC, BBR will become an associate of Eden Hotel Lanka PLC and a subsidiary of Palm Garden Hotels PLC, and Brown Investments PLC.
www.ft.lk

Walkers finalizing strategic plan with MTI

MTD Walkers PLC invited MTI Consulting to develop  their strategic plan for 2020 and this has reached the final stages of the exercise. The Colombo-based infrastructure company undertook this exercise to achieve greater heights in line with Sri Lanka’s economic development path.

The past few months have involved numerous workshops, site visits and one to one sessions with a cross section of people in the company from the managing director to the CEO’s, functional staff, GM’s, DGM’s & the front line workers. All of which gave MTI an intimate insight to the various businesses which acted as the foundation to developing the strategic plan for the company.

Speaking at the recently concluded strategic planning session, Group Executive Deputy Chairman of MTD Walkers PLC, Jehan Amaratunga said "The exercise with MTI has been effective in working towards restructuring the Group to support our strategic vision. The purpose of this strategy exercise is to harness synergies within the group through this immense growth period, maximizing stakeholder value, whilst diversifying revenue streams to sustain our performance going forward. To put this in context, over the last 5 years we have had 40% compound growth each year and hope to enhance this further. www.island.lk

Industrial Asphalts introduces full range of colour anti-corrosive paints

History is being made by Industrial Asphalts (Ceylon) PLC by introducing for the first time in Sri Lanka the full range of color to anti-corrosive paints. Upto now anti-corrosive paints were available only in 4 basic colors.

Britex®, the protective coatings range from Industrial Asphalts (Ceylon) PLC – IAC - has launched full range colored anti-corrosive paints for the Sri Lankan market. This pioneering move is as a result of the new restructuring being carried out at IAC, the Company’s newly established Product Development team had carried out detailed study of the products available in the market to identify and meet the customers evolving requirements.

After carrying out several market studies, the Product Development team using IAC’s newly establishing Research & Development facility went about to produce a range of color anticorrosive paints. Launched to the market in October 2014, the new color range is well received and is getting positive reviews.

The customer is now given a choice of 1,000+ colors to choose from and IAC is rolling out color pallets through its key dealers, enabling the customer to color match virtually any color. Britex® has been providing the market with its range of protective coatings for 50 years and over the years had developed a reputation for delivering quality which matches international standards at very reasonable prices.

IAC is the pioneer in bitumen based products in Sri Lanka, established in 1964 by a team of Sri Lankans who had the audacious dream of converting what was essentially an area monopolized by multinational companies.
www.island.lk

Sri Lankan stocks end steady; turnover moderate

Dec 30 (Reuters) - Sri Lankan stocks ended steady on Tuesday as gains in telecoms were offset by losses in construction shares, with active participation by foreign and institutional investors, stockbrokers said.

Turnover was moderate and sentiment was negative as political uncertainty ahead of the Jan. 8 presidential poll capped the gains.

The main stock index ended up 0.05 percent at 7,291.33.

"Buying by some foreign and institutional buying helped the market," a stockbroker said. "We expect the market to be sideways until we see some clear direction on the political front after the elections."

Turnover stood at 677.7 million rupees ($5.17 million), less than half of this year's daily average of 1.42 billion rupees, stock exchange data showed.

Net foreign inflows into stocks were 163.5 million rupees, extending net inflows to 22.05 billion rupees so far this year, exchange data showed.

Analysts said defections ahead of the election have hurt sentiment.

Since President Mahinda Rajapaksa announced snap elections last month, 23 legislators including former health minister Mithripala Sirisena, who is challenging Rajapaksa's bid for a third term, have defected. Two opposition legislators have joined the ruling party.

Political analysts see a tight race between Rajapaksa and Sirisena, whose New Democratic Front has promised to eliminate corruption and reduce prices of essential goods and fuel by cutting taxes. Rajapaksa has promised good governance and media freedom if he wins.,

Top fixed-line phone operator Sri Lanka Telecom gained 1.01 percent to 50.00 rupees, while top mobile phone operator Dialog Axiata rose 0.75 percent to 13.40 rupees. Construction firm Access Engineering fell 4.04 percent to 33.20 rupees. 

($1 = 131.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sunil Nair)

Sri Lanka 79-mo T-bond yield 7.05 pct, 124-mo 7.88 pct

Sri Lanka’s Asian Alliance terminates rating agency agreement with Fitch

Dec 30,2014 (LBO) – Sri Lanka’s Asian Alliance Insurance PLC said it terminated the rating agency agreement with Fitch Ratings Lanka Ltd on 28th October 2014 as Fitch insisted on reviewing Asian Alliance’s rating due to a rating revision of ultimate parent – Softlogic Holdings PLC (SHL).

SHL was subsequently rated A- by Lanka Rating Agency Ltd, formerly RAM Ratings (Lanka) Ltd, the insurer said in a media release.

Fitch Ratings Lanka has withdrawn Asian Alliance Insurance PLC's National Insurer Financial Strength Rating and National Long-Term Rating of 'BBB(lka)', due to insufficient information to maintain them the rating agency said in a media release earlier this month.

The Sri Lanka-based company's Insurer Financial Strength Rating of 'B' has also been withdrawn. All the ratings were on Rating Watch Negative. Fitch said that they will no longer provide rating or analytical coverage for this issuer.

Responding to that Asian Alliance Insurance said,

“A rating is not a mandatory requirement for insurance companies in Sri Lanka and Asian Alliance had obtained both local and international ratings in order to demonstrate best practice,”

“Asian Alliance is in contact with leading international rating agencies to obtain an international rating which process is scheduled to be completed in 4 months.”

The company recorded PAT of 532 million rupees as at end September 2014 with 21 percent of Life premiums growth at 2.2 billion rupees, the company said.

Profits after tax were 511 million rupees for Life business and 21 million for the General insurance business has been reported for the first nine months of the year, the company said.

HNB to get 60% of the Rs 1.5 B Singer (Sri Lanka) Debenture issue

Hatton National Bank PLC will be allotted 60% of the debentures of the Rs 1.5 billion debenture issue of Singer (Sri Lanka) PLC.

This follows Singer ( Sri Lanka) PLC issue of 10 million Listed, Rated, Unsecured and Redeemable Senior Debentures of Rs 100 each, with an option of going to issue a further Rs 5 million debentures in the event of an oversubscription.

Of the remaining debentures, up to 100,000 of the balance applications, 100 % of the applied value would be allotted.

For over 100,000 of the balance applications, a minimum allotment of 100,000 debentures will be allotted and the balance debentures applied for would be allotted on a pro rata basis, rounded to the nearest 100. Any residues would be adjusted from the largest applicant.
www.ceylontoday.lk

Nimal Perera buys Rs 3.4 m worth shares of Pan Asia Bank

Pan Asia Bank Chairman Nimal Perera has bought Rs 3.4 million worth of shares in the bank on December 23.

He has purchased 7,250 shares at Rs 24.90 in a transaction worth Rs 180,525 and a further 129,600 shares at Rs 25 worth Rs 3,240,000 on the same day.

The total transaction value of both deals have been Rs 3,420,525.00.  

He has informed the Board of Directors of the Bank of these two transactions on December 24.
www.ceylontoday.lk

Tourism revenue tops Rs 2.48 billion this year

Shirajiv Sirimane (shirajivs@gmail.com)

Sri Lanka Tourism has earned record revenue of US$ 2.48 billion so far and also surpassed their target of 1.5 million arrivals.This is the first time in the history of Sri Lanka tourism industry that 1.5 million tourists have arrived in the island in 2014.

Sri Lanka has earned US$ 1.6 billion from tourism in the first nine months of this year. One of the main reasons for this leap in tourism is the permanent peace which has made Sri Lanka one of the safest countries in the world. After ending of the war, Sri Lanka has also received tremendous publicity by several leading magazines like National Geography, New York Times and several others.

In addition the promotions done in several countries including China also helped to increase arrivals.

In addition the anticipated opening of several world famous chain hotels like ShangriLa, Movenpick and Hyatt has also helped Sri Lanka to achieve the target of 2.5 million arrivals set for 2016.

