Sri Lankan shares up led by blue-chips; turnover subdued

Reuters: Sri Lankan shares ended firmer for a fourth straight session on Friday at a more-than-two-week high led by blue chips, despite some selling by foreign investors.

The turnover was subdued as many investors and stockbrokers were on holidays ahead of Christmas next week.

The main stock index ended up 0.36 percent at 6,884.69, the highest close since Dec. 1.

Foreign investors sold a net 99.1 million rupees ($690,352) worth of equities on Friday, extending the net outflow to 4.17 billion rupees so far this year.

Turnover stood at 696.8 million rupees ($4.85 million), just above half of this year's daily average of 1.1 billion rupees.

The market is expected to be lacklustre with low turnover due to year-end holidays starting next week, stockbrokers said. Markets will be closed on both Thursday and Friday.

Top conglomerate and market heavyweight John Keells Holdings and fixed-line phone operator Sri Lanka Telecom gained over 2 percent each, helping the overall index gain. 

($1 = 143.5500 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sunil Nair)

President controls smaller share of govt expenditure: Manthri.lk

(LBO) Sri Lanka’s President Maithripala Sirisena controls a smaller percentage of total government expenditure compared with his predecessor Mahinda Rajapaksa, according to budget analysis conducted by Manthri.lk.

The former president had 1.6 trillion rupees under his portfolios, while the current president has 377 billion rupees under his purview.

Manthri.lk profiles the actions and activities of the 225 members of Parliament and provides a MP monitoring scorecard.

According to the site, Defence has the second highest allocation of expenditure, but it is the 34th most discussed topic in Parliament. 53 MPs contribute to discussions.

Agriculture, which has the 12th largest allocation of expenditure, is the 19th most discussed topic with 94 MPs contributing to discussions. Local government has the third highest budget allocation, but it is the 22nd most discussed topic in Parliament.

According to Manthri.lk, recognizing the need for accountability between MPs and their electorates, the site seeks to promote transparency and good governance in order to improve Sri Lanka’s democratic framework.

It ranks MP’s on the basis of productive time spent on 42 topics based on an objective coding system.

The site collects data from an analysis of the Parliamentary Hansard, which is then entered into a detailed classification coding system.

Motor car registrations high at 10,054 in November: JB Securities

(LBO) – Vehicle registration momentum continued into the month of November due to the pre-Nov 20 budget surge and relaxation of LTV rule, JB Securities said in a research note.

Total motor cars registrations recorded 10,054 units in Nov slightly down from 10,349 units in Oct but significantly higher than 2,419 units recorded 12 months ago.

Brand new car registrations recorded 6,682 units in Nov, the second highest number on record slightly higher than 6,225 units recorded in Oct but lower than the all-time record set in Sept of 9,427 units, the figure 12 months ago was 672 units showing a YoY growth of almost 1,000%. Almost 95% of the total are from small cars, i.e. less than 1,000cc, mainly Marutis accounting for 5,578 units (Alto – 5,105, Celerio – 459) followed by Panda Micro with 543 units. Hyundai recorded 176 mainly from Eon – this is a stylish looking car and I expect its segment share to go up in future.

Pre-owned car registrations recorded 3,372 units in Nov a drop from 4,124 units in Oct but higher than 1,747 units recorded 12 months ago. Financing share was at 65% indicative that the relaxation of the LTV rule drove volumes although they are down from the highs set in Sep of 5,117 units.

Premium segment recorded 77 units (30 brand new units and 47 preowned units) down from 101 units in Oct but up from 61 units 12 months ago. Mercedes accounted for 16 brand new units (C-class 9, E-class 4 and S-class 2) and 23 preowned units (C-class 5, E-class 8 and S-class 2) followed by BMW accounting for 7 brand new units (5-series 7) and 19 pre-owned units (5-series 6).

Electric cars recorded 494 units in Nov slightly down from 528 units in Oct but significantly up from 9 units 12 months ago. Nissan Leaf accounted for 470 units followed by 9 units of BMW I3, Mercedes B class 9 and 1 Tesla unit).

SUVs recorded 787 units in Nov slightly down from 797 units recorded in Oct and significantly down from 1,369 units recorded 12 months ago. Mitsubishi is the market leader with 235 units (Outlander – 167 units, Montero – 58) followed by Nissan with 166 units (all of them Xtrail hybrids) and Toyota with 134 units (Prado – 107, Harrier – 24). A notable decline is Honda Vezel, 12 months ago 1,293 units were registered which has now dropped to 83 units. A noteworthy observation is that of the 787 units registered last month 418 units are hybrids of which 399 are preowned. In the non-hybrid category volumes are mainly agent imported diesel Mitsubishi Monteros (permit vehicles) and preowned Toyota Prados. Financing share was 55.1% in line with levels recorded in the last few months.

Hybrid registrations recorded 3,240 units in Nov down from 3,970 units recorded in Oct but higher than 2,864 units recorded 12 months ago. Motor cars accounted for 2,790 units of which Suzuki accounted for 1,174 units (Wagon R – 1,102) followed by Toyota accounting for 979 units (Aqua – 456, Axio – 343, Prado – 167) and Honda with 578 units (Fit – 360). Financing share for motor cars was at 64.8% a level consistent with prior months.

