Megapolis plan presented to President, USD 30bn worth investments in pipeline

(LBO) – Sri Lanka’s President Maithripala Sirisena was presented with the new government’s Megapolis Plan formulated to develop the island’s Western Province by Minister Champika Ranawaka on Wednesday.

Minister of Megapolis and Western Development, Champika Ranawaka said Sri Lanka will be able to get about 30 billion dollars worth investments within next 10 years through this project.

The plan aims to transfer informal urban development into formal urban development and boost the living standards of the people n the region.

The Megapolis Development Plan has identified issues that should be given priority in the town development and includes traffic congestion, garbage disposal and housing facilities for slum dwellers as well as drinking water and sanitary facilities, Ranawaka said.

“The implementation of the development plan will be carried out under three phases and will be completed by 2030.”

Speaking at this occasion, the President said everybody should contribute to make the Megapolis Development Plan, the main development project to be implemented by the government in the new year, successful.

“The Megapolis Development Plan will be implemented at the beginning of 2016 and every ministry, department and government officer should fulfill their responsibilities in that regard, considering it as a prominent task,” he said.

The President said this plan aims at developing every mega town to a similar level and thereby reduce the number of people who are migrating to Colombo, seeking better facilities.

Ministers Rajitha Senaratne, Susil Premajayantha, Arjuna Ranathunga and Western Province Chief Minister Isura Dewapriya also participated in the event.

Sri Lanka may request IMF loan in February: CB Governor

ECONOMYENXT - Sri Lanka may make a formal request for a loan from the International Monetary Fund early next year, Central Bank Governor Arjuna Mahendran said.

Informal discussion on a loan has started already he told reporters in Colombo.

An IMF team was due for regular discussions in February 2016, when a formal request may be made, he said.

At the moment reserves are comfortable he said.

Sri Lanka inflation slows to 2.8-pct in December

ECONOMYNEXT - Sri Lanka's inflation slowed to 2.8 in the 12-months to December 2015, down from 3.1 percent in November, the statistics department said.

Prices rose 0.3 percent during the month with the Colombo Consumer Price Index rising to 185.2 from 184.7 points.

Food price inflation slowed to 0.8 percent during the month from 3 percent in November.

The statistics department said year-on-year inflation of the Food Group fell to 4.2 percent in December 2015 from 5.2 percent in November 2015 while the Non‐food Group increased to 1.5 percent from 1.1 percent during this period.

For the month of December 2015, on a year-on-year basis, contribution to inflation by food commodities was 1.99 percent while contribution of Non food items was 0.77 percent.

The core inflation index, which excludes items like fresh food, energy, and transport edged back up to 4.5 percent in December, the highest in two and a half years, after having fallen from 4.5 percent in October to 4.3 percent in November.

Sri Lanka removes share trading levy

ECONOMYNEXT – A share transaction levy of 0.3 percent from the buyer and seller on Sri Lanka’s stock exchange will be removed with effect from 1 January 2016, the Colombo stock exchange announced.

The proposal was announced in the government’s 2016 budget presented to parliament in November aimed at encouraging share market trading.

The CSE said in a statement that under the new fee structure, total transaction fees on equities up to 50 million rupees would be 0.82 per cent while the fees for trades over 50 million rupees would be 0.31 percent.

Sri Lanka’s Metropolitan Resource to delist, offers Rs28 a share

ECONOMYNEXT – Metropolitan Resource Holdings, which owns a Sri Lankan listed plantations firm, said it plans to delist its shares from the Colombo Stock Exchange offering to pay 28 rupees for a share which last traded at 28.50 rupees.

A stock exchanging filing said the only asset of Metropolitan Resource Holdings is its 67 percent stake in Bogawantala Plantations PLC, which grows and exports tea.

Metropolitan Resource Holdings shares have had low liquidity in recent years “as a result of which there is a strong possibility of the price of a share to be manipulated, thereby distorting its real value,” the statement said.

Sri Lankan share index falls 5.5 pct in 2015, ends at 1-month high

Reuters: Sri Lanka's main share index fell 5.5 percent this year, but ended firmer at a more than one-month high on Thursday in thin trading due to the holiday and investors awaiting the impact of a hike in commercial banks' statutory reserve ratio (SRR).

Sri Lanka's central bank on Wednesday raised the SRR by 150 basis points to 7.50 percent, to stabilise a rupee hovering near record lows and slow private sector credit growth.

The main stock index recouped early losses to end 0.35 percent firmer at 6,894.50, its highest close since Nov. 30.

The index fell 5.5 percent in 2015, Thomson Reuters data showed. In terms of U.S. dollar value, Sri Lanka's market capitalisation fell 13.9 percent, still performing better than the other stock index in Asia like Malaysia, Thailand , Indonesia and Singapore.

Stockbrokers said many investors are on year-end leave and some are waiting to see the impact of the central bank's first step in monetary tightening.

Foreign investors bought a net 49.1 million rupees ($340,617) worth of equities, but the market saw a net foreign outflow of 4.43 billion rupees in 2015, compared to a net foreign inflow of 22.07 billion rupees last year.

Turnover stood at 326.4 million rupees, less than a third of this year's daily average of 1.06 billion rupees. Last year's daily average was 1.42 billion rupees.

Diversified conglomerate Aitken Spence, which led the overall index gain, rose 5.1 percent, while development lender DFCC Bank gained 3.3 percent.

($1 = 144.1500 Sri Lankan rupees) (Reporting by Shihar Aneez; Editing by Richard Balmforth)

Sri Lanka Treasuries yields up across the board

ECONOMYNEXT – Sri Lankan Treasury Bill yields rose across the board at Wednesday’s auction with one-year yields rising 19 basis points to 7.30 percent, the debt office said.

Three month bills rose 07 basis points to 6.45 percent at the auction while six month bill yields rose 14 basis points to 6.83 percent.

The debt office, a unit of the central bank, said it got bids worth 43.1 billion rupees and accepted 7.4 billion rupees of bills.

2016 may not be the year for 'hot' investment tips

By Sanath Nanayakkare

Investors are mostly putting their money in very short term investments eying maturity-yields as they still find it hard to guess how the financial year 2016 is going to turn out for Sri Lanka in terms of investment prospects, The Island Financial Review learnt yesterday from Dimantha Mathew, Manager - Research, First Capital Equities (Pvt) Ltd.

"In the wake of this trend extending into the New Year, 2016 may not herald the ideal first or second quarters for investors looking for the quick fix, the easy answer, the magic formula or hot investment tips. However, if the government's envisaged construction projects start pumping money into the economy between first and second quarters, a construction-led growth could come to the rescue in the second half, renewing hopes of a more predictable, a more tangible business and investment outlook in which the investors will roll over their money" Dimantha noted.

Speaking in a broader manner, Dimantha said," Basically, 2016 may turn out to be a tough year with, interest rate hikes, increasing funding-costs and the weakening rupee. The slowly but steadily rising inflation will add to this unwelcome mix. The government will look to borrow funds from local sources rather than foreign credit lines. This will invariably push funding costs higher for the private sector. We may see T-Bill rates going up to around 10% in 2016. As a consequence of increased funding costs, corporate entities' volumes, earnings and profits could be affected, which is not a healthy development. The 1st quarter will see an economy dependent on domestic consumption which places pressure on importer dollar demand. As the government has to also deal with the balance of trade issue, either the exchange rate or the interest rate will have to take a beating," he pointed out.

Concluding on a positive note Dimantha said. "However, with the government's planned construction projects hopefully streaming money into the economy between 1st and 2nd quarter, the construction industry and allied enterprises will spur the economy to a noticeable degree injecting fresh hopes towards the 3rd and 4th quarters".

www.island.lk

Monetary Policy Review – December 2015 - Policy rates unchanged

The year-on-year growth of broad money (M2b) continued to expand at a high rate of 17.0 per cent in October 2015 compared to 16.0 per cent recorded in the previous month, driven by the expansion of credit extended to both private and public sectors by the banking system. Amongst contributory factors, credit granted to the private sector by commercial banks increased by 26.3 per cent, year-on-year, compared to 22.2 per cent in the previous month. Tentative data for November 2015 also shows that credit flows to the private sector continue to expand at a high rate. 

Meanwhile, excess liquidity in the domestic money market continues to remain high, fuelling monetary expansion. Meanwhile, headline inflation, as measured by the Colombo Consumers’ Price Index (CCPI, 2006/2007=100), increased to 3.1 per cent, on a year-on-year basis, in November 2015 from 1.7 per cent in October 2015. On an annual average basis, headline inflation increased to 0.9 per cent in November 2015 compared to 0.7 per cent in the previous month. Following a similar trend, headline inflation based on the National Consumer Price Index (NCPI, 2013=100) also increased to 4.8 per cent, on a year-on-year basis, in November 2015 from 3.0 per cent in October 2015. Reflecting the firming up of aggregate demand conditions in the economy, the CCPI-based core inflation rate registered 4.3 per cent, on a year-on-year basis, in November 2015 vs. 4.4 per cent in the previous month and compared to its recent low of 0.8 per cent in February 2015. Meanwhile, core inflation measures, based on NCPI, also suggest rising underlying inflationary pressures in the economy.

