Sri Lankan stocks hit over 3-yr closing high; commercial banks lead

(Reuters) - Sri Lankan stocks hit their highest closing in more than three years on Thursday, led by Commercial Bank of Ceylon Plc and Nestle Lanka Plc .

Analysts said low interest rates and continued foreign buying into risky assets boosted sentiment.

The main stock index rose 0.19 percent, or 13.50 points, to close at 7,060.60, its highest close since June 14, 2011.

"Buying interest was seen in big-cap counters with continued foreign purchase," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.

"Net foreign inflow will provide sufficient cushion for the index to stay above the 7,000 mark."

The index has gained nearly 19.41 percent so far this year.

The bourse has been in an overbought region since July. The Relative Strength Index, a momentum indicator tracked by chartists, was at 76.928 on Thursday, Thomson Reuters data showed.

Stocks are deemed "overbought" above the 70-mark, which tends to signal a reversal in the near term.

Commercial Bank of Ceylon, the country's biggest listed lender by market capitalisation, led gains with a rise of 0.67 percent at 151 rupees, while Nestle Lanka rose 1.21 percent to 2,090 rupees.

John Keells Holdings Plc rose 0.16 percent to 249.90 rupees.

After market hours on Wednesday, Fitch Ratings downgraded John Keells' National Long-Term Rating to 'AA+(lka)' from 'AAA(lka)'.

Exchange turnover was 1.63 billion rupees ($12.52 million), more than this year's daily average of 1.2 billion rupees.

Foreign investors were net buyers of 405.2 million rupees worth of shares, extending the year-to-date net foreign inflows to 8.95 billion rupees.

The central bank did not offer 91-day t-bills at the weekly auction on Wednesday after it rejected all bids in the last two auctions, while yields on the 182-day and the 364-day treasury bills held steady for the third time. 

(1 US dollar = 130.1800 Sri Lankan rupee) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

Sri Lanka stocks close up 0.2-pct

Sep 04, 2014 (LBO) - Sri Lanka's stocks close 0.19 percent higher with price gains in index heavy counters such as Nestle Lanka, Ceylon Tobacco Company and Commercial Bank amid strong foreign participation, brokers said.

The Colombo benchmark All Share Price Index closed 13.50 points higher at 7,060.60, up 0.19 percent. The S&P SL20 closed 15.93 points higher at 3,902.81, up 0.41 percent.

Turnover was 1.63 billion rupees, up from 1.19 billion rupees a day earlier with 119 stocks closed positive against 95 negative.

Ceylon Tobacco Company closed 3.60 rupees higher at 1,200.00 rupees with an off-market transaction of 240.00 million rupees changing hands at 1,200.00 rupees per share contributing 15 percent of the daily turnover.

John Keells Holdings closed 40 cents higher at 249.90 rupees with three off-market transactions of 226.17 million rupees changing hands at 250.00 rupees per share contributing 14 percent of the turnover.

The aggregate value of all off-the-floor deals represented 43 percent of the turnover.

ODEL closed 80 cents higher at 21.60 rupees, attracting most number of trades during the day.

Foreign investors bought 951.70 million rupees worth shares while selling 546.46 million rupees worth shares.

Nestle Lanka closed 24.90 rupees higher at 2,090.00 rupees, contributing most to the index gain.

Selinsing closed 395.00 rupees lower at 1,500.00 rupees.

T bill yields flat, 2nd week running

Ceylon Finance Today: Central Bank of Sri Lanka (CBSL) by not offering Treasury (T) bills of 91-day maturity at yesterday's weekly T bill primary auction prevented upward pressure on rates, CBSL statistics showed.

Yesterday was the second week running that the weighted average yields (WAYs) of the 182 and 364-day T bills have remained unchanged. In the previous week's auction held on 27 August 2014 too, these yields remained unchanged at 6.28% and 6.30% respectively, whilst CBSL, on behalf of the Government of Sri Lanka (GoSL) rejected offers made for the 91 day maturity for the second consecutive week then, because the market was asking for higher yields than that which CBSL/GoSL was prepared to pay for this tenure.

