Sri Lanka’s Central Bank allows foreign investors full control: CIFL

(LBO) – Sri Lanka’s troubled Central Investment and Finance Company says the Monetary Board has assured that investors would get 100 percent control once the proposed investment materializes.

Clarifying a newspaper report, CIFL said that such intervention would be subject to other circumstances of the mechanism of proposed investment.

The investors have already expressed their requirement of acquiring 100 percent ownership of the company.

“We sought advice from the Central Bank by our letter dated 20 September,” CIFL said.

“The CB has responded indicating that the Monetary Board is empowered under Finance Business Act to ensure that investors would get 100% control in the event of the proposed investment is materialized satisfactorily.”

Central Investment and Finance Company earlier said they are awaiting a response from a prospective German investor indicating their future plan of action to revive CIFL.

The company said they submitted all clarifications to the investor delegation who visited the island recently.

A high level delegation from Vandell Financial Services arrived in Sri Lanka recently to discuss opportunities of investing in the troubled finance company.

Govt. expects to raise Rs.100bn through revised VAT this year

By Chandeepa Wettasinghe

The government expects to raise as much as Rs.100 billion through the revised Value Added Tax (VAT) law this year, Finance Minister Ravi Karunanayake said yesterday, while shooting down allegations the Joint Opposition made against him for circumventing the due process again in his attempt to legislate the VAT Bill’s latest iteration.

“We’re expecting to collect even more,” Karunanayake said in response to a question by Mirror Business whether the Rs.100 billion revenue target from the revised VAT rates is still realistic given the time restriction for the year.

The claim could have some merit, given the large reductions of the VAT liability threshold, even though VAT will only be collected from VAT liable goods, compared to a blanket charge on the revenue in the past on all goods and services sold by a supplier liable for VAT. Karunanayake had this May set a Rs. 100 billion revenue target to be collected from raising the VAT rates from 11 percent to 15 percent.

However, against the then hopes of having the VAT in effect for 8 months of 2016, the Supreme Court in July had halted the rate hike due to a petition made by the Joint Opposition which claimed that the revised Bill had not followed the parliamentary standing orders of gaining parliamentary and Cabinet approval.

In August, the Supreme Court ruled that the process pursued by the government raising the tax rate was unconstitutional and was against the parliamentary standing orders.

When the next draft of the revised VAT Bill was gazetted last week, the Joint Opposition said that the document was gazetted on September 9, even though Cabinet approval was given on September 13, and that it would go to courts again to stop it from being legislated.

However, Karunanayake refuted the allegation by providing a letter written by the Government Printer Gangani Liyanage, where she had stated the revised VAT Bill was published on the September 13 Extraordinary Gazette, which was a part of the September 9 Gazette.

The increased rates of the VAT Bill, if implemented, is likely to come into effect retrospectively for the two months from May to July as most suppliers had already collected increased rates from consumers.

Meanwhile, Karunanayake said that other forms of revenue had surpassed expectations this year, helping to reach the budget targets.

Cabinet decides to impose 15% VAT on cigarettes

The government has decided to impose the proposed 15 percent VAT on cigarettes and increase the current production tax by Rs.5 for any size cigarette, it was revealed during the Cabinet media briefing yesterday.

The Cabinet of Ministers also has agreed to increase the cess on the import of beedi leaves by Rs.1000 to Rs.3000.

The revised VAT Bill is likely to be presented to parliament for approval in October.

The moves come in the wake of a survey finding that shows 15 percent of people between 18-69 years are engaged in smoking and about 30,000 die annually due to tobacco related diseases.

It has been calculated that government spends about Rs.72 billion annually to treat such patients.

VAT was relegated into excise duty in 2014 on tobacco, liquor and several other products in an attempt to cut back on the plethora of taxes levied on these products.

A re-imposition of VAT on cigarettes could thus create a scenario of ‘VAT on VAT’, as a VAT component is already present in excise duties.

