Sri Lankan shares end at over 8-month low ahead of Fed decision

Reuters: The Sri Lankan share index fell to its lowest close in more than eight months on Monday led by blue chips and large-cap stocks as investors turned cautious ahead of an interest rate decision by the U.S. Federal Reserve and holidays next week.

The main stock index ended 0.43 percent weaker at 6,803.08, its lowest close since March 30.

"Market is down on lacklustre trade. Foreigners are exiting while the market is in the red zone while retail market is also dull," said Yohan Samarakkody, head of research at SC Securities (Pvt) Ltd.

Foreign investors sold a net 184.6 million rupees worth of shares on Monday, extending the year-to-date net foreign outflow to 3.94 billion rupees worth of equities.

Turnover stood at 557 million rupees ($3.88 million), around half of this year's daily average of 1.1 billion rupees.

Volatility swept through world markets on Monday with China's yuan hitting a fresh multi-year year low and oil's continued travails adding to nervousness before an expected hike in U.S. interest rates later this week.

Analysts say many investors and brokers will be on year-end holidays from next week due to Christmas.

Conglomerate John Keells Holdings Plc was down 1.08 percent, while Bukit Darah Plc fell 4.71 percent and Sri Lanka Telecom Plc eased 1.08 percent. 

($1 = 143.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Sri Lanka tea prices perk up

ECONOMYNEXT - Sri Lankan tea prices perked up at the weekly Colombo auctions possibly in response to urgent orders for the winter, brokers said.

Prices of high grown teas rose sharply and low growns also did better at last week’s sale.

High grown teas from regional plantations companies had “excellent demand,” Forbes & Walker Tea Brokers said.

Teas from the western slopes of the central hills rose 20 rupees a kilo and some types as much as 40 rupees.

High priced teas from Uva region also rose by similar margins for some types.

“An encouraging sale for high and medium grown small leaf teas and perhaps a reaction to urgent shipping requirements,” the brokers said.

Low grown teas, which make up the bulk of the crop, met with “fair demand”, brokers Asia Siyaka Commodities said.

Sri Lanka insurers stable despite rule changes, more transparency: Fitch

ECONOMYNEXT – Sri Lanka’s insurance sector is expected by Fitch Ratings to stay stable despite uncertainty created by regulatory separation of life and non-life businesses while intense competition in the motor segment might make it unprofitable for some firms.

“ . . . most insurers will maintain stable financial fundamentals in 2016, supported by moderate sector growth,” Fitch said in a new report.

Fitch views the many regulatory changes as positive for the industry as they will promote efficient capital allocation, corporate governance, and better risk management.

Minimum regulatory capital has been increased to 500 million rupees from 100 million rupees, risk-based capital (RBC) will replace the current rules-based solvency regime by 2016, and insurance companies - with few exceptions - are required to list by 2016.

“Intense pricing competition in the motor segment is likely to hold the combined ratios in non-life above 100 percent,” Fitch Ratings said.

This would “put pressure on the financial performance of the more aggressive companies, while challenging the market share of others,” it said.

A combined ratio above 100 percent means an insurer is paying out more money in claims that it gets from premiums, although it can still make a profit, because the ratio does not include investment income.

Fitch said it expects economic growth and the still low insurance penetration in the market to support the growth of total gross written premiums (GWP).

“Fitch does not expect significant improvement in life penetration in the short term, due to the low disposable income of the population, and life premiums growth is likely to be moderate,” the rating agency said.

Fitch also expects non-life insurance business growth to slow as higher vehicle taxes may reduce new car registrations in 2016.

Sri Lanka vehicle eco tax Rs1,500, revenue licenses up by 15-pct: Prime Minister

ECONOMYNEXT - Sri Lanka will charge an extra 1,500 rupee fee from vehicles for emission tests and annual revenue licenses will be upped by 15 percent, Prime Minister Ranil Wickremesinghe said as a trade unions and bus transporters threatened a general strike.

A budget for 2016, proposed a 5,000 rupee vehicle emission tax and 25 percent rise in the annual revenue licenses.

In Sri Lanka some taxes are raised by mid-nigh gazette as if by 'Royal Prerogative' and parliament is only informed later. In any case the parliament passes taxes regardless using their majorities of whether it is arbitrary or against the principles of a free country.

Several alcohol firms are expected to be killed off by a hefty 200 million rupees.

A 'valuation fee' for vehicles that are leased would be 5,000 rupees and 3,000 rupees for three and two-wheelers, the Prime Minister said.

Sri Lanka's rulers have to collect more money from the people to finance a steep increase is state worker salaries and pensions promised during elections.

The inability to finance the new expenditure of a revised budget is now threatening to derail the economy.

Up to November the Central Bank has printed money to finance the spending and manipulate interest rates generating an unsustainable import demand and sent the rupee sliding from 131 to 143 to the US dollar.

Up to July 2015, 61.3 cents out of every tax rupee collected from the people went to pay the salaries and pensions of state workers.

An attempt by Finance Minister Ravi Karunanayake to end tax free cars to the elected ruling class and state workers was also reversed after legislators and a doctors' union protested.

Sri Lank's Janatha Vimukthi Peramuna is among key sections of the ruling class that promotes a bloated state and burdens private sector workers and the self-employed in productive sectors.

Port City to create regional business hub

The recently released Supplementary Environmental Impact Report (SEIA) for the Colombo Port City (CPC) project says the main objective of the CPC is to create a regional business hub - a distinctly branded city, with high quality public spaces and infrastructure facilities, which would attract local and international developers and investors.