To date India, Germany, UK and China remain as the top four markets for Sri Lanka.
www.dailynews.lk

Rise in industry, services sector growth

Sri Lanka has achieved Rs.911,064 million of total economic output as measured by Gross Domestic Product of the country at constant prices (2002) for the third quarter of 2014 (July, August, September) over Rs.846,102 million reported in third quarter of 2013 achieving a 7.7 percent of positive growth rate the Department of Census and Statistics (DCS) Sri Lanka said yesterday.

The three mainstays of the economy, Agriculture, Industries and Services sectors has shared the GDP by 10.1 percent, 31.2 percent and 58.7 percent respectively in the third quarter of 2014.

The sub sectors, 'Tea' and 'Vegetables' showed a striking increase of 10.8 percent and 11.5 percent respectively over the corresponding time period, while the sub sectors of 'Firewood and forestry', 'Coconut' and 'Highland crops' also have showed an increase in growth rates by 9.6 percent, 7.0 percent, 6.7 percent respectively during this period. The main sub sector of Paddy reported a high drop of growth by 35.5 percent in third quarter of 2014 compared to third quarter 2013.

Sub sectors of 'Rubber' and 'Inland fishery' has shown 32.0 and 24.8 percent decrease in third quarter 2014 compared to the third quarter of 2013.

Therefore the main sector of 'Agriculture, Livestock, Forestry' and 'Fishery' has reported a decline in growth rate by 2.0 percent in the third quarter of 2014, compared to third quarter 2013. The Industry sector all together showed an 12.6 percent increase within this period. The sub sectors of 'Mining and quarrying', and 'Manufacturing' has achieved 14.2 and 3 8.8 percent growth rates respectively.

The sub sectors of 'Electricity, gas and water' and 'Construction' have increased by 8.4 and 21.0 percent in third quarter 2014 compared to the third quarter 2013.

The Services sector, which is the largest contributor to the Gross Domestic Product contributes 58.7 percent, reported a 7.0 percent increase for the third quarter of 2014 with compare to the respective quarter in 2013.
www.dailynews.lk

Sri Lankan stocks fall, turnover slumps to 7-mth low

Dec 29 (Reuters) - Sri Lankan stocks fell in thin trade on Monday from a five-week closing high in the previous session, as many investors were away for year-end holidays, while fresh defections ahead of the Jan. 8 presidential poll hurt sentiment, stockbrokers said.

The main stock index fell 0.29 percent, or 21.44 points, to 7,287.59. It had marked its highest close since Nov. 21 in the previous session.

Turnover fell to a seven-month low of 349.7 million rupees ($2.67 million), less than a quarter of this year's daily average of 1.42 billion rupees, stock exchange data showed.

Net foreign inflows into stocks were 50.4 million rupees, extending net inflows to 21.88 billion rupees so far this year, exchange data showed.

"Demand was very weak due to the holiday season. Foreign investors are also on holidays, so we don't see large volume share trading," said a stockbroker.

"The tight election between the two main candidates is also hurting sentiment. Some foreign investors are asking which listed companies could be hit if the opposition candidate wins next month's election."

Eight legislators from the main Muslim party defected from President Mahinda Rajapaksa's ruling United People's Freedom Alliance on Sunday.

Since Rajapaksa announced snap elections last month, 23 legislators, including former health minister Mithripala Sirisena, who is challenging Rajapaksa's bid for a third term, have defected. Two opposition legislators have joined the ruling party.

Political analysts see a tight race between Rajapaksa and Sirisena, whose New Democratic Front has promised to eliminate rampant corruption and reduce prices of essential goods and fuel by cutting taxes. Rajapaksa has promised good governance and media freedom if he wins.,

Top fixed-line phone operator Sri Lanka Telecom fell 3.7 percent to 49.50 rupees, while Commercial Leasing and Financial Plc lost 6.38 percent to 4.40 rupees.

($1 = 131.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Fitch Maintains MCSL Financial Services' Rating on Watch Positive

Dec 29, 2014 (LBO) - Fitch Ratings Lanka has maintained MCSL Financial Services Limited's (MFSL) National Long-Term Rating of ‘BBB (lka)' on Rating Watch Positive (RWP) as Fitch expects the merger of MFSL, MBSL Savings Bank Limited and Merchant Bank of Sri Lanka to be concluded within the first quarter of 2015.

Press Release Reproduced

Significant progress has been made since the merger announcement in March 2014, including securing the necessary shareholder approval at the extraordinary general meeting held on 13 October 2014, setting the share swap ratios and adoption of new articles of association. In addition, the surviving entity has been renamed to Merchant Bank of Sri Lanka & Finance PLC (MBSF).

MFSL was placed on RWP after Merchant Bank of Sri Lanka announced its proposed merger with MFSL and another company, all of which are subsidiaries of Bank of Ceylon (BOC: AA+(lka)/Stable).

KEY RATING DRIVERS
The RWP reflects Fitch's expectations that MFSL, as part of the surviving entity MBSF, will be of greater importance to the BOC group than MFSL on its own. This is based on BOC continuing to be the dominant shareholder in the merged entity - Fitch expects BOC to directly own 74% of MBSF compared with its current 50.1% direct holding and 80% effective holding in MFSL.

MBSF will operate as a licensed finance company focusing on vehicle financing activities.


RATING SENSITIVITIES

The Rating Watch will be resolved on the completion of the merger and on the receipt of final details of BOC's shareholding in the merged entity, which Fitch expects to be as early as January 2015. The next step in the merger would be the issue of a certificate of amalgamation by the Registrar General of Companies, subsequent to which shares will be issued to the owners of the entities merging to form MBSF.

MFSL's rating could be upgraded by multiple notches because of the merged entity's greater importance to BOC as the only licensed finance company within the group. That said, Fitch is likely to maintain a difference of several notches between the ratings on BOC and the merged entity due to the latter's limited strategic importance to the group.

CBSL holds promotions in four financial capitals Govt. to raise US$ 1.5 B after polls Interest charged to be higher

By Paneetha Ameresekere

Ceylon Finance Today: The Central Bank of Sri Lanka (CBSL) which plans to raise a Sovereign Bond of US$ 1.5 billion on behalf of the Government of Sri Lanka (GoSL) after next month's polls, has held road shows and meetings in this connection in London, Hong Kong, Singapore and New York recently, according to market sources.


The tenure of the Bond will be five years, an official who didn't want to be named told Ceylon FT. "CBSL doesn't want the tenure to be longer than that for fear that the market would ask for higher rates in the backdrop of a buoyant US economy, where the Federal Reserve System is expected to raise rates, after a lapse of over eight years, by the middle of next year," the official said.

The last time GoSL raised money in international markets was in April, where it borrowed US$ 500 million of a five year tenure at a 5.125 per cent interest rate. "This time the interest charged will be higher, but at the same time demand is slack, which will put a cap on an 'untoward' spike in rates," an official said Earlier, on 6 January, 2014, the Sovereign raised US$ one billion, also of a five year tenure, but at a higher interest rate of 6%.

The problem facing Sri Lanka's external sector, which results in GoSL having to borrow from international commercial markets, is that it runs a continuous trade deficit. 

According to latest statistics, the trade deficit in the first 10 months of the year increased by 4.3% year on year (YoY) to US$ 6.79 billion. Sri Lanka last established a trade surplus 37 years ago in 1977.

Currently, CBSL is protecting the local currency from further depreciating pressure at Rs 131.99 to the US dollar in interbank "spot next" and "spot next next" trading, while on Friday (26 December), CBSL allowed the administered "spot" price to depreciate by 15 Sri Lanka cents to Rs 131.15 to the dollar on that day.

He further said that while major international currencies worldwide are depreciating against the dollar due to the recovery of the US economy, here it was being protected and not allowed to depreciate.

The official didn't discount what happened in November 2011 and February 2012 once more being repeated, where CBSL/GoSL let go of the rupee due to pressure on CBSL's external reserves; then too after continuously protecting it at the Rs 110 level against the dollar in "spot" trading for months.

