Sri Lanka sovereign bond rated 'BB-(EXP)' by Fitch

Apr 07, 2014 (LBO) - Fitch Ratings has given a 'BB-' 'Expected' rating for Sri Lanka's 500 million US dollar sovereign bond.

Fitch said a fiscal deficit of 5.9 percent of gross domestic product in 2013 and a debt burned of 78.3 percent of GDP was at "relatively high levels' but the 2014 budget signaled commitment to better management.

But Sri Lanka's external finances was weaker with foreign debt of 35.9 percent of GDP, with similar rated other countries having only 18.9 percent of debt.

The full statement is reproduced below:-

Fitch Rates Sri Lanka's US Dollar Bond at 'BB-(EXP)'

Fitch Ratings-Hong Kong-07 April 2014: Fitch Ratings has assigned Sri Lanka's forthcoming US dollar-denominated global bonds due 2019 an expected rating of 'BB-(EXP)'. The final rating is contingent on the receipt of final documentation conforming to information already received. The expected rating is in line with Sri Lanka's current Long-Term Foreign Currency Issuer Default Rating (IDR) of 'BB-' with Stable Outlook. The sovereign's Long-Term Local Currency IDR is also 'BB-' with Stable Outlook.

KEY RATING DRIVERS
Sri Lanka's 'BB-' IDRs reflect the following key rating drivers:

- Relatively strong growth, a comparatively high level of basic human development (as indicated by the UN's Human Development Index) and a solid payment record.

- The fiscal deficit (5.9% of GDP in 2013) and government debt burden (78.3% of GDP in 2013) remain at relatively high levels, although the 2014 budget signals commitment to medium-term debt reduction and an ability to maintain a gradual fiscal consolidation trend.

- The external finances form a weakness with a persistent but narrowing current account deficit and higher net external debt level (35.9% of GDP) compared with peers also rated in the 'BB' category (on average, 18.9% of GDP).

RATING SENSITIVITIES
A Stable Outlook reflects Fitch's assessment that upside and downside risks to the rating are well balanced.

The main factors that individually, or collectively, could trigger negative rating action are:
- An extended period of economic overheating accompanied by a large surge in inflation.

- A material deterioration in the public finances, which leads to a substantial increase in Sri Lanka's general government debt-to-GDP ratio.

- Intensification in external financing risks, particularly a renewed widening in the current account deficit combined with a fall in capital inflows.

The main factors that individually, or collectively, could trigger positive rating action are:

- Sustained improvement in the macroeconomic outlook that is consistent with healthy economic growth coupled with moderate and stable inflation and external equilibrium.

- A material improvement in Sri Lanka's public finances underpinned by a higher government revenue-to-GDP ratio and conversely a large decline in the general government debt-to-GDP ratio.

- Significant improvement in external finances, with smaller current account deficits and higher levels of non-debt capital inflows (that is, foreign direct investment).

KEY ASSUMPTIONS
- Sri Lanka's political landscape remains broadly stable and there is no renewal in the civil conflict that previously lasted 26 years and ended in 2009.

- No sustained rise in commodity prices, particularly in crude oil, in line with Fitch's Global Economic Outlook.

Sri Lanka stocks slip from near seven-week high

(Reuters) - The Sri Lankan index slipped on Monday from a near seven-week high hit in the previous session, despite foreign investors buying risky assets.

The main stock index ended 0.1 percent, or 6.17 points weaker at 6,048.38, declining from its highest since Feb. 17 hit in the previous session.

The day's turnover was 537.5 million rupees ($4.1 million) turnover, well below this year's daily average of 1 billion rupees.

The bourse saw net foreign inflows of 211.1 million rupees, though foreigners have net sold 9.39 billion rupees worth of shares so far this year.

Lanka Orix Leasing Co Plc shares fell 3.72 percent to end at 75.10 rupees, while Cargills (Ceylon) Plc fell 3.66 percent to close at 136.80.

Investor sentiment is yet to recover after the United Nations announced it would probe alleged war crimes by the island nation, analysts said.

