Sri Lankan shares end at 22-month low; rising rates weigh

Reuters: Sri Lankan shares fell to 22-month lows on Monday on low volume as rising market interest rates dampened market sentiment and forced some investors to shun risky assets.

Sri Lanka's benchmark share index closed 0.2 percent, or 12.17 points weaker at 6,191.81, the lowest close since April 29, 2014.

The index remained in the oversold territory for the fifth straight session, with the 14-day relative strength index at 27.170, Thomson Reuters data showed.

A level between 70 and 30 indicates the market is neutral.

"The market continued its slow downtrend and selling pressure is continuing," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd. "Investors are awaiting to see the local interest rates and a statement from IMF."

On Wednesday, 182-day and 364-day t-bill yields rose 50 to 55 basis points at a weekly auction to over two-year high, after the central bank raised key policy rates by 50 basis points from record lows.

Sri Lanka is in initial talks with the IMF about a loan amid concerns over pressures on its balance of payments, outflows from government bonds and a ballooning fiscal deficit.

Turnover was 443.9 million rupees ($3.08 million) on Monday, well below this year's daily average of 709.3 million rupees.

Foreign investors were net buyers for the second straight session. They bought 158.7 million rupees worth of shares on Monday.

Shares in Nestle Lanka Plc fell 1.88 percent, while Lion Brewery Plc slipped 5.77 percent. 

($1 = 143.9000 Sri Lankan rupees) 

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

Sri Lanka January tea export earnings slump to six-year low

ECONOMYNEXT – Sri Lanka’s tea exports in January 2016 fell to their lowest level in US dollar terms in six years because of the commodity price slump, brokers said.

Ceylon tea exports fell one percent to 24.1 million kilos in January 2016 from a year ago with earnings down four percent to 14.3 billion rupees, according to data analysed by Asia Siyaka Commodities.

“The US dollar value of exports has dropped sharply by 12 percent year-on-year 2015,” they said.

“Earnings at 99.4 million dollars is the lowest since 2010 when a much lower quantity of 21 million kilos was exported and value of 90 million dollars was achieved.”

Sri Lanka’s tea exports earnings in January 2015 were 113 million dollars.

Asia Siyaka Commodities said the approximate FOB (free on board) value per kilo in January 2016 fell to 4.12 dollars from 4.64 dollars last year and 5.37 dollars in 2014.

Sri Lanka's Janashakthi Insurance Dec net up 37-pct

ECONOMYNEXT - Profits at Sri Lank's Janashakthi Insurance Plc in the December 2015 quarter rose 37 percent from a year earlier to 662 million rupees with assets also growing with the acquisition of another general insurance.

The group reported earnings of 1.68 rupees for the quarter. In the year to December the group reported earnings of 2.45 rupees on total profits of 965 million rupees, down from 1,061 million.

Gross written premium rose 27 percent to 3.1 billion rupees, with net premium up 34 percent to 2.7 billion rupees. Claims rose 35 percent to 1.5 billion rupees.

Investment income rose 38 percent to 467 million rupees.

Group gross asset grew from 20 billion rupees to 31 billion rupees during the year. Net assets grew from 5.2 billion rupees to 8.3 billion rupees.

The firm raised 3.6 billion rupees from a rights issue to acquire the general insurance unit of AIA Insurance in Sri Lanka.

"With the amalgamation now complete, we are working on unveiling a host innovative insurance solutions," Prakash Schaffter, Managing Director, Janashakthi Insurance said in a statement.

The firm had also sold lease rights to land in Staples Street in Colombo to Sanken Construction for 1.93 billion rupees. A 50 percent advance of 965 million had been received in December 23, and the firm expects to book profits in the first quarter of 2016 after regulatory approvals.

Sri Lanka feed mill profits soar amid strong demand for chicken

ECONOMYNEXT - Strong demand for chicken and eggs and farmers shifting from self-mixed to feed helped boost profits 300 percent to 387 million rupees in the December 2015 quarter from a year earlier, Ceylon Grain Elevators, a poultry and feed milling group said.

The group, a unit of Singapore based Prima, said earnings were 6.47 rupees for the quarter. In the year to December earnings were 15.72 rupees per share on total profits of 1,178 million rupees, up from 71 million rupees.

In December revenues rose 21 percent to 3.8 billion rupees and costs rose at a slower 11 percent to 3.2 billion rupees, allowing gross profits to go up 142 percent to 598 million rupees.

"During the quarter under review, the Group was able to post the outstanding results consequent to the increased demand for chicken meat and eggs," the firm told shareholders in a statement.

"Shortage of local raw materials compelled the farmers to move from self-mixing to compound feed also led to an increase in the demand for feed. The Group continued to maintain its market share in all segments during the year 2015."

Sri Lanka taxes imported raw material like maize to keep prices high, making chicken, usually a cheap source of protein, expensive to the poor and children of the poor, in Sri Lanka due to nationalist ideology of self-sufficiency, critics have said.

As a result raw material may run out for chicken farmers causing 'shortages', unlike in countries with free trade.

Chicken meat is also price-controlled by the rulers in Sri Lanka after keeping maize prices up.

As a result there is wide fluctuations and demand in poultry products from year to year.

Sri Lanka saw a strong demand for chicken meat and eggs in 2015, after excess production and low demand in 2014, Three Acre Farms, a CGE unit said.

During the year under review, the Group performance improved significantly with higher demand and stable market prices for Broiler, Layer and Parent Stock Day Old Chicks.

"The glut in Broiler Chicken and Broiler Day Old Chicks in year 2014 caused farmers to curtail their production which limited supply into year 2015," TAFL told shareholders.

"The Group was able to leverage on this with better pricing supported by the increased purchasing power of the consumers."

Sri Lankan shares steady near 22-month low; Keells boosts turnover

Reuters: Sri Lankan shares ended steady on Friday, hovering near their 22-month closing low that hit in the previous session, while last-minute trading in conglomerate John Keells Holding Plc boosted the turnover, brokers said.

The bourse hit a 22-month low on Thursday as investors shunned risky assets, and an interest rate hike last week continued to dampen sentiment.

Sri Lanka's benchmark share index closed up 0.02 percent, or 1.34 points, at 6,203.98, little changed from its lowest close since April 29, 2014, that hit the previous session.

It has fallen 10 percent this year, as of Thursday's close.

The index remained in the oversold territory for the fourth day, with the 14-day Relative Strength Index at 28.203, Thomson Reuters data showed.

A level between 70 and 30 indicates the market is neutral.

On Wednesday, 182-day and 364-day t-bill yields rose 50 to 55 basis points at a weekly auction to over two-year high, after the central bank raised key policy rates by 50 basis points from record lows.

"The market is very weak. There is not much happening, except for the John Keells trading, which took place in the latter part of the session. The market will continue its declining trend with the selling pressure due to high interest rates," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Turnover was 803.5 million rupees ($5.59 million) on Friday, more than this year's daily average of 716.3 million rupees.

John Keells Holdings Plc, which accounted for 80.3 percent of the day's turnover, ended down 0.13 percent.

Foreign investors were net buyers for the first time in six sessions; they bought 29.2 million rupees worth of shares.

Shares in Sri Lanka Telecom Plc rose 3.2 percent, while Lanka ORIX Leasing Company Plc climbed up 3.6 percent.

($1 = 143.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips)

Sri Lankan shares fall for 3rd day as investors shun risky assets

Reuters: Sri Lankan shares fell for a third straight session on Thursday to a 22-month closing low, as investors shunned risky assets and an interest rate hike last week continued to dampen sentiment.

Local shares also tracked losses in Asian shares as crude oil prices seesawed and Chinese shares dived, rekindling anxiety about the impact of high market volatility on the global economy on the eve of a G20 meeting in Shanghai.

Sri Lanka's benchmark share index closed 0.24 percent, or 15 points, weaker at 6,202.64, its lowest close since April 29, 2014. It has fallen over 10 percent this year through Thursday.

The index remained in the oversold territory for the third day, with the 14-day Relative Strength Index at 27.923, Thomson Reuters data showed. A level between 70 and 30 indicates the market is neutral.

On Wednesday, 182-day and 364-day t-bill yields rose 50-55 basis points at a weekly auction to more-than two-year highs, signalling a further rise in market interest rates.

"We expect the declining trend to continue with selling pressure due to high interest rates," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

The central bank raised key policy interest rates by 50 basis points on Friday from a record low, to prevent demand-driven inflationary pressure.

Turnover was 559.3 million rupees ($3.89 million) on Thursday, well below this year's daily average of 713.8 million rupees.

Foreign investors sold a net 192.5 million rupees worth of shares, extending the net foreign outflow to 1.66 billion rupees worth equities so far this year.

Shares in Sri Lanka Telecom Plc fell 6.09 percent, while Trans Asia Hotel Plc dropped 7.06 percent. 

($1 = 143.9500 Sri Lankan rupees) 

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

SEC reconsiders minimum public float rule: CSE

(LBO) – Sri Lanka’s securities regulator is reconsidering the minimum public float rule as the intention of introducing such rule was not met, ‎a senior official at the CSE said.