On the external front, the decline in expenditure on imports in October 2015 was greater than the decline in earnings from exports, narrowing the deficit in the trade account by 6.8 per cent, on a year-on-year basis, to US dollars 791 million. However, on a cumulative basis, the trade deficit during the first ten months of the year widened by 2.5 per cent to US dollars 6,936 million reflecting the continued increase in non-oil imports. Meanwhile, earnings from tourism during the first eleven months of 2015 are estimated to have grown by 18.1 per cent, while workers’ remittances grew marginally by 0.8 per cent in the first eleven months of the year. Gross official reserves, which stood at US dollars 6.5 billion at end October 2015, are estimated to have increased to around US dollars 7.3 billion by end November 2015. Reflecting domestic and global developments, the Sri Lanka rupee has depreciated by 8.8 per cent against the US dollar so far in 2015. Notwithstanding these developments, the Monetary Board is of the view that external sector policies already implemented need to be further supported by some monetary policy tightening. 

If the current excess liquidity in the domestic money market continues to remain high for an extended period, it could lead to an undue expansion in monetary aggregates, fuelling future inflation in the economy. In that respect, the Monetary Board is of the view that it is appropriate to restrain the build-up of demand-side pressure on inflation to ensure continued monetary and price stability. Accordingly, the Monetary Board decided, at its meeting held on 30 December 2015, to raise the Statutory Reserve Ratio (SRR) applicable to all rupee deposit liabilities of commercial banks by 1.50 percentage points to 7.50 per cent to be effective from the reserve week commencing 16 January 2016. Furthermore, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at their current levels of 6.00 per cent and 7.50 per cent, respectively.

Sri Lankan shares rise to one-week high ahead of cenbank rate decision

Reuters: Sri Lankan shares ended firmer at more than one-week high on Wednesday, led by financials, but trading was this ahead of the central bank's key monetary policy rate decision later in the day.

The main stock index rose 0.33 percent to finish 6,870.63, its highest close since Dec. 21.

"The market is waiting for clear direction on the interest rates and many investors are still on holiday," a stockbroker said asking not to be named.

Sri Lanka's central bank is expected to raise interest rates by 25 basis points from record lows at its December policy meeting on Wednesday, a Reuters poll found, a move that could relieve pressure on the fragile rupee. The central bank's policy decision is due at 1400 GMT.

Stockbrokers expect some investors to shift to fixed and risk free assets from stocks in the event of a rate hike.

Foreign investors sold a net 31.6 million rupees ($219,292) worth of equities, extending the net outflow to 4.45 billion rupees so far in the year.

Turnover stood at 271.2 million rupees, around a quarter of this year's daily average of 1.06 billion rupees.

Commercial Leasing and Finance Plc rose 5 percent, while Lanka Orix Leasing Co Plc gained 2.5 percent.

Top lender Commercial Bank of Ceylon, which saw net selling by foreign investors, ended flat, but accounted for around a third of the day's turnover. 

($1 = 144.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Anand Basu)

Ten Southeast Asian countries to launch single market

With over 600 million people, ASEAN's potential market is larger than the European Union or North America.

The center of global economic gravity is shifting toward Asia. Within Asia, it is shifting toward the two giant economies of the People's Republic of China and India. Their emergence as economic superpowers suggests that "economic size" bestows significant advantage in accelerating growth and fostering development.

The Association of Southeast Asian Nations (ASEAN) is in the process of creating a single market and production base, called the ASEAN Economic Community, which will allow the free flow of goods, services, investments, and skilled labor, and the freer movement of capital across the region. This is envisioned to be in place by 31 December 2015.

If ASEAN were one economy, it would be seventh largest in the world with a combined gross domestic product of $2.4 trillion in 2013. It could be fourth largest by 2050 if growth trends continue. Source: Speech by ADB Vice-President Stephen Groff. 2014. Berlin, Federal Republic of Germany.

With over 600 million people, ASEAN's potential market is larger than the European Union or North America. Next to the People's Republic of China and India, ASEAN has the world's third largest labor force that remains relatively young. Source: Speech by ADB Vice-President Stephen Groff. 2014. Berlin, Federal Republic of Germany. ASEAN is one of the most open economic regions in the world, with total merchandise exports of over $1.2 trillion - nearly 54% of total ASEAN GDP and 7% of global exports.

ASEAN is taking a more cautious approach to regional economic integration than Europe. In Asia, there is currently no serious consideration of a single currency.

The ASEAN Economic Community is founded on four basic initiatives: creating a single market and production base; increasing competitiveness; promoting equitable economic development; and further integrating ASEAN with the global economy.

ASEAN's physical infrastructure is critical to the ASEAN Economic Community's goal of establishing a single market and production base.

Cross-border roads, power lines, railways and maritime development will help propel the community forward. This will boost existing and new value chains or production networks.

One of the challenges to the ASEAN Economic Community is bridging the perceived "development divide" between the older and economically more advanced members - Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand, known as the ASEAN-6, and the four newer members - Cambodia (1999), Lao People's Democratic Republic (1997), Myanmar (1997), and Viet Nam (1995). Some analysts believe that the ASEAN Economic Community will miss its December 2015 deadline because of the challenging requirements of economic integration, including changes to domestic laws and in some cases constitutional changes.

The flexibility that characterizes ASEAN cooperation, the celebrated "ASEAN way," may hand member states a convenient pretext for noncompliance, according to one ADB report. How to enforce the accords remains an issue. Currently, the economic integration commitments lack sufficient mechanisms to ensure compliance.

ASEAN needs a plan beyond the ASEAN Economic Community to achieve the long-term development aspirations of its 10 member countries, according to an ADB study. This includes introducing structural reforms nationally and taking bold actions regionally to further deepen economic integration. ADBI. 2014

www.dailynews.lk

Colombo city hotels record high occupancy

Colombo city hotels have increased occupancy by 10% from 2014 to record 75% in 2015, Colombo City Hotels Association Chairman M. Shanthikumar told to Daily News Business yesterday. He said that in 2015 December, the average occupancy too has increased by around 20% in comparison to December 2014 . He said that the current devaluation of the rupee too is helping the industry and it's adding into their revenue.

Shanthikumar said unclassified hotels are eating into their revenue and this is a major issue.They are not paying any taxes and are also under cutting us by offering low rates. "We have brought this up with the government which has now responded. These unclassified hotel rooms which we estimate to be around 1,000 will soon be made accountable,"he said.

Commenting on the increase of rooms in Colombo city, he said around 250 star class rooms were added in 2015. This number will significantly increase with new hotels like Mövenpick opening next year.
www.dailynews.lk

Abans Finance to raise Rs 185 mn in rights issue

Abans Finance PLC will raise Rs 185 million.

This is by way of a rights issue, the company said in a stock exchange filing.

Subject to the necessary approvals, the company is to issue 7,400,000 ordinary shares at Rs 25.00 each in the ratio of 1 for every 5 shares.

The proceeds will be utilized to expand the lending activities of the company and the capital adequacy requirements that have arisen as a result of business expansion.
(IH) www.dailynews.lk

Janashakthi eager for more buys : Bouyant after AIA General acquisition

Janashkthi Insurance over the years has grown through acquisitions and are bullish on more in this direction, Janashakthi Insurance Managing Director Prakash Schaffter said.

Speaking to Daily News Business he said that this was the logic that came into play when the company decided to acquire AIA Insurance’ General Business recently.

He recalled that in 2001 too they made a similar investment to purchase Sri Lanka Insurance. “We are on the lookout for more similar acquisitions.”

Janashakthi Insurance, a company established in 1994, paid Rs.3.2 billion to AIA Insurance Lanka to seal off its acquisition of AIA General Insurance Lanka Limited in October. With the financial aspects of the transaction now complete, Janashakthi will commence amalgamation of AIA General Insurance Lanka Limited with Janashakthi General Insurance Limited.

Janashakthi received the go ahead from its shareholders to raise over Rs.3.357 billion by way of a Rights Issue of over 181.5 million new ordinary shares at its Extraordinary General Meeting (EGM) to raise capital for this acquisition.

“In line with our long term growth plans and to be the number one in the industry, the acquisition of AIA General Insurance Lanka Limited marks a significant milestone in Janashakthi’s history. With the combined strengths of the two entities as we strive to deliver greater value to our customers, employees and shareholders,”Schaffter said.

“Currently we are overstaffed but with the opening of new branches this will be resolved.”