Due to CBSL not offering 91-day maturities to the market at yesterday's auction, market demand was concentrated only on the balance two tenures on offer, that is, the 182 and 364-day tenures at that auction, as a result of which their WAYs remained unchanged at 6.28% and 6.30% respectively, week-on-week (WoW), without increasing.
These WAYs last fell at the T bill auction held a fortnight ago, that is, on 20 August,...


.with the WAYs of 182 and 364 day T bills having had fallen by a nominal two and one basis point (bp) to 6.28% and 6.30% respectively at that auction, the same rates they commanded at yesterday's T bill auction as well.

The last time that CBSL sold 91 day maturities to the market was in the weekly T bill auction held on 13 August, 2014, where its WAY fell by nine bps to 6.19%. Meanwhile the WAYs of the other two tenures on offer, that is, that of the 182 and 364 day maturities, fell by nine and 14 bps to 6.30% and 6.31% respectively at that auction.

The T bill auction of 13 August, 2014, was held two days prior to the release of CBSL's monthly monetary policy stance for that month.

At that time, certain sections of the market expected a policy rate cut when CBSL was to announce its monetary policy stance then, which however didn't take place. CBSL has for seven consecutive months (including last month) since January has left its policy rates unchanged, that is, its standing deposit facility (SDF) at 6.50% and its standing lending facility at 8.00% respectively.
CBSL is yet to announce when it will make known its monetary policy stance for the current month, that is, for September.

Market sources told Ceylon FT that with the SDF at 6.50% giving a higher yield than the current WAYs of T bills, there was no enticement for the market to invest in T bills, instead, preferring the SDF to invest their money. Nevertheless for certain statutory requirements, like maintaining capital adequacy ratios by banks, it may compel such financial institutions to invest in T bills too despite the lower returns offered.

Meanwhile, CBSL which administers such auctions on behalf of the GoSL rejected bids received for the 91 day maturity at the auction held on 20 August, 2014 too, because the market was asking for higher WAYs than that which CBSL/GoSL was prepared to pay. Selling T bills to the market is a key way that the GoSL raises money to meet its expenditure requirements. Such auctions are administered by CBSL on behalf of GoSL.

Meanwhile, the exchange rate in interbank spot trading remained unchanged at Rs 130.20 to the US dollar on low volumes in interbank spot trading for the third consecutive day at the end of yesterday's trading, market sources told Ceylon FT.

In the government securities secondary market, heavy trading was witnessed, but that had no bearing on yields, they added.

In analyzing yesterday's CBSL's "open market operations" (OMO) press release, it may be gauged that a minimum of Rs 2,617.8 million (US$ 20.12 million) was creamed off from the money market, to CBSL's accounts, on behalf of GoSL's foreign debt servicing, where the required US dollars to meet such an obligation was creamed off from CBSL's foreign reserves and not from the foreign exchange (FX) market.

This is done to avoid downward pressure on the rupee. Sri Lanka is an import dependent economy. So, if the rupee depreciates, it will hit the poor and the fixed income earner the hardest.
With average daily volumes in the FX market in the week ended 29 August 2014 at US$ 51.34 million, a sum of US$ 20.12 million is equivalent to 39.2% of the FX market, enough to cause pressure for the rupee to depreciate as per CBSL/GoSL thinking. This also reveals that Sri Lanka's FX market lacks the height, depth, length and breadth to accommodate such obligations without disturbing the rupee.

These figures are taken into account by comparing yesterday's OMO with that of the previous day. It does not take into account inflows which CBSL purchased yesterday, to infuse further liquidity into the money market, as such are not shown by the authorities, if there were such inflows.
If that was so, GoSL's foreign debt servicing costs would have been much higher than the figure of US$ 20.12 million derived for yesterday.

CBSL's book value T bill holdings, yesterday over Tuesday increased by Rs 10.8 million (0.053%) to Rs 20,518.53 million. The danger of CBSL increasing excess liquidity by buying T bills is that it may stoke demand side inflationary pressure on the economy.