Chief Executive Officer at the Colombo Stock Exchange Rajeeva Bandaranaike said the intention of introducing the minimum holding rule was to encourage the public float.

“The intention was good, but companies really did not choose to divest. Instead some companies choose to demote themselves to Diri Savi board and some others choose to de-list,” Bandaranaike said.

Few companies have already de-listed and several others have transferred to the secondary Diri Savi Board following the introduction of new rules.

“The regulator is looking at it right now and there is a strong possibility that they reconsider the rule. Right now most of the companies have been given extension of one year.”

Bandaranaike was speaking at the capital market conference 2016 organized by UTO Edu Consult.

The securities watchdog brought in the new rules that are applicable to all public listed entities which have their equity listed on the CSE effective from 01 January 2014.

As per the minimum public holding rules, there are two ways to get listed on the main board of the Colombo Stock Exchange.

One option is that a listed entity on the main board should maintain a minimum public holding of 20 percent of its total listed ordinary voting shares in the hands of a minimum of 750 public shareholders.

Second option is that a market capitalization of 5 billion rupees of its public holding in the hands of a minimum of 500 public shareholders while maintaining a minimum public holding of 10 percent.

To list on the secondary DiriSavi Board, a company should maintain a minimum public holding of 10 percent of its total listed shares in the hands of a minimum of 200 public shareholders.

FC Capital Market App launched

First Capital Holdings PLC (FC) a full service investment bank with30 years of experience recently launched the "FC Capital Market App', providing up to date information on the Sri Lankan capital market freefor Android and IOS smart mobile users.

The FC Capital Market App gives investors and market enthusiasts detailed insights into government securities, stock market, debentures and research.

The users can create a personalised watch list to keep track of chosen securities and eliminating the need to access multiple information sources.

"The app enables investors the convenience to follow the performance of their investment portfolio and is available free for downloading onto smart mobile and tablet devises for any interested user and does not require a client account with First Capital" Dilshan Wirasekara, Chief Executive Officer of First Capital Holdings PLC, stated.

The FC Capital Market App can be downloaded on App Store, Google Play and through the Company's website.http://www.firstcapital.lk/mobile-app/

About First Capital :

First Capital Holdings PLC, an Investment Bank listed on the Colombo Stock Exchange, is the holding company of the First Capital Group offering a full range of products and services, through subsidiaries operating in Debt & Equity markets including First Capital Treasuries Limited, a Primary Dealer licensed by the Central Bank of Sri Lanka, First Capital Asset Management Limited, an Investment Manager licensed by the Securities and Exchange Commission of Sri Lanka which also manages several dedicated fixed income Unit Trusts, First Capital Equities Private Limited a licensed Stockbroker and Member of the Colombo Stock Exchange, First Capital Markets Limited a licensed Margin Provider and First Capital Limited, a structuring and placement agent for debt and equity, and provider of corporate finance and advisory services.

For nearly 30 years, the First Capital Group has been a leading non-bank financial institution in Sri Lanka. A pioneer Primary Dealer in government securities, First Capital has steadily grown to become a leader in this field, buoyed by a loyal and continuously growing customer base. The company operates in Colombo and several major cities in Sri Lanka.

www.dailynews.lk

CSE fully geared to enhance investor confidence - Chairman

By Zahida Rizvi


Colombo Stock exchange's daily average turnover equity and equity market capitalization to GDP for 2015 stands at Rs 1.06 billion and Rs 2.9 Trillion respectively, CSE Chairman Vajira Kulathilake said.

Speaking at the Capital Market Conference held yesterday at the Ramada Hotel he said CSE performance in terms of corporate debt had raised the largest volume of capital accounting to Rs 81 billion in 2015. "On the other hand corporate debt has been recorded as Rs 4.5 billion for 2015", he said. He added that the key factors CSE focuses to achieve better performance is by having a better approach to risk management, new products, attracting new listings and attracting investors governance. Kulathilake said that risk management is backed by adapting to schemes such as the Broker Back Office (BBO), Introduction of Central Counter Party institution (CCP )and Capital Adequacy Ratio (CAR).

"Broker Back Office (BBO) is an Order Management Systems (OMS) which will facilitate seamless trading, clearing and settlement of securities".

"CCP is an entity that will take up the risk of transactions in the market in the event of a clearing and settlement failure" "Capital requirement applicable to a Broker Firm which compares the total

risks faced by the Broker Firm with the liquid capital it holds", he said.

The CSE Chairman said that one of the new products introduced into the CSE is a real estate investment trust (REIT). The trust is categorized into two segments. "Rental REITs which is invested in income generating real estate properties and development REITs are invested for development of constructions".

Kulathilake further added that new listings are encouraged in to the CSE to further enhance its performance by enabling issuer relations, SOE listings and adding in alternative markets such as SME, Board Dollar Denominated Board and BOI Board.

He said," Turnover is doubled by increasing foreign investor turnover through foreign Investor Forums"."Additionally, increasing domestic investor turnover by targeting retail investors and institutional investors". "Governance in the CSE is kept intact through demutualization and amendments to the SEC Act to include new provisions", he said.

www.dailynews.lk

ComBank posts Rs 11.9 bn net profit for 2015

Commercial Bank of Ceylon PLC has recorded profit before tax of Rs 17.144 billion for the 12 months ended December 31, 2015, a year in which it strengthened its positions in Sri Lanka and Bangladesh.

The bank has attained solid growth across all business lines to improve pre-tax profit by a healthy 8.94% over the preceding year and achieve net profit of Rs 11.903 billion for 2015, a growth of 6.47% despite lower margins, reduced capital gains and higher tax commitments. Profit before Financial VAT and Nation Building Tax (NBT) was up 8.73% to Rs 20.033 billion.

Gross income increased by 7.03% to Rs 77.868 billion, and net interest income grew by a robust 11.47% to Rs 30.346 billion, the Bank reported in a filing with the Colombo Stock Exchange (CSE).

One of the many performance highlights of the year under review was the strong growth of the Bank's loan book, which increased by Rs 102.684 billion or 25.33% to Rs 508.115 billion. This was the first time that the Bank's loan book achieved a net growth of more than Rs 100 billion in a year.

Total assets grew by a noteworthy Rs 84.195 billion or 10.58% over the 12 months to Rs 879.805 billion at December 31, 2015. Deposits from customers increased by Rs 94.740 billion at an average of Rs 7.9 billion a month to Rs 624.102 billion at the end of 2015, reflecting Year-on-Year growth of 17.90%.

"We are pleased with these results because they reflect the ability of the Bank to grow in changing conditions, while continuing to enlarge its footprint in Sri Lanka and overseas, and consolidating its position as a catalyst in the socioeconomic progress of our country," Commercial Bank Chairman Dharma Dheerasinghe said.

The Bank's Managing Director and CEO Jegan Durairatnam said 2015 was noteworthy because a strong foundation for future growth had been set with the licenses secured to operate in Myanmar, Maldives and Italy.

"These achievements are perhaps the most significant for the year as they expand our horizons, presenting new opportunities for growth and further strengthening our position in our home market," he said.
www.dailynews.lk

DFCC posts healthy growth

The DFCC Bank has posted a healthy balance sheet for the nine months for the New Financial Year ending December 31.

The performance reported is for nine months from April 2015 to December 2015 as against that of the previous full year. Net profit after tax as at December 31,2015 was Rs1,642 million (Group) and Rs 1,068 million (Bank) while that for FYE March 2015 was Rs 4,439 million and Rs 3,240 million respectively.

CEO Arjun Fernando said:"While 2015 was a transformative year for DFCC, the amalgamation with Vardhana has laid the foundation for the Bank to take on the competition.We are therefore confident of resuming our normal growth trajectory in 2016 and beyond."

However, there were several exceptional items in both periods which distort the comparison. FYE 31 March 2015 included substantial one-off capital gains and impairment reversals, while the period ended 31 December 2015 entailed significant non-recurrent expenses incurred during the amalgamation for items such as systems integration and data migration.

The change of the financial year meant that the Bank incurred an additional taxation charge based on the full year, even though results were for nine months. Also, substantial dividend income, which accrues in the first quarter of the calendar year, could not be included.

Meanwhile, total assets grew by 17% to LKR 247,109 million as at 31 December 2015 from LKR 210,610 million as at 31 March 2015. This included a robust credit portfolio growth of 18% to LKR 171,111 million from LKR 144,896 million. At the same time credit quality was not compromised.

The ratio of impaired loans to total loans for 31 December 2015 was 5.1% compared to 6.1% for 31 March 2015, indicating a credit quality improvement. Close monitoring drove down the Bank's ratio of impaired loans to total loans as well as its regulatory non-performing loan ratio, with the latter improving to 3.7% as at 31 December 2015 from 4.3% as at 31 March 2015.

Its balance sheet strength is demonstrated by a Group Tier 1 Capital Adequacy Ratio of 15.4% and a total Capital Adequacy Ratio of 15.3% making DFCC Bank one of the highest capitalised banks in the industry.
www.dailynews.lk

Singer (SL) B,V, sells control interest of Regnis (Lanka)

Singer (Sri Lanka) B,V, the immediate parent of Regnis (Lanka) PLC and Singer (Sri Lanka) PLC, has sold its controlling interest in Regnis (Lanka) in terms of Section 8 of the Listing Rule of Colombo Stock Exchange.

