Sri Lanka 3 and 6 months Treasury bill yields up, 12 months flat: Central Bank

(LBO) – Sri Lanka’s Treasury bill yields were up at Tuesday’s auction with 3-months yield up 03 basis points to 6.11 percent and 6-month yields also were also up 03 basis points, to 6.21 percent, data from the state debt office showed.

It was decided to accept 12,175 million rupees from the auction of 03 month yields from received 17,750 million rupees worth bills.

Treasury bills of 20,000 million were issued through the auction held today.

6-month bills closed at 6.21 percent and it was decided to accept 6,055 million rupees.

12-month closed at 6.28 percent and 845 million rupees were accepted from the auction.

The auction was oversubscribed with bids amounting to 47,870 million rupees being received.

It was decided to accept 19,075 million rupees from the auction.

Sri Lanka inflation 0.1-pct in June 2015

COLOMBO (EconomyNext) - Sri Lanka's consumer prices rose 0.1 percent in the 12-months to June 2015, falling back to the rate in March and April, the central bank said.

Prices rose 1.0 percent during the month of June, the highest rate since January, it said in a statement.

Sri Lanka's consumer prices are now at their lowest since the 0.5 percent reported in January 2004 with the government having cut taxes on some consumer goods and dropped fuel prices earlier this year.

The annual inflation rate had edged up to 0.2 percent in May.

The 12-month moving average fell to a record low of 1.7 percent in June 2015 from the earlier low of 1.9 percent in May.

The monthly increase in Colombo Consumers’ Price Index was mainly caused by the increase in food prices, the central bank said.

“Prices of some varieties of vegetables, fresh fish, green chilies, red onions, limes, dhal, potatoes and sprats increased during June 2015,” it said.

“However, prices of many varieties of fruits, coconuts, coconut oil, big onions and green gram decreased during the month.”

Criminal probe for Sri Lanka Insurance Corporation, Litro Gas hotel deal

ECONOMYNEXT - A criminal probe will be initiated into alleged procurement fraud and mis-appropriation of hundreds of millions of rupees at a unit of state-run Sri Lanka Insurance Corporation group which is building a 27 billion rupee hotel in Colombo, officials said.

"They have not followed government procurement processes," Chairman Hemaka Amarasuriya told reporters in Colombo.

"In procurement activities they have totally dis-regarded processes. There is no corporate governance, no respect for rules and regulations. No audit committee. No risk committee."

SLIC had invested 8.5 billion rupees in Canwill Holdings (Pvt) Ltd, an investment vehicle which in turn controlled SinoLanka Hotels and Spa, a firm with land and building expropriated from the Ceylinco group, which is expected to house a Grand Hyatt hotel in 2017.

SLIC unit Litro Gas held another 23 percent in Canwill with a 5 billion rupee investment and the Employees Provident Fund another 23 percent with a 5.0 billion rupee equity investment.

A forensic audit has uncovered evidence of padded contracts, mis-appropriation of hundreds of millions of rupees without board approval and awarding deals without competitive tender involving a hotel project, where the SLIC group had invested, officials told reporters.

The group had also initiated another hotel project in Hambantota, where 300 million rupees had been.

Evidence uncovered so far will be handed over to the police criminal investigation department, Chairman Hemaka Amarasuriya said.

Amarasuriya said the new board had cancelled a series of contracts awarded without competitive tender.

About 100 million rupees had been reduced from existing contracts by negotiation and the new board was hoping to slash another 150 million rupees.

Contracts apparently awarded by personal negotiation appeared to be padded Amarasuriya said.

Former SLIC Chairman Gamini Senarath and Managing Director Piyadasa Kudabalage had spent money without board approval apparently by email communication, during the ousted Rajapaksa administration officials alleged.

Both Sri Lanka Insurance and Litro Gas were privatized entities which was taken back to the state providing opportunities for corruption.

SinoLanka Hotels had also bought three blocks of land bordering the hotel from private parties at prices higher than the government valuation. The government valuation had also been increased three times in succession.

In one case a land had been valued at 191 million rupees in January 09, 2013, 253 million rupees on October 27 and 260 million rupees on November 22 for which eventually 270 million rupees had been paid.

"How the prices went up is a mystery," Amarasuriya said.

Managing Director Piyadasa Kudabalage had drawn multiple salaries from SLIC and its subsidiaries totalling 3.4 million rupees, an official said.

