Sri Lankan stocks fall from near 7-wk closing high; earnings eyed

Sri Lankan stocks fell on Monday from their near seven-week closing high in the previous session as investors stayed on the sidelines ahead of financial results of blue chips like Commercial Bank of Ceylon Plc .

The main stock index ended lower 0.2 percent, or 14.10 points, at 7,147.86, snapping a seven-session rally. It had closed at its highest since June 1 on Friday as hopes of political stability after the Aug.17 parliamentary polls lifted sentiment.

Foreign investors sold a net 232.1 million rupees ($1.73 million) worth of equities on Monday, extending the year-to-date net foreign outflow to 994.98 million rupees.

"Most of the investors were on the sideline today. Investors are awaiting the earnings," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd.

Last Tuesday, Sri Lankan President Maithripala Sirisena criticised a comeback bid by Mahinda Rajapaksa, the rival he beat in elections last January, and his own allies for backing him to become prime minister.

Analysts see Sirisena's statement as a step towards strengthening his grip and one that is likely to help the ruling coalition win.

Turnover stood at 646.8 million rupees on Monday, the lowest since July 14 and well below this year's daily average of 1.06 billion rupees.

Shares in the nation's biggest listed lender, Commercial Bank of Ceylon, fell 0.83 percent, while Aitken Spence Hotel Holdings Plc dropped 4.15 percent. 

($1 = 133.8000 Sri Lankan rupees) 

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

Sri Lanka auto registrations up 95-pct in June amid cheap credit

CREDIT CARS: The share of credit financed car purchases had risen from 46-pct in January 2014 to 68 percent in June 2015.

ECONOMYNEXT - Sri Lanka's vehicle registrations rose 95 percent to 95,624 in June 2015 from a year earlier, driven by state interventions including low interest rates and tax cuts, an analysis by an equities research house shows.

Car registrations hit an all-time high of 7,641 units up 238 percent from a year earlier, JB Securities, a Colombo-based brokerage said in a research unit.

Car imports started to pick up in the last quarter of 2014 as credit recovered. After January, sales of small cars rose further following a tax cut in January.

Brand new car registrations rose to an all-time record of 4,358 units in June, up 540 percent from a year earlier. Indian-made Maruti cars were 3,470 units, with the Alto model, Sri Lanka's best-selling car, making up 2,344 units.

The Chinese-made Geely Panda, badged Micro Panda in Sri Lanka also saw sales of 545 units up from 394 units a year earlier.

Around 70 percent of small cars were financed by credit, JB Securities said.

Car registrations are also driven by lower taxes in hybrids compared to even small conventional cars in another state intervention, despite a January rise in taxes of hybrid cars.

Hybrid registrations rose to 3,377 units in June up from 2,756 a month earlier and up from 1,491 a year earlier, before credit recovered in 2014. Financing was 68.1 percent.

In this 2015 there has also been a surge in motorcycle registrations following privileges given by the elected ruling class to tax-spending state workers discriminating against ordinary citizens during the run-up to presidential polls.

Motor cycle registrations rose 81 percent to 30,222 units in June from a year earlier. Three wheeler registrations also rose 81 percent to 11,349 units. JB Securities says three-wheelers are now increasingly used as a personal transport vehicle, rather than only as a taxi.

However all vehicles imports are now driven by cheap credit, with interest rates artificially held down by liquidity injections by the Central Bank, despite a rise in state credit mostly taken to finance a sharp rise in state worker salaries which has pushed up consumption in the economy.

Though all state interventions can have multiple perverse, unintended consequence, manipulating interest rates down through a central bank is the most dangerous of all interventions.

Though the rise in vehicle imports, especially motor cycles shows a welcome improvement in living standards of ordinary people, especially in rural areas and women in particular who are using scooters, in some urban areas congestion has cropped up.

In Sri Lanka due to lack of reasonable quality and fast urban transport system, people tend to use personal transport to commute to work. People are packed by sardines in small busses, while all policymakers travel around in cars telling why everyone else should use public transport.

The last administration built roads, improving infrastructure as other administrations in more advanced countries did during the last century.

Building roads and paving way for people to achieve their requirements as best decided by them is an important way rulers can respond to the decisions of the people, as has happened in freer countries.

The last administration also planned for a light rail system, a high quality and fast system of transport which makes people abandon cars without any coercion or violence of the state being used against them.