It was devalued by 3% in Budget 2012 presented in November 2011 to Rs 113.40 but the pressure persisted due to import demand, after which CBSL virtually let go of defending the local currency three months later in February 2012, which resulted in the exchange rate (ER) closing 2012 at the Rs 127 level.

Nevertheless, with private sector credit growth being low, it grew by 5.1% in October on a YoY basis according to latest statistics, compared to a recent record high of 34.5% on a YoY basis, established three years ago in December 2011. Sources said that the recent demand for dollars was due to credit once more picking up, a condition favoured by CBSL.

Meanwhile, top officials of the Central Bank defended the Bank's ER policy on the basis that CBSL has reserves of more than US$ eight billion. But when it was pointed out that this was borrowed money, they said that the debt to GDP ratio in the USA was 114%, while even in the UK this ratio was high.

They said that outflows in the government securities market (GSM) was not a concern, because they had received over a billion dollars of net inflows. Since August, net outflows from the GSM have totaled Rs 48 billion (US$ 365 million). Meanwhile, GoSL's foreign debt servicing commitments in the 12 months to October 2015 have been estimated at US$ 6.9 billion.

Central Bank officials declined to comment on the proposed Sovereign Bond sale at the present time.
www.ceylontoday.lk

CB Governor: Good times ahead for Sri Lanka in 2015 Roll out those barrels! With oil at US$ 60 per barrel

By Ravi Ladduwahetty

Ceylon Finance Today: Central Bank Governor Ajit Nivard Cabraal predicted good times ahead for Sri Lanka in 2015, if global fuel prices stay at the current US$ 60 per barrel.
In an exclusive interview with Ceylon Finance Today, Cabraal said that the country's total fuel imports, estimated at US$ 4.8 billion for 2014, would fall by as much as US$ 2-2.8 billion, if crude oil prices remain around US dollars 60 per barrel in 2015.

As an oil importing country, Sri Lanka also will be benefitted by ease of current account deficit, low inflation and high economic growth, while reducing pressure on fiscal accounts, he observed.

Further, import prices of intermediate goods such as fertilizer, synthetic rubber and polythene will decline in line with the decline in oil prices, he said.

Commenting on the further immediate benefits of the reduction on global fuel prices, Governor Cabraal said that, the decline in oil prices will reduce the import bill substantially, strengthening the current account balance of the Balance of Payments.

Stressing that Sri Lanka's expenditure on fuel imports accounts for around one fourth of its import expenditure, he also said that the reduction in fuel prices will impact inflation favourably, both directly and indirectly.

"As per the composition of the consumption basket which is used to calculate the Colombo Consumer Price Index (CCPI), petrol, diesel and kerosene account for more than 5 per cent of the total weight. Therefore, fuel price reduction will directly reduce the expenditure value in CCPI reducing inflation," he said.

"Further, reduction in fuel prices will help to reduce transportation cost and electricity prices which are also major items in the CCPI basket. In addition, reduction in fuel prices, transport cost and electricity cost reduces the production cost of goods and services having indirect impact on reducing inflation," he remarked.

He added: "The reduction of fuel prices will have a favorable impact on economic growth of Sri Lanka especially through the supply channels. Fuel is used as a main source of energy for the productive sectors such as the agricultural sector, the formal manufacturing sector and transport sector. Therefore, reduction in cost of energy will reduce the cost of production of firms, increasing their profitability and encouraging them to enhance production which leads to high economic growth"

The declining trend of international oil prices will reduce the pressure on fiscal accounts through reductions in energy subsidies, as it will improve the financial performances of Ceylon Petroleum Corporation (CPC) and Ceylon Electricity Board (CEB). CPC has been able to record profits since 2013 while gradually reducing the dependence on the banking sector resources due to cost reflective price revisions.

The declining oil prices will reduce the cost of production of petroleum products substantially, even though it takes some time to make a positive impact due to time lag in importation and production cycles. While passing the maximum benefits to all stakeholders by reducing domestic fuel prices, improving cash flow will further reduce CPC's liabilities to the banking sector.

The price reduction of petroleum products will also improve the CEB's financial position. 

The reduction of Diesel and Furnace oil prices will help reduce the cost of thermal oil power generation, though the thermal power generation is currently low due to commissioning of Phase 2 of the Norochcholai coal power plant.

"Accordingly, as an oil importing country, the oil price reduction observed in the international market will be favorable to Sri Lanka and it will strengthen the external sector, monetary sector, real sector and the fiscal sector through lower current account deficit, lower inflation, high economic growth and reduction in cost of production respectively, he added.

Crude oil prices had been around US dollars 110 per barrel during the period from 2010 to June 2014. But then declined rapidly to below US dollars 60 per barrel by December 2014 recording the lowest level after July 2009.

The reduction of the global price reduction is mainly attributed to weak demand in many oil consuming countries due to sluggish economic growth, and increased oil production by the USA.
www.ceylontoday.lk

1.5 millionth tourist arrives

Sri Lanka yesterday welcomed the arrival of 1,500,000th tourist for 2014 at the Bandaranaike International Airport.

The name of the milestone visitor was Torence Jimmy, who along with Qupika Hedwig arrived via UL 558 Sri Lankan Airlines flight from Germany. Sri Lanka Tourism Promotion Bureau officials including Managing Director Rumy Jauffer and representatives from the travel and tourism industry extended a warm welcome.


 

– Pix by Deepa Adhikari

www.ft.lk

Rs 48B net outflows from Govt. securities market

By Paneetha Ameresekere

Ceylon Finance Today: Friday saw a net foreign outflow (NFO) of Rs 706 million from the Government Securities Market (GSM) in the week ended Wednesday (24 December), taking NFOs in the last four months to date to Rs 48 billion (US$ 364 million), thereby causing further depreciating pressure on the rupee, market sources told Ceylon FT.

"Strengthening of the US dollar against other major international currencies, a buoyant US economy which grew by five per cent in the 3rd quarter, complemented by foreign funds exiting from the GSM (Treasury (T) bonds and T bill) to US based assets are causing downward pressure on the rupee," they said.

Meanwhile, the exchange rate (ER) on thin trades closed Friday (Boxing Day) at
Rs 131.99 to the dollar, both at 'spot next' and 'spot next next' trading under Central Bank of Sri Lanka's (CBSL's) moral suasion umbrella, while trading in the government securities market was also thin due to the holiday season, the sources said.

In a bid to shore up interest rates, in a dual role of trying to satisfy those living off interest income and to mitigate pressure on the ER, CBSL, on Friday, simultaneous with drawing in excess liquidity from its standing deposit facility (SDF) at the low, five per cent interest rate, also held an overnight repo auction and a short term repo auction, by which it drew in further excess liquidity at the higher interest rates of 5.91% and 5.98% respectively.

CBSL, in its monetary policy statement of 23 September said that banks parking their excess liquidity in CBSL's SDF for more than three calendar days a month would be paid the low, five per cent interest rate, rather than the standard, SDF rate of 6.5%. CBSL further said that they will be suspending their repo auctions, only to reintroduce them hardly 10 days later, in the first week of October, in order to push up interest rates.

Meanwhile, CBSL lent Rs 2.4 billion to the Government of Sri Lanka (GoSL), by buying T bills of an equivalent value at Friday's trading, thereby helping to create demand side inflationary pressure on the economy.

As a result, CBSL increased its T bill holdings by nearly 1,700% to Rs 2.4 billion at Friday's trading.

Statistics further revealed that a sum of US$ 143 million (Rs 18.8 billion) was drawn out from CBSL's foreign reserves for the purposes of defending the rupee or GoSL's foreign debt servicing or due to a mix of both.

CBSL, in order to prevent depreciating pressure on the rupee, sells dollars to the market on selective trades at Rs 131.55/65 to the dollar in two way quotes in interbank spot trading, currently.

As a result, market's excess liquidity of an equivalent rupee amount (Rs 18.8 billion) was swallowed up by CBSL in return.

Meanwhile, on the previous market day Wednesday (24 December) too the ER on thin trades closed at Rs 131.99 to the dollar at 'spot next' and 'spot next next' trading under CBSL's moral suasion umbrella, while trading in the GSM was also thin due to the holiday season, sources said.