Van registrations recorded 799 units in Nov down from 1,113 units in Oct but significantly up from 186 unit 12 months ago. Preowned vans account for 689 units, Mini vans account for 338 units (Suzuki – 239) with the balance 461 units being normal vans (Toyota 290). Hybrid vans are a very small component accounting for 32 units. Financing share was 76.7% similar to previous months.

3-wheelers hit an all-time record recording 13,593 units in Nov beating the prior record set in Sept of 12,406 units and significantly up from 8,142 units in Oct, the figure was 6,917 units 12 months ago. Bajaj maintained its brand share of 88% followed by TVS with 6.7% and Piaggio with 5.3%. Financing share was a high 90.1%.

2-wheeler registrations recorded 30,981 units in Nov slightly down from 31,425 units in Oct but down from election fuelled volumes 12 months ago of 38,539 units. Hero is the market leader claiming a share of 36.5% followed by Bajaj with 24.4%, Honda with 19.9% and TVS with 10.5%. Bajaj was the market leader for many years accounting for 50% but the lack of a scooter in their line up (Bajaj exited the scooter market in 2009) is hurting them. The scooter segment now accounts for 50% of the market – Hero – 9,243, Honda’s Dio – 4,841 and TVS Wego – 1,160. Financing share was 48.5% in line with levels recorded in previous months.

Pickup truck registrations recorded 460 units in Nov slightly up from 416 units in Oct and significantly up from 261 units 12 months ago. Tata accounted for 57% of the market followed by Mitsubishi with 21.3% and Toyota with 14.6%. Financing share was a high 85.9%.

Mini truck registrations recorded 1,766 units in Nov significantly up from 1,154 units in Oct and 1,022 units 12 months ago. Tata maintained its segment share recording 57.7% followed by Mahindra with 38.3%. Financing share was a high 92.8%.

Lite truck registrations recorded 741 units in Nov significantly up from 586 units in Oct and 250 units 12 months ago. Mahindra is the market leader commanding a share of 63.7% followed by Chinese brand DFSK with 17.3% share. Financing share was a high 92.3%.

Medium truck registrations recorded 182 units in Nov slightly lower than 178 units recorded in Oct and 173 units recorded 12 months ago. The market leader is Isuzu with a segment share of 40.7% followed by Mitisubishi with 16.5%. Financing share was 73.1% in line with previous months.

Heavy truck registrations recorded 118 units in Nov slightly down from 131 units recorded in Oct and 127 units recorded 12 months ago. Tata is the market leader claiming a share of 46.9% followed by Ashok Leyland with a share of 40.7%. A noteworthy observation is that tipper units have fallen to a trickle this year with the slowdown in public infrastructure projects. Financing share was a high 94.1%.

Bus registrations recorded 243 units in Nov up from 200 units in Oct but significantly down from election fuelled registations of 506 units recorded 12 months ago. Financing share was 95.1%.

Sri Lanka plantations firms warn of higher losses from wage hike

ECONOMYNEXT – Sri Lankan plantations companies have warned that a wage hike demanded by labour unions would increase losses at a time when commodity prices remain low, with workers themselves losing if the industry collapses.

With wage talks deadlocked, the Planters’ Association of Ceylon, which represents listed regional plantations companies, said unions would have to accept either the PA’s proposal for productivity linked wages or a revenue sharing model.

PA Chairman Roshan Rajadurai said the 1,000 rupee wage hike demanded by unions “is plainly impossible and completely unaffordable.”

He said in a statement the RPCs understand the demand of the workers for a higher wage and have continuously provided significant wage increases – in some years even exceeding 35% – whenever they were able to.

The PA said that if the wage hike was granted, the cost of production of the RPCs, which is in the region of 450 rupees per kilo, would exceed 610 rupees.

Since the total sale average of tea at the Colombo tea auction in the last week of November 2015 only amounted to 409 rupees, the loss from a single kilo of tea produced by RPCs would increase from around 50 - 70 rupees at present to over 200 rupees.

This would make their operations “completely financially and economically unviable and impossible.”

Rajadurai said that for the unions to adamantly stick to “impractical demands which cannot be fulfilled is a short-sighted policy akin to ‘killing the goose that lays the egg.’

“An adverse impact on the Regional Plantation Companies and its eventual collapse would be totally detrimental to the workers themselves and the nearly one million resident population living in RPC estates, who enjoy many facilities provided by the RPCs despite not being part of our workforce,” he added.

The PA said that since the privatisation of the estates in 1992, the labour wages have increased 13 fold, although the tea prices have increased only by 6 fold in the same period.

Many of the RPCs are listed companies which are answerable to shareholders.

“We cannot simply agree to draconian terms which will inevitably put the companies further in financial jeopardy and to its eventual collapse,” the statement said.