Litro Gas Executive Chairman Shalila Moonasinghe said Kudabalage had drawn 1.19 million rupees a month for Sri Lanka Insurance, 1.3 million rupees from Litro Gas, 450,000 rupees from Litro Gas Terminals and 500,000 rupees from Canwill Holdings.

His son who had been employed at the group had been given a 10,000 rupee phone allowance, while senior engineers were given only 1,500 rupees, they were told.

Sri Lanka’s Access Engineering buys property firms for Rs523.6mn

COLOMBO (EconomyNext) – Access Engineering Ltd. said it has invested 523.6 million rupees to buy into two property companies developing land in a suburb of the Sri Lankan capital Colombo.

The construction firm invested 273.6 million for 100 percent control of Horizon Holdings Ventures (Pvt) Ltd., a company incorporated in June 2015, a stock exchange filing said.

Access Engineering also invested 250 million rupees for a 50 percent share in Horizon Holdings (Pvt.) Ltd., a firm incorporated in March 2014.

Both firms are in the business of developing their 12.5 acre property located in Malabe, a fast-growing suburb of Colombo.

“Whilst this investment has synergies with the core business, it will enable AEL to enter the promising property development sector adding a complimentary segment to its operations,” the statement said.

Sri Lanka shares end weaker; pre-poll uncertainty weighs on sentiment

Sri Lankan shares fell on Tuesday, hovering near 2-1/2 month lows, led by large caps such as Nestle Lanka Plc as political uncertainty before parliamentary elections weighed on sentiment.

President Maithripala Sirisena dissolved parliament on Friday and scheduled elections for Aug. 17, in an effort to consolidate power and push through political reforms.

The main stock index ended 0.16 percent, or 11.35 points, weaker at 7,020.80, hovering near its lowest close since April 15 hit on Friday.

The day's turnover was 651.5 million rupees ($4.87 million), well below this year's daily average of 1.07 billion rupees.

"Still the political situation is not clear. We expect the market to continue on sideways due to political uncertainty," said Reshan Wediwardana, a research analyst at First Capital Equities (Pvt) Ltd.

The market saw net foreign outflow of 82.1 million rupees on Tuesday, after suffering net outflows of 4.15 billion rupees over the past 25 sessions.

But foreign investors were net buyers of 1.79 billion rupees worth of shares so far this year.

Shares in Nestle Lanka fell 0.03 percent, while Ceylon Theatres Plc declined 2.84 percent. 

($1 = 133.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

Sri Lanka revives tea auction automation plan

COLOMBO (EconomyNext) – Sri Lanka’s tea trade has revived the idea of automating the more-than-century-old Colombo tea auctions, a senior official said.

“It has been decided to revisit the prospect of the automation of the Colombo tea auction,” Anselm Perera, chairman of the Colombo Tea Traders Association (CTTA), said.

A committee of stakeholders has been set up to study the development of an integrated computer system for the automation of the pre- and post-auction procedures of the Colombo tea auction, he told the CTTA’s annual general meeting.

A Colombo University information technology consultant has been hired for the work.

The CTTA has been running the Colombo tea auction since 1894 although the first public sale of tea in the island took place in 1883 in the offices of a broking company.

The tea trade has previously considered automating the auctions and commissioned studies on the issues but the idea was abandoned almost 10 years ago.

Textured Jersey Lanka to buy Indian fabric maker for US$15mn

COLOMBO (EconomyNext) – Sri Lanka's Textured Jersey Lanka (TJL) said it will acquire an Indian knit fabric manufacturer, owned by one of its main shareholders, Brandix Lanka, for 15 million US dollars.

TJL will pay half the price in cash and the balance through a share swap by issuing new Textured Jersey Lanka shares valued at 28.50 rupees each.

Textured Jersey Lanka, whose shares were last traded at 28.60 rupees on the Colombo bourse Monday, said the acquisition was part of its regional expansion and capacity enhancement strategy.

The company will buy all 36.6 million shares of Ocean Mauritius Ltd., the parent firm of Ocean India, which operates a knit fabric manufacturing plant in Visakhapatnam, India.

In May this year, TJL said it will acquire Quenby Lanka Prints (Pvt) Ltd, a fabric printer, for 3.5 million US dollars.