The current effective tax rate on cigarettes is around 81 percent. Additional taxes means the cigarette monopoly in the country, Ceylon Tobacco PLC (CTC) will have to raise the cigarette prices.

CTC in 2015 paid over Rs.90 billion taxes to the government, and this year the tax payment is estimated at Rs.100 billion.

www.dailymirror.lk

Sri Lanka heading for ‘significant’ tea production shortfall

ECONOMYNEXT – Sri Lanka is heading for a ‘significant’ shortfall in tea production this year with the crop down 12% up to August while reduced offerings at the Colombo auctions have pushed up prices, brokers said.

Tea production in August 2016 was down 13% or 3.4 million kilos to 23.01 million kilos from a year ago with all elevations affected, they said.

“If the current extreme weather pattern continues, Sri Lanka’s tea crop is poised to show a significant negative variance by the end of the year,” Forbes & Walker Tea Brokers said.

At this week’s auction, only 5.4 million kilos were offered in contrast to the corresponding sale of last year which had on offer a quantity of 6.8 million kilos.

The August 2016 crop was the lowest in 10 years, the brokers said.

Sri Lanka’s tea production in the first eight months of this year was down 12% to 198.6 million kilos, with low grown teas which make up the bulk of the crop showing the biggest deficit, brokers John Keells Ltd. said.

Prices perked up at this week’s auction owing to the limited quantity on offer, they said.

Sri Lanka IOC unit erodes Chevron dominance in lube market

ECONOMYNEXT – Indian Oil Corporation’s Sri Lanka subsidiary has gained market share from the dominant Chevron unit and state-owned Ceylon Petroleum Corporation in the lubricant market, a new study by the regulator shows.

The Public Utilities Commission of Sri Lanka (PUCSL) said in its lubricant market report 2015 that competition was increasing in island’s lubricant industry.

Sri Lanka's lube market grew at 6.8 percent to 23.4 billion rupees in 2015, with 10.1 percent growth in automotive lube and 7.7 percent increase in industrial lube, the report said.

Currently, 13 operators compete in Sri Lanka's lubricant market and are authorized to import, export and sell lubricants, with only three authorized to blend lubricants.

Chevron Ceylon’s lubricant market share narrowed to 47.58 percent in 2015 from 49.30% in 2014 with its nearest competitor, Lanka Indian Oil Corporation seizing 14.86 percent of market share, up from 12.59 percent in 2014, the report said.

The PUCSL said the market share of Ceylon Petroleum Corporation also decreased to 9.19 percent in 2015 from 10.54 percent in 2014.

Sri Lankan shares end at near one-month closing high

Reuters: Sri Lankan stocks on Thursday posted a third straight session of gains to end at a near one-month closing high, led by gains in financial stocks, a day after yields in T-bills dropped.

The benchmark index of the Colombo Stock Exchange ended up 0.25 percent, or 15.98 points, at 6,528.30, its highest close since Sept. 2.

The central bank's widely expected decision on Wednesday to hold the rates steady suggested that policy makers were keen to support a slowing economy even as they kept a tight leash on rampant credit growth.

Treasury bill yields fell between 16 basis points and 33 basis points after the rate decision.

Analysts said they expected the stock index to rise this week due to the fall in the return on fixed income assets.

The bank has tightened policy three times since December.

After four consecutive weekly losses, the index had posted a weekly gain of 0.1 percent last week.

"The market is poised to move up. We see retail buying coming into the market," said Reshan Kurukulasuriya, chief operating officer, Richard Pieris Securities (Pvt) Ltd.

"All economic indicators are also helping the market to move up. Market will move further up after the budget," he said referring to 2017 budget, scheduled to be presented in the parliament on Nov. 10.

Foreign investors bought a net 6.9 million rupees worth of shares on Thursday. But they have been net sellers of 2.95 billion rupees worth of equities so far this year.

Turnover stood at 479.4 million rupees ($3.27 million), less than this year's daily average of 753.2 million rupees.