Nevertheless, the longer tenure T bonds, that is, those maturing on 2021, 2022 and 2024, saw their yields decline by 10 basis points since Friday (19 December) due to local demand, they said. Meanwhile, market's excess liquidity increased by 69% to Rs 18 billion, due to banks parking their excess with CBSL, in order to capitalize on an additional day of interest earned, due to Christmas Day, 25 December being a holiday, they said.

Previously, some of their excess was kept in their own vaults, which however didn't earn interest for them. CBSL pays banks interest at the rate of 6.5% on an overnight basis in the event they park their excess with them for a maximum of three calendar days a month, while the interest paid on other days is a mere five per cent.
www.ceylontoday.lk

Auto Company mulls legal action against ex People’s Merchant Leasing Company Chairman

For alleged default of Rs. 2.25 mn on purchase of two vehicles

BY SURESH PERERA

A leading automobile parts company is contemplating legal action against the former Chairman of a government-controlled company in the financial service industry for alleged default of Rs. 2.25 million due as final payments on the purchase of two vehicles.

Three cheques to the value of Rs. 3 million given by him to meet the due payments had bounced as the HSBC account had been closed at the time of their issuance.

The company, Japan Lanka Auto Parts (Pvt) Limited of Mirihana, Nugegoda, has already sent a letter of demand through its lawyer, Namasena Gamage, seeking payment of the money "lawfully due within two weeks".

At the time Ajith Panditaratne served as the Chairman of People’s Merchant Leasing Company PLC, he had entered into a legal contract with the company in November, 2010 to purchase two Toyota Axio motor cars for Rs. 9.2 million. He had undertaken to settle the total due amount within one year.

Although it was a raw deal, the company agreed to a time extension for settlement based on representations made by the buyer (Chairman) considering, inter alia, that he is personally very close to the top most authorities in the country and that he served as the head of a state-owned financial institution, which had secured an A+ Rating, the letter of demand stated.

It was discovered that the cheques had been drawn from the account of the Chairman’s personal assistant, and there are doubts whether such a person could maintain an account in this bank. There are also doubts whether this account was actually maintained by the Chairman himself under the name of his assistant, it further noted.

"We sent the letter of demand in October 2014, but he has still not responded to it", a senior official of Japan Lanka Auto Parts, said. "He is also avoiding answering our telephone calls".

"We are now in the process of initiating legal action against him", he noted. "We entered into a legal agreement with him based on trust, but we have been led up the garden path".

Apart from instituting legal proceedings against him to recover outstanding dues with costs, criminal action will also be filed on the dishonored cheques, the official explained.

Asked why he had defaulted on the payments, Panditaratne said he "ran into some problems which resulted in the delay". The two cars were purchased for his personal use and not for People’s Merchant Leasing Company, where he served as Chairman at the time.

He said that he had kept in touch with the company and briefed them on the developments with an assurance he will honor his commitment shortly.


"That’s bunkum. He continues to duck and our repeated phone calls are also not answered", the official interjected. "When we use a different number, he answers, but immediately hangs up saying he is busy".

"I can give a categorical assurance that I will pay back the money in the second week of January 2015", Panditaratne said. "I will call the company immediately and assure them that it will be done".

Contacted again five days after Panditaratne gave this assurance, the company official described it as "typical bluff". This is just eye wash. He didn’t call, and is not expected do so in the future either.

"We have decided to seek legal redress as this hide-and-seek game cannot be allowed to continue", he said. "We have suffered a substantial financial loss as a result".

The former Chairman, it is understood, is closely connected to the powers-that-be, which warranted his appointment to head the state-owned financial institution at the time.
www.island.lk

Sri Lankan stocks rise to 5-wk closing high in thin trade

Dec 26 (Reuters) - Sri Lankan stocks closed at its highest in five weeks Friday in thin trading, led by large caps such as Ceylon Tobacco Company Plc even as investors stayed away amid holiday season and political uncertainty before the Jan. 8 presidential polls.

The main stock index rose 0.63 percent, or 45.78 points, to close at 7,309.03, its highest close since Nov. 21.

The day's turnover fell to a near two-week low of 438.1 million rupees ($3.32 million), less than a third of this year's daily average of 1.43 billion rupees, stock exchange data showed.

Shares in Ceylon Tobacco Company Plc rose 3.7 percent in low trade while Sri Lanka Telecom Plc rose 2.8 percent also in low trade.

"Market turnover is up on block deal of Dialog Axiata and Lanka IOC; if you take out that the turnover is very low as many investors and stockbrokers are still on Christmas holiday," said Reshan Wediwardene, research analyst at First Capital Equities (pvt) Ltd.

Analysts said low volume trading was seen in illiquid stock.

Shares in Lanka IOC Plc rose 1.55 percent while Dialog Axiata Plc ended 0.74 percent weaker.

President Mahinda Rajapaksa's United People's Freedom Alliance lost its two-thirds majority in Parliament for the first time in more than four years after two ruling party legislators, including a cabinet minister, defected to join the opposition on Monday.

Fifteen legislators, including former health minister Mithripala Sirisena, who is challenging Rajapaksa's bid for the third term, have defected after the president announced snap elections last month. Two opposition legislators have left to join the ruling party.

Political analysts see a tight race between Rajapaksa and Sirisena, whose New Democratic Front has promised to eliminate rampant corruption and reduce prices of essential goods and fuel by cutting taxes.

Rajapaksa said on Tuesday he would ensure good governance and media freedom if he bags a third term.

Net foreign inflows into stocks were 192.9 million rupees, extending net inflows to 21.83 billion rupees so far this year, exchange data showed. 

($1 = 131.99 Sri Lankan rupees) 

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

East West Properties buys 36 million shares of Weligama Hotel Properties

East West Properties PLC is to purchase 36 million ordinary shares of Weligama Hotel Properties Limited at Rs. 09 per share.

The total value of this major transaction is Rs. 324 million.
www.adaderana.lk

Pelwatte Sugar under liquidation

Sri Lanka's first Colombo Stock Exchange- listed sugar growing and manufacturing company Pelwatte Sugar Industries PLC is under liquidation.SJMS, Joint Liquidators, in a filing to the Colombo Stock Exchange dated December 18, 2004, under the topic Commercial High Court of Western Province Colombo Case No: HC (Civil) 46/2012/CO said: We refer to your letter dated 05-12-2014 and the discussion your officers had with us previously regarding the above company and wish to confirm you that the above said company is presently under winding-up as per the order made by the above said Court with effect from 12-03-2013. A certified copy of the said Court Order is sent herewith as requested.

Under present status of the liquidation of the company, SJMS has told the CSE:

a. Vesting of company assets in the State:
The leasehold land obtained by the company from the State was vested in the State with effect from 11.11.2011 under the provisions of Revival of Under performing Enterprises or Under-utilized Assets Act No. 43 of 2011. However, as per the information furnished by the former management of the company the Competent Authority (CA) appointed under the said Act has taken over the entire assets of the company and its business operations, prior to the winding up order was made by the Court. The inventory of the assets taken over by the State has not yet been furnished to us by the CA.

Since most of the assets of the Company and its business operations were not vested in the State under the said Act, we have requested the Competent Authority – the Secretary of the Ministry of Sugar Industries, to provide us the inventory of the assets vested in the State under the provisions of the said Act and to handover the balance assets not vested in the State, to us. We have not received any response in this regard up to date from the Competent Authority, despite several reminders.

b. Claim submitted to the Compensation Tribunal:
Liquidators have submitted their claim for compensation on behalf of the Company under Liquidation, the Compensation Tribunal appointed under said Act. The claim was based on the market value of the company shares and the creditors' liability of the company as at the relevant date, as the entire assets of the company and its business operations were taken over by the competent authority.

However, the tribunal was of the view that they have no mandate to assess the compensation as claimed by the liquidators since what was vested under the said Act was only the leasehold land held by the company.

Under these circumstances, the Liquidators have requested the Chairman of the Compensation Tribunal to refer the matter to the Attorney General and seek his advice in this regard.