Singer (Sri Lanka) PLC has purchased 6,568,461 shares in Regnis (Lanka) PLC at a price of Rs: 110 per share, amounting to a total of Rs. 722,530,710.

Singer (Sri Lanka) holds 58.295/0 shares subsequent to this transaction. Accordingly, Singer (Sri Lanka) PLC will be the immediate parent of the company with effect from February 23 2016 Singer ( Sri Lanka) BV will continue to be an intermediate Parent Company.
www.dailynews.lk

Namal Acuity Value Fund declines

The Namal Acuity Value Fund (NAVF) for the quarter ended December 31, 2015 has generated a return of 3.01% for the six month period ended December 2015, outperforming the benchmark All Share Price Index (ASPI) and the S&P Sri Lanka 20 Index (S&P SL20).

For the third quarter of FY16, the Fund recorded a 61.2% YoY growth in dividend and interest

income to Rs. 5.54m, which was offset by unrealized losses on financial asset held for trading.

As a result, the fund reported a total investment loss of Rs 22.80m compared to an investment income of 79.26m the perious year.

This resulted in a net loss of Rs. 27.56 m compared to a net profit of Rs. 73.24m in 3QFY15.

Net asset value of the fund declined 5.8% YoY to Rs. 1,366m. During 2015, the ASPI decreased 5.54% while the S&P SL20 declined 11.33%.

The average daily turnover during the year dropped to Rs 1,058m from Rs 1,411m in the comparative year.

Sri Lankan equity market witnessed a net outflow of Rs. 4.4bn (Jan-Dec 2015) as foreign investors exited emerging markets on the fear of economic slowdown and the US rate hike.

Foreign participation stood at 34.6% of turnover for the year 2015.

Benchmark 12 month Treasury bill auction yields increased by 111 basis points to 7.11% over the year under review.

CBSL raised the Statutory Reserve Ratio by 1.5ppt to 7.50% in December 2015 in order to control the demand side pressure on inflation, which was caused by the excess liquidity in the market.

www.dailynews.lk

Sri Lanka HNB group December net flat

ECONOMYNEXT - Profits at Sri Lanka's HNB group, which is in commercial banking and insurance edged 2 percent lower to 3.5 billion rupees, dragged down by a higher tax charge, despite a provision reversal.

The group reported earnings of 9.41 rupees per share for the quarter.

In the 12-month to December the HNB group reported earnings of 25.8 rupee per share on total profits of 10.4 billion which were up 16 percent.

At stand-alone bank level interest income rose 16 percent to 14.4 billion rupees and interest expenses rose at a faster 26 percent to 7.5 billion rupees, and net interest income grew at a lower 6 percent to 6.9 billion rupees.

Fee and commission income rose 27 percent to 1.65 billion rupees.

There were trading losses of 444 million rupees and 1.2 billion rupees of other income up from 262 million a year earlier.

In the year to December the bank grew loans 26 percent to 507 billion rupees.

The bank reversed 1.1 billion rupees in general provisions, up from a reversal of 576 million a year earlier.

New specific provisions of 299 million rupees were made, down from 494 million a year earlier.

The bank had sharply higher income tax charge of 1.9 billion rupees, up from just 579 million a year earlier.

Available for sale assets - which usually includes bonds - rose 15 percent to 79 billion rupees.

In the year to December the bank took a 2.4 billion fair value loss as interest rates rose, which is not taken in to the profit and loss account.

Group gross assets rose 27 percent to 757 billion rupees and net assets rose 12 percent to 77 billion rupees.

Fitch rates Singer Sri Lanka's debt 'A-(lka)'

ECONOMYNEXT - Fitch Ratings said it has assigned Singer Sri Lanka PLC's proposed senior debentures of up to two billion rupees a final National Long-Term Rating of 'A-(lka)'.

The debentures will have a tenor of three years with a mix of fixed and floating coupon payments, a statement said.

Singer expects to use the proceeds to refinance existing debt, restructure short-term debt and for working capital requirements.

The full rating report follows:

Fitch Ratings-Colombo-23 February 2016: Fitch Ratings has assigned Singer Sri Lanka PLC's (Singer, A-(lka)/Stable) proposed senior debentures of up to LKR2bn a final National Long-Term Rating of 'A-(lka)'.

The assignment of the final rating follows the receipt of documents conforming to information already received, and the final rating is the same as the expected rating assigned on 15 December 2015.

The issue will have a tenor of three years with a mix of fixed and floating coupon payments. Singer expects to use the proceeds to refinance existing debt, restructure short-term debt and for working capital requirements.

The debentures are rated at the same level as Singer's National Long-Term Rating of 'A-(lka)' because they represent senior unsecured obligations of the company and would rank equally with the company's other senior unsecured debt.

KEY RATING DRIVERS

Leading Consumer Durables Retailer: Singer's position as a leading consumer durables retailer is supported by its extensive distribution network, multi-brand strategy, and robust after-sales service.

Improved Operating Environment: Demand for consumer durables is likely to be sustained over the medium term by increases in public-sector salaries in February 2015, lower income-tax rates for private-sector employees introduced in November 2015 and reduced pricing on essential items, including fuel and electricity.

Recent Acquisitions: Singer's recent acquisitions of Singer Industries Ceylon PLC and Regnis (Lanka) PLC - both from its direct parent Singer (Sri Lanka) B.V - have a neutral impact on Singer's rating.

Cyclical Demand, Currency Risk: Singer's earnings are subject to business cycles, due to the non-essential nature of the company's products and price volatility. Prices and profitability are also sensitive to foreign-exchange fluctuations as most of the inventory is imported.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for the issuer include:

- Revenue to increase due to improved consumer purchasing power.

- EBITDAR margins to settle in the high-single digit range in the medium term due to increased contribution from low-margin IT and communication products

RATING SENSITIVITIES

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

- A sustained increase in Singer's leverage (measured as adjusted net debt/EBITDAR excluding Singer Finance) to over 5.5x (3Q15: 4.13x)

- EBITDA margin sustained below 7% (Nine months ending September 2015: 7.4%)

- A material weakening in Singer's (company-level) liquidity profile

- A material weakening of the credit profile of Singer's 80% subsidiary, Singer Finance (Lanka) PLC (BBB(lka)/Stable), given strong linkages between the entities

Positive: Future developments that may individually or collectively lead to a positive rating action include:

- Singer's leverage falling below 4.5x on a sustained basis

- EBITDA margin sustained above 10%

LIQUIDITY

As at end-September 2015, Singer had LKR1.3bn of unrestricted cash and LKR7.0bn of committed but unutilised credit lines to meet debt obligations of LKR6.6bn falling due in the next 12 months.

Sri Lanka's Sampath Bank rated B1 by Moody's

ECONOMYNEXT - Moody's Investors Service said it had given a 'B1' rating to Sri Lanka's Sampath Bank Plc.

The rating agency said Sampath's asset quality was strong, profitability was high funding and liquidity was healthy relative to peers but had weak capital levels.

Sampath was raising new capital.

Its foreign currency load to deposit ratio was also high at 135 percent.

The full statement is reproduced below:

Moody's assigns first-time B1 Issuer ratings to Sampath Bank; outlook stable

Global Credit Research - 24 Feb 2016

Singapore, February 24, 2016 -- Moody's Investors Service, ("Moody's") has assigned an issuer and long term local currency deposit rating of B1 to Sampath Bank PLC and short-term ratings of non prime.

Moody's has also assigned the bank with a CR Assessment of Ba3(cr).

The assigned long-term foreign currency deposit rating is B2 and is constrained by the foreign currency deposit ceiling for Sri Lanka.

At the same time, Moody's has assigned a baseline credit assessment (BCA) of b1.

All the ratings have a stable outlook.

RATINGS RATIONALE

The B1 issuer ratings reflect Sampath Bank's baseline credit assessment (BCA) of b1.

The b1 BCA is driven by the bank's (1) strong track record in asset quality, (2) high profitability metrics, (3) healthy funding and liquidity profiles relative to its peers, and (4) weak capital levels.

The BCA of the bank is constrained by the Sri Lankan government's sovereign rating of B1.

Sampath Bank has healthy asset quality metrics, with a gross nonperforming loan (NPL) ratio of 1.71%, loan loss coverage of 120% at end September 2015, and compares well with other Sri Lankan banks..

At the same time, our evaluation of the bank's asset quality also factors in its high credit concentration - a structural feature of the banking system in Sri Lanka - as well as strong growth in the non-pawning part of the loan book, which recorded a 28% compound annual growth rate over the last two years.

Profitability is the bank's key credit strength, with its average ROA over the last three years staying at 1.4%. In addition, there is reasonable potential for profitability to further increase.

The bank has reported a much higher cost-income ratio ( cost component includes financial services value added tax and nation building tax), than peers, at 59% for 9m2015. As operating revenue growth picks up in line with loan growth, cost-income ratio may trend down. This would increase profitability.

The bank's capital levels are low, with a common equity tier one (CET1) ratio of only 7.98% at end-September 2015. In this respect, it is lower than its peers in Sri Lanka, as well as other similarly rated banks.

