Sri Lanka's February tourist arrivals up 16.7 pct yr/yr

According to SLTDA figures, Sri Lanka's tourist arrivals rose 16.7 percent in February compared to the same period in 2014 with the arrival of 165,541 tourists compared to the 141,878 arrived in February 2014.

Most of the tourist arrivals were from East Asia. For the month of February 68,105 tourists arrived in the island, 33.8% more than in February 2014.

Tourist arrivals from Eastern Europe declined in February by 20.9 percent.

Sri Lanka's Guardian Acuity Asset Management launches low risk gilt fund

Mar 04, 2015 (LBO) – Sri Lanka’s guardian Acuity Asset Management, a fund management firm launched a mutual fund invested in risk free government securities which will provide investors to enter and exit easily as a bank deposit, officials said.

"It is purely invested in government securities and is therefore meant for investors who have the lowest risk profile," Ruvini Fernando, Chief Executive of Guardian Fund Management said.

“Investors can come into this fund and exit any time they want. There won’t be ant entry or exit fees.”

The newly launched “Money Market Gilt Fund” will be invested in government securities with maturities below 12 months and gilt-edged reverse repurchase deals. Fund Manager Sumith Perera said the fund which will be valued daily, targeted to attract senior citizens, professionals and corporates.

The Guardian Acuity Asset Management says the fund size would be 500 million rupees and its expense ratio stands at 0.49 percent including trustee and management fees.

Official says the fund will pay higher returns than savings deposits, which closely tracks Treasury bills. Due to the short term nature of the investments it can also follow market interest rates.

“We do not think bank deposits are way to go forward but a unit trust (a pool of funds) will give more avenues to for people to invest,” Fernando said.

Investors could downloand forms online from GuardianAcuity.com and also used Hatton National Bank branches to enter and exit the fund, officials said.

The returns from the mutual funds are also tax free.

The Guardian Acuity Asset Management, is a joint venture with Guardian Fund Management which is part of the Sri Lanka's Carsons Cumberbatch group and Acuity Partners, an investment banking owned DFCC and Hatton National Bank.

Sri Lanka Softlogic Capital's stated capital reduced

Mar 06, 2015 (LBO) - Sri Lanka's Softlogic Capital on Friday obtained the shareholder approval to reduce its stated capital, a statement said.

The decision has been made at an extraordinary general meeting which eventually intends to reduce the accumulated losses of the company.

According to a previous statement issued by the company, the amount of reduction of the stated capital is 618.46 million rupees and the new stated capital is 2.88 billion rupees.

"The number of ordinary shares in issue would remain unchanged." the company said in a stock exchange filing released in January.

Govt. justifies Treasury bond issuance

* Reveals Rs. 15 b additional funding required on an urgent basis to fund the recommencement of highways and road construction projects

* Previous regime hadn’t settled Rs. 44 b outstanding for land acquisition

* Says change in policy and procedures relating to setting of interest rates was in good faith and will result in several benefits to Govt. and economy

* Statement silent on allegations of a primary dealer unfairly profiteering

The Ministry of Policy Planning and Economic Affairs yesterday issued a statement on the Government’s Treasury bond issue in March which spiked rates in debt market causing widespread concern as well as led to allegations of a primary dealer unfairly profiteering.

The statement however was silent on the allegations but explained the background why interest rates rose.The Government also pointed a finger at the President Mahinda Rajapaksa regime for several irregularities of the past.

Here is the full text of the statement:
At a meeting held on 26 February 2015 to ascertain the Government expenditure projections attended by the Minister of Finance, Minister of Highways, Investment Promotion and Higher Education, Secretary to the Treasury and the Governor of the Central Bank of Sri Lanka, it was decided that the Government needs additional funding of approx. Rs. 15 billion on an urgent basis to fund the recommencement of highways and road construction projects.

The previous regime had not settled money owing to contractors and had not paid for lands acquired for road projects. The outstanding amount to be paid for land acquisition alone is Rs. 44 billion.

To complete the balance road construction work the Government needed Rs. 12 billion as counterpart funds. Most of the loan agreements for these projects have already been signed. Although the Government will be renegotiating prices, it will continue with these projects. The Government’s immediate needs for cash to make payments for the bills in hand and to complete incomplete projects were to be met through the Treasury bond issues in March 2015.

The latest bond issue was opened on 27February 2015. The amount offered was Rs. 1 billion. Thirty-six offers were received amounting to Rs. 20 billion in bids. This enabled the Governor of the Central Bank of Sri Lanka to accept Rs. 10 billion in accordance with the above decision.

Around September 2014, when it became clear that the previous Government would hold presidential elections in early 2015, the then management of the Central Bank of Sri Lanka decided to reduce interest rates and yields on Sri Lanka Government bonds.

As a consequence, the yield on the 10-year Sri Lanka Government bond declined from 9.23% in July 2014 to 7.88% in January 2015.Similarly, the yield on the Sri Lanka Government 30-year bond fell from 11.75% in May 2014 to 11.73% in February, 2015.

The foreign exchange reserves of Sri Lanka have been falling sequentially since interest rates were lowered in September 2014.From a level of $ 9.2 billion from June 2014 they have come down to $ 7 billion in February, 2015.As a result, the exchange rate of the Sri Lanka Rupee which has been under pressure depreciated by 1.2% in January 2015.

The acceptance of Rs. 10 billion worth of bonds has also resulted in raising the interest rate on the 30-year bond to 11.5% which is where it stood in June 2014 before interest rates were reduced. Furthermore, the Central Bank of Sri Lanka has also scrapped the three-day rule restriction that allowed banks to park their funds in the Central Bank at the 6.5% base rate on three days a month and get 5% in all other days, a practice implemented in September 2014.

The Government also decided that as far as possible all bonds should be through public auction. Private placement at pre-agreed rates only helped favoured investors.

It’s a well-known fact that during the last decade the intersection of finance and business was controlled by a few people with nexus to the Rajapaksa regime. They had access to vital information on transactions, which they used to earn undue profits. There were prearranged transactions with state owned institutions instead of public auctions open to stock brokers and large investors.

Many stakeholders were adversely affected due to manipulations in the stock market. Two chairpersons of the SEC lost their jobs trying to enforce the existing regulations. The Government is inquiring into these prior malpractices and will also investigate the alleged malpractices which are taking place at the Public Debt Department during bond auctions and private placements.

Finally, the above change in policy and procedures relating to setting of interest rates was done in good faith and will result in several benefits to the Government and economy of Sri Lanka such as;

(a) the maintenance of a stable currency

(b) the maintenance of a clear and stable monetary policy conforming to international standards

(c) creating a liquid yield curve to enable the market to price risk.

(d) the transparent conduct in the sale of Government securities to the markets without pandering to vested interests

(e) the adoption of an appropriate monetary policy stance keeping with the current state of the finances of the Government of Sri Lanka; and

(f) ensuring sufficient funding for the Government in the next six months which will ensure no interruption to the implementation of policies announced in the Budget and the 100-day program.
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