Currently Janashakthi is the third largest general insurer in Sri Lanka, the resulting entity will account for an estimated Gross Written Premium (GWP) of Rs.11 billion with a market share of approximately 17.5%. Commenting on the industry he said they see lot of potential since the insurance penetration levels are very low. “In India it’s at around 3% and back in Sri Lanka it’s around 5.6%”

He said that the 2016 budget proposals saw an increased of NBT which he said would have a negative impact on them. “We hope that the new taxes would not be detrimental to the industry.”

He said looking back at 2015 the Easy Claim product (Solution that enables a fast claim payment via ATMs up to Rs.100,000 paid through from any Sampath Bank ATM) was very popular. In addition the Premier Medical (International health insurance plan provides a global coverage for Sri Lankans and expatriates) and the Janashakthi Green Light (Only life cover available to those who have been diagnosed with HIV) are very popular.

Janashakthi General Insurance is the third largest general insurer in Sri Lanka with an estimated Gross Written Premium of Rs. 7.5 bn (market share of approximately 11.4%).

www.dailynews.lk

Sri Lanka rejects all bids at bond auction

ECONOMYNEXT – Sri Lanka’s Central Bank rejected all bids at the treasury bond auctions Tuesday, the public debt department said in a statement.

It got bids of 12.4 billion rupees for five billion rupees worth of 12 years and 08 months bonds with a coupon rate of 11.50 percent.

The public debt department, a unit of the central bank, got bids worth almost 12 billion rupees for five billion rupees of 05 years and 10 months bonds with a coupon rate of 9.45 percent.

It also got bids of 8.7 billion rupees for three billion rupees of 03 years and 10 months bonds with a coupon rate of 08 percent. 

Sri Lankan shares end higher ahead of cbank rate decision

Reuters: Sri Lankan shares firmed up in low volume trade on Tuesday after hitting a near two-week low in the previous session, as financials and telecom stocks led the recovery ahead of the central bank's decision on policy rates.

Turnover was however muted as many market participants kept away in the holiday season, traders said.

The main stock index rose 0.28 percent to touch 6,847.74 at the close, recouping from Monday's loss, when it reached its lowest closing level since Dec. 15.

"Buying side is very weak and investors are also waiting for the central bank's direction on the interest rates," a stockbroker said asking not to be named.

"If they are going to raise the monetary policy rates, investors may shift to fixed and risk free assets, from stocks."

Sri Lanka's central bank is expected to raise interest rates by 25 basis points from record lows at its policy meeting on Wednesday, a Reuters poll found, a move that could relieve pressure on the fragile rupee.

Foreign investors sold a net 141.2 million rupees ($981,237) worth of equities, extending the net outflow to 4.44 billion rupees so far in the year.

Turnover stood at 306.6 million rupees, less than a third of this year's daily average of 1.07 billion rupees.

Top fixed line phone operator Sri Lanka Telecom gained 2.6 percent, while Commercial Leasing and Finance plc rose 5.3 percent.

Top lender Commercial Bank of Ceylon, which saw net selling by foreign investors, ended flat, but accounted for around 50 percent of the day's turnover.

($1 = 143.9000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Biju Dwarakanath)

Sanasa Bank’s debentures draw applications over Rs.2bn

Micro finance lender Sanasa Development Bank PLC yesterday said it received applications for over Rs.2 billion for its listed debenture issue which officially opened yesterday. 

The bank last week announced the issue of 20 million rated, guaranteed, redeemable debentures at the par value of Rs.100 with an option to issue up to a further 20 million debentures in the event of an oversubscription of the initial tranche. 

The bank yesterday said the initial issue of Rs.2 billion was oversubscribed and the issue would be closed at 4.30 p.m. today (Dec.29th) as per the prospectus. 

The bank further said any application received until 4.30 p.m. today (Dec.29th) to the collection points as mentioned in the issue prospectus would be accepted. 

www.dailymirror.lk

Dollar gains limited in 2016, fund managers look elsewhere

(LBO) – US Dollar gains are expected to be limited next year compared with the strengthening seen over the last two years after a well-expected tightening of interest rates by the US Fed this month.

The dollar rallied 10 percent to 1.09 per euro this year from 1.2 per euro at the beginning of the year. This is a gain from 1.35 per euro at the beginning of 2014.

The currency will appreciate about 5 percent to 1.05 per euro by the third quarter of 2016 due to the well-expected Fed liftoff, analysts said.

Money managers say they will be looking elsewhere for returns after chasing the U.S. dollar’s gains in the past three years.

The Dollar Index has extended 2014 gains, up near-9 percent against a basket of major world currencies. Some individual currency trades, like USD/Brazil Real, have netted currency investors huge returns, a CNBC report said.

The performance was only beaten by the digital currency bitcoin up 40 percent this year to 428 dollars.

The dollar’s gains are already losing steam in parts of Asia, with the Indonesian rupiah rallying 7.3 percent in the fourth quarter, the Malaysian ringgit 2.5 percent and the Singapore dollar 0.9 percent, according to a Bloomberg report.

Sri Lanka may merge two state-run cement firms

ECONOMYNEXT - A re-structuring committee has recommended the merger of two state-run cement firms, one of which is a listed company, which are at the moment engaged in the import and sale of cement, a minister has said.

Lanka Cement Plc is listed on the Colombo Stock Exchange but Lanka Cement Corporation is an unlisted firm.

Industries minister Rishard Bathiudeen told parliament that Lanka Cement Plc earned revenues of 2.446 billion rupees up to September 2015 selling 2614 metric tonnes of cement.

Sri Lanka Cement Corporation had sold 2,090 metric tonnes of cement and lost 7.7 million rupees. Revenues were not given.

A re-structuring committee has recommended that a voluntary retirement scheme be given to staff and the two firms merged, he said.

‘People's disposable income slide hitting CSE listed companies’ profits’

By Hiran H.Senewiratne

Most of the Colombo Stock Exchange listed companies' net profits have come down by more than 6 percent. The reason behind this development is that people's disposable income has come down this year. Consequently, companies have been affected where business volume growth is concerned, stock market analysts said.

"Listed companies saw total net profits sliding 6.2 percent year-on-year to Rs 47.7 billion in the month of September quarter.This was because the disposable income of most people came down significantly. That affected the volume growth in many companies, president of the Colombo Stock Brokers Association Ravi Abeysuriya told The Island Financial Review.

Some analysts said that there are many reasons for profits to come down in many listed companies. They said corporate earnings in 2015 were driven by the boom in consumer demand, which was, in turn, stimulated by lower interest rates, benign inflation and fiscal stimulus extended by way of lower taxes and higher public sector salaries.

Abyesuriya said that some companies adopted a wait and see approach until the budget but the banking sector will be affected from next year with certain tax restrictions coming in.

Third quarter earnings demonstrate a reversal of the growth trend in corporate earnings as second (June) quarter earnings grew by a healthy 10.7 percent year on year.According to stock brokers the total earnings of many listed companies in the September quarter came down. Lanka IOC PLC, Carson Cumberbatch PLC and Bukit Darah PLC incurred heavy losses of Rs.373 million, Rs.497 million and Rs.1 billion respectively. However, the growth trend of the early quarters will soon reverse as consumer demand growth is expected to slow down amid tightening credit due to rising interest rates, increase in inflation and higher taxes which will taper people’s disposable income.

The largest individual contributors to September quarter earnings were John Keels Holdings, Ceylon Tobacco, Commercial Bank and Hatton National Bank, with 7.3 percent, 6.9 percent, 6.8 percent and 5.6 percent respectively. The sector-wise highest contributors were, banking, finance and insurance (BFI) sector with a 43 percent share, followed by beverage, food and tobacco (BFT) with 19 percent and diversified holdings with a 13 percent share.

www.island.lk

Browns to build two resorts in Maldives

Browns Hotels and Resorts will be extending their footprint to the Maldives.The group is planning to build two resort hotels in the island nation.

In addition the company has also signed up with one of the leading travel agencies in Italy, Alpitours to market the newly opened Dickwella Resort and Spa opened on December 22.

Browns Hotels and Resorts General Manager Eksath Wijeratne said that they have signed up with the Italian company who in turn will send tourists for the hotel. “The company also invested over Rs. 250 million to upgrade the 56 roomed hotel.

“We were closed for six months for this refurbishment,” Wijeratne said. All rooms have been done up while several other features too were added under the refurbishment program.

Wijeratne said that the company has also repositioned the hotel as an all inclusive club concept hotel on the request of Alpitours.

The Italian counterpart will also be operating chartered flights from next month and they will use the Mattala Airport for this purpose.Wijeratne said Dickwella Resort and Spa’s forward bookings are very positive and they already have over 80% Italian booking for the January February season channeled through Alpitours. The average stay would be around one week.He said that Alpitours has also stationed a 10 member animation team to work in the hotel to entertain the guests.

LOLC Group’s Leisure sector was grouped under their subsidiary Browns Hotels and Resorts in 2014.

The Group now has nine properties in its portfolio both locally and internationally with 1,200 keys upon completion.