Moody's expects a capital raise over the next 18 months, as the bank needs to increase its capital levels to comply with Basel 3 norms. However, even with the capital raise, we expect the bank's capital levels to be just above the minimum norms.

The bank has a strong retail funding franchise, with a 48% CASA ratio at end-September 2015. Overall liquidity levels are also adequate, with its loan to deposit ratio (LDR) at 95%. On the other hand, a key weakness for the bank is the funding of its foreign currency book, where its LDR stood at 135%.

The bank's long-term ratings are at the sovereign rating for Sri Lanka and thus, the ratings are unlikely to receive a further upgrade unless Sri Lanka's sovereign rating is upgraded.

Sampath Bank's BCA could be raised if Sri Lanka's sovereign rating is upgraded.

Conversely, the bank's BCA could be lowered due to the following: (1) a material decrease in the Moody'sadjusted capital adequacy ratio (tangible common equity/risk-weighted assets); (2) a tangible deterioration in asset quality or risk-adjusted profitability; and (3) a downgrade of Sri Lanka's sovereign B1 rating, which will also result in a downgrade of Sampath Bank's B1 deposit rating.

The principal methodology used in these ratings was Banks published in January 2016. Please see the Ratings Methodologies page on www.moodys.com for methodology.

Headquartered in Colombo, Sampath Bank PLC had total assets of LKR503 billion (USD3.5 billion) at end-September 2015.

Sri Lanka LOLC group borrows US247mn from FMO, ADB led loans

ECONOMYNEXT - Sri Lanka's LOLC group has borrowed 247 million US dollars from three syndicated loans led by the FMO, a Dutch development agency and the Asian Development Bank for on lending to its customers, officials said.

Commercial Leasing and Finance Plc, will get 153.1 million US dollars in a syndicated loan led by FMO, a Dutch development lender.

FMO is giving 113.9 million dollars and 11 others are making up the balance.

The OPEC fund for International Development (OFID) - USD 20 million);
Finnfund- the Finnish Fund for Industrial Cooperation (USD 11 million);
Proparco – a subsidiary of the Agence Française de Développement (AFD) - USD 10 million
BIO - the Belgian Investment Company for Developing Countries - USD 7 million)
DEG – the German Investment and Development Corporation - USD20 million
OeEB the Austrian Development Bank - USD 10 million
ResponsAbility Investments AG - USD 12 million
Blue Orchard Finance - USD 10.1 million
Symbiotics - USD 9.0 million
Dutch Oikocredit - USD 5 million
ACTIAM USD 5 million.

FMO is mandated lead arranger for the deal.

Linda Broekhuizen, Chief Investment Officer of FMO said the LOLC's focus on funding smaller businesses were a key reason for the syndication.

LOLC Finance Plc, another unit is getting a 69 million dollar loan led by Asian Development Bank, with the ADB itself giving 39 million dollars and Middle Eastern banks making up the balance.

Tranche A is for a period of 7 years and has been funded by ADB.

Tranche B is for 3 years has been funded Emirates NBD Bank, Bank Muscat, First Gulf Bank, National Bank of Oman and Rakbank.

ADB was lender of record for both the tranches. Bank Muscat and First Gulf Bank was the mandated lead arrangers for tranche B, with Dubai Based Investment Bank, Alpen Capital ME Limited acting as financial advisor.

LOLC chief executive Kapila Jayawardene said it was the first time Middle Eastern banks were financing a non-bank lender in Sri Lanka.

ADB is also giving another 35 million US dollars to LOLC Micro Credit Limited.

LOLC will also get technical assistance for capacity building.

Nestlé Lanka December net up 4.2-pct, malted drinks market share grows

ECONOMYNEXT - Nestlé Lanka, the Sri Lankan unit of the Swiss food multinational, said December 2015 quarter net profit rose 4.2 percent to 641 million rupees from a year ago.

Sales grew 10.1 percent to 8.8 billion rupees in the quarter, according to interim accounts filed with the stock exchange.

The firm reported earnings per share of 11.92 rupees for the quarter.

For the full-year ending 31 December 2015, EPS was 76.77 rupees with net profit up 8.9 percent to 4.1 billion rupees.

The annual profit growth was “supported by strategic portfolio optimisation and focus on driving efficiencies across the value chain,” a company statement said.

Nestlé Lanka’s annual sales grew nine percent to 35.9 billion rupees, fuelled by its Nestomalt, Milo and Maggi brands, it said.

Nestomalt was a “key growth driver” for the company with the brand increasing its market share, especially among rural consumers, Nestlé Lanka said.

“These are strong results for what has been a challenging year,” Nestlé Lanka chief executive Shivani Hegde said.

Sri Lanka’s Dialog, Asiri in health e-commerce deal

ECONOMYNEXT – Sri Lanka’s Dialog Axiata and Asiri Hospitals have entered into a joint venture agreement in their electronic commerce business in the health sector, the companies said in separate stock exchange filings.

The agreement is between Digital Holdings Lanka, a wholly owned subsidiary of Dialog Axiata, Asiri Hospitals and their joint venture Digital Health (Pvt) Ltd.

Asiri Hospitals and Dialog last year said they had formed the Digital Health joint venture with the aim of developing and operating electronic commerce infrastructure for Sri Lanka’s healthcare sector.

Digital Holdings owns 70 percent of the joint venture firm and Asiri Hospital Holdings the remaining 30 percent.

Sri Lanka vehicle purchases plunge after tax hike, leasing controls

ECONOMYNEXT - Sri Lanka's new vehicle registrations have plunged around 50 percent to 31,854 units in January 2016 from peaks seen in November 2015 before a budget hiked taxes and leasing restrictions were slapped a month later.

Total vehicles registration fell from 61,864 in November to 54,316 in December and 31,854 units in January, with Indian made Maruti, two wheelers and 3-wheeler bought by relatively less affluent people falling most, an analysis of vehicle registry data by by JB Securities, a Colombo-based brokerage shows.

Three wheeler registrations fell 67 percent to 3,440 units in January from 10,494 units in November and motor bike sales fell 29 percent to 21,287 units from 31,262 units in November.

Min-truck registrations fell 54 percent to 801 units in January from 1,613 units in December.

In the run up to the budget in November 2015 when taxes were expected to be hiked, buyers scrambled to import cars in an 'announcement effect.'

From December the central bank slapped a loan to value ratio of 70 percent on vehicles.

Sri Lanka's rulers have a habit of controlling imports after keeping interest rates low and printing money to finance the budget. The worst trade controls on the poor were placed in the 1970s when almost all Treasury bills issued were bought by the central bank with printed money.

Small car imports rose partly because state workers were given a 10,000 rupee monthly salary increase by the new administration as a vote buying exercise. Some state workers effectively 'securitized' the salary increase by leasing vehicles.

Economic analysts who saw the central bank starting printing money and warned of the impending balance of payments trouble also warned that vehicles imports - a favourite scapegoat - will be curbed.

Though it was widely expected that extra deposits would be required on import letters of credit of credit - a practice which falls foul of obligations to the International Monetary Fund - authorities this time placed a more damaging control on the poor.

JB Securities in a note to clients said motor cycles were bought on lease by self-employed person whose radius of employment was raised.

A three wheeler which cost 500,000 rupees before the budget could be bought for a 50,000 rupee down payment. After the budget it had gone up to 600,000 rupees.

The initial deposit had gone up to 180,000 rupees with the loan to value ratio coming down to 70 percent from 90 percent.

"Will this rule lead to the unintended consequence of depriving economic opportunity to lower income groups due to the lack of mobility?, JB Securities questioned.

Analysts say what is required to fix the balance of payments is not ad hoc administrative measures, but avoid manipulating interest rates and injecting nominal rupee reserves into the commercial banking system through central bank credit.

Banks will now extend credit to other areas. However banks have on their own raised deposit rates by around 200 basis points over the past few months. The Central Bank also hiked policy rates 50 basis points in a belatedly.

However analysts say BOP troubles could persist if the Central Bank continues to buy Treasury bills with printed money and inject excess demand to the economy.

Sri Lanka Treasuries auction fails despite rate hike

ECONOMYNEXT - Sri Lanka failed to sell the 22 billion rupees of maturing Treasury bills offered for auction on Wednesday selling only 9.2 billion rupees of paper, data from the debt office showed, raising fears that at least a part of the balance will be repaid with printed money.

There is an estimated 26 billion rupees of maturing bills due on Friday.

The debt office, which is a unit of the Central Bank said 6.8 billion rupees of 6-month bills were sold at 8.07 percent, up exactly 50 basis points and 2.3 billion rupees of 12-month bills were sold 8.50 percent, up 55 basis points.

Unlike in the 1990s the Central Bank no longer reveals the volume of money printed each week and market participants have to wait till Friday to find how much freshly minted liquidity hits the interbank market.

The Treasuries auction also failed last week with the central bank's Treasuries stock climbing from around 163 billion rupees to 184 billion rupees and excess liquidity went up from 14 billion rupees to 36 billion rupees.

Analysts warn that despite a 50 basis point rate hike, the monetary authority's habit of using central bank credit to finance the deficit will lead to continued pressure on the currency, as the newly created money generates imports.