Even though a Meeting in this regard was convened by the AG's Department in April 2014, unfortunately it was postponed indefinitely.

c. Creditors & Shareholders Claims received by Liquidators:
Consequent to the publication of Notices of winding up of the Company and our appointment as the liquidators, number of Creditors and shareholders of the Company have submitted their claim against the Company to us.

Any shareholder of creditor of the company who has not yet submitted his or her claim could submit his/her claim to the liquidators.

However, the settlement of the claims will be made in accordance with the provisions of the Companies Act No. 07 of 2007 depending on the amount of compensation to be awarded by the compensation tribunal.

All these matters have been reported by us to the winding up court regularly, SJMS has told the Colombo Stock Exchange.

www.ceylontoday.lk

Bonanza for senior citizens! 280,000 retirees to get 12% interest on FDs tax free

By Menaka Indrakumar

Ceylon Finance Today: Over 280,000 senior citizens would be benefitting from a government announcement that fixed deposits worth more than Rs 2.5 million maintained at State banks by senior citizens, will receive an increased 12% interest rate and that earnings would be interest free.

This is a Budget 2015 proposal and would be implemented with effect from 1 January, Deputy Secretary to the Treasury Dr. Suren Batagoda told Ceylon FT yesterday. "There will be 280,000 senior citizens who will be getting an added interest which will also be tax free, he said.

He also said that Rs 30 billion was allocated in Budget 2015 for this purpose and if the need occurred, the government will increase the amount. The Finance Ministry also requests senior citizens to inquire from banks about their eligibility for this benefit.
www.ceylontoday.lk

We will replace Port City with Western Province Metropolis – Ranil

By Skandha Gunasekara and Shaahidah Riza

Ceylon Finance Today: Opposition and UNP Leader Ranil Wickremesinghe said Tuesday that a government under him as Prime Minister would halt the port city which had been envisioned by the Mahinda Rajapaksa Government and replace it with a much larger 'Mega-polis' that would encompass the Western Province in its entirety.


Addressing the business forum, 'Lets Unite' held at Cinnamon Lakeside, Wickremesinghe alongside and Common Presidential Candidate Maithripala Sirisena addressed corporate leaders and senior business officials on the policies of a possible Sirisena Government would adopt.
The establishment of a 'Megapolis' was first suggested in 2002-2003, and the Port City was a small part of it. The 'Megapolis' project would transform the entire Western Province into a fully developed modern city."

He went on to say that the Port City project would not be stopped but halted temporarily.
"We haven't completely scrapped the Port City project. However, if we come to power we will first take into account the environmental impact report, as well as a feasibility study before we go further with the project." Wickremesinghe observed.

Wickremesinghe stressed, that environmental impact of any project was of vital importance when considering its implementation and that a Sirisena Government would take global warming into serious consideration. "We are looking into sustainable development. Global warming is a grave issue and we are seriously considering its impact on our economy. We will go green. The world is pivoting towards sustainable energy and development."

The Leader of the Opposition went on to say that feasibility of any project proposed by a government headed by Sirisena, would be taken into account citing the heavy debts incurred by the nation for the construction of the Hambantota Harbour and the Mattala Airport.

"Feasibility of any project will be of paramount importance. The country has billions in debt as a result of projects taken up without proper consideration," he noted.
www.ceylontoday.lk

Issuer Rating of Orient Finance revised to [SL]BB+: outlook revised to stable

ICRA Lanka Limited, a wholly owned subsidiary of ICRA Ltd, a group company of Moody’s Investors Service, has revised the Issuer rating of Orient Finance PLC (OFP) to [SL]BB+ (pronounced SL double B plus) from [SL]BBB- (pronounced SL triple B minus)1 . The outlook on the rating has been revised to stable from negative.

ICRA Lanka’s rating revision follows the continuous weakening in OFP’s key performance indicators. The company’s asset quality deteriorated significantly during the current financial year, with gross NPAs increasing to about 9.7% in Jun-2014 before moderating in Sep 2014 to about 8.5%, it continues to remain significantly higher than the systemic levels. The above had a cascading effect on the profitability of the company, with PBT/ATA2 moderating to 2.3% for FY20143 (1.2%, provisional in H1FY2015) as compared to 6.3% in FY2013, as the provision costs witnessed a steep increase. ICRA takes note of the robust growth in the company’s portfolio, with overall portfolio growing at 33% in FY2014 (36%, annualized in H1FY2015); consequently, the company’s gearing increased to 4.5 times in Mar 2014 (5.3 times provisional in Sep 2014) vis a vis 3.3 times in Mar 2013.. The rating continues to derive strength from the financial, operational and management support that OFP is expected to receive from the Janashakthi group. The rating also factors in the experienced and professional management team coupled with the improvements in overall risk management systems by the company in the recent past.

ICRA Lanka however believes that the impact of the above could be observed in a gradual manner and the key performance indicators are expected to remain under pressure till then. ICRA Lanka also notes that OFP’s liquidity position has weakened in the recent past due to increase in the share of fixed deposits (FDs; about 54% of the borrowing in Sep 2014 vis a vis 21% in Mar 2014) and higher concentration towards shorter term fixed deposits (about 63% of FDs Maturing in less than one year period as in Sep 2014) in its funding mix leading to high near term Asset-Liability mismatches. The key rating sensitivities for OFP, going forward, would be to improve its liquidity profile by diversifying its funding, arresting incremental slippages and to make effective recoveries, which in turn would result in a gradual improvement in the key profitability indicators.

OFP’s core lending operations continue to be focused on auto financing (approximately 83% of total portfolio). Factoring, being the second largest product segment, accounted for approximately 16% of the company’s total portfolio as of end Sep 2014. Pawning (introduced in FY2013) accounted for less than 1% of OFP’s total portfolio. The company has discontinued its equipment finance division due to high portfolio losses in this segment. ICRA Lanka notes the company’s strategy is to focus on higher end auto financing and factoring going ahead in order to improve the overall quality of the portfolio. OFP’s auto financing.
www.island.lk

Deposit insurance coverage up 50% to Rs. 300,000

Central Bank said yesterday that in line with the decision announced in the Budget 2015 to increase the deposit insurance cover by 50%, the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) will increase its deposit insurance coverage per-depositor per-institution from Rs. 200,000 to Rs. 300,000, with effect from 1 January 2015.

Central Bank said the regulation on the revised insurance cover has been published in Gazette Extraordinary No. 1891/11 of 2 December 2014 under the citation ‘Sri Lanka Deposit Insurance and Liquidity Support Scheme Regulations, No. 1 of 2014’.

SLDILSS was established in October 2010 in the interest of the overall financial system stability of the country to protect depositors from failure of financial institutions and thereby to promote the stability of financial institutions by maintaining depositor-confidence. It is operated and managed by the Monetary Board of the Central Bank of Sri Lanka.
www.ft.lk

Sri Lankan stocks rise to 3-wk high; DFCC boosts turnover

Dec 24 (Reuters) - Sri Lankan stocks rose on Wednesday, with trading in development lender DFCC Bank boosting turnover in otherwise thin pre-Christmas trade, shrugging off concerns over political uncertainty ahead of upcoming elections dented sentiment.

Turnover hit a near six-week high of 3.84 billion rupees ($29.29 million) after an individual investor in DFCC Bank sold part of his stake, dealers said. Wednesday's turnover was more than double this year's daily average of 1.42 billion rupees, stock exchange data showed.

The main stock index gained 0.35 percent, or 25.20 points, to close at 7,263.25, its highest close since Dec. 3.

DFCC Bank ended flat at 218.50 rupees. Top conglomerate John Keells Holdings rose 0.28 percent to 250 rupees.

"Apart from the DFCC deal, the sentiment is dull because of the political uncertainty and holiday mood. We see the index on the sidelines until the elections," a stockbroker said.

President Mahinda Rajapaksa's United People's Freedom Alliance lost its two-thirds majority in Parliament for the first time in more than four years after two ruling party legislators, including a cabinet minister, defected to join the opposition on Monday.