With over 3.1 million customers, Alpitour World is the leading Italian travel group and high-ranking in the European travel industry.

www.dailynews.lk

Sri Lankan shares end at near two-week low; financials lead

Reuters:Sri Lankan shares closed at a near two-week low on Monday, led by financials amid thin trading as many market participants were on holiday after a long weekend.

The main stock index ended 0.44 percent weaker at 6,828.51, its lowest close since Dec. 15.

"There was no reason for market to move up with many investors on holiday. The market is also concerned over the budget as the government had given up most of its revenue," a stockbroker said on condition of anonymity.

Foreign investors sold a net 30.8 million rupees ($214,634) worth of equities, extending the net outflow to 4.3 billion rupees so far this year.

Turnover was at 354.4 million rupees, a third of this year's daily average of 1.08 billion rupees.

Markets were closed on Thursday for a Buddhist religious holiday and on Friday for Christmas.

Top listed lender Commercial Bank of Ceylon fell 1.1 percent, while People Leasing and Finance plc lost 3.95 percent. 

($1 = 143.5000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Biju Dwarakanath)

China establishes rival to World Bank

The China-backed Asian Infrastructure Investment Bank (AIIB), viewed by some as a rival to the World Bank and Asian Development Bank, was formally established on Friday, according to a statement issued by Beijing.

The United States and Japan - the world's largest and third-largest economies, respectively - have notably declined to join the bank, which is expected to begin operations early next year, though others such as Australia, Germany and Britain will take part.

The bank's establishment came after 17 funding members of the AIIB, which account for just over 50pc of its share capital, ratified an agreement on the bank, state television quoted Finance Minister Lou Jiwei as saying.

"The AIIB is legally established as the Articles of Agreement take effect today," said Lou said.

"The establishment of the AIIB marks a milestone in the reform of global economic governance system."

It will be operational once its board of directors and executive council have met for the first time at an opening ceremony scheduled for January 16-18, the ministry of finance said.

Beijing will be by far the largest AIIB shareholder at about 30pc, according to the legal framework signed by 50 founding member countries in late June.

The AIIB has been feted by Beijing as a way of financing regional development, and is seen as a potential rival to US-based institutions such as the World Bank.

The bank will initially focus on financing projects in power, transportation, and urban infrastructure in Asia, the television quoted the bank's president-elect, Jin Liqun, as saying.

With authorised capital of $100bn, it expects to offer its first batch of project loans by mid 2016, according to the official Xinhua news agency.

First proposed by President Xi Jinping less than two years ago, the bank has become one of China's biggest foreign policy successes.

Despite the opposition of Washington, major US allies such as Australia, Britain, Germany, Italy, the Philippines and South Korea have joined.

http://www.telegraph.co.uk

Lanka's city property prices soar

The skylines of the world's emerging cities are being transformed. Colombo is no exception. As construction booms in the emerging markets, cities in these regions will soon be home to record-breaking property developments and some of the most ground-breaking real estate the world has seen.

Shangri-La Colombo
As the year draws to a close, online property portal Lamudi looks back at the key developments in real estate in the emerging markets in 2015.

One Galle Face, Sri Lanka

This $608 million integrated lifestyle development from Shangri-La Colombo includes high-end residential, retail and office space, as well as a prestigious five-star hotel.

The development sets a new standard for luxury living in Colombo and seeks to tap into the growing number of tourist arrivals to the country.

Prices of apartments in the Residences at One Galle Face start at $405 per square meter, ensuring the development targets investors, expatriates and Sri Lanka's growing upper income bracket.

The project will also offer seven levels of shopping, dining and entertainment, plus 60,000 square meters of prime office space. Slated for completion by 2018.

Jeddah Tower, Saudi ArabiaThis mega project in Obhur, just north of Jeddah, is set to take real estate to new heights. Measuring 1km into the sky, the tower will overtake Dubai's Burj Khalifa as the world's tallest building once construction ends in 2020. In late November, the Saudi government announced that Jeddah Economic Company and Saudi Arabia's Alinma Investment had signed a $2.2 billion deal to build Jeddah Economic City, which includes the 200-floor skyscraper.

International Financial Centre Jakarta Tower Two

Construction of the International Financial Centre (IFC) Jakarta Tower Two entered its final phase in September. Located in the heart of Jakarta's financial district, the development is billed as a state-of-the-art eco-office tower. The existing 10-storey Tower Two is being redeveloped to offer 49 storeys of prime Grade A office space. The project, from Singapore developer Keppel Land, is slated for completion next year. With features such as rainwater recycling and a range of energy- and water-efficient fittings, the building will be the first in the city to receive the renowned Green Mark Gold PLUS Award from Singapore's Building and Construction Authority.Myanmar Center Tower, MyanmarStrategically located in New Yangon, the Myanmar Centre Tower will offer four blocks of world-class office space totaling 180,000 square meters. With flexible floor plans and customizable spaces, the development is suitable for all businesses seeking to make their mark on one of Southeast Asia's fastest growing economies. The project is part of the broader HAGL Myanmar Centre, which also includes a retail mall, a five-star hotel and luxury apartments, The Lakes Suites, which started pre-sales in June this year. HAGL Myanmar managing director Cao Duy Thinh told the media that the development would set a new standard for Yangon as the city's first integrated mixed-use project built to international standards.

Proyecto Akaroa, Colombia

Located in a residential neighborhood in the northeast of Bogotà city, the highly sought-after Proyecto Akaroa housing project consists of 192 apartments of one, two and three bedrooms.

There are 16 apartments per floor, each offering the latest in interior design, and common areas such as a pool, gym, sauna and jacuzzi.The development is unique in the city for its rooftop outdoor areas, including a mini golf course, barbecue space and playground.

Launched in 2013, Lamudi is a global property portal focusing exclusively on emerging markets. The fast-growing platform is currently available in 34 countries in Asia, the Middle East, Africa and Latin America, with more than 800,000 real estate listings across its global network. wwwdailynews.lk

VIAL hails lowering import duty of electric cars from 50% to 5%

The Vehicle Importers Association of Lanka (VIAL) President Indika Sampath Merenchige said that the decision to lower the import duty of electric cars from 50% to 5% by President Maithripala Sirisena was a step taken in the right direction.

Electricity cars save energy and are also environmental friendly and hence they should be encouraged by the government over other vehicles. "We are happy that the government has understood this advantage and we thank them for this decision that would be advantageous to the vehicle import industry.

He said, however, that the prices of electric cars would increase slightly because of the revised valuation system. "Therefore an electric car would cost at least Rs. 2.8 million,"

During a cabinet meeting on Wednesday , President Maithripala Sirisena had re adjusted this tax increase.

Meanwhile Cabinet Co Spokesperson Minister Gayantha Karunathilake said the government had decided not to increase import tax on electric cars because of numerous requests by various individuals. "As a responsible government which considers people's opinions, we decided to withdraw the proposal," he said. The Minister also said the Cabinet had decided not to impose the increased import tax introduced in the Budget 2016 for all cars for which Letters of Credit (L/C's) had been opened before November 20.
www.dailynews.lk

Lanka Sathosa to turn around in six months

The loss making Lanka Sathosa would be turned around in six months, said new Chairman Dr Rohantha Atukorale.

He said that the institution is running in the excess of Rs. 30 million monthly loss and this is due to bad planning and positioning.

Dr Atukorale said that within the next three months all outlets will receive a face lift with the basic infrastructure corrected in lighting, freezer facilities and retail staff so that it can ensure that total basket of goods for a housewife can be bought at a Lanka Sathosa outlet.”

The Chairman said that they are also looking at introducing 185 new outlets by the end of the year to make it a 500 outlet institution.

Dr Atukorale said under the previous government there had been a buying spree of consumer goods which were not appealing to the customers of Lanka Sathosa. “In addition the institution also suffered billions of losses due to low quality rice imports sans quality control. “We are still paying for these financial sins, ” he said.

Asked if the Lanka Sathosa was over staffed the chairmkan said it was mainely at the head office. “However we can overcome this by assigning them to the new outlets that would be opened this year, ” he said.

Dr Atukorale who was earlier the Chairman of Sri Lanka Tourism Promotions Bureau said that once these dues are settled they would be in a better financial position. “No rocket science is needed to turn the institution around what you need is to develop the grocery business,” he said.

Sathosa has commanding store equity of 3.4 among the mass market consumer at a trial to retention rate of 67% that no other brand in the market can elucidate.

He said that they would also launch loyalty cards, special bank offers, gift vouchers and several such promotions to woo increase customers to patronize Lanka Sathosa. “We have appointed professionals to bring in new management thinking into the organization and expand the outlets so that we can meet the changing consumer requirements of the Sri Lankan consumer.

Whilst we are increasing the retail outlets we will introduce an internal quality laboratory so that we offer the best,” said Minister of Industry and commerce Rishad Bathuideen. “I want Sathosa to be not only a “price setter in the Sri Lankan retail industry but also the best supermarket chain that offers a value addition to a Sri Lankan household,” the Minister said.