The bourse has suffered 5.26 billion rupees in foreign outflows in the seven sessions since March 28 due to the exit of a large foreign fund.

The United Nations has launched an inquiry into war crimes allegedly committed by both Sri Lankan state forces and Tamil rebels during a conflict that ended in 2009, saying the government had failed to investigate properly.

Analysts said the outcome of the resolution was expected, but investors' sentiment has been dented over concerns it could hurt the country's economy.

Several potential buyers of risky assets are waiting for a clear direction.

($1 = 130.6000 Sri Lanka rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)

Sri Lanka shares end down 0.1-pct

Apr 07, 2014 (LBO) - Sri Lanka's shares end in the red Monday with finance and insurance sector losing ground, brokers said.

The Colombo benchmark All Share Price Index closed 6.17 points lower at 6,048.38 down 0.10 percent. The S&P SL20 closed 1.67 points lower at 3,321.43, down 0.05 percent.

Turnover was 537.61 million rupees, down from 5.04 billion rupees last Friday with 75 stocks close positive against 77 negative.

Commercial Bank closed flat at 125.00 rupees with market transactions of 152.22 million rupees contributing to 28 percent of the turnover and two off market transactions of 50.90 million rupees contributing to 9 percent of the turnover.

Asia Asset Finance also closed flat at 2.00 rupees and Lanka IOC closed 30 cents higher at 40.00 rupees, attracting most number of trades during the day.

Foreign investors bought 289.41 million rupees worth shares while selling 78.31 million rupees worth shares.

LOLC closed 2.90 rupees lower at 75.10 rupees, Ceylinco Insurance closed 64.30 rupees lower at 1,334.30 rupees and Cargills Ceylon closed 5.20 rupees lower at 136.80 rupees, contributing most to the index drop.

Bukit Darah closed 6.30 rupees lower at 564.20 rupees and Carson Cumberbatch closed 3.20 rupees lower at 365.00 rupees.

Asian Hotels and Properties closed 1.00 rupee higher at 63.00 rupees and John Keells Holdings closed 1.70 rupees higher at 234.40 rupees.

JKH’s W0022 warrants closed 80 cents lower at 68.00 rupees and its W0023 warrants closed 1.20 rupees lower at 71.10 rupees.

HNB closed 1.00 rupee higher at 153.00 rupees and L B Finance closed 50 cents higher at 101.50 rupees.

Ceylon Tobacco Company closed 10 cents lower at 1,074.90 rupees and Nestle Lanka closed 9.90 rupees lower at 1,990.00 rupees.

Dialog Axiata closed 10 cents higher at 9.10 rupees.

Sri Lanka launches sovereign bond; price guidance 5.5-pct

April 7, 2014 (LBO) - Sri Lanka has begun selling a 500 million US dollar sovereign bond in international markets, a media report said.

Bloomberg newswires said price guidance for the 5-year bond has been set at around 5.5 percent.

Sri Lanka sold a 5-year one billion dollar bond at 6.0 percent in January but its yield has come down in secondary trading since then.

Citigroup, HSBC and Standard Chartered are managing the issue.

Tourist arrivals up 24.8%

By Mario Andree

Ceylon FT: Tourist arrivals during the first three months of this year increased 24.8% to 421,501 from 337,719 a year earlier. Arrivals in March reached 133,048 up 17.5% from 113,208 recorded in 2013, Sri Lanka Tourism Development Authority showed.

India led with 54,154 arrivals up 16.1% from 46,648, followed by United Kingdom 39,035 arrivals up 1.3% from 38,544 and Germany with 32,964 arrivals up 17.3% from 28,105 a year earlier.

Overall tourist arrivals for the three months from North America increased 10.7% to 18,440 from 16,651 with arrivals in March up 4.7% to 6,042 from 5,772, while arrivals from Latin America and the Caribbean increased 44.0% to 1,109 from 770 with arrivals in March up 30.1% to 350 from 269.

Arrivals from Western Europe, still the largest market for Sri Lanka, increased 12.6% to 143,760 from 127,655 with arrivals in March up 4.5% to 44,824 from 42,891, while arrivals from Eastern Europe increased 56.5% to 66,421 from 42,442 with arrivals in March up 49.1% to 18,657 from 12,513.