Fifteen legislators, including former health minister Mithripala Sirisena, who is challenging Rajapaksa's bid for the third term, have defected after the president announced snap elections last month. Two opposition legislators have left to join the ruling party.

Political analysts see a tight race between Rajapaksa and Sirisena, whose New Democratic Front has promised to eliminate rampant corruption and reduce prices of essential goods and fuel by cutting taxes.

Rajapaksa said on Tuesday he would ensure good governance and media freedom if he bags a third term.

Net foreign inflows into stocks in the session were 11.7 million rupees, extending net inflows to 21.64 billion rupees so far this year, exchange data showed.

($1 = 131.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez, editing by Louise Heavens)

BIA records increased passenger handling

Mattala Airport monthly revenue tops Rs.12.5 million

Shirajiv Sirimane (shirajivs@gmail.com)

The Bandaranaike International Airport (BIA) handled 7.3 million passenger movements in 2013,22% in excess of its designed capacity, exhibiting a remarkable growth of 72% over a period of 5 years.

Of these, approximately 19% are transit movements, which indicates a growing potential for achieving passenger hub status. Cargo operations have also flourished with a throughput of 192,550 metric tonnes in 2013. In order to cope with the capacity problem the phase II stage 2 of BIA development project was launched in September 2014.

Sri Lanka’s aviation industry has snowballed into being a key player in the national economy now providing rapid international access via two international airports serving the two national carriers, SriLankan and Mihin and 23 other carriers connecting 60 destinations worldwide.

The commissioning of the Mattala – Rajapaksa International Airport (MRIA) at Hambantota in March 2013 in addition to enhancing the total national passenger and cargo handling capacity, has had a positive ripple effect of increasing the over flying air traffic within Sri Lanka’s assigned airspace by 100% with many operators opting to make their long-haul flights through it, given the enhanced emergency diversion capacity at Mattala. These include the ultra-high capacity modern aircraft like the Airbus 380.

The airport charges that include Landing, Parking, Aerobridges, Rentals, Embarkation Tax have totalled Rs. 224,256,565 as at November 30, 2014, which is an average of Rs.12.5 million monthly, Chairman Col. Prasanna Wickremasuriya said.

Due to availability of an airport in Mattala, which can be used for an emergency many airlines are now flying over Sri Lanka for which they have to pay a fee.

Amidst these growths, Sri Lanka enjoys the fifth rank in the Asia Pacific Region in respect of effective safety implementation as determined by the ICAO’s Universal Safety Oversight Audit Programme (USOAP).

On completion of the BIA development project, its capacity will increase to 15 million passenger movements per annum. MRIA too is to be developed to handle 6 million passenger movements per annum. Vision 2020 encompasses the increase of the national carrier fleet to 26 aircraft thus gearing the country to attract 4.5 million tourists annually by year 2020.

MRIA offers lucrative investment opportunities that are directly linked to aviation as well as those catalyzed by it. A few examples are domestic aviation, MRO (Maintenance, Repair and Overhaul) services for airlines, freight forwarding, tourism, hospitality, flying schools, industrial parks, adventure and recreation.
www.dailynews.lk

Distilleries transfer 17.9 mn. ComBank to Melstacorp

Indices down on lackluster trading

The crossing of a large block of slightly over 17.9 million Commercial Bank (voting) shares held by the Distilleries Company of Sri Lanka in a deal worth Rs. 2.8 billion dominated the Colombo bourse yesterday in an otherwise lackluster day with a turnover of Rs. 3.38 billion posted, up from the previous day’s Rs. 868 million, with both indices down and losers comfortably outpacing gainers.

"Distilleries transferred the long-held block most probably to Melstacorp, a related party acting as a holding company for the group’s equity portfolio," a broker said. "The price at which the transaction was done was eight rupees below market."

Combank was traded on the floor at between Rs. 165 and Rs. 170 closing four rupees up at Rs. 169 on 0.1 million shares, contributing Rs. 17.3 million to the day’s turnover.

Apart from the ComBank crossing, 0.1 million JKH was crossed at Rs. 248.40 in a deal worth Rs. 24.8 million. JKH was traded on the floor between Rs. 248 and Rs. 251 contributing Rs. 31.8 million to turnover.

There was a net foreign inflow Rs. 112.6 million with purchases of Rs. 230.3 million and sales of Rs. 117.7 million.

Brokers and analysts expected current market trends to continue until the election is concluded on Jan. 8. But they said that if there’s violence, there will be a dip. Some brokers said there were investors who were collecting stocks they were confident of but there was little depth in the market.

The All Share Price Index closed 13.52 points down (0.19%) while the S&P SL20 Index lost a fraction of a point (0.44 points/0.01% with 92 losers ahead of 62 gainers while 55 counters closed flat.

"The ASPI ended lower for the second day of the week with selling in the manufacturing, diversified and banking, finance & insurance sectors. Turnover exceeded Rs. 3bn largely due to crossings of Rs. 2.8bn on COMB," John Keells Stock Brokers said in a market wrap.

Chevron led the floor trades closing flat at Rs. 399 on nearly 0.2 million shares contributing Rs. 67.3 million to turnover. Ceylon Tobacco followed, also closing flat at Rs. 1,015 contributing Rs. 54.1 million with Access, closing Rs. 1.40 down at Rs. 34.70 on 1.6 million shares contributing Rs. 45.1 million running third.
www.island.lk

NDB Investment Bank successfully concludes Siyapatha Finance debenture

NDB Investment Bank Ltd. (NDBIB), the premier investment bank in Sri Lanka, acted as Managers and Financial Advisors to the successfully-concluded debenture issue of Rs. 1.0 billion for Siyapatha Finance Ltd. (SFL).

The Issue which was oversubscribed shortly after opening and was closed on the same day. SFL decided to exercise the option to accept a further five million debentures (Rs. 500 million) in addition to the initial issue of five million debentures (Rs. 500 million) as there was a good demand for the issue, mostly from institutional investors.

Siyapatha Finance issued rated unsecured subordinated redeemable debentures with a tenor of five years with interest payable annually; and will be listed on the Colombo Stock Exchange.

SFL proposes to utilise the funds raised through this debenture issue to expand and strengthen the capital base of the company and help maintain the capital adequacy requirements as stipulated by Central Bank of Sri Lanka.

The funds raised would reinforce the company’s Tier II capital and facilitate future expansion of operations and the asset base. It will also allow for the settlement of short term money market loans and restructuring of the balance sheet in order to reduce mismatches in funding exposures. This will minimise interest rate risk arising due to frequent re-pricing cycles.

Gaining access to additional source of funds from non-deposit sources will open up the capital market funding (public listed) for the company and provide access to a wider investor base.

NDBIB has been successfully raising funds for Siyapatha Finance over the years through debt instruments such as securitisations, unlisted debentures and commercial paper. The repeat business demonstrates client confidence in NDBIB’s capability in successfully placing debentures under challenging market conditions and the professional integrity in maintaining process transparency.

This is the fourth debenture issue NDBIB has successfully concluded during 2014. NDBIB is the market leader in debenture issues for the Non-Financial Institution category.

NDB Investment Bank is a fully-owned subsidiary of NDB Capital Holdings PLC, which is a subsidiary of National Development Bank PLC, providing full-service investment banking services to its diverse clientele.
www.ft.lk

Sri Lanka SEC sets directive on IPO price

Dec 23, 2014 (LBO) – Sri Lanka Security Exchange Commission (SEC) issued a directive to be included in the Colombo Stock Exchange listing rules, which will further strengthen the SEC’s mandate for protecting investors, SEC said in a statement.

Media Statement Reproduced

Prior to this, entities were not required to disclose the basis of the ‘IPO Price’, and as a result in some limited instances entities were criticised due to overpricing without a justifiable basis at the expense of the investors.

The new directive has simplified and standardised the presentation of useful information in the prospectus in a more investor friendly manner, whilst facilitating a means for entities and investment banks/IPO managers to maintain credibility by engaging competent experts throughout the process. This is achieved by mandating to incorporate an opinion of an independent, competent party on the fairness of the IPO price whilst substantiating the claim.