He also assured that a three month stock cover on essential were available at the institution.

wwwdailynews.lk

Tourism Earnings Over Rs. 2.2 Billion

The occupancy and earnings in Sri Lanka’s tourism sector are increasing and from around US$ 500,000 earnings in foreign exchange in 2010, it has today risen to over US$ 2.2 billion.

According to veterans in the industry, today it has climbed to the No. 3 spot, preceded only by the Apparel industry and Worker Remittances. Unfortunately there are negative aspects where Sri Lankan woman employed in the Middle East are concerned, but the Sri Lanka tourism attracts this much needed forex directly at the point of consumption in the country, with a very high value added component.

Tourism as an industry came into the limelight in early 1960s. Thereafter, all governments places emphasis on the tourism industry. However, till recently, there had been no proper steady development and follow up. According to the veterans in the industry, a stable government is of utmost importance for the development of the industry and it is in existence today.

Tourism is the world’s largest and fastest growing industry, with the year 2014 recording over 1 billion tourists, generating US$ 1.2 trillion revenue and accounting for almost 10% of the global GDP.

Also one in 11 jobs worldwide is tourism related. Despite certain setbacks and disasters, tourism has continued to grow at about 4-5% year on year, with Asia growing the fastest at around 6%.

Sri Lanka, of course, could not maintain such rates on a regular basis due to the almost three-decade long conflict which ended a few years ago. It should also be stressed that despite the major setback, Sri Lanka tourism managed to keep the arrival figures at or over 450,000, displaying the resilience and determination of the country’s tourism industry professionals.

For centuries, the Emerald Isle, Ceylon or Sri Lanka, has been well known for its hospitality, and the island nation is also reputed for its natural wonders both in land and sea. It’s the only country in the world were the largest animal and mammals exist. Within hours of watching Elephants in the wilds, it takes only one or two hours to see blue whales, the largest mammals on earth in the ocean.

According to the veterans, the real development that has actually taken place in the tourism industry has been spearheaded by the private sector. (RS)
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FCID Commences Probe On Krrish Deal

By Mandana Ismail Abeywickrema

The police Financial Crimes Investigations Department (FCID) has commenced an investigation into the controversial Krrish Transworks Colombo (Pvt) Limited project that was initiated during the former Mahinda Rajapaksa regime. Several VVIPs of the former regime are hence expected to be interrogated by the FCID in the next few weeks.

The US$ 650 million Krrish square mixed development project in Colombo was aimed at constructing four high-rise buildings containing a luxury hotel, apartments, malls and office space covering a land space of 4.3-acres on a 99-year lease from the Urban Development Authority (UDA).

However, the Krrish project was marred with controversy and allegations made of secret payoffs to several prominent figures of the former regime including a few VVIPs in order to expedite the relevant approvals. The issue of the alleged payoff resulted in a controversy over the final installment the Krrish Group was due to pay the UDA to complete the land lease transaction. The project has been stalled since March 2013.

It was reported at the time that Krrish had deposited the amount equivalent to the final installment for the Krrish Transworks Colombo (Pvt) Limited project in a private bank in Singapore as a payoff to a VVIP. The final installment that was due to the UDA by Krrish amounted to around Rs. 450 million.

The names of several powerful members of the former regime were highlighted in the controversial Krrish project while drafting of the agreement was undertaken by a legal firm that was owned by the son of a VVIP of the former regime.

The Sunday Leader learns that the relevant files have gone missing from the respective legal firm.

Krrish has so far made a payment of Rs 4.4 billion while the total due to the UDA is Rs 4.995 billion. The final payment is yet be made to close the land lease deal.

Be that as it may, officials from India’s Krrish Group visited the country early this year to discuss the possibility of resuming the stalled project under the new government.

Accordingly, a discussion was held between the Krrish officials and the Chairman of the Board of Investment (BoI), Upul Jayasuriya. The BoI during the discussion had requested Krrish to pay the dues and continue with the project. The Krrish Group however is yet to respond positively to the request.

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Port City will add green area nine times as big as Galle Face to the city

New Environmental Impact Assessment outlines details

The Colombo Port City will add a new green area of approximately 45 ha, nine times the size of the Galle Face Green which is five ha. in extent, Chin Harbour Engineering Co. Ltd., the developer said last week.

CHEC said this green area which will be accessible to the general public will comprise "a hierarchy of public and private landscape typologies offering habitat provision, urban cooling and helping Colombo to proactively prepare for climate change."

The developer explained that the project’s park strategy is to provide different types of parks and places for recreations for people living in Port city and visitors. The Central Park works as a community park with a wide range of recreation facilities, such as areas for sport, an informal lawn area, play area, ornamental garden, woodland and naturalistic area for relaxation and study.

"There will be close proximity to water via jetties as well as raised views over the park from adjacent bridges and the organically formed boardwalks that transverse the water for the public to enjoy."

It assured that the Project Company will take required action to maintain good visual appearance of the undeveloped land portion till such time developments commence upon the land plots being sold/leased to third party developers.

The new Environmental Impact Assessment (EIA) plan presented by the Government for the Colombo Port City shows an increased public area, the developer revealed last week.

"The area allocated for public usage according their originally negotiated position of September 2014 was 63ha but now it has been increased to 96ha, which has moved the public land area from 27% of the total land extent to 36%,"a CHEC news release said.

"The public areas will follow an open space concept consisting of a network of public parks and open water, large scale and small?scale streets, public squares and small plazas. Open space provision is based on land use, demographics and maximum walking distances to various facilities creating a hierarchy of open spaces that has the benefits of enhancing the physical character of an area; improving physical and social inclusion, including accessibility; and providing connected routes between places for walking and cycling, and safer routes to schools."

According to the Supplementary Environmental Impact Assessment (SEIA) Report of the Colombo Port City (CPC) Development Project, the Presidential Secretariat will command the most prominent views of the CPC. The front of the Secretariat building will have an uninterrupted view of the Grand Ceremonial Boulevard of Colombo Port City, the developer said.

The sketches of the Master Plan also indicate that the view of the sea from the Galle Face Green will not be obstructed. The plan indicates that the Presidential Secretariat building will be enhanced with an extended public green space (North of the lotus sculpture) and uninterrupted views of the Marina and water to the South. The Presidential Secretariat (and its immediate vicinity) will therefore become an aesthetic center?piece of the Colombo Business District (CBD) and a focal point where the old city meets the new seamlessly, they said.

Colombo Port City’s Master Plan is made up of five distinctive urban areas, namely the Marina District, Port City CBD, International District, Park Living District, and the Living Island. Each of these urban areas is unique, yet complementary and integral part of the overall Master Plan, and all have public spaces incorporated into their design.The local parks provided in the linear parks and other green areas should offer a wide range of facilities for play and relaxation, while pocket parks are provided on private lands, the release explained.

The Marina is a leisure destination for both office workers in CBD and residents from the whole of Colombo. Restaurants, entertainment and shopping are located in small?scale low? rise buildings on the pier, it explained.

The breakwater for the reclamation and the marina, which is visible from Galle Face, has been designed keeping in mind safety and aesthetics. With the offshore island breakwater approach, a pool of relative calm water of around 300m length will be formed between the breakwater and the beach area of the landfill, which would facilitate swimming and water sports activities currently not possible in the Colombo area, the release said.

Port City CBD is a natural extension of the already-existing CBD in the old city neighbouring the site. The park and the layout with pavilions and many pedestrian connections help integrate the old city and the new Port City. In order to preserve the aesthetic appeal, the master plan indicates that taller buildings will be located along the Boulevards and decrease in height towards the water areas of the Port City. Therefore, the report, says no development will block significant views to the waterfront and Presidential Secretariat, it explained.

International District will include the public places much needed by neighbouring office and university areas, such as small parks and squares. Along the edge towards the existing wall a buffer park will be created. As office area, this district will become a start?up incubator.

The Park Living area is a residential area concentrated around "The Central Park" of 22 ha and the northern part of a Linear Park. The housing volumes may stretch out into the parks to enhance the feeling of living in a green open space, and not merely beside one.

The Living Island District is an urban residential area with close proximity to the sea, beach, canal and central park. Although with a quiet character, the main boulevard offers close by shops, restaurants and services for the residents.

The park strategy is to provide different types of parks and places for recreations for people living in Port city and visitors. The Central Park works as a community park with a wide range of recreation facilities, such as areas for sport, an informal lawn area, play area, ornamental garden, woodland and naturalistic area for relaxation and study. There will be close proximity to water via jetties as well as raised views over the park from adjacent bridges and the organically formed boardwalks that transverse the water for the public to enjoy.

The Project Company will take required action to maintain good visual appearance of the undeveloped land portion till such time developments commence upon the land plots being sold/leased to third party developers.

Upon completion of the reclamation and ground improvement of the bare land, all roads (including main ring roads), landscaping, the Central Park and other green areas and utilities required for the initial stage of marketing will be completed.

