Sri Lankan shares rise for fourth session; policy awaited

Reuters: Sri Lankan shares rose for a fourth straight session and closed at their highest in nearly two weeks on Friday, but investors were cautious ahead of a key policy statement by the government.

The main stock index ended 0.18 percent, or 12.64 points, firmer at 7,081.49, its highest close since Oct. 12.

Turnover was 1.08 billion rupees ($7.66 million), in line with this year's daily average of 1.1 billion rupees.

"Most of the investors were on a wait-and-see mood," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd, adding that the market advanced on "some speculative buying" on illiquid shares.

"Investors are waiting for the policy statement and the budget."

Foreign investors, who have been net sellers of 2.92 billion rupees worth of equities so far this year, bought a net 4.25 million rupees worth shares on Friday.

Prime Minister Ranil Wickremesinghe is expected announce the economic policy in the first week of November, outlining the government's economic priorities ahead of the 2016 budget scheduled on Nov. 20, Finance Minister Ravi Karunanayake has said.

Analysts said a government move to implement a budget proposal of a retrospective tax targeting corporate has dented sentiment.

Shares of John Keells Holdings rose 0.29 percent, while Asian Hotels and Properties Plc increased 4.67 percent. 

($1 = 141.0000 Sri Lankan rupees) 

(Reporting by Ranga Sirilaland Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka Treasury guarantees water agency loan from Bank of Ceylon

ECONOMYNEXT – Sri Lanka’s Treasury is to guarantee a 3.7 billion rupee loan from state-run Bank of Ceylon to the Water Board to pay for a water supply project in towns east of Colombo.

The contract for the project, scheduled to be completed in 2017, has been awarded to Maga Engineering Ltd., according to the Ministry of National Policies and Economic Affairs.

The Cabinet of Ministers approved a proposal from the National Water Supply and Drainage Board to get a loan from the Bank of Ceylon amounting to 3.7 billion rupees, plus provisional sum of 793 million rupees and 10 percent contingency of 366 million rupees.

The ministry said the Cabinet approved the loan request and Treasury guarantee.

Interest on the loan is equal to Sri Lanka’s 6-month average weighted prime lending rate to be reviewed twice yearly plus a 2.25 percent margin a year.

Interest is to be serviced half-yearly and the loan has a repayment period of 14 and a half years including a grace period of two and a half years.

The National Water Supply and Drainage Board is expected to service and repay the loan using its own self-generated funds, the ministry said.

Sri Lanka to get US$200mn from ADB for rural roads

ECONOMYNEXT – Sri Lanka is to get two more low-cost long term loans amounting to 200 million US dollars from the Asian Development Bank (ADB) for the third phase of a rural road modernisation program.

It aims to improve road connectivity within selected rural centres by rehabilitating national, provincial, local authority and feeder roads, government spokesman Health Minister Rajitha Senaratne.

The total program covers 3,108 km of rural roads and 248 km of national roads at an estimated cost of 906 million dollars of which 800 million dollars is borne by the ADB and the rest by the government of Sri Lanka, he told a news conference.

The ADB will lend 175 million dollars from its Ordinary Capital Resources at an annual interest rate of 0.6 percent on top of the London Inter-bank Offered Rate (LIBOR), less a credit of 0.1 percent and a commitment charge of 0.15 percent a year on the undisbursed balance.

The interest on the loan, repayable over 26 years, with a five-year grace period, includes a maturity premium of 0.1 percent a year, according to the Ministry off National Policies and Economic Affairs.

The ADB will also lend 25 million dollars from the Asian Development Fund in Special Drawing Rights, repayable over 25 years with a five-year grace, at two percent annual interest throughout the tenor and equal amortisation.

The project covers the Southern and Sabaragamu provinces, Kalutara District, and the Central, North Central and North Western Provinces.

Uber ride-sharing comes to Sri Lanka

ECONOMYNEXT - Uber, a ride-sharing company that allows car owners and drivers to take passengers for a fee has been launched in Sri Lanka.

"At Uber, every city that we launch outperforms its predecessor and we expect nothing less from Colombo," the company said in a statement.

"In fact, for months now, we know that demand for Uber has been rapidly growing as more and more people and visitors are opening up the Uber app and trying to request rides in cities across Sri Lanka."

Uber said with over a million credit cards and over 20 percent of the population on smart phones, its services are expected to grow rapidly in Sri Lanka.

"We bring our global technology, expertise and best practices in the on-demand mobility space, coupled with the hyperlocal knowledge of the local operations team in the city," the firm said.

"Uber brings a plethora of benefits to the cities it operates in and Colombo is no different."

Uber is a disruptive business process which can challenge established taxi companies and better utilize resources and capacity.

However some governments driven by vested interests had tried to stop people from adopting Uber, like they in earlier ages tried to stop supermarkets in favour of small shops, and mass producing factories against artisans.