Arrivals from Africa increased 55.8% to 2,493 from 1,600 with arrivals in March up 61.4% to 873 from 541, while arrivals from the Middle East increased 14.7% to 18,390 from 16,027 with arrivals in March up 18.8% to 6,629 from 5,580.

Arrivals form East Asia, the third largest market, increased 53.0% to 72,639 from 47,461 with arrivals in March up 43.5% to 21,751 from 15,162, while arrivals from South Asia, the second largest market, increased 17.5% to 84,278 from 71,710 with arrivals in March up 15.9% to 29,907 from 25,799.

Arrivals from Australasia increased 4.2% to 13,971 from 13,403; however, arrivals in March fell 14.2% to 4,015 from 4,681.

Sri Lanka managed to achieve last year's tourism target after revising data. According to Central Bank Data earnings from the sector increased 35% to US$ 1.4 billion from 1.03 billion.

The government and the hospitality industry expects more than 1.5 million arrivals to support the ambitious goal of 2.5 million arrivals by 2016 to earn more than US$ 2.75 billion foreign exchange.

According to the industry, tourism arrivals to Sri Lanka needs to grow more than 27% annually to reach the government's expectation.

The Cabinet early this year approved a proposal to conduct a comprehensive tourism promotional campaign. Last year according to information Sri Lanka Tourism Promotions Bureau spent nearly Rs 1 billion on campaigns.
www.island.lk

Ethics vital to boost investor confidence – SEC Chairman

H.D.H Senewiratne

Securities and Exchange Commission (SEC) Chairman Dr. Nalaka Godahewa called on investor advisors in the Colombo Stock Exchange (CSE) to be more ethical and responsible in their dealing to boost investor confidence in the market.

“Investor advisors are now fortunate with the country's economy on the forward march after three decades of war and they could play a pivotal role in the capital market,” Dr. Godahewa told a seminar on Capital Markets Training last Saturday organized by the Colombo Stock Broker's Association. He said all investor advisers should follow ethics and work with sense of responsibility while doing the right thing to build investor confidence in the stock market, which is important to build a strong capital market in the country. “At this juncture, the country's economy is growing at 7 to 8 percent and the capital market could play a pivotal role to increase their contribution to the country's GDP, which contribution towards the GDP is only 30 percent now, he said. Dr Godahewa said that in matured markets in the region, capital market contribution to the GDP is more than 70 percent to 80 percent, while certain markets it is 100 per cent.

“But now with the government's proper economic policies our stock market is also poised for growth,” he said.

Foreign investor contribution in the stock market which is 36.5 percent, could be increased further for front-lines or investor advisers in the market. Since, a lot of infrastructure projects are in place and therefore government economic policies are now moving in the right direction, he added.

Therefore the government's plan to become a US $ 100 billion economy and to increase the per capita income to US $ 4000 by 2016 and could be achieved with these proper economic foundations.

Because of that foreigners have shown keen interest about the government's post war development achievements, he said. Dr Godahewa said that SEC is constantly in consultation with CSE and other stakeholders in the sector to improve the market in order to increase their contribution to the national GDP and also attract foreign and local investors.

SEC is also focusing on listed companies activities and closely monitoring errant directors who misappropriate funds of companies and many measures improve the credibility in the market, he said.

Chief Executive Officer CSE Rajeeva Bandaranaike said ethics in the market is important to enhance investor confidence in market activities.
www.dailynews.lk

Blue Diamonds Board quits; Chinese owner, reps. and ex-CEO Asanga rejoins

The entire Board of Directors of Blue Diamonds Jewellery Worldwide Plc has resigned with effect from 2 April.

Those who resigned include Aruna Fernando, Jeffry Ebert, P. Bandara Herath, R. Chitrakumar, Sampath A. Hettiarachchi, Tharaka R. Galahitiyawa, W.K.A.K. Premaratne, W.M. Ravi B. Bandara and Isuru Balapatabendi. The latter was appointed only 28 February as a nominee of Sri Lanka Insurance Corporation, the Board of which he also serves.