There will be Development Control Regulations established collaboratively with the UDA for all investors who intend to undertake developments within CPC. This would include guidelines on maintenance of undeveloped?land pending the commencement of development. Also, pending construction, the undeveloped areas of Port City may be maintained as green belts with landscaping, trees, green walls, hoarding or temporary structures and facilities appropriately in order to maintain visual aesthetic, public appeal and adaptability.
www.island.lk

Capital Alliance Finance PLC now Colombo Trust Finance PLC

Capital Alliance Finance PLC has changed its name to Colombo Trust Finance PLC with all necessary regulatory approvals obtained, the company announced in a stock exchange filing last week.

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New oil price formula soon; revision every three months

Minister says petrol price will not be reduced

Despite tumbling world oil prices and a tax of Rs. 65 a litre on petrol, the Government has decided not to reduce the local selling price of petrol. Instead, plans are afoot to bring in a new fuel pricing formula where prices will adjust in line with world market trends.

The new pricing mechanism is expected to be presented to Cabinet on January 6 by Petroleum Minister Chandima Weerakkody. The minister did not elaborate on the details of how the new pricing mechanism is to work.

World oil prices this week fell to a record low of US$ 37 per barrel from $85 in October 2014. Local prices have been unchanged since January this year, though India has lowered fuel prices.

In the President’s election manifesto he had promised a “suitable pricing formula” where the people “will get the benefit when world oil and coal prices fall”. Asked why local prices have not been reduced to reflect crumbling world prices, the minister told the Sunday Times by phone while on an overseas visit, that there was no reason to do so as fuel prices were reduced sharply on January 21, this year.

Other officials say that even though the CPC is making profits on the sale of petrol and diesel (nearly Rs. 30 per litre), its accumulated losses have risen to Rs. 244 billion now from Rs. 238 billion at the end of 2014, compelling the state fuel importer to retain current prices.

They said the CPC is also not getting the full benefit of reduced crude oil prices as only refined fuel is being imported since the Sapugaskanda refinery is not operating due to a long breakdown. “Yes there is a benefit from reduced refined oil imports but not as much as raw crude imports,” one official said.

According to Treasury data, the CPC sells a litre of petrol at Rs. 117 while it costs the corporation Rs. 113.39 inclusive of a tax of Rs. 64.40 a litre. Diesel costs the corporation Rs. 79.88 a litre (inclusive of a tax of Rs. 28.02 a litre) while the selling price is Rs. 95 a litre. In both cases, there is a small profit in addition to the tax revenue to the Government.Officials conceded that the Government instead of reducing prices and passing on the benefits to consumers, sees this as an opportunity to collect more tax revenue from fuel sales and recoup past losses.

Crude prices have been mixed in the past year. It was $85 per barrel in October 2014, $75 (November 2014), $59 (December), then further slumped to $44 (January 2015) but rose to $54 (February), $62 (May) and then began easing to $45 (October).

The minister said the new formula has been devised following extensive discussions with the CPC, Lanka Indian Oil Company (LIOC) and other stakeholders, including the Finance Ministry.

“The transparent fuel pricing formula will be a regulated state-run type of system that would benefit both the consumer and the utility. It would change prices every three months based on global prices,” Mr. Weerakkody disclosed.

He noted that the outstanding debt from state institutions and power plants to the CPC was running up to billions of rupees and it has affected the profitability of the corporation.

“By the end of May this year, the public sector owed CPC Rs. 30.4 billion,” he said adding that the corporation was being maintained at breakeven due to cost cutting. With the formula, consumers would be privy to a breakdown of various cost components such as the cost of product in the international market, freight and insurance costs, government taxes and marketing margin, he pointed out.

Welcoming the Government’s move, LIOC Managing Director Shyam Bohra noted that “the formula should be such that it provides reasonable margins to the oil companies to invest in energy-related infrastructure, including storage and efficient distribution of petroleum products.”

He said that even though fuel prices had dropped sharply, the LIOC is losing Rs. 15 to Rs.16 a litre of petrol by selling it at the current fixed price of the Government, since it was selling stocks that were purchased at higher-than-current-prices.

“It would help everyone if the Government could evolve a long-term pricing formula which will provide for adjustment of duties and levies and revision in prices from time to time based on the world market prices, with provisions to protect consumers wherever required,” he said.

Each year, Sri Lanka imports nearly 30 million barrels of oil at a cost of some $2.2 billion.

www.sundaytimes.lk

Import duty cut doesn’t affect RCL – report

Royal Ceramics Lanka PLC (RCL) posted a 37.5 per cent year on year (YoY) growth in Q2 FY 16 bottom line, resulting in a recurring Earnings Per Share (EPS) of Rs. 6, a Bartleet Religare report said. “The growth in tiles, sanitary ware and aluminum sector volumes, coupled with the group’s cost saving initiatives, aided in a 2 per cent increase in earnings before interest, taxes, depreciation, and amortization (EBIT) margin to 19 per cent and 6 per ent increase in Gross Profit Margin to 37.6 per cent. Its topline grew 8.2 per cent YoY to Rs. 5.91 billion.”

According to the report, RCL’s Market Price of the Share (MPS) has dropped 9 per cent post-budget on panic selling as concerns over a reduction in import duty and removal of tile and sanitary ware from the BOI negative list was signaled. “The total import duty has risen by 5 per cent and the removal from the negative list would barely affect RCL volumes. The reduction in corporate tax from 28 per cent to 15 per cent would boost RCL’s net earnings from FY 2017E onwards.”

The company is also geared to supply to the mid to long term demand in the local construction industry, with several capacity expansions taking place. The company has already signed up for several construction projects (Hotels and condominiums) in the pipeline. RCL entered into a joint venture this month with Pakistan’s leading premium brands retailer SFnZ & Co. Ltd to expand into Pakistan “This move would also create a market for RCL’s excess stock, during times of a slowdown in domestic demand,” the report said.

“The proposed reduction in corporate tax from 28 per cent to 15 per cent would bode well for RCL and we estimate a saving of Rs. 4000 million to FY 2017E bottom line.” The industry continued to be protected by the government with total import duty increasing further by 5 per cent to 85 per cent. The import cess remained at 35 per cent while general duty, NBT and PAL in-creased further by 2 per cent each and 2.5 per cent respectively, the report said. According to industry sources, the local tile market has seen a commendable growth of 10 per cent so far this year, so Lanka Floor tiles PLC, also under the some group may shed some market share due to competition, it added.

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SEC’s recent actions praised by good governance activist

Good governance activist and stockmarket investor K.C.Vignarajah has praised the Securities and Exchange Commission (SEC) for taking steps to create investor interest and confidence, once again, in Colombo’s stock market.In a letter to SEC Chairman Tilak Karunaratne, he said the criticism that the wrongdoers and the mafia had got around the powers that be, to use unethical and unlawful, escape routes from adhering to public policy for public good, created by the earlier corrupt regime is now muted.

“Appreciation of the SEC has begun on a broad scale,” he said, praising Mr. Karunaratne and other officials.Mr. Vignarajah, who has been a strong campaigner for accountability and transparency in the market and considered a ‘pain’ by many conglomerates where he has sizable shares and persistently raises issues at AGM’s and board-level meetings, said it was clear that inspite of many obstacles and insufficient supporting staff, (with the necessary motivation and capacity), the SEC has succeeded in taking firm action in many areas of stock market reform.

“The collection of evidence and channeling them to the relevant authorities to investigate and apprehend those who caused much loss to shareholders and harm to the country’s image is most commendable. The Financial Crimes Investigation Division (FCID) taking action against former SEC top officials has restored faith, that funds of investors and the public are being carefully monitored,” the letter said.He said investors were also pleased that steps have been taken to strengthen the rules and regulations to prevent wrongdoing to, and oppression of, Independent Minority shareholders(IMS); to expedite the process of compensation of victims while recovering the loot from the errant Controlling Interest and Related Parties (CI&RP) and punishing the wrongdoers administratively/civil action/criminal prosecution process.

“These actions are most commendable considering political compulsions as a detraction. However, we believe the leadership of President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe will support you fully as they have the will to lead a good team to usher in justice, fairplay, prosperity peace and harmony for all in our country,” he told Mr. Karunaratne in the letter.”This determination will certainly help you in your brave efforts to bring in protection for ‘witnesses and whistleblowers’ who do their duty to safeguard the interests of honest investors and the economy of our country.”Referring to the de-listing regulations, he said strong representations have been made against de-listing. He said independent shareholders should have rights to nominate independent directors, auditors and to good governance, transparency and accountability.

www.sundaytimes.lk

November cautious month for trader

The month of November saw the UNP-led coalition government announcing its maiden budget for the year 2016 with market activities remaining low during the first half of the month as investors were seen adopting a cautious approach prior to the budget, anaysts said, analysing events in the market in the past month. Despite the budget having some sound proposals to enhance investor confidence, the capital market did not react as expected, according to a Bartleet Religare report. “This resulted in the Colombo bourse closing at a near seven and a half month low by the end of November. The benchmark ASPI lost a staggering 132.91 points month on month (MoM) to close at 6,909.15 points while S&P SL20 followed suit to depreciate 145.31 points MoM to close at 3,657.69 points.” Banking sector stocks were the most hit during the month. Investors were seen moving away from banking sector counter following the unpleasant treatment received from the 2016 budget proposal, the report added.