The RPCs have provided viable alternatives; productivity based wages and revenue sharing – which will be a win-win, workable method, enabling workers to earn their desired income by increasing output, which unfortunately the unions have failed to agree with.”

Sri Lanka in deal to borrow US$350mn from Turk Exim Bank

ECONOMYNEXT - Sri Lanka's cabinet of ministers had given the nod to sign a deal with Turk Exim Bank to borrow 350 million US dollars for capital projects, Minister Rajitha Senaratne said. 

Finance Minister Ravi Karunanayake had said that the deal with Turkey will diversify the sources of external finance. Unlike foreign aid, export import bank finance is provided at rates closer to commercial terms. In recent years, China Exim Bank has become a larger financier of roads and power projects in Sri Lanka.

Sri Lanka seeks to extend RBI swap deal

ECONOMYENXT - Sri Lanka has requested India to extend a central bank swap deal which is expiring in March 2015, Finance Minister Ravi Karunanayake told parliament.

He a part of the swap had already been paid back and the second tranche is to be paid back in March 2015.

Sri Lanka has requested India to extend the deal for another year, he said.

Sri Lanka had already re-paid back a 400 million dollar tranche and a second 1.1 billion 6-month dollar swap is expiring on March 2016.

Sri Lanka has faced balance of payments trouble as the central bank printed large volume of money to manipulate interest rates down despite strong private and state credit.

The central bank credit (printed money) has boosted credit has allowed banks to give loans above the deposits they raised, generating excess domestic demand and imports.

In Sri Lanka the Central Bank can buy Treasury bills for three months of more with printed money outside ordinary overnight domestic operations - which is a deadly 'quantity easing' exercise - without formal announcement or process unlike in the US.

As part of future central bank reforms analysts say the ability to engage in such exercises should be restrained through law.

Sri Lanka secondary bond yields rise as monetary policy tightens

ECONOMYNEXT - Sri Lanka's bond yields have risen about 100 basis points over the last two weeks since the Central Bank stopped large scale money printing and started to withdraw some liquidity in monetary tightening moves, market data shows.

The three month Treasuries auction yield has gone up 22 basis points to 6.28 percent from 6.06 percent, the 6-month yield has risen 24 basis points to 6.54 percent from 6.30 percent and the 12-month yield has risen 15 basis points to 7.01 percent from 6.86 percent.

Large Scale Monetization

Up to December the central bank was monetizing hundreds of billions of rupees in quantity easing moves generating long term liquidity outside the overnight open market operations putting the rupee under pressure and generating balance of payments trouble.

By the beginning of December the Central Bank's Treasury bill stock, a proxy for money printing and forex reserve appropriations was at 220 billion rupees.

Even if policy rates are not hiked, once excess liquidity runs out of the banking system, the Central Bank should have injected cash at 7.50 percent ceiling overnight rate or above the mid-point of the policy corridor through open market auctions instead of buying bills at around 6.0 percent, analysts say.

By purchasing Treasury bills with printed money, the central bank kept the three month rate near the 6.00 percent overnight window injecting liquidity 'quantity easing style, generating balance of payments pressure and engineering a collapse of the currency in the process.

Data released later on Friday will show whether more rupee were printed at Wednesday's Treasuries auction.

Falling through the floor

This year the Central Bank also lost control of the overnight gilt-backed fell through the Central Bank's 6.0 percent overnight floor rate on several occasions amid massive excess liquidity and monetization.

Sri Lanka's central bank no longer gives securities when it withdraws liquidity.

As a result market participants preferred to do repos with counterparties who gave them bills to pass on to clients at a rate below the floor window rate.

"On monetary policy, we are on the tightening side,” Deputy Governor Nandalal Weerasinghe said Thurday.

"Market rates are going up. In future, we are ready to take whatever policy measures are needed – if monetary policy needs to be tightened."

However over the last two weeks the Central Bank has effectively tightened monetary policy by withdrawing liquidity through outright securities sales, term and overnight auctions, central bank watchers say.

On Thursday overnight excess cash was sterilized at 6.09 percent, near the 3-month bill yield two weeks ago.

There was still 66 billion rupees of excess liquidity in interbank markets by Thursday, though lower than the 138 billion rupees seen on December 01. Overnight repos were quoted around 6.25 percent, Friday morning.

Bonds Soar

In the bond markets Friday there were hardly any quotes as the market looked for direction with a bond auction results due later in the day. Only a few maturities were quoted.

A 2-year bond maturing on 15.07.2017 closed at 7.80/8.20 on Thursday up from 7.35/7.50 percent on December 08.

A 5-year bond maturing 01.05.2020 closed 9.20/60 yesterday up from 8.85/95 two weeks ago.

8-year bond maturing on 01.09.2023 quoted at 10.00/50 Friday up from 9.25/50 percent two weeks ago. The 8-year was one of few bonds that were quoted.

10-year bond maturing on 01.08.2025 closed at yesterday at 10.40/10.60 percent up from 9.35/60 percent two weeks ago.

20-year bond maturing on 15.03.2035 quoted at 11.00/11.40 up from 10.10/25 percent two weeks ago.