The central bank is effectively printing money to prevent sovereign default. From time to time, there has also been foreign bond sales, which generates outflows, which are not directly related to domestic credit conditions.

When the early balance of payments crises started after the central bank was created with money printing powers in 1951, reports show that parliament's Public Accounts Committee had questioned officials closely though the knowledge seems to have been lost later.

The central bank was "forced by necessity" to be main subscriber of Treasury Bills, against its own advice to avoid the government defaulting on its payments, then Governor R W Rajapathirana was quoted as telling the Public Accounts Committee in a 1962 media report reproduced in Central Bank of Sri Lanka in Retrospect published in 2010.

Asked why he could not refuse to buy Treasury bills Governor Rajapathirana had said: "..suppose we refuse to buy and there are no other purchasers then the government has no money to pay its bills. That would be a more chaotic situation than the Central Bank buying Treasury bills."

PAC chairman R S V Poulier: Is it then correct to say that although the Monetary Board functioning in the proper capacity could not recommend the purchase of Treasury bills they had to do it because of the practical necessities?

Governor R W Rajapathirana: That is correct…

In 1968, during another period of balance of payment troubles, John Exter founder Governor of the Central Bank in a lecture at Institute of Chartered Accounts at Longdon Place had said:

"..[A] central bank should show restraint in its monetary policies, there should be a reasonable expansion of credit in the economy but the creation of excess credit by deficit financing were bound to cause inflation, balance of payments difficulties and generally unstable conditions."

Exter had pointed to Singapore and Hong Kong which had no exchange or trade controls and inflation was low.

"The thing about Hong Kong and Singapore was there were no Central Bank-like institutions…" he had said.

Monetary policy was determined by market conditions and were "no organization to disturb the stable dynamism of the economy."

Exter had slammed "The New Economics" of the then US administration, saying the edifice "could collapse like a pack of cards," and the consequences would be "disastrous for the world economy."

His prophesy came true when in 1971 the Bretton Woods system of soft-pegs collapsed ignominiously with gold and oil prices shooting up. 

Sri Lanka shares end lower as investors shun risky assets

Reuters: Sri Lankan shares edged down for a second straight session on Wednesday, hovering near a 22-month low, as investors preferred low-risk assets in line with global peers and as an interest rate hike last week continued to dampen sentiment.

Shares fell in Europe and Asia on Wednesday as oil prices dipped after Saudi Arabia effectively ruled out output cuts by major producers, lifting investor appetite for safe-haven assets such as the Japanese yen and gold.

Yields on 182-day and 364-day t bills rose 50-55 basis points at a weekly auction on Wednesday to a more-than two-year high, signalling a further rise in market interest rates.

The benchmark share index closed 0.18 percent weaker at 6,217.64, hovering near its lowest close since April 2014 which it hit on Thursday. It has fallen around 10 percent this year through Wednesday, amid a rise in market interest rates.

"Market is down mainly because of the negative effects of the rate hike," said Yohan Samarakkody, head of research, SC Securities (Pvt) Ltd. "It's not factored in immediately with low liquidity, but it will be factored in slowly."

The central bank raised key policy interest rates by 50 basis points on Friday from a record low, to prevent demand-driven inflationary pressure.

Turnover was 384.3 million rupees ($2.68 million), well below this year's daily average of 718.3 million rupees.

Foreign investors sold a net 4.3 million rupees worth of shares on Wednesday, extending the net foreign outflow to 1.47 billion rupees worth equities so far this year.

Shares in Commercial Leasing and Finance Plc fell 7.89 percent, while Sri Lanka Telecom Plc dropped 2.43 percent. 

($1 = 143.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lanka shares close lower on rate hike, global woes

Reuters: Sri Lankan shares closed lower on Tuesday, led by large caps, as investors shunned risky assets in line with weaker global markets and after the country's central bank raised interest rates last week.

The central bank on Friday raised its key policy interest rates by 50 basis points from a record low, to prevent demand-driven inflationary pressure, signalling a rise in the local interest rates.

The recent recovery in riskier assets fizzled out on Tuesday, with a fall in stocks, oil and the value of China's yuan currency boosting investor demand for safer assets such as the Japanese yen, government bonds and gold.

The stock markets were closed on Monday for a Buddhist religious holiday.

The benchmark share index closed 0.35 percent weaker at 6,228.99, hovering near its lowest close since April 2014 which it hit on Thursday. It has fallen around 10 percent this year through Tuesday, amid a rise in market interest rates.

"Though there was an initial uptrend, invariably it came down," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd. "It may not be a shock fall as the rate hike was expected. It'll be a gradual fall."

Yields on 91-day t-bills rose 13 basis points at a weekly auction last Wednesday to a more-than-two-year high, signalling a further rise in market interest rates.

Turnover was 605.2 million rupees ($4.20 million), less than this year's daily average of 728.1 million rupees.

Foreign investors sold a net 94.9 million rupees worth of shares on Tuesday, extending the net foreign outflow to 1.47 billion rupees worth equities so far this year.

Shares in Ceylon Tobacco Company Plc fell 2.35 percent, while Sri Lanka Telecom Plc fell 2.12 percent. 

($1 = 144.1000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

NDB places Seylan stake under AFS

Theagarajah said NDB’s investment in Seylan Bank PLC was under the bank’s trading portfolio categorized under the available-for-sale (AFS) investments at this point of time but would continuously be evaluated how such investments could play a meaningful role in the bank’s strategic journey. 

“The bank also had around 9.8 percent (stake) in Seylan Bank some time in the first quarter of last year and it is parked in the bank’s trading portfolio and it is still recorded under available-for-sale (category) of investments and it will continue to be recorded under AFS at this point in time. 

We believe in this model (because) at this point in time Sri Lanka needs financial inclusion; we see the universal banking model making sense to us,” NDB Director and Chief Executive Officer Rajendra Theagarajah said. 

The group posted a net profit of Rs.1.25 billion (EPS of Rs.7.62), up 46 percent year-on-year (YoY) during the December quarter, but the full-year net profit narrowed by 14 percent to Rs.3.54 billion (EPS of Rs.21.51) due to margin contraction and the hefty marked-to-market losses on its trading portfolio. 

The net interest margin (NIM) of the bank fell to 2.63 percent from 3.31 percent a year ago. Having operated as a development bank, NDB received the commercial banking licence 10 years ago. 

However, the bank has increased its retail and small and medium enterprise (SME) book by as much as 54 percent and the segment now accounts for 39 percent of the group’s assets, Theagarajah told an investor forum held last week. 

“This segment is critical for the future of the bank,” he emphasized, adding that the retail and SME sector would play a leading role in the country’s next phase of economic growth. 

The bank revamped its strategic direction end of last year as the bank thinks it could leverage its historical advantage in project and development financing to empower each individual and SME financially and linking up the latter with the value chains to provide them the market access. 

The veteran banker and the former CEO of Hatton National Bank PLC, who took the reins at NDB in 2013, said he would pull three key levers to ensure the bank constantly delivers shareholder value expected of him while closely watching the NIM. One such key performance indicator (KPI) he constantly monitors is the bank’s ‘fees-to-net income’, which rose from little above 20 percent at the beginning of 2015 to 28 percent by the end of the year. 

The bank makes conscious efforts to bring in fee-based incomes to cushion the pressure on margins. 

“The bank recognizes the pressure on margins and the pressure on volumes,” he explained. 

Further, the ‘cost-to-income’ ratio – a key efficiency ratio in the banking sector – was brought down to 49.5 percent and he expressed confidence in bringing it further down. 

However, the bank is on an aggressive channel expansion drive as it opened five branches year-to-date after opening 10 in 2015. 

The third and most importantly, the bank will drive its efforts to increase its low-cost deposit base – current and savings accounts (CASA) – in a bid to maintain its average cost of funds to a minimum and increase margins. 

The bank had a CASA ratio of 25.6 percent at the end of 2015 but remains well below the industry average that hovers around 40 percent. 

“Our peers are ahead of 40 (percent) and we recognize that. It’s a journey,” said Theagarajah adding that the bank records this CASA ratio in just 10 years since it started raising deposits. 

Notably, the new branches opened during 2014, 2015 and 2016 maintain a CASA ratio between 40 and 70 percent. Matured branches too show a growth in CASA as a result of the bank’s efforts to capture the SMEs. 

www.dailymirror.lk

Royal Ceramics 3Q net up 32% over higher top line

Porcelain and ceramic manufacturer, the Royal Ceramics Lanka PLC group (RCL), increased its net profits by 32 percent to Rs.903.4 million for the quarter ended December 31, 2015 (3Q16) as a result of higher top line, the interim results showed. 

The earnings per share (EPS) for the quarter rose to Rs.8.15 from Rs.6.18 a year ago. The group turnover rose by 10.7 percent year-on-year (YoY) to Rs.7.68 billion. During the quarter, the distribution expenses rose by over 35 percent YoY to Rs.858.3 million. RCL, with its associate and subsidiary companies, is said to be controlling over 80 percent of Sri Lanka’s porcelain and ceramic tile industry. 