“The acquisition of Quenby Lanka and Ocean India should potentially launch TJL to the next level of solution provision and innovation while also catering to growing customer demand,” TJL said in a stock exchange filing.

It said the acquisitions should make TJL, whose major shareholders are Pacific Textured Jersey Holdings and Sri Lankan apparel exporter Brandix, one of the leading textile players in the South Asian region.

“These acquisition also offer prospects of margin improvements through business and production synergies,” TJL said.

Ocean India is a joint venture between Brandix Lanka and Leading Investment Holdings, in which the Brandix is the largest shareholder with management control, the three other partners being Jacob BAC (a subsidiary of Brandot), Compagnie Mauricienne de Textile Ltd (Mauritius) and Pioneer Elastic Holdings Ltd. (Hong Kong).

TJL is to issue 35,197, 368 shares by way of a share swap to the selling shareholders in return for the transfer of 17.8 million shares – half of Ocean Mauritius – with a cash value of just over a billion rupees (7.5 million dollars).

Brandix Lanka, which now holds 29.81 percent of TJL, will be paid 11.28 million dollars, and raise its stake in TJL to 32.11 percent with the share swap.

TJL said it has been told by Pacific Textured Jersey Holdings and Brandix Lanka – major shareholders of TJL - that they are acting in concert and agreed to maintain a collective shareholding in TJL of not less than 51 percent for five years from 1 April 2015.

Pacific Textured Jersey Holdings, which now has 39.65 percent of TJL, plans to sell about 10 percent of its stake, the stock exchange filing said.

Sampath Bank goes to Myanmar

By Ishara Gamage

Ceylon Finance Today- Sampath Bank PLC., Sri Lanka's third – biggest privately owned lender by assets, is looking to invest and lend in Southeast Asia's developing economies like Myanmar, Managing Director/CEO Aravinda Perera revealed to the Ceylon FT yesterday.

"We wish to start our Myanmar operations with a representative office. Sampath is the first Sri Lankan bank applied for the Myanmar banking licence. We wish, we will get it soon," he said.

Myanmar is a virgin market. Firstly, we have to study the situation, he said.

Banks in Sri Lanka is highly competitive; our branch expansions with strategic locations contribute positively in increasing market share in credit and deposits, Aravinda Perera said.

The bank now operates 220 branches. So far this year we opened three new branches with another five to follow he said.

According to the Asian Development Bank (ADB), Myanmar could follow Asia's fast growing economies and expand at 7-8% a year, become a middle income nation and triple per capita income by 2030.

Commercial Bank has become the first Sri Lankan bank to be granted a licence by the Central Bank of Myanmar to operate a Representative Office in the Southeast Asian Republic which has more than 50 million people, which was exclusively reported in the Ceylon FT in its 1 June edition.

The Commercial Bank of Ceylon opened its representative office in Yangon on Monday, 8 June, formally launching its operations in Myanmar, initially to offer Advisory Services to Sri Lankan and Bangladeshi businesses wishing to enter that country, and to arrange Banking and Advisory facilities, funds transfer and encashment services.

"Due to Myanmar's restricted banking environment, we didn't expect much from it," the Commercial Bank official said.

Meanwhile, Hatton National Bank PLC (HNB)., second-biggest privately owned lender by assets, also is looking to invest and lend in Southeast Asia's developing economies, HNB, Chief Executive Officer Jonathan Alles recently said in Bloomberg interview.

"The region of Cambodia and Myanmar are presenting opportunities," for lending to small and medium enterprises and microfinance, he told Bloomberg news wire.

According to Bloomberg news wire, Hatton National may also look at 'placing debt or taking equity stakes in companies' in the Asia-Pacific region.
www.ceylontoday.lk

Sri Lanka Monetary Policy Review, June 2015 - Policy Rate - Unchanged

The Sri Lankan economy expanded by 6.4 per cent in the first quarter of 2015, with positive contributions from all three key sectors of the economy. The Services sector and the Industry sector grew by 7.5 per cent and 6.5 per cent, respectively, while the Agriculture sector displayed strong signs of recovery. Going forward, the prospects of improved performance in advanced economies along with low inflation and low market interest rates are expected to benefit domestic economic activity.