 Market's excess liquidity in the review period declined by Rs 2,607 million (5.11%) to Rs 48,406 million, while the weighted average rates of call money and market repo transactions remained unchanged for the eighth consecutive market day at 6.70% and 6.52% respectively, yesterday.

Sri Lanka’s first-ever Investor Forum in New York kicks off today

• Biggest-ever Lankan listed company contingent and capital markets team in attendance;
• Over 190 fund managers registered to attend event co-hosted by CSE and SEC;
• Presentation by ‘Breakout Nation’ author Ruchir Sharma a key highlight with Dr. Amunugama, Nivard reinforcing post-war rebound;
• 
  Sri Lanka’s first-ever capital markets investor forum in New York kicks off today with the post-war rebound providing an ideal platform to woo more interests to tap emerging economic and business opportunities.
  
  Organised by the Colombo Stock Exchange (CSE) and the Securities and Exchange Commission of Sri Lanka (SEC), in association with the Sri Lankan Embassy in Washington DC, the ‘Invest Sri Lanka – Investor Forum’ will be held at the J.W. Marriot Essex House Hotel. Bloomberg and the American Chamber of Commerce (AMCHAM) Sri Lanka are the strategic partners.
  
  Sources said over 190 fund managers have registered to attend the event whilst Sri Lanka will have the largest contingent of listed firms numbering 14 and around 28 representatives as well as several broking firms.
  
  CSE said registered major US institutional investors manage assets over $ 100 million. A series of one-to-one meetings will be held between these participants and Lankan companies.
  
  The highest number of Sri Lankan listed companies, in comparison to previous forums, will participate at the event. The listed companies set to participate are John Keells Holdings PLC, Commercial Bank of Ceylon PLC, Hatton National Bank PLC, National Development Bank PLC, DFCC Bank, Hayleys PLC, Access Engineering PLC, People’s Leasing & Finance PLC, Hemas Holdings PLC, Softlogic Holdings PLC, Tokyo Cement Company (Lanka) PLC, LAUGFS Holdings PLC, Sunshine Holdings PLC and MTD Walkers PLC.
  
  Senior Minister for International Monetary Cooperation and Deputy Minister of Finance and Planning Dr. Sarath Amunugama and Governor of the Central Bank Ajith Nivard Cabraal will make principal presentations. Permanent Representative of Sri Lanka to the United Nations in New York Dr. Palitha Kohona will deliver the opening address at the Forum, while Chairman of the Colombo Stock Exchange Vajira Kulatilleka will speak on the capital market of Sri Lanka.
  
  As an endorsement of the Sri Lankan capital market and the investment experience in Sri Lanka, a series of well-reputed investment professionals will enlighten the participants on the ‘Sri Lankan experience’. Morgan Stanley Investment Management Head of Emerging Markets Ruchir Sharma who is famous for his best seller ‘The Breakout Nation,’ TPG Capital Senior Advisor Michael O’Hanlon and Bloomberg FX Application Specialist Stephen Jonathan will speak at the event and give their insights.
  
  The presentations will be followed by a panel discussion with Dr. Amunugama, Cabraal, Chairman of the SEC Dr. Nalaka Godahewa and Kulatilleka.
  
  Prior to the event, SEC Chairman Dr. Godahewa said:  “This is the first instance the ‘Invest Sri Lanka – Investor Forum’ will be held in North America and we see it as an ideal time to do so. Thus far in 2014 we have foreign holdings of Rs. 87.4 b from the United States in the Sri Lankan capital market. This figure is likely to grow as more investors begin to see Sri Lanka as a viable and steady Frontier Market moving towards the status of an Emerging Market.”           “The Exchange has had a steady growth in the past few months crossing a number of performance indicators, which include highest turnover and the main index (ASPI) crossing the 7,000 mark. It is clear that the market is on a positive trajectory and we expect a period of exponential growth. Furthermore, with a number of new companies listing, we are positive that we will be able to offer investors a variety of choice when diversifying their portfolios and selecting their investment options,” Kulatilleka said.
  
  This is the third ‘Invest Sri Lanka – Investor Forum’ for the year, with previous Forums being held in Singapore and London in January and May respectively.
   www.ft.lk