The Budget 2016 proposed to remove the import tariff protections on the domestic ceramic tile manufacturers. However, the impacts of this proposal are yet to be seen in the market place. Meanwhile, for the nine months ended December 31, 2015, the RCL group posted a net profit of Rs.2.14 billion (EPS of Rs.19.27), up 67 percent YoY. The top line grew a moderate 12 percent YoY to Rs.19.65 billion and the gross profit rose a strong 32 percent YoY to Rs.6.8 billion. 

During the nine months, the distribution expenses rose 30 percent YoY to Rs.2.24 billion. The segmental results showed the group’s tile and associated products business grew its net profit by 75 percent YoY to Rs.1.93 billion. 

The segment’s top line improved 15.9 percent YoY to Rs.12.4 billion. The sanitaryware business increased the net profits by 33 percent YoY to Rs.309.3 million. 

The top line grew by 16 percent YoY to Rs.1.08 billion. The paint and allied products segment narrowed net losses to Rs.44 million from Rs.75.2 million a year ago. 

The group’s plantation segment turned a net loss of Rs.119.6 million from a net profit of Rs.26.3 million. 

The packaging segment increased the net profits by 36.8 percent YoY to Rs.142.5 million. 

The aluminum business increased its bottom line by 51 percent YoY to Rs.172.4 million. 

The impact of the one-off Super Gains Tax on the group was Rs.262 million. As of December 31, 2015,high-net-worth investor Dhammika Perera’s holding company Vallibel One PLC had a 51 percent stake in the group while the state-controlled private sector pension fund, the Employees’ Provident Fund, had a 13.99 percent stake, up from 13.65 percent in September 2015. 

www.dailymirror.lk

Brandix CFO gets candid on what ails stock market

By Shehana Dain

Bringing a balanced view to the mixed fortunes of the Colombo Stock Exchange, an expert recently stressed the current situation is not as grim as commonly perceived, recalling the country has weathered worse situations in the recent past.

Brandix CFO Hasitha Premaratne in a recent seminar bringing positivism to the gathering stressed that Sri Lanka’s economic woes in the global front were far lower compared to other countries going through severe financial turmoil.

“We are very good at getting into a mindset and saying ‘this is bad’ and keep on talking about it. When the mood is good we say companies with zero assets are good but when the mood is bad companies with fundamentally sound stocks are also bad,” Premaratne said at a presentation titled ‘Macro Shocks Vs Colombo Bourse’ organised by the SEC’s Capital Market Education and Training Division.

The year 2015 was known as the year of volatility in the market as ups and downs were frequent but the overall trend ended up on a negative note. Therefore the ASPI index which started at a peak of 7,600 points ultimately closed the year at 6,800 points,an 8% drop. Meanwhile, 2016 bought forward the negative impact and is yet to bounce back.

Elaborating on the role the capital market community should undertake to bounce back, he said: “The world is in hot water and we seem to be in a better place.

We all know the market will correct itself; today people have forgotten that they earned big sums during the peak period of the stock market and now they only talk about the negatives.”

He also said that even during height of the civil war the market performed well, not going below 3% compared to the current dip of 8%.“The market is performing worse than it was during a time when bombs were blowing up every now and then. It’s because we have got used to a better time and we have forgotten how to handle bad times.”

Addressing possible action plans, Premaratne pointed out: “You must talk to the investors who have never known worse times than thisin this language. Have a diversified portfolio without limiting your exposure to onestock from a small investor point of view. In the meantime be aware of the macro developments and shift the portfolio. This could be questionable in a short-term aspect but in a long-term scenario it’s going to bring more money to the investors.”

According to him, the Chinese economy which has been driving global growth for the past 15 years has shown signs of slowdown, which has impacted global growth. China’s decision to devalue its currencyhad a global impact,especially in this part of the world, particularly on Indian, Malaysian and Taiwanese currencies.

“When we talk of our exchange rate, what we forget is that the Indian Rupee exchange rate which was INR 58 last year is INR 68 today. That’s depreciation of 19%. We speak about our 10% being very bad and our Government not doing its job well but don’t forget our neighbour which has billions of foreign reserves has lost almost 19% of its current value,” he highlighted.

Moreover, the Russian Ruble has depreciated by about 50% due to its political unrest and sanctions imposed subsequently.

Additionally he highlighted that Sri Lanka was a silent beneficiary during the economic calamity the world was currentlyexperiencing.

“The oil price and commodity price crash has majorly impacted the world. Indian steel companies are closing down on a daily basis as their losses per day mount up to $ 8 billion. Even though we say we should produce commodities, at this juncture we are blessed that we are not inthe commodity game. Low oil prices are good for us while it’s not disastrous for the Middle East; it’s a huge comfort factor to bridge our budget deficit. Thus we are the place to be and the place to invest, yet we complain about our situation.”Govt. instability causing red tape for investors

Addressing macro factors and their impact on the Bourse, Brandix CFO Hasitha Premaratne stated that the hung Parliament and unstable Government had been the most impactful red tape which had slowed down CSE growth.

“The Unity Government looks stable on paper but with these diverse views, can we really finalise the decisions that we want to make? One can always argue that it’s democracy, but growth will require a balance between democracy and dictatorship. So we need to find middle ground, otherwise this delay in decision-making is going to affect the stock market from an investor perspective.”

Commenting on Budget 2016, Brandix’s CFO said that it was “disastrous,” adding that continuous change in budget proposals tended to dampen investor sentiment.

“We had one of the most disastrous budgets in the history of this country last November. They were trying to do too much in one budget. Change management isn’t easy because it involves people and changing people isn’t an easy job. These guys thought that reading something in the Parliament would change the game. It looked a very reformist budget which was good in a longer-term economic kind of view but too many policy shifts were proposed and ultimately ended up with the reversing of more than half of them. It gave a serious setback to consistency and stability because even after the Budget was passed there have been many shifts, which has created a lot of uncertainty in investor mindsets,” he opined.

Nonetheless on a confident note he said that the Government would definitely strengthen the tax net via the new Budget, adding that it was the correct thing to do.

“The Inland Revenue Department is going through a revamp. The industry and service sector will get prominence while State institutions are said to go through capital market activity. These policies look realistic, but can they be consistent?” he queried.

He also said that the current UNP Government during its earlier short term as the ruling party had similar good policies but lacked implementation, however he noted that now things could shift to a more positive footing.
www.ft.lk

Sri Lanka's tobacco firm Dec net down; sales plunge q-o-q

SMOKE SIGNAL: Ceylon Tobacco's sales which rose steadily for four quarters have fallen sharply.

ECONOMYNEXT - Profits at Sri Lanka's Ceylon Tobacco Company Plc, fell 8 percent to 1.84 billion rupees in the December 2015 quarter from a year earlier, while revenues and taxes to the government were back to levels seen last year.

Ceylon Tobacco reported earnings of 9.79 rupees per share for the quarter. In the year to December earnings were 56.7 rupees per share on total profits of 10.6 billion rupees which were up from 8.6 billion rupees.

In the December quarter gross revenues fell marginally to 23.70 billion rupees from 23.738 billion rupees a year earlier, tax revenues to the government also fell to 17.44 billion rupees from 17.916 billion rupees a year earlier.

Sri Lanka's economy recovered from a 2012 balance of payments crisis in the last quarter of 2014 and in 2015 a budget expanded deficit with a state salary hike and banks started to lend accumulated up excess liquidity (foreign reserves bought by the Central Bank).

CTC revers rose steadily from 20.4 billion rupees in September 2014 to 26.9 billion rupees in June 2015 and 29.9 billion rupees in September 2015.

But in December revenues were back down to 23.7 billion rupees.

There were tax increases in October 2014 also in October 2015. In September Sri Lanka's rupee fell to in a failed float and has continued to depreciate. The rupee is down to 144 to the US dollar from 131 in the beginning of the year.

Tax revenues which were rose as much 22.6 billion rupees in the September quarter, plunged to 17.4 billion rupees in the December quarter.

Whether the declining spend on cigarettes is a temporary reaction to the tax hike or a more permanent decline in disposable income from the currency collapse is not yet clear.

Ceylon Dollar Bond Fund at ‘BB-/ V5′: Fitch

(LBO) – Fitch Ratings has affirmed Ceylon Dollar Bond Fund’s Fund Credit Quality Rating of ‘BB-‘ and affirmed the Fund Volatility Rating at ‘V5′.

The fund is managed by Ceylon Asset Management (CAM).

The full statement follows:

Fitch Affirms Ceylon Dollar Bond Fund at ‘BB-/ V5‘

Fitch Ratings-London/Colombo-19 February 2016: Fitch Ratings has affirmed Ceylon Dollar Bond Fund’s Fund Credit Quality Rating of ‘BB-‘ and affirmed the Fund Volatility Rating at ‘V5′. The fund is managed by Ceylon Asset Management (CAM).

KEY RATING DRIVERS

The affirmation of the ‘BB-‘ Fund Credit Quality Rating is driven by the weighted average rating factor (WARF) and rating distribution based on the expected composition of the fund and the fund’s investment guidelines. The fund has a limited investment space as it will only invest in US dollar bonds issued by the government of Sri Lanka, licensed banks in Sri Lanka and Sri Lankan corporates that are rated by an international rating agency. This limits the potential investments to 13 issuances totalling just under USD9bn.