The ultimate goal is to establish the city as a centre for finance, tourism, shopping and entertainment, attracting new investments and new buyers of real estate and tourists who will spend more money and entrepreneurs who will invest in new businesses in Sri Lanka.

The SEIA says that the structural changes of the economy over the past ten years indicate the dominance of service sector economic activities, particularly in the areas of tourism, ICT, ports and shipping, retail, transport and financial services. The report states that the CPC has the capacity to contribute towards service sector oriented growth and development by attracting high profile FDI’s and generating a wide range of direct and indirect benefits to the national economy.



The project, which is to be implemented over a 25-year period,does not involve replacing any economic activities in the area of its location or its immediate neighbourhood. Thus, the benefit generated by the entire reclaimed land becomes an additional asset to Sri Lanka as a result of a Foreign Direct Investment (FDI).

According to an integrated master plan which is to be developed, the development of the CPC will create a significant amount of additional oceanfront land thus providing opportunities for expansion of Colombo’s Central Business District (CBD).

Further, through planned development, the government of Sri Lankan will be able to envision part of its objectives outlined in the Regional Structure Planof2004 (theCESMA Plan), without the burden of spending state resources.



Additionally, the oceanfront land within CBDs emerging business cities would encourage finance, commerce and residential living within close proximity to each other. The CPC project therefore creates new land that will generate economic returns to the government, the investor, the city and the country as a whole.

The positive impacts of the project include employment creation, enhanced foreign investment, positive revenue generation to the government, transfer of technology and value added contribution to the national economy. Once the physical, socio economic and environmental impacts of the CPC are identified and quantified, the next step of analysis is to monetize these impacts with economic prices.

The report further states that the proposed CPC has the capacity to significantly contribute to the economic well being of the Colombo city and the Colombo Metropolitan Region (CMR). The long term employment figures include jobs generated at the CPC and multinational firms, jobs supporting local purchases made by local and foreign employees within CPC and firms that provide services to the CPC companies including office supplies and equipment, utilities, communications and professional services.

The CPC project has the potential to generate a wide range of indirect socio economic benefits such as high profile FDI which will thereby create direct employment mainly for professional and technical occupations in areas such as Information Communication Technology (ICT), banking, fund management, investment banking, real estate, and retail and tourism sub sectors.

The employees of these occupational groups are expected to be well paid and have the capacity to create indirect employment in the national economy due to high disposable income. Additionally, the project has the capacity to attract high profile FDI particularly for high value added service sector investments and headquarters of export manufacturing establishments. The immediate impact of such investments would be an increase in GDP and also an increase in foreign exchange earnings.

In addition to job creation, other long term outcomes include fostering modern management practices in various fields that will upgrade the living standards of Colombo. Through the utilization of world class residential spaces, the project will also extend socio economic benefits.

Additional economic benefits include an increase in higher paying jobs related to international trade and the movement of greater amounts of imports and exports through the Colombo Port.
(SEIA report)

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Vehicle prices to stabilize with taxes remaining

The 2016 budget proposal to increase taxes on motor vehicles will entice more second hand vehicles to be imported to Sri Lanka,Vehicle Importer's Association Chairman Indika Sampath Merenchige said.

Speaking to Daily News Business he said that this is because it will be around 30% less than that of a brand new vehicle. "Yes it will be a saving for the country on the long run,"

The association members met Finance Minister Ravi Karunanayake and it was confirmed that the Finance Ministry will not re adjust the motor import tax structure until the next budget. "We requested the Minister to reconsider of lowering the taxes on vans and mini lorries as it will help the SME sector but he opposed it."

The Minister had maintained that two months before the budget he had said that vehicle taxes were going to be increased and the industry should have known to gear themselves up for it. "This will also result in car sale owners clearing their around 250 vehicles from the port under the new tax structure soon as the Minister rejected an appeal by us to offer them the pre budget tax rate."

"We now know that there won't be any changes in import taxes and now will set up guidelines to the industry. What we wanted was a clear word from him and now we have got it."

He said that currently there are around 7,000 new and reconditioned vehicles in the market and he assured that they could be purchased at around 10% more than the pre budget price. "However I must say that popular models such as Axio, Prius,GP5, Aqua will increase after about one month."

Asked to comment on the second hand market he said that the current high prices will stabilize in two months. "Both the second hand seller and buyer are adopting a wait and see policy and as there is not going to be a change of policy, the prices will stabilize," he said.
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Lankaputhra Development Bank profits jump by 70%

Lankaputhra Development Bank (LDB), which recorded a profit after tax of Rs.104 million in 2014, has been able to increase this figure to Rs.178 million by November 30.

“This figure is expected to go beyond Rs.200 million by the end of the year,” LDB Chairman Lasantha Goonewardena said.

Although all 8 LDB branches suffered losses during 2014, during this year, five branches have managed to record profits so far while the remaining branches are heading towards a profitable outcome by the end of the year. With Wennappuwa, Polonnaruwa, Batticaloa, Hambantota and Trincomalee branches registering profits, the managers and other officials of these branches were given special acknowledgments by the Chairman while a special programme will be set in motion in order to encourage them to continue such achievements.

He added that the Bank needs the fullest support and cooperation of the staff of the remaining branches in order to maximise their profits and end the year on a positive note.

LDB is currently making arrangements to open service centers at Tambuttegama and Akuressa before the end of the year.

“In order to face the year 2016 with optimism and energy, plans have been drawn up for the employees to undergo an attitudinal transformation and there will be greater emphasis placed on staff training in 2016,”the Chairman said.
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