An analysis of IPO prices in recent years has indicated that some IPOs traded below the issue price since the first day of trading, highlighting the need for the SEC to strengthen the disclosures relating to IPO pricing. An overvalued IPO price negatively impacts investor appetite and confidence in IPOs, as well as on interest for listing on the CSE by new entities due to poor market performance and negative public sentiment of the entity.

Furthermore, this has a negative impact on the future development and growth of the Sri Lankan capital market.

The SEC considered above circumstances, even though the occurrences were limited and initiated evaluating measures for minimising above effects. Subsequent to much deliberations and public consultation, the SEC has issued a directive mandating that the ‘IPO price’ be supported by a valuation opinion/research report prepared by an independent, competent third party.

The SEC noted that there were no requirements to disclose the basis of the offer price for entities listing via IPO mechanism where entities seek to raise funds from the General Public, although the same was a prerequisite for the ‘introduction’ method of listing. Lack of a provision in the CSE Listing Rules which requires disclosing the basis upon which the IPO price is determined, has led some entities to decide the offer price in an arbitrary manner, which may have resulted in an ‘overvalued IPO Price’.

Consequent to observing the impact of having a valuation opinion for the ‘Introduction reference price’, and the positive response received from investors and stakeholders, the SEC, upon public consultation, extended the concept of ‘validating the IPO Price’ for equity listings with effect from 1st January 2015.

The requirement for a competent Valuer or Investment Bank/IPO Manager to provide a rationale for the IPO Price, is expected to enhance the transparency of the IPO pricing process and strengthen the IPO market. Experts who value shares when the entity is preparing to list, may adopt various valuation methodologies to arrive at the IPO price, such as Price Multiples, Net Assets Value, Capitalisation of Future Earnings, etc. Hence among others, knowledge of the methodology used to arrive at the IPO Price, is of paramount importance to an investor to make an informed decision about a potential new investment in an entity.

Main Features of the New Rule

Option 01:

1. The entity to obtain a competent, independent valuation justifying the IPO Price/Price Band, and to disclose a meaningful summary of the valuation report in the Prospectus, together with the certain minimum disclosures with respect to the independent valuer’s credentials;

OR

Option 02:

2. The entity to publish the Research Report prepared by the investment bank/IPO manager for justifying the IPO Price together with the Prospectus. The said Report should contain at minimum, a section that covers the basis and methodologies used to determine the IPO Price/Price Band, whilst requiring to host the same on the CSE website and the entity’s own website.

And together with either option 1 or 2 above, simplified disclosure requirements to enhance clarity, the entity must also mandatorily disclose in the Prospectus in a consistent format, at minimum, the basis of IPO Price/Price Band as per the format given in Schedule 1 to the SEC Directive.

UN investigation will not derail Sri Lanka's economy - Business report

Dec 23, Colombo: The successful passage of the United Nations Human Rights Council's (UNHRC) third resolution will neither hurt the political stability in Sri Lanka nor derail its economy, a recently released business report says.

The market report, "Sri Lanka Business Forecast Report Q1 2015" from Business Monitor International has therefore maintained the short-term political risk rating for the country at 77.1 out of 100.

The agency has upgraded their 2014 real GDP forecast of 7.1%, from their previous estimate of 6.8%, as they expect the country's manufacturing and services sectors to maintain their strong performances in 2014.

It maintains that the Central Bank of Sri Lanka (CBSL) will keep its standing lending facility rate and standing deposit facility rate unchanged at 8.00% and 6.50% respectively over the course of 2014, as inflation will remain relatively subdued and the strong economic growth momentum seen in 2013 will likely continue this year.

The ranking agency continues to expect the Sri Lankan rupee to remain fairly stable against the US dollar over the course of 2014, as the improvement seen in the external accounts for 2013 will likely continue this year, while the central bank continues to build up reserves.

"We are forecasting the currency to trade within LKR130.00-131.50/US$, and the current account deficit to narrow to 3.5% of GDP in 2014."

"We believe that the pace of fiscal consolidation in Sri Lanka will remain slow, as we expect the impact of ongoing tax reforms to remain marginal, and see a substantial reduction in government expenditures as unlikely," the agency says.

The Sri Lanka Business Forecast Report by Business Monitor International (BMI) includes three major sections: Economic Outlook, Political Outlook and Business Environment.

The 43-page report can be purchased from Business Monitor International, a Fitch group company.

http://www.colombopage.com/

Sri Lanka stocks down; political uncertainty grows after fresh defections

Dec 23 (Reuters) - Sri Lankan stocks traded weaker on Tuesday as fresh defections from the ruling party hit sentiment, raising political uncertainty ahead of the presidential polls early next year.

The main stock index was down 0.3 percent or 21.57 points at 7,230.00 at 0841 GMT.

"The sentiment is down due to defections yesterday," a stockbroker said. "Going forward the market may be sluggish and weaker with more defections expected from the ruling party raising concerns over political stability."

After market hours on Monday, two ruling party legislators, including a cabinet minister, defected from President Mahinda Rajapaksa's United People's Freedom Alliance to join the opposition camp.

With the latest defections, Rajapaksa has lost his two-thirds majority for the first time in more than four years.

Thirteen legislators, including former health minister Mithripala Sirisena, who is challenging Rajapaksa's bid for a third term as the consensus candidate of a united opposition, have defected after the president announced snap elections last month. Two opposition legislators have defected to the ruling party.

Turnover stood at 3.38 billion rupees ($25.78 million) due to some block deals, with 40.3 million shares changing hands.

Political analysts see a tight race between Rajapaksa and Sirisena, who in his policy announcement on Friday said he would eliminate rampant corruption and reduce prices of essential goods and fuel by cutting taxes.

Rajapaksa announced his policies on Tuesday and analysts said the market is yet to react to his manifesto.

In the forex market, four-day rupee forwards were steady at 131.99/132.05 per dollar at 0904 GMT with the central bank capping it at 132.00 through moral suasion, dealers said.

Three-day forwards, or spot-next, also traded at 131.9950, dealers said.

The spot currency was not traded. 

($1 = 131.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sunil Nair)

Treasury Bill auction held on 23 December 2014

3Q Earnings Up 51% To Rs. 51bn; Banking Sector Leads The Pack

The Colombo Stock Exchange (CSE) listed entities upped their total earnings for the quarter ended September 30, 2014 by as much as 51.3 percent to Rs.51.1 billion from the same quarter in 2013, according to a 3Q earnings update released by an independent research firm.This is an acceleration from a 21.7 percent year-on-year (YoY) earnings increase in the second quarter of 2014, Capital Alliance Securities (Private) Limited’s research unit (CAL Research) said.

The banking, finance and insurance sector, composed of 57 listed entities, contributed as much as Rs.19.7 billion or 38.4 percent to the total market earnings during the quarter. The sector increased its earnings by as much as 56 percent YoY.This was followed by t he beverage, food and t obacco sector with earnings of Rs.6.9 billion, recording a 15 percent YoY increase and the diversified holdings sector with Rs.6.8 billion earnings, recording a phenomenal 159 percent YoY increase.Listed banking sector leader Commercial Bank of Ceylon PLC (ComBank) led the pack with the highest contribution to the total earnings with 6.5 percent or Rs.3.33 billion, up 21 percent YoY.

The banking sector earnings grew by 30 percent YoY during the September quarter against the 8 percent decline in earnings in the corresponding quarter last year. According to CAL Research, the sector earnings were pushed up by the lower impairments and capital gains on bond portfolios. This is despite most banks seeing a decline in net interest incomes.

However, the banking sector earnings are expected to come under pressure in the future due to shrinking net interest margins in the low interest regime.

“Non-bank financial institutes saw an 80 percent YoY growth i n earnings as fixed lease portfolios lent at higher rates during the last two years benefited from lower funding costs as interest rates declined 700 basis points YoY and impairment charges slowed during the quarter,” CAL Research stated.Sri Lankan stocks gained this year due to low interest rates, higher foreign buying and strong 3Q earnings.However, since mid November the Colombo bourse has seen some volatility due to the party defections and political uncertainty leading up to the January 8 polls.
www.dailymirror.lk

CSE, best in three years with highest net inflow – CEO

By Ravi Ladduwahetty

Ceylon Finance Today: The performance of the Colombo bourse has been the best in three years with the statistics for 2014 being better than 2013 and 2012.