Uber had also generated some public relations setbacks in Western nations.

Sri Lanka to start nation-wide consumer price index

ECONOMYNEXT - Sri Lanka will start a nation-wide price index with 2013 chosen as the base year, Cabinet spokesman Rajitha Senaratne said.

Prime Minister Ranil Wickremesinghe has proposed to the cabinet of ministers that the index be released from November.

Sri Lanka already has a consumer price index covering Colombo.

Sri Lanka had a country-wide index up to 2007, but it was suppressed when inflation reached 29 percent claiming that it was getting 'politicized' because the then opposition United National Party was criticizing the state for generating high inflation.

Sri Lanka then started changing base years and revising the basket frequently, techniques widely adopted from the second half of the 20th century by governments in the West to understate inflation.

Inflation rose sharply after World War II when many countries started to print money under the failed Bretton Woods system and state-connected statisticians tried to find ways to understate inflation.

By frequently revising the basket in times of rising inflation, cheaper substitutes that people use, when prices of some goods go up (when people move down to sprats and dried fish from larger sized fresh fish) helps under-state real inflation.

At the moment global commodity prices are falling due to a stronger US dollar coming from tighter monetary conditions in the US.

Sri Lanka's national price index will be compiled using prices collected from all nine provinces and will be released monthly, according to the Ministry off National Policies and Economic Affairs.

Ceylon Cold Stores Group 2Q revenue up 24% YoY

Ceylon Cold Stores Group second quarter which ended in September saw the revenue increasing by 24.0% Year of Year to Rs. 8.1 billion from Rs. 6.5 billion reported last year.

This is growth was primarily due to volume growth mainly from beverages followed by ice cream sales. During 1Q16, the revenue demonstrated a 16.% yoy increase to Rs 7.8bn. Therefore, from a qoq basis also CCS.N0000 demonstrated a 4.1% increase.

The management revealed this growth was purely on the back of a volume growth. The company has not increased any prices during the quarter. Therefore, the growing demand from increased inclination to consumption of beverages as well as ice cream due to increased spending power of the mass has resulted in a revenue growth yoy.

Further, as per the company the volume push for chilled beverages and ice creams during the reported quarter enabled the company to register increased revenue levels even with a cold weather climate reported with rains setting in during the month of September.

Further, a slight favouration was experienced during the quarter with the main competitor Coca-Cola beverages was under scrutiny by the regulators due to a oil spill to the Kelani river which resulted in a temporary production halt.

Cost of sales also increased by approximately by 19.% yoy to Rs 6.8b from Rs 5.7b reported an year ago. This was primarily due to an expansion in the volumes produced and sold.

Gross Profit expanded by approximately by 59.9% yoy to Rs 1.35b from Rs 851.8mn. Further, the current quarter the Gross profit margin expanded from 13.0% reported an year earlier to 16.7% in 2Q16. Further, this was an increase qoq basis as well as the 1Q16 Gross profit margin was 15.2%. Therefore, the increase in volumes which resulted in economies of scale has enabled the company to report improved gross profit despite along with stable price levels of many production inputs.
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Exports earnings dip 19.5% to US$ 799 mn in August

Sri Lanka's external sector reflected a modest performance in August 2015 (year-on-year basis) with a slightly lower trade deficit and robust growth in tourist earnings,the Central Bank said yesterday.

Despite the slowdown in imports during the first eight months of 2015, the cumulative trade deficit as at end August 2015 had increased by 5.0 per cent, as a result of mediocre export performance on account of dampened global demand. However, the current account balance was buoyed by the growth in earnings from tourism.

As observed across emerging markets, net inflows to the financial account moderated as a result of the unwinding of short term foreign investments, in the wake of a possible increase in interest rates in USA.

The decision of the Central Bank to accommodate greater flexibility in the determination of the exchange rate from early September 2015 will help the external sector to gather momentum gradually.

This policy change is expected to strengthen the external sector mainly through the improvement in the trade account and financial account leading to the strengthening of the country's gross official reserves position.

The total earnings from exports amounted to US$ 799 million in August 2015. This reflected a decline of 19.5 per cent, year-on-year, showing decreases in all major export categories.

The lower earnings from tea, textiles and garments, transport equipment and rubber products mainly contributed to the overall decline in exports earnings during the month. Earning from tea exports in August 2015 declined by 33.9 per cent to US dollars 92 million due to the combined effect of lower export volumes and prices. Tea export earnings from Russia and the Middle East declined, year-on-year, by 38.6 per cent and 38.3 per cent, respectively, during the month owing to the substantial decline in oil revenue of those countries. Gems, diamonds and jewellery, machinery and mechanical appliances, food beverages and tobacco are the other export categories that largely contributed to the overall decline in export earnings during the month.

However, spices and unmanufactured tobacco, categorised under agricultural exports, and printing industry products, categorised under industrial products recorded a growth during the month.
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