The affirmation of the Fund Volatility Rating is driven by the reduced exposure to interest-rate risk and spread risk, while recognising the fund’s ability to extend duration risk to a greater level than that expressed in the target portfolio. The rating is also affirmed because the target portfolio is not yet fully invested and its ultimate composition remains uncertain, and due to Fitch’s conservative assumptions relating to potential volatility in emerging market debt.

ASSET CREDIT QUALITY

The fund’s updated target portfolio comprises of four bonds – three rated ‘BB-‘ and one rated ‘B+’ – which have been issued by the entities detailed above. The target portfolio is mainly exposed either directly to government or government-guaranteed debt. The fund will invest up to 4% of its assets in US-dollar fixed deposits in a licensed commercial bank in Sri Lanka.

By 17 February 2016, the fund had invested in three of the four issuances in the target portfolio (representing 73.4% of the portfolio). The rest of the funds are placed in US dollar deposits with Deutsche Bank Sri Lanka, a branch of Deutsche Bank AG (A-/Stable/F1+). The fund has struggled to reach a substantial size since its launch in July 2014, partly due to volatility in overall market conditions.

CONCENTRATION

The target portfolio will be concentrated with material exposure to Sri Lankan sovereign risk. The concentration risk is a structural feature given the limited opportunities in the fund’s investment universe. Fitch has conducted stress tests on the target portfolio. Based on its analysis, Fitch believes the fund has a limited capacity to withstand negative rating migration in its investments before it would be downgraded to the ‘B’ category.

PORTFOLIO SENSITIVITY TO MARKET RISK

The updated target portfolio has a shorter weighted average life (WAL) than the original model portfolio based on which we assigned the ratings in July 2014. As a result, the target portfolio has a significantly lower sensitivity to interest-rate risk and spread risk than the original model portfolio. Based on the fund’s market risk factor alone, it could achieve a ‘V4′ Fund Volatility Rating. However, in affirming the rating at ‘V5′, Fitch has taken into consideration the fact that the fund is not yet fully invested so its eventual composition may differ from that of the target portfolio, and that the fund manager does have discretion to extend duration above current levels if it sees fit.

Fitch has also taken wider market conditions- notably potential volatility in emerging market debt – into consideration in its rating decision. According to Fitch’s criteria, funds rated ‘V5′ are considered to have high sensitivity to market risk. On a relative basis, total returns and/or changes in net asset value are likely to experience substantial variability across a range of market scenarios due to substantial exposure to interest rates, credit spreads and other risk. The fund will invest in instruments with a relatively long maturity (WAL of 2.52 years in the target portfolio) except for an allocation of up to 4% to three-month deposits. Therefore the fund will be reliant on secondary market liquidity to meet large redemption requests. However, the fund has access to an overdraft facility of 10%, and requires 14 days’ notice on redemptions above 3% of the fund. On the asset side, it will hold only a limited proportion of outstanding debt issues, all of which will be listed on the Singapore Exchange.

FUND PROFILE

The fund is regulated by the Securities and Exchange Commission of Sri Lanka under the Unit Trust Code, 2011. The fund’s trustee is Deutsche Bank Sri Lanka.

THE ADVISOR

Fitch considers CAM suitably qualified, competent and capable of managing the fund. The investment committee has relevant experience, and the company has sufficient sources of information on which to base its decision-making process. Fitch considers the systems supporting the fund’s investment activities to be satisfactory.

CAM is 21%-owned by Sri Lanka Insurance Corporation Limited (SLIC, BB-/Stable), 69% by Ceylon Capital Trust (Pvt) Ltd and 10% by Commercial Credit and Finance PLC (CCF). Fitch believes CAM has support from the shareholders. However, a key challenge facing the business will be to demonstrate sustained growth in assets under management. The Ceylon Dollar Bond Fund is a key component of its growth strategy. CAM has been managing funds since 1999. The current management team has been in place since 2005, and SLIC and CCF invested in the business in 2010 and 2013, respectively.

RATING SENSITIVITIES

The ratings may be sensitive to material changes in the credit quality or market risk profile of the fund. A weakening in the liquidity inherent in the fund or changes to liquidity provisions – such as the manager’s ability to borrow against the net assets of the fund or its ability to delay redemptions – would be viewed as negative. A downgrade of the ratings on the Sri Lankan sovereign or the banks in which the fund has invested its assets, especially the banks whose issues are not government guaranteed, could also lead to a downgrade of the Fund Credit Quality Rating. Changes in exchange-control regulations that could increase transfer and convertibility risks for the fund would also be viewed as negative.

Fitch has capped the fund’s rating at that of the Sri Lankan sovereign (BB-/Stable), given its expected material exposure to the Sri Lankan sovereign. Therefore upside potential for the fund rating is limited. To maintain the bond fund ratings, CAM will provide Fitch with portfolio information, including details of the portfolio’s holdings and credit quality. Fitch closely monitors the credit composition of the portfolio, the credit market risk profile of the investments.

Sri Lanka sells 1 and 2 year bonds; risk premium up

ECONOMYNEXT - Sri Lanka has sold 294 million dollars of 13 and 26 month bonds floating rate bonds which will pay up to 424 basis points above the 6-month London Interbank Offered Rate, sharply up from last year.

The Sri Lanka Development Bonds (SLDB) styled bonds are offered mostly to resident investors who are allowed to hold dollar deposits.

Key buyers include banks who borrow abroad at lower rates and buy into the government bonds.

The debt office said it accepted 247.15 million dollars out of 290.5 million dollars of bids for 1 year 1 month bonds at a weighted average yield of 388.83 basis points above Libor. In May 2015, Sri Lanka sold 13 month bond at 316.69 basis points above Libor.

It also sold 47 million dollars of 2-year 2-month bond after getting bids of 52 million at 424.79 basis points above Libor. In April 21, 2-year bonds were sold at 360 basis points above Libor.

Monetary Policy Review – February 2016 - Policy rates increased

Broad money (M2b) continued to grow at a high pace, recording a growth of 17.8 per cent (year-on-year) in December 2015 compared to 13.4 per cent in December 2014. The year-on-year growth of credit granted to the private sector by commercial banks accelerated during the year, with a growth of 25.1 per cent in December 2015 in comparison to 8.8 per cent in December 2014. In absolute terms, the expansion in private sector credit during 2015 amounted to Rs. 691.4 billion compared to Rs. 223.9 billion in 2014. 

The Colombo Consumers’ Price Index (CCPI, 2006/2007=100) based core inflation continued its increasing trend reaching 4.6 per cent in January 2016, on a year-on-year basis, from 0.8 per cent recorded in February 2015. Headline inflation, as measured by the year-on-year change in CCPI decelerated to 0.9 per cent in January 2016, mainly reflecting the impact of low international commodity prices, broadly favourable domestic supply conditions as well as the relatively high base in January 2015. Year-on-year headline inflation based on the National Consumer Price Index (NCPI, 2013=100) was at 4.2 per cent in December 2015. 

The Central Bank’s decision to increase the Statutory Reserve Ratio (SRR) with effect from 16 January 2016 has permanently absorbed a part of excess rupee liquidity from the domestic money market. The decline in excess liquidity also resulted in market interest rates adjusting upwards. In effect, most market rates have shown adjustments towards the levels observed prior to the reduction in policy interest rates in April 2015.

Considering these developments, the Monetary Board, at its meeting held on 19 February 2016, observed that, in spite of the recent policy measures taken by the Central Bank and some upward adjustments observed in market interest rates, certain risks to macroeconomic stability continue. In particular, the Monetary Board was of the view that the excessive growth of broad money fuelled by domestic credit expansion in the midst of continued upward trend in underlying inflation requires pre-emptive policy measures in order to contain further build-up of demand driven inflationary pressures. Accordingly, the Monetary Board decided to increase the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points each, to 6.50 per cent and 8.00 per cent, respectively, effective from the close of business on 19 February 2016.

Sri Lanka shares end 9-day fall; turnover surges

(Reuters) - Sri Lankan shares closed higher on Friday, ending a nine-session losing streak, with turnover rising to an over-three-week high on block deals in Textured Jersey Lanka.

However, analysts said rising domestic interest rates and global economic worries still remain the main risks.

The benchmark index CSE closed 0.67 percent higher at 6,250.78, edging up from its lowest close since April 29, 2014 hit on Thursday. It has fallen 2.87 percent in the last nine sessions through Thursday.

"The block deal in Textured Jersey translated into positive sentiment," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

"With the deal, we saw some buying coming into the market. But this will be a temporary measure and overall direction in the medium term is still downward."

The key index has fallen around 10 percent this year through Thursday, amid a rise in market interest rates.

Yields on 91-day t-bills rose 13 basis points at a weekly auction on Wednesday to a more-than-two-year high, signalling a further rise in market interest rates. was 1.56 billion rupees ($10.83 million), well above this year's daily average of 731.8 million rupees and highest since Feb 2, on block deals in Textured Jersey Lanka.

Textured Jersey Lanka, which accounted for 70.1 percent of the day's turnover, ended up 1.95 percent at 31.40 rupees.

