Sri Lankan shares hit over 1-wk closing high; cbank keeps policy rates steady

Jan 27 (Reuters) - Sri Lankan shares hit a more than one-week closing high on Tuesday after the central bank kept key policy rates steady at record lows without any tightening measures amid foreign outflows, while investors waited for clarity from a supplementary budget later this week.

The main stock index ended higher 0.7 percent, or 51.57 points, at 7,367.65, its highest close since Jan. 20. It hit a one-month closing low on Friday.

Foreign investors sold a net 86.5 million rupees ($655,800) worth of shares on Tuesday, extending the net foreign outflow so far this month to 865.9 million rupees. They bought a net 22.07 billion rupees worth of stocks last year.

The central bank kept key policy rates steady on Tuesday, saying inflation is expected to ease further.

"Market is a little better with the policy rates announcement. People see some kind of direction," said a stockbroker asking not to be named.

Some analysts said investors are still waiting for clarity on the government's policies.

Turnover was 1.13 billion rupees, the highest since Jan. 22 but less than last year's daily average of 1.42 billion rupees, exchange data showed.

Finance Minister Ravi Karunanayake will present a supplementary budget on Thursday, aiming to fulfil election pledges by President Maithripala Sirisena, including pay hikes for the state sector and price reductions on essential goods.

Shares of top conglomerate John Keells Holdings Plc rose 2.98 percent, while Nestle Lanka Plc gained 1.98 percent. 

($1 = 131.9000 Sri Lankan rupees) 

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

Tough regulator will ensure better governance: stockbroker

A local stockbroking firm with a foreign partner said in a report that the appointment of Thilak Karunaratne as the new Chairman of the Securities and Exchange Commission (SEC) will be beneficial for the country’s capital market in the longer run.Stock brokerage Bartleet Religare Securities (Pvt.) Ltd (BRS), a joint venture between Sri Lanka’s Bartleet group and India’s Religare Capital, said the return of Karunaratne, who is generally perceived a tough regulator, is likely to ensure better governance and transparency at the Colombo Stock Exchange (CSE). 

“The regulator SEC is getting the tough enforcer Thilak Karunaratne back in the saddle as the new head. We believe this will be a move towards better governance and transparency in the CSE,” BRS said.Karunaratne was first appointed as the SEC Chairman in December 2011, when the then Presidential Secretary’s spouse Indrani Sugathadasa resigned from the post to ‘uphold her principles’. 

However, he was asked to resign by former President Mahinda Rajapaksa, who was also the then Finance Minister, just nine months into his Chairmanship, for supposedly antagonizing some high-net-worth investors and influential stockbrokers.When Karunaratne resigned, 17 investigations into market malpractice were on-going. His successor Dr. Nalaka Godahewa later said all or most of those investigations had been concluded. 

The announcement of Karunaratne’s return sent shockwaves among some capital market stakeholders due to his reputation for tirelessly going after market malpractices, at times even at the risk of upsetting the market sentiment. 

However, BRS advised investors not to worry. “The market will take some teething pains in the short run, particularly with the retailers reacting to the changes, but over the long run we believe the CSE will be a more level playing field for investors,” it said.In an earlier interview with Mirror Business, Karunaratne said his first priority would be to stabilize the market but that he would reinvestigate those cases following careful examination of what transpired in the market during his absence. Karunaratne is expected to assume duties at the SEC in a couple of days. 

www.dailymirror.lk

Monetary Policy Review – January 2015 - Policy interest rates unchanged

Press Release - CBSL

In December 2014, headline inflation on a year-on-year basis was at 2.1 per cent compared to 1.5 per cent in the previous month. Core inflation, which directly measures underlying price pressures, continued to remain between 3-4 per cent while decelerating to 3.2 per cent in December 2014 from 3.6 per cent in November. While low inflation is mainly attributable to contained demand pressure in the economy, it was also supported by favourable supply side developments, particularly the downward revisions in domestic energy prices in the last few months of 2014. Subdued demand pressure and inflation expectations in the economy, the favourable impact of further reductions in fuel prices in January 2015, and the expected reduction of administered prices of other key commodities announced in the Government’s ‘100-Day Programme’ are expected to reduce inflation further in the months ahead.