In the healthcare sector counter, Lanka Hospitals (which is controlled by state-owned Sri Lanka Insurance) saw reduced interest during the month due to a government decision to divest from non-strategic investments in the CSE.”Activity was limited during the month with total volumes contracting by 24 per cent MoM to 491 million. Retail and institutional participation remained relatively low throughout the month.” The market posted a turnover of Rs. 13 billion, 35 per cent lower MoM with the highest contribution coming from JKH with a contribution of 25 per cent. The stock closed Rs. 5.30 higher MoM at Rs. 179.90.The report added that foreign investors aligned on to the selling side for the second consecutive month amid an expectation of a Federal Reserve rate hike in December. The cumulative net foreign outflow for the month was recorded at Rs. 71 million.

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Sri Lanka’s motor tax policies seriously questioned

The vehicle registration momentum continued into November due to the pre-November 20 budget surge and relaxation of loan-to-value (LTV) rule, a JB Stockbrokers research report said. “Total motor cars registrations recorded 10,054 units in November slightly down from 10,349 units in October, but significantly higher than 2,419 units recorded 12 months ago,” it said, adding that brand new car registrations recorded 6,682 units in November which is the second highest number on record slightly higher than 6,225 units recorded in October, but lower than the all-time record set in September of 9,427 units.

Running up to the budget, the Customs changed the basis of valuation on which duties would be charged, for example for a Nissan Leaf it is now around Rs. 4.35 million whilst previously the declared value was around Rs. 3.2 million which was due to a combination of under invoicing and lower values since they are pre-owned vehicles, it said. “How would you optimally tax vehicles? For the last 50 years no government has figured out how to optimally tax imported vehicles. The policy has yo-yoed depending on whether the country was facing a balance of payment crisis or the Treasury has a revenue shortfall or reacting to excess traffic on the road. Due to policy unpredictability the market places has seen idiosyncratic and discretionary behaviour,” it said, adding that when duties are reduced there is a surge of demand since consumers believe it will be short-lived; thus they don’t want to miss out.

“This invariably creates a spike in government revenues but places a strain on the balance of payments,” the report said, noting that periodically the permits with restrictions are issued to various interest groups – these in turn are flipped in the market defeating the rationale of issuing permits. Since permits come with restrictions, the supply side clamours to procure models that come within the defined threshold – the winners are invariably the ones who can genuinely match a suitable model to fall within the stated criteria or more likely the players who game the system by mastering the art of under invoicing, it pointed out.

Rationale
The report said that the “rate of duty is set depending on the size of the engine – one does not understand the rationale why it should be the criteria”. If the thought process is that larger engines equate to large size vehicles that doesn’t always hold for a BMW 520 and Mercedes Benz E200 as both engines are below 2L and attract the same duty level as a Toyota Corolla that has an engine size of 1.5, the report said. “Further, why should the rate of duty be different between a car with an engine size of 2L and 2.2L? Perhaps a progressive methodology should be used. There is a wide range of duties – one is not sure on what basis they have been decided.”

Personal vehicles serve a functional need to allow people to be economically active – go to work, trade, generate income by running a taxi service, etc, the report said, adding that the best evidence of its utility value is that people are willing to lease vehicles even though they are paying an interest rate of 24-28 per cent for two wheelers, 18-22 per cent for three wheelers, 14-16 per cent for used cars, etc. If vehicles become unaffordable economic activity will be affected. For the burgeoning middle class owning a personal vehicle has high aspirational value – it’s nice to have a Maruti Alto at home that is infrequently used, it also signals to the neighbours that the household is prosperous, the report said.

At the premium end of the market there is a snobbish value to owning a prestige brand. Thus there is a level of inelasticity for cars – the challenge is to set the taxes at a level that maintains demand – if set too high demand will slump due to unaffordability or customers buying an alternative with an equal utility – e.g. option for a duty free speed boat or yacht instead of a Mercedes Benz, it said.The research report said that congestion on the road should (not) be addressed via higher taxes on vehicles. Congestion is primarily an urban phenomenon and more pronounced at specific times of the day – thus congestion pricing has to be implemented in the cities to dissuade users from using their cars especially during peak times. “Penalising a car owner in Hambantota a town that has eight lane roads due to congestion in Colombo does not seem to be fair. We could be a pioneer by implementing dynamic congestion pricing using the mobile phone ecosystem – triangulate a vehicle’s location and price accordingly,” it emphasised.

It added that the level of duty should be based on value of the vehicle (not) on engine size or fuel type and it must be applied in progressive slab. “Offering permits to public servants as a remedy for below market wages is not tenable. Thus the recent budget announcement to pay a cash bonus in lieu of the permit was the right policy.”The report said that the cost of ownership of a vehicle has gone up considerably (rupee has depreciated by 7 per cent over the last three months, interest rates on leases are edging up) and the rate of duty has gone up by 10 per cent for the most popular hybrid vehicles and the customs valuations have been significantly revised upwards. “Its most likely that demand will drop dramatically due to lower affordability emanating from the depreciation of the currency, higher interest rates, lower LTVs and higher duties – tax revenues would also drop significantly requiring the Treasury to rethink its strategy,” the report added.

www.sundaytimes.lk

Listing SOEs will be a game changer next year

By Duruthu Edirimuni Chandrasekera

CSE signals confusing 2016

The signals for Sri Lanka’s stock market for the next quarter in 2016 range from confusing to hopeful, according to industry analysts.

They say that while the famous capital market investor George Soros, slated to be in Sri Lanka in early January, and the setting up of the Megapolis in two months will augur well for the capital market, the possible currency devaluation along with foreign / High Net Worth Individuals (HNWI) boycotting the Colombo Stock Exchange (CSE) will spell negativity.

The exchange rate is under pressure due to a strong dollar and capital outflows and the Central Bank (CB) is likely to prop the rates up, which will see outflows from the CSE, according to stockbrokers. However, according to some, the ‘real game changer’ will be listing the State Owned Enterprises (SOEs) as promised in the recent budget. It was announced that the government is keen to streamline its portfolio of investments and will therefore exit partially or fully from those non-strategic investments in Lanka Hospitals, Hotel Developers PLC (Colombo Hilton), Hyatt Residencies, Waters Edge, Grand Oriental Hotel, Ceylinco Hospital and Mobitel by listing such investments in the CSE during 2016.

There will be a paradigm shift if the SOEs are listed,” an analyst said, noting that it will be like what Dialog did to the Colombo Stock Exchange (CSE), 10 years ago. The Colombo bourse’s largest initial public offering (IPO) at the time, Dialog Telekom was pursued by over 40 leading investment banks and fund managers from around the world.The analyst added that SOEs will do a similar thing to the CSE. “The volumes will be low without foreign participation but if the sentiment is right, I think the market can really move up from domestic activity alone with SOEs coming in.

He said that early next year the CSE will slump before it goes up, which is to be expected with the current trend. If SOEs are listed, it will certainly be a boost to the market.Another analyst pointed out that the HNWI like the EPF have stopped buying and the latter has in fact sold over the past two months, which has dropped the indices. “Over the past two months the EPF has sold some 5 million John Keells Holdings (JKH) shares. For a long term (outlook) pension fund this isn’t so good.”He said that if this is stopped or at least curtailed, traders will start eyeing the CSE more positively.

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Sri Lanka tea exports drop sharply in November

ECONOMYNEXT – Sri Lankan tea exports fell nine percent to 26.3 million kilos in November 2015 from a year ago with shipments so far this year the lowest in three years, brokers said.

Although bulk tea exports grew, shipments of packeted tea and tea bags which fetch higher prices fell during the month.

Total revenue fell 2.6 billion rupees to 15.4 billion rupees in November 2015 from the year before, Forbes & Walker Tea Brokers said.

Russia followed by Turkey and Iraq were the largest importers of Sri Lankan tea in the January – November 2015 period with Iran and UAE the other noteworthy importers.

Brokers Asia Siyaka Commodities said tea exports in the eleven months to November 2015 were down five percent to 281.5 million kilos from the year before, the lowest since 2012, when 288 million kilos were shipped during the same period.

“Sri Lanka earned 166.9 billion rupees for the January - November 2015 period, down a sharp 14 percent on last year’s earnings,” they said in a report.

The approximate US dollar value of exports for the period was 1.23 billion dollars, the lowest since 2009, Asia Siyaka Commodities said.

“In that year the international banking crisis and drought restricted supply and total exports for the year was a low 289 million kilos.”