Foreign purchases for 2014 (from January 1 to December 22) were Rs. 104.8 billion, which is more than that of 2012 and 2013, Director/ General of the Colombo Stock Exchange Rajeeva Bandaranaike told Ceylon FT yesterday.

While total foreign purchases of Colombo stocks for 2014 were Rs. 104.8 billion, foreign sales were Rs. 83.2 billion, leaving a net inflow of Rs. 21.6 billion.

Similarly, foreign purchases for 2013 were Rs. 83.2 billion while sales were Rs. 60.8 billion, thereby leaving a net inflow of Rs. 22.7 billion. In 2012, there was a total inflow of Rs. 72.6 billion, and foreign sales Rs. 33.9 billion, leaving a net inflow of Rs. 38.6 billion.

Bandaranaike also said that the All Share Price Index had risen by 22.6% for 2014 over 2013 while the S&P Index had also risen by 24.5% and the market gave the best returns in the current year.

He also said that in terms of Capital gains for 2014 through Initial Public Offerings for 2014, both debt and equity, Rights Issues and Placements, the market had raised Rs. 59.7 billion while a further Rs. 40 billion worth of issues was still pending at various stages of finalization.
www.ceylontoday.lk

Demand for Seylan’s Rs. 3 b debenture tops Rs. 5 b

Amidst the year-end rush of debenture issues, where six debt issuances were lining up for subscriptions, aspiring to raise a total value of approximately Rs.12.5 billion, Seylan Bank’s initial tranche of Rs. 3 billion, ‘A’- rated, Senior, Unsecured Listed debentures was successfully oversubscribed, receiving Rs. 5.134 billion worth of applications.

As notified to the Colombo Stock Exchange, the date of allotment is scheduled for 23 December 2014 and all applications accepted will be fully allotted.

Seylan Bank will mobilise the debenture funds raised to strengthen the medium- to long-term funding mix of the bank, leading to enhanced asset – liability and interest rate risk management.

Taprobane Wealth Plus Ltd. was the Managers to the issue while Bank of Ceylon acted as the Trustee. SSP Corporate Services Ltd. was the Registrars to the Issue and Seylan Bank itself acted as the Bankers and Lawyers to the issue.

The debenture issue comes in the wake of a very successful year for Seylan Bank, with net profits seen soaring by 47% to Rs. 2.25 billion and net interest income by 21% to Rs. 8.22 billion for the nine months ended 30 September 2014.

The improvement in the deposit base to Rs. 174.8 billion during the year also bears testimony to the solid growth achieved by the bank, continuously for the past few years. 

The deposit base comprised mainly current and savings deposits which enabled the bank’s low-cost deposit base to increase from 33% in December 2013 to 36% as at 30 September 2014.
www.ft.lk

Fitch withdraws ratings on Sri Lanka’s Asian Alliance Insurance due to insufficient information

Dec 22,2014 (LBO) - Fitch Ratings Lanka has withdrawn Asian Alliance Insurance PLC's National Insurer Financial Strength Rating and National Long-Term Rating of 'BBB(lka)', the rating agency said in a media release.

The Sri Lanka-based company's Insurer Financial Strength Rating of 'B' has also been withdrawn. All the ratings were on Rating Watch Negative.

The ratings have been withdrawn due to insufficient information to maintain them.

Fitch will no longer provide rating or analytical coverage of this issuer, the release said.

Sri Lankan stocks end steady; political uncertainty weighs

Dec 22 (Reuters) - Sri Lankan stocks ended little changed on Monday amid moderate trading, but stockbrokers expect volatility until the Jan. 8 presidential poll with fresh defections from the ruling party raising political uncertainty.

The main stock index ended 0.01 percent weaker at 7,251.57.

After market hours on Monday, two ruling party legislators, including a cabinet minister, defected President Mahinda Rajapaksa's United People's Freedom Alliance to join the opposition camp for the upcoming presidential poll.

With the latest defection, Rajapaksa has lost his two-third majority for the first time in more than four years.

Thirteen legislators, including former health minister Mithripala Sirisena, who is challenging Rajapaksa's bid for a third term as the consensus candidate of a united opposition, have defected after the president announced snap elections last month. Two opposition legislators have defected to the ruling party.

"With the new defections there could be volatility," a stockbroker said on condition of anonymity.

"A majority of market players, including the stockbroker community, had expected Rajapaksa to win the election convincingly. But with more defections the chances of his re-election look difficult."

Speculation over more defections also weighed on sentiment, analysts said.

The day's turnover stood at 867.8 million rupees ($6.62 million), stock exchange data showed, lower than this year's daily average of 1.41 billion rupees.

The bourse saw a net foreign outflow of 179.6 million rupees this session, but it has seen a net inflow of 21.5 billion rupee worth stocks so far this year, exchange data showed.

Gains led by financials were offset by losses mainly in conglomerates.

DFCC Bank gained 3.03 percent to 224 rupees, while construction firm Access Engineering fell 1.9 percent to 36.10 rupees.

($1 = 131.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Trend in increase of cars in Sri Lanka

Currently some 5,000 motor vehicles are being registered per month in Sri Lanka and around 50,000 have been registered during this year alone, says the Commissioner General of Motor Traffic.

Commissioner General of Motor Traffic S.H. Harischandra told www.adaderanabiz.lk, “Around 5,000 motor vehicles are being registered since August. Before this it was somewhere around 3,000 only.”

The reason for this increase motor vehicle registration is the considerable decrease in taxes on smaller motor vehicles through the 2015 budget proposals.

According to the Commissioner General of Motor Traffic some 8,000 three-wheelers are being registered each month.

Accordingly, around 400,000 vehicles are expected to be registered by end this year whereas the number was around 325,000 last year, added the Commissioner General.
www.adaderana.lk

Sri Lanka’s Amãna Takaful PLC to transfer its long-term business to Amãna Takaful Life Ltd

Dec 22, 2014 (LBO) - Sri Lanka’s Amãna Takaful PLC to transfer its life insurance business, Family Takaful to Amãna Takaful Life Limited with effect from 1st of January 2015, the company said in a media release.

Media Release Reproduced

The separation of Amãna Takaful’s life and general insurance businesses will enable the company to run the two categories of insurance as separate business entities.

The transfer is taking place following a mandatory requirement introduced by Section 53 of the Regulation of Insurance Industry Amendment, Act No. 3 of 2011 which requires all composite insurance providers to segregate their long-term and general insurance businesses.

With effect from 1 January 2015, all Life insurance policies held by policyholders of Amãna Takaful PLC will be transferred to Amãna Takaful Life Limited, which will operate as a wholly owned subsidiary.

The transfer will come with the assurance that all obligations and responsibilities that the insurer has undertaken will continue unchanged. Amãna Takaful remains dedicated to providing all policyholders with a range of high quality insurance products and exceptional standards of service.

Amãna Takaful products in the Life category include; ‘Prosper’ Sri Lanka’s first Shari’ah compliant unit linked life insurance plan, ‘Adhyapana’, a long-term protection and saving plan that will fund the education of children whilst providing their parents with health cover and ‘Surakshitha’, an affordable life insurance cover. Also included in the Life portfolio is ‘Platinum’, which is designed to suit those who want to provide the best money can buy for the ones dearest to them, ‘Group Life’, a life insurance cover created especially for employees and ‘Safeguard’ a mortgage protection cover.

In 2014, Amãna Takaful also introduced several innovations and unique insurance policies to effectively meet the needs of the market.

The ‘Suwasiri’ health insurance policy priced at Rs.2222 /- (annually) gives all Sri Lankans access to medical insurance in order to continue peace of mind throughout bouts of poor health. The ‘Crystalline’ cover specially designed for ladies was introduced to support the health and well-being by providing comprehensive insurance cover for common ailments faced by women.