As at end 2013, Chinese investor Xia Liqiang held an 18% stake in Blue Diamonds whilst SLIC held 10.22% and Ceylinco Insurance Life and General Fund held a collective 5% stake.

At an Extraordinary General Meeting last month, three nominees of the largest investor from China were appointed. They are Xia Liqiang, Zhao Min and P.A. Gayathri Manori.

Liqiang is a Chinese national holding a Bachelor’s Degree in International Economy and is  the Chairman of V.V.S. Lanka Holdings Ltd., Shenzhen Beneficial Investment Company, Suntopway Solar Group and Liyan Lanka Jewellery Co Ltd. He has eight years working experience in the China Government and 20 years experience in the fields of renewable energy, jewellery industry and hotel business globally.

Min is a Chinese national holding a Bachelor’s Degree in Business Management and is the Managing Director of Liyan Lanka Jewellery Co Ltd., and has 10 years experience in the jewellery industry in China.

Manori is a well experienced in auditing and finance for seven years and has served for two years at the Colombo Pharmacy Co Ltd. At present she works at the Centre for Poverty Analysis.

With effect from 3 April, three new Directors have been appointed. They are former CEO/Director of eChanneling Plc and former CEO of Blue Diamonds Asanga R. Karunaratna, Blue Diamonds Jewellery CEO and Nakshastra Overseas CEO Darshan T. Jayanetti and Guo Wei. Asanga served as CEO between September 2012 and February 2013. Jayanetti was the former Chairman of JEDB, SPC and Elkaduwa Plantation and former Director of Tea Board and Sri Lanka Rubber Research Institute.

Wei has a Master of Gemmologist of China University of Geosciences with over four years experience in the gem and jewellery industry in China and has worked in the National Gems and Jewellery Technology Administrative Centre.
www.ft.lk

Captain’s buy 2% more of JKH for Rs. 4.3 b

Collective stake estimated at 19% now

Largest shareholder Sohli Captain on Friday picked up a further 2% stake in top blue chip John Keells Holdings for Rs. 4.36 billion.

Analysts estimate the collective stake controlled by Captain is around 19% following the fresh buying.

As at end 2013, Captain held 11.7% stake of 116.15 million shares directly and a further 5.3% via Paints and General Industries Ltd., bringing the collective stake to 17%. The Captains have a trading portfolio of JKH as well.

Analysts welcomed the capacity of the Captains to have picked up the block, a move that is likely to boost overall local investor sentiments.

Malaysia’s sovereign fund Khazana is the second largest shareholder at JKH with a stake of 10.5%.

Deals on JKH dominated the Colombo stock market last week. JKH saw 32 million of its shares traded for Rs. 7.47 billion. It closed at Rs. 232.70, up by Rs. 7.70.

On Friday 18.84 million shares traded for Rs. 4.4 billion, of which 18.65 million shares were done at Rs. 234 each.

The week’s main seller was Janus Overseas Fund whilst net foreign holding of JKH was down by 18.2 million shares on Friday whilst for the entire week the net foreign holding was down by 13.3 million shares (worth Rs. 3 billion) to 51.43%

As at 31 December 2013, Janus Overseas Fund held 77 million shares of 7.8% but by last week it had come down to around 30 million shares.

With Friday’s massive sale, year to date net foreign outflow surged to Rs. 9.7 billion. Despite that, several foreign funds were on the buying side as well. Commercial Bank saw Rs. 321 million of net foreign buying. 

HNB (Rs. 67 million), Sampath Bank (Rs. 22 million) and Dockyard (Rs. 20 million) were among other favourites whilst Shalimar saw Rs. 120 million of net buying.

Acuity Stockbrokers said renewed investor confidence boosted markets this week, with the benchmark ASPI surging past the key 6,000 barrier after a 6-week hiatus.

“Markets in the week ahead are likely to sustain the current momentum created by HNI and institutional investors who are strategically buying into selected counters. The consequent boost to sentiment is likely to attract further retail investor interest and help boost overall volumes,” Acuity added.
www.ft.lk