Foreign investors were net sellers of 1.09 billion rupees worth of shares on Friday, extending the net foreign outflow to 1.37 billion rupees worth of shares so far this year.

Shares in Ceylon Tobacco Company Plc CTC climbed 2 percent and Nestle Lanka Plc NEST rose 1.31 percent while Dialog Axiata Plc DIAL gained 1.01 percent.

The markets will be closed on Monday for a Buddhist religious holiday. 

($1 = 144.0000 Sri Lankan rupees)

Move to reduce broking firms

By Ishara Gamage

Ceylon Finance Today: Securities and Exchange Commission's (SEC's) move to increase the stock brokering sector's minimum capital adequacy ratio will encourage sector consolidation, CSE CEO Rajeeva Bandaranaike said.

He expected this to result in the number of existing stock broking companies to come down to 15, from the current number of 29.

"Prevailing low turnover market conditions definitely dampen stock broker revenues, so we must always encourage sector consolidation", he said, on the sidelines of a market opening ceremony yesterday (18).

Bandaranaike said that the market is expecting some big deals like the selling of government stakes in Lanka Hospitals and Hilton Hotel.

"According to government sources it will happen within next few months", he remarked.
Meanwhile, Orient Finance PLC, rang the opening bell to start trading at the Colombo Stock Exchange (CSE) yesterday.

Speaking at the event, Orient Finance PLC, Chairman Dr. D. C. Jayasuriya (PC) said, "Stock markets worldwide are structured around responsible investment, due compliance and good governance. They were planning to add five more branches to its existing 25 branch network and expand its core business in leasing and hire purchase areas.

These are values which Orient Finance upholds." Commenting on the IPO he said, "I would like to thank individual and institutional investors for the trust they have placed in the company." Jayasuriya also expressed his appreciation to the CSE and Securities and Exchange Commission (SEC) for the assistance provided through the IPO process. CSE Chairman Vajira Kulatilaka speaking at the event said, "We welcome Orient Finance to the list of prestigious companies that are listed on the CSE. The listing is a proud moment for the management, directors and investment bankers who were involved in the process." He further said, "We are pleased to see an increasing number of companies showing an interest in listing on the CSE, especially considering the recent initiatives we have implemented to develop the stock exchange and give it world-class status."

www.ceylontoday.lk

Sri Lanka’s Commercial Bank to raise Rs7bn in debentures

(LBO) – Sri Lanka’s Commercial Bank said it was planning to raise as much as 7 billion rupees from the sale of debentures which will be quoted on the Colombo Stock Exchange.

The bank said in stock exchange filing that it wanted to sell 50 million debentures of 100 rupees each.

But it would offer another 20 million debentures at the discretion of the bank if the initial offer was oversubscribed.

Subscription list will be open on 29 February 2016.

Pan Asia Bank crosses Rs.1 bn net profit

Pan Asia Banking Corporation PLC saw its post tax profit for the year ended December 31, 2015 (FY'15) increasing by 151% to surpass the key milestone of achieving a billion rupee profit.

The bank closed the year with a post tax profit of Rs.1.04 billion well supported by the above average growth in gross loans and advances, higher margins and improved efficiency.

The earnings per share has risen to Rs. 3.53 from Rs.1.41 a year ago. Meanwhile for the quarter ended December 31, 2015 (4Q'15) the bank has increased its after tax profit by as much as 110% to Rs. 289.6 million. The bank has grown its net loans and receivables by as much as 40% or Rs. 23.9 billion during the year to Rs.84.2 billion. This is by far the highest growth in net loans and advances recorded by a licensed commercial bank in 2015.

This is also above the economy's private sector credit growth of 24% for the first eleven months.

The bank's Director and Chief Executive Officer Dimantha Seneviratne said the bank was able to record this exceptional performance due to proactive decisions and effective execution of strategies capitalising on the opportunities in the macro-economy while managing the risks.

"This performance reflects the immense potential of Pan Asia Bank and our contribution to the economy where we have disbursed our funds in to all sectors and regions in the country. Our Retail, SME and Corporate segments reached out to all areas of the country uplifting many industries and living standards of the people whilst creating financial inclusion," he added. The bank has made tremendous progress in its core-banking performance as its fourth quarter Net Interest Income (NII) has risen by 23% to Rs.1.04 billion and the entire year's NII increased by 45% to Rs.3.96 billion..

Despite the pressure on banking sector margins, Pan Asia Bank has expanded its net interest margin to 4.34% from 3.82% in December 2014 due to prudent re-pricing and proactive assets and liability management.

www.dailynews.lk

Softlogic Finance posts Rs 102 mn profit in Q3

Softlogic Finance PLC has reported remarkable growth and improvements in many key indicators in the third quarter as well as the first nine months of the 2015/16 financial year.

Softlogic Finance has boosted net profit by 48.47% year-on-year (YoY), to Rs. 227.18 million as well as Profit Before Tax by 50.04% YoY to Rs. 260.05 million. The growth was even more commendable considering the figures for the third quarter of the 2015/16 financial year (3QFY15/16) with Profit Before Tax increasing by an outstanding 70.06% YoY to Rs. 106.87 million and net profit by 66.98% YoY, to Rs. 102.01 million.

Despite decrease in Interest Income year-on-year as a result of the low interest environment which prevailed during 9MFY15/16, net operating income rose by an impressive 15.16% YoY to Rs. 1,167.31 million, reflecting the company's strong fundamentals and resilience, as well as prudent strategic shift particularly in its assets portfolio.

Total assets as December 31, 2015 grew by a significant 11.56% YoY to Rs. 21,692.40 million, surpassing the growth of Liabilities by 9.3% YoY to Rs. 19,630.42 million.

The company added 11 branches to its network during the last nine months of the current financial year and at present has a network of 27 branches spread across the island.Softlogic Finance is part of the Softlogic Group.
www.dailynews.lk

Stock market set to recover this year

Shirajiv Sirimane

The negative sentiments in the market is expected to recover mid this year said Colombo Stock Exchange CEO Rajeeva Bandaranaike said. He said this negative trend is continuing all over the world and in fact Sri Lanka's stock market is doing better than some of the other countries. He said that though the lower oil prices have a positive impact for the economy, the depreciating rupee (against the dollar) and the high balance of payments has a negative impact on the stock market. "This is a global cycle which was triggered by China."

The Colombo Stock Exchange is also looking to launch an education portal targeting youth next month.

The CSE will also participate in the Sri Lanka Investment Summit which will be held in Singapore on March 15 2016.The event has already attracted over 200 registrations.

Standard Chartered Bank is the lead sponsor of the Sri Lanka Investment Summit which is presented by FinanceAsia. It will be positioned to showcase and highlight the country to potential investors from across the globe. 

www.dailynews.lk

Sri Lankan shares fall for 9th session; further weakening seen

Reuters: Sri Lankan shares fell for a ninth straight session on Thursday to their lowest close in nearly twenty-two months as rising domestic interest rates and global economic worries dented investor sentiment.

The main stock index edged down 0.19 percent at 6,208.89, its lowest close since April 29, 2014. It has fallen 2.87 percent in the last eight sessions to Wednesday.

"The market is waiting for direction. But that direction has not come yet. Investors are waiting for direction on both economical and political side," said Danushka Samarasinghe, research head at Softlogic Stockbrokers.

"We expect the market to weaken further until we see some direction."

The key index has fallen around 10 percent this year through Thursday, amid a rise in market interest rates.

Yields on 91-day t-bills rose 13 basis points at a weekly auction on Wednesday to a more-than-two-year high, signalling a further rise in market interest rates.

Turnover was 534 million rupees ($3.7 million), less than this year's daily average of 706 million rupees.

Foreign investors were net sellers of 81.6 million rupees worth of shares on Thursday, extending the net foreign outflow to 283.3 million rupees worth of shares so far this year.

Among the decliners, Bukit Darah Plc fell 2.2 percent while Nestle Lanka Plc lost 1.5 percent.

($1 = 144.0000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sunil Nair)

Sri Lanka’s Sampath Bank net up 15-pct in Dec quarter

(LBO) – Net profits at Sri Lanka’s Sampath Bank group rose 15 percent to 1.5 billion rupees in the December quarter from a year earlier, interim accounts showed.

The group reported earnings of 8.91 rupees for the quarter against 7.74 rupees per share last year.

For the year ended December the group reported earnings of 38.44 rupees per share on total profits of 6.6 billion rupees, up 26 percent from a year earlier.

In the December quarter, interest income rose 14 percent to 10.7 billion rupees and interest expenses rose 19.1 percent to 5.9 billion rupees, and the bank grew net interest income 9 percent to 4.7 billion rupees.

Fees and commission income rose 23 percent to 1.9 billion rupees and other operating income also rose to 687 million rupees from 493 million rupees.

Individual loan loss provisions rose 88 percent to 234 million rupees while collective provisions declined 175 percent to 60 million rupees.

In the year to December customer loans grew 25 percent to 386 billion rupees and deposits grew 20 percent to 407 billion rupees.

As at the end of December 2015, Gross Non Performing Advances Ratio was 1.64 percent while net Non Performing Advances Ratio was 0.46 percent.