Some freedom advocates say Sri Lanka's rulers, backed by interventionist policymakers, had used their coercive powers to prevent urbanization, in the past second guessing the economic decisions of individuals in the past and held back the people in a pastoral society for decades.

Fitch downgrades Siyapatha Finance to ‘A-(lka)’

Fitch Ratings Lanka has downgraded Siyapatha Finance PLC's (SLFL) National Long-Term Rating to ‘A-(lka)’ from 'A(lka)'. The Outlook is Stable. The agency has also downgraded the National Long-Term Ratings on SLFL's outstanding senior unsecured debentures to 'A-(lka)' from 'A(lka)' and outstanding subordinated debentures to 'BBB+(lka)' from 'A-(lka)'.

Key rating drivers, national ratings and senior debt.

The downgrade of SLFL's rating follows the downgrade of its parent, Sampath Bank PLC's National Long-Term Rating to 'A+(lka)' from 'AA-(lka)' on 8 July 2015. It reflects Sampath Bank's decreased ability to support SLFL. Fitch continues to believe that support for SLFL would be forthcoming from Sampath Bank, if needed.

SLFL is rated two notches below its parent, reflecting full ownership by Sampath Bank and the bank's influence on SLFL's strategic direction through representation on the finance company's board. Funding from its parent accounted for 15% of SLFL's total borrowings at end-March 2015. However, Fitch expects the share of deposits in SLFL's funding profile to increase after the regulator gave approval for it to be a Licensed Finance Company (LFC) in 2013, which allows SLFL to collect deposits.
www.island.lk

CBSL, Reserve Bank India sign currency swap deal

The Central Bank of Sri Lanka (CBSL) and the Reserve Bank of India signed a currency swap agreement in New Delhi on Friday enabling Sri Lanka to draw USD 1.1 billion.

This is in addition to the USD 400 mn made available to the Central Bank of Sri Lanka in April 2015 under the financing facility for South Asian Association for Regional Cooperation (SAARC) member country Central Banks.

This new facility will allow the Central Bank to further strengthen its position in the financial market and bring greater stability to the exchange rate. Extended swap facility is the direct result of the goodwill gesture extended by Narendra Modi, Prime Minister of India consequent to his visit to Sri Lanka on March 14, 2015.

This facility will further enhance the economic cooperation between the two institutions and strengthen the long standing relationship between two countries.
www.dailynews.lk

Fitch rates People’s Leasing’s senior debt AA-(lka)

Fitch Ratings has assigned People’s Leasing & Finance proposed senior unsecured debentures of up to Rs 6 billion an expected national long term rating of ‘AA-(lka)(EXP)’.

The final rating is contingent on the receipt of the final documents conforming to information already received, Fitch Ratings said. The issue is expected to have tenors of four and five years with fixed-rate coupon payments. PLC expects to use the proceeds for working capital purposes, to diversify its funding mix, and to reduce maturity mismatches.

The proposed debenture is rated in line with PLC’s National Long-Term Rating of ‘AA-(lka)’, given that the issue is expected to rank equally with the claims of company’s other senior unsecured creditors.

PLC’s IDRs and National Long-Term Rating reflects Fitch’s view that PLC’s parent, the state-owned and systemically important People’s Bank (AA+(lka)/Stable), has a high propensity but limited ability to provide extraordinary support to PLC if required.
www.dailynews.lk

Fitch rates BOC’s debentures ‘AA(lka)(EXP)’

Fitch Ratings Lanka has assigned Bank of Ceylon’s (BOC; AA+(lka)/Stable) proposed Basel II-compliant subordinated debentures of up to Rs 8b an expected National Long-Term Rating of ‘AA(lka)(EXP)’.

The proposed issuance, which will have tenors of five and eight years and carry fixed and floating coupons, will be listed on the Colombo Stock Exchange. BOC 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.The proposed subordinated debentures are rated one notch below BOC’s National Long-Term Rating, to reflect the subordination to senior unsecured creditors.

The issuer rating is driven by Fitch’s expectation of extraordinary support from the government of Sri Lanka (BB-/Stable).

This stems from BOC’s high systemic importance, quasi-sovereign status, role as a key lender to government, and full state ownership. The Stable Outlook on BOC reflects the Stable Outlook on the sovereign’s rating.

The rating on the proposed debentures will move in tandem with BOC’s National Long-Term Ratings.
www.dailynews.lk