In 2014, the approximate US dollar value of exports for the January - November periodwas 1.49 billion and the country went on to earn a record 1.63 billion dollars during the year, the brokers said.

They projected total tea export earnings for the 12 months ending December 2015 at 1.3 billion dollars.

Treasury Bond Auctions held on 23 December 2015

Sri Lanka annual tea crop seen at three-year low

ECONOMYNEXT – Sri Lanka’s November 2015 tea crop was the lowest in seven years with the island’s annual output expected to be around 325 million kilos, brokers Asia Siyaka Commodities said.

The 2015 annual production would be more in line with the 2012 total of 327 million kilos and well below last year's figure 338 million kilos, the brokers said in a report.

“The projected loss of production is 12-13 million kilos with much of it coming in the third and fourth quarters.”

Sri Lanka November tea crop of 25.2 million kilos, 16 percent less than a year ago, was the lowest since 2008, Asia Siyaka Commodities said.

“Heavy showers, overcast conditions and almost a month of wet days restricted tea crop from most growing districts in November,” it said.

“In 2008, in the midst of financial turmoil, collapsed markets and related issues, Sri Lanka produced 24.8 million kilos. Since then the November tea production has been 27-30 million kilos.”

The report said that tea crops were lower in all three elevations in November 2015 with the higher elevations declining the most.

Tea production for January to November 2015 at 305.3 million kilos is the lowest since 2012, and 2.7 percent lower than the same 2014 period.

Sri Lankan shares edge up in thin trade

Reuters: Sri Lankan shares closed marginally higher on Wednesday, snapping a two-session losing streak in thin trade ahead of a long weekend, led by market heavyweight John Keells Holdings.

Turnover slumped to the lowest level since March 24, 2014 at 205.2 million rupees ($1.43 million), against this year's daily average of 1.08 billion rupees.

The market is expected to be lacklustre with low turnover due to year-end holidays starting this week, stockbrokers said.

Markets will be closed on Thursday for a Buddhist religious holiday and on Friday for Christmas.

The main stock index ended 0.06 percent firmer at 6,858.64, after hitting its lowest close since Dec. 16 in the previous session.

Foreign investors sold a net 9.3 million rupees worth of equities, extending the net outflow to 4.27 billion rupees so far this year.

John Keells, the country's top conglomerate, closed 0.5 percent higher. 

($1 = 143.7500 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Fitch rates Commercial Bank’s Subordinated Debentures AA-(lka)(EXP)

(LBO) – Fitch Ratings Lanka has assigned Commercial Bank of Ceylon proposed Basel II-compliant subordinated debentures of up to 7 billion rupees an expected National Long-Term Rating of AA-(lka)(EXP).

The proposed issuance, which will have tenors of five and ten years and carry fixed coupons, will be listed on the Colombo Stock Exchange. CB expects to use the proceeds to strengthen its Tier 2 capital base and reduce asset-and-liability maturity mismatches.

The final rating is subject to the receipt of final documentation conforming to information already received.

KEY RATING DRIVERS

The proposed subordinated debentures are rated one notch below CB’s National Long-Term Rating, to reflect the subordination to senior unsecured creditors.

The issuer rating is driven by CB’s measured risk appetite, solid franchise, sound track record, and strong funding profile.

RATING SENSITIVITIES
The rating on the proposed debentures will move in tandem with CB’s National Long-Term Ratings.

These ratings are primarily sensitive to CB’s ability to withstand cyclical asset quality deterioration.

A full list of CB’s ratings follows:

National Long-Term Rating: ‘AA(lka)'; Stable Outlook

Outstanding Basel II-compliant Sri Lanka rupee-denominated subordinated debentures: ‘AA-(lka)’

Proposed Basel II-compliant Sri Lanka rupee-denominated subordinated debentures: ‘AA-(lka)( EXP)’

Details on new investment and exports framework in January: Malik

(LBO) – Sri Lanka will have its first glance of the country’s new investment and export framework as early as next January, a top Cabinet Minister said.

The Board of Investment and Export Development Board are slated to become implementing arms of a new, higher level policy and strategy body consisting of ‘proven performers from both private and public sectors’, Development Strategy and International Trade Minister Malik Samarawickrama said.

Samarawickrama was addressing a capacity building session for senior staff of both BOI and EDB conducted yesterday.

“We are in the process of forming a new Agency for Development and an Agency for International Trade, which will have both government and private sector personnel’s participation,”

“These personnel are packed based on their proven track record. However the implementing of their projects and proposals will be done through the BOI and EDB. We are discussing details and they will be ready sometime in January 2016.” Samarawickrama said.

Prime Minister Ranil Wickremesinghe in his economic policy speech of November 5 in Parliament announced new economic reforms as well as changes to EDB and BOI.

Sri Lanka expects EU fishing ban to be revoked by mid 2016

(LBO) – Sri Lanka is looking at a favorable response about the lifting of EU fishing ban from the European Parliament by mid next year, the Fisheries Minister said.

“During the coming months the proposal to lift the fishing ban will be presented to the European Parliament,” Fisheries Minister Mahinda Amaraweera said.

“We are losing over 100 million US dollars per year because of this ban. So we are expecting a favorable response from them before the Sinhala and Tamil New Year in 2016.” he said.

Minister Amaraweera said they have installed Vessel Monitoring Systems to the vessels operating in international waters in order to stop fishing in prohibited areas.

The 2016 budget proposed a deep sea fishing licensing scheme where one license holder will have to engage in collaboration with at least 100 persons in the fishing community.

Amaraweera however stated that the budget proposal has no effect to the exiting small boat owners as the proposal only affects new comers.

As per international law, Sri Lanka has the authority to send 1,615 boats to the international waters for fishing.

“We already have over 1,550 boats fishing in international waters. So we have left only few boats to add,’

“We have invited local businessmen to invest in new ships that use new technology.” he further said.

European Union Council last month encouraged Sri Lanka to take further measures necessary to address the shortcomings established in the context of the EU legislation on Illegal, Unreported and Unregulated (IUU) fishing.

The Council added that the ban on fishery exports to the EU could be lifted if further necessary steps are taken.

Sri Lanka received a “yellow card” or a strict warning in November 2012 before the ban was imposed, as the country was not complying with international rules on illegal fishing.

Finlays Sri Lanka unit delisting approved by regulator

ECONOMYNEXT – Sri Lanka’s stock market regulator, the Securities and Exchange Commission, has approved tea exporter Finlays Colombo Plc plans to delist its ordinary shares from the Colombo Stock Exchange.

A stock exchange filing said offer documents on the exit offer to be made by James Finlay Ltd. of London will be sent to the rest of the shareholders in due course.

Finlays Colombo has made arrangements for James Finlay Ltd. of Swire House, London to buy shares from shareholders at 302 rupees a share.

The company blends and packages tea for export and is also into cold storage logistics, tea warehousing and insurance brokering.

Sri Lanka Fitch rates LB Finance's outstanding debentures 'BBB+(lka)'

ECONOMYNEXT - Fitch Ratings said it has assigned LB Finance PLC's outstanding Sri Lanka rupee-denominated subordinated debentures a National Long-Term Rating at 'BBB+(lka)'.

The debentures mature in 2016, 2017 and 2018 and have total value of 2.5 billion rupees.

The full Fitch rating report follows:

Fitch Ratings-Colombo-22 December 2015: Fitch Ratings has assigned LB Finance PLC's (LB, A-(lka)/Stable) outstanding Sri Lanka rupee-denominated subordinated debentures a National Long-Term Rating at 'BBB+(lka)'. The debentures mature in 2016, 2017 and 2018 and have total value of LKR2.545bn.

A full list of LB's ratings is given below.

KEY RATING DRIVERS

The outstanding subordinated debentures are rated one notch below LB's National Long-Term Rating to reflect their subordination to senior unsecured creditors.

LB's National Long-Term Rating reflects its established franchise among licensed finance companies, whose higher yielding exposures have supported sound profitability. The rating also captures its relatively higher risk appetite compared to peers as indicated by its exposure to gold-backed loans. Fitch views LB's capital as satisfactory while its revenue generation is sound.

RATING SENSITIVITIES

The rating on the outstanding debentures will move in tandem with LB's National Long-Term Ratings.

These ratings are primarily sensitive to changes in LB's capitalisation, risk appetite and liquidity position.

A full list of LB's ratings follows:

National Long-Term Rating: 'A-(lka)'; Outlook Stable

The following outstanding Basel II-compliant subordinated debentures are rated 'BBB+(lka)':

- LKR215.0m 12.68% unlisted subordinated debentures due 2016

- LKR100.0m 12.30% unlisted subordinated debentures due 2016

- LKR230.0m 12.30% unlisted subordinated debentures due 2017

- LKR640.1m 14.00% listed subordinated debentures due 2018

- LKR757.0m 14.50% listed subordinated debentures due 2018

- LKR602.9m 15.00% listed subordinated debentures due 2018