In the external sector, proceeds from the International Sovereign Bond, Sri Lanka Development Bonds, foreign currency swap arrangement with the Reserve Bank of India and regular inflows in the form of earnings from the export of goods and services, including tourism as well as workers’ remittances, improved the country’s foreign reserves. Meanwhile, cross currency movements, tax adjustments favouring the importation of lower engine capacity motor vehicles and eased monetary conditions resulted in increased imports in April 2015. However, the substantial reduction in global oil prices resulted in a significant decline in the expenditure on oil imports.

Broad money supply (M2b) recorded a year-on-year growth of 13.9 per cent in April 2015. The year-on-year growth of credit to the private sector in April 2015 was 15.2 per cent. In absolute terms, credit extended to the private sector has been increasing by around Rs. 25 billion on average per month up to April 2015 supporting continued expansion of economic activity. Meanwhile, the increase in net credit to the government and State Owned Enterprises (SOEs) by the banking sector also contributed to the monetary expansion.

Inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI) was 0.2 per cent in May 2015 and remained well below 1.0 per cent for four consecutive months. Annual average inflation declined further to 1.9 per cent in May 2015 from 2.1 per cent in the previous month. Meanwhile, core inflation on a year-on-year basis also remained low at 2.6 per cent in May 2015. Inflation is projected to remain comfortably below 4.0 per cent during the remainder of the year.

In this background, the Monetary Board was of the view that the current monetary policy stance is appropriate. Accordingly, the Monetary Board, at its meeting held on 26 June 2015, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 6.00 per cent and 7.50 per cent, respectively.

Banks under pressure with LCR, NSFR regulations

Indunil Hewage

The introduction of the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) under Basel III is likely to put pressure on bank capacity to take high risks and improve margins, Asia Securities,Senior Analyst, Srimal Liyanage said.

He made these remarks addressing a wealth insight series organized by Asia

Securities under the theme,“Banks;An evolving story of Elephants an Cheetahs, held in Colombo recently.

Under the LCR proposals, the banks need to hold high quality liquid assets to survive in emerging stress scenario whilst NSFR will limit the over reliance on wholesale and short term funding and ensures that investments activities are funded by stable liabilities.

“While there is insufficient data to calculate if the banks do meet the proposed ratios, our channel checks suggests that the banks are maintaining the ratios well above requirements. In order to maintain margins, banks will have to maintain the ratio limits well above the minimum standards which we think will result in additional capital being raised in the near future.

The banking sector represents for 14% in the total market capitalization of the Colombo bourse. Institutional funds will hold positions in the sector to maintain a positive alpha despite short term risks.” he added.

The banking sector must maintain its position in a sector which has a high weightage in the market index and is also largely secured by regulations due to recent political uncertainty. In order to maintain margins, banks will have to maintain the ratio limits well above the minimum standards. This will result in additional capital being raised in the near future.

The banks should also raise additional capital to cater to the increasing banking activities with economic growth.
www.dailynews.lk

Arpico Finance posts Rs.269 m profit

Arpico Finance Company PLC (AFC) has posted a strong financial performance in the year ended March 31,2015, achieving commendable growth in several new product lines and customer segments.

The company achieved the highest ever profit in its operating history of 64 years, with a profit-after-tax of Rs 269.32 million, compared to Rs 88.34 million the previous year.

AFC’s interest income was relatively unchanged at of Rs 1.01 billion, primarily due to the low interest rate scenario whereas loan growth was robust at 35%, significantly higher than the industry average of 16%.

The company adopted a strategic and focused approach to growth leveraging on its branch network to pursue expansion in new products and market segments which also enabled diversification of its business lines.

Net interest income was Rs 488.06 million, reflecting a growth of 11% compared to the previous year.

Notwithstanding the robust growth in its loan books, the Company maintained a relatively healthy loan portfolio, with its gross non-performing-loans ratio improving to 6.86% by end-March 2015.

The company’s deposit base grew by 42% during the year, reaching a record high of Rs 4.13 billion, an attestation to the stability and security offered to our depositors throughout our track record of over 6 decades.
www.dailynews.lk

Sri Lanka sells Rs 32.3bn of 4, 6 and 8 year bonds

(LBO) The issue of treasury bonds amounting to 30 billion rupees have been oversubscribed with Rs 79.15 b of bids received from investors.

The Central Bank has accepted Rs 3.7 b of four year bonds maturing on June 1,2020 at a weighted average yield rate of 8.16.

The bond auction held on Monday accepted Rs 13.3 billion of six year bonds maturing on January1,2022 at a rate of 8.67.