Supported by historically low market interest rates in nominal terms, credit obtained by the private sector from commercial banks continued to expand at a healthy pace. Credit flows to the private sector increased by 6.5 per cent on a year-on-year basis in November 2014, while in absolute terms, the increase was Rs. 57.8 billion during the month, bringing the cumulative credit flows to the private sector to Rs. 147.4 billion during January November 2014. Credit granted against immovable property, plant and machinery, personal Economic Research Department guarantees and promissory notes, and other securities as well as unsecured loans increased substantially in November 2014. It is expected that the increasing trend in private sector credit disbursements can be sustained throughout 2015 providing the necessary impetus to the growth momentum of the economy.

Looking at the real sector, the Sri Lankan economy grew by 7.7 per cent during the third quarter of 2014 supported by strong performance in the Industry and the Services sectors. The Industry sector, which posted a growth of 12.4 per cent in the first half of 2014, maintained its growth momentum in the third quarter recording an expansion of 12.6 per cent. The performance in the Industry sector was supported by the significant growth observed in the construction, manufacturing and mining and quarrying sub sectors. In the meantime, the Services sector grew by 7.0 per cent while the Agriculture sector, which was hampered by weather related disruptions, contracted by 2.0 per cent. With appropriate macroeconomic policies to boost domestic and foreign investor confidence, the Sri Lankan economy is expected to record a robust performance in the period ahead.

Taking the above developments in the economy into consideration, the Monetary Board at its meeting held on 26 January 2015, was of the view that the current monetary policy stance is appropriate, and accordingly, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank of Sri Lanka unchanged at 6.50 per cent and 8.00 per cent, respectively. Access to the Standing Deposit Facility (SDF) will remain rationalised.

The date for the release of the next regular statement on monetary policy would be announced in due course.

Monetary Policy Decision: Policy interest rates unchanged.
Access to SDF remains rationalised.
Standing Deposit Facility Rate (SDFR) 6.50%
Standing Lending Facility Rate (SLFR) 8.00%
Statutory Reserve Ratio (SRR) 6.00%

Port City Project before Parliament in February

By Ravi Ladduwahetty

Ceylon Finance Today: Thefuture of the Chinese financed US$ 1.4 billion Colombo Port city project will be submitted to Parliament in February, subject to the feasibility, cost appraisals and other environmental considerations.

We are for investments; but we have to see how feasible they are and also the cost and the benefits and the social impact as well, Deputy Minister of Highways and Investment Promotion Eran Wickremaratne told Ceylon FT.

The project is still at the review stage and the implementation and the going ahead will depend on these criteria, he said.

Other official sources confirmed that despite the project going through the Board of Investment only, the present government would make the entire project go through with the technical advice of not only the Board of Investment, but also the Sri Lanka Ports Authority and the Coast Conservation Department.

However, the project, if it has to proceed, would have to be approved in Parliament on or before 17 February, which is exactly three months after the project was gazetted on 17 November, 2014, which was two months after the first phase of the project was jointly commissioned by former President Mahinda Rajapaksa and Chinese President Xi Jinping on 17 September, 2014

The Chinese-financed US$1.4 billion.... 'Colombo Port City' project is its largest foreign-funded investment in Sri Lanka.

The Port City will be built by a unit of State-controlled China Communications Construction Co. Ltd on 233 hectares (576 acres) of reclaimed land. The offices, hotels, apartments and shopping centres will draw as much as US$20 billion in investment over about 15 years, which was meant to provide competition to Singapore and Dubai which were perceived to be running out of capacity."

Sri Lanka will own rights to 125 hectares of the reclaimed land and 20 hectares will be held by China Communications, with the remaining 88 hectares leased to the company for 99 years.

Colombo's Port is the only one in South Asia that can accommodate 18-metre deep draft vessels, putting it in position to serve the Indian subcontinent, the Middle East and some African States.

Chinese Government lending to Sri Lanka has increased 50-fold over the past decade to US$490 million in 2012, compared with US$211 million combined from Western countries and lending agencies.

Unlike previous infrastructure projects undertaken by Chinese companies in Sri Lanka, the port city is financed by equity from China Communications or funds raised through it, with no commitment or guarantee from the Sri Lankan Government.
www.ceylontoday.lk