Shares in Lanka ORIX Leasing Company Plc climbed 2.5 percent while the biggest-listed lender Commercial Bank of Ceylon Plc edged up 0.7 percent. 

($1 = 146.0000 Sri Lankan rupees) 

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

Pegasus Reef goes for Rs 215 mn refurbishment

Pegasus Reef Hotel Wattala, the first five star hotel in Sri Lanka is investing over Rs. 215million to refurbish the hotel after a lapse of a decade.

The refurbishment is currently underway and the owning company, Carsons Management Services, which also own and operate the Giritale Hotel, will add 78 deluxe rooms and four suites with jaquzies and other modern facilities under this investment.

The suites are also offered to both local and foreign honeymoon couples. With the current 42 rooms that are in operation, the hotel inventory will increase to 124 keys. It will be maintained as a four star hotel.

Hotel's General Manager Harsha Jayasinghe said that with several famed international players opening up hotels in the city they too wanted to compete with them.

"This is why we are investing and refurbishing the hotel to offer five star standard to guests and be the best hotel in Colombo.."

He said that the hotels' main income was from banquets for which the hotel has made a reputation for the past four decades.

"We can accommodate over 500 guests and could even offer facilities to cater to two functions of 200 to 300 guests in each venue. In addition there are conference facilities with multimedia for another 100 guests."

The hotel is one of the largest hotels in Sri Lanka boasting of 11 acres and there are plenty of recreation facilities including two synthetic tennis courts, squash courts, modern gym and indoor sports.

"This is the only tennis court after Colombo upto Negombo and we offer them to school children and visitors as well."

Due to the demand of their Sunday buffet which is almost sold over every Sunday, the hotel has also introduced 'The Fishery', an outdoor restaurant overlooking the sea where one could see two harbours. (Colombo and Fisheries harbor) This has been built to cater to 200 guests and with the large garden and live cooking; it's very popular for private functions.

The hotel also boasts of a large garden which can accommodate over 4,000 visitors and is a popular pick for host 'mega' outdoor events in the beach. Mrs. World and Miss World and similar high profile events were hosted at Pegasus Reef Hotel, Wattala.

The hotel currently being operated with 42 rooms is maintaining over 60% occupancy and with the new wing to be ready by November this year both revenue and occupancy will further increase.

"We see a growing market from Indian, Japanese and Chinese markets and also a very big response form online bookings. The hotel has also been winning several international awards including the Trip Advisor and Holiday Check award. Pegasus is among the exclusive holders of ISO 14001:2004 and OHSAS 18001:2007 certifications.

The General Manager counts over two decades in the hospitality field having started in the F&B department in Cyprus and Holland and moving out to Germany, Austria, Luxemburg and Asia.

Chief Accountant Kapila Gunatilleke said the investment is made from profits generated with the hotel. "We don't have any borrowings." The current refurbishment programme commenced last June and will be ready for the 2016 winter season.
(SS)

www.dailynews.lk

Fitch affirms Alliance Finance at ‘BB+(lka)’

Fitch Ratings Lanka has today affirmed Alliance Finance Company’s National Long-Term Rating at ‘BB+(lka)’ with a Stable Outlook.

At the same time Fitch affirmed AFC’s outstanding senior unsecured debentures at ‘BB+(lka)’ and outstanding subordinated debentures at ‘BB(lka)’. AFC’s rating reflects its established but modest franchise and weaker capitalisation given its growth track record. This is balanced against recent improvements in risk controls. Execution of management’s strategic plan to expand its loan book and adherence to sustainable growth targets underpin the Stable Outlook, and meaningful deviation from the plan may place downward pressure on AFC’s ratings.

Fitch expects AFC to expand at a pace commensurate with its current capitalisation levels over the medium term, led by growth in vehicle financing and other term loans. Consequently, Fitch expects AFC’s capital ratios to remain at current levels, with capital being supported by gains from planned asset disposals and a planned Rs 72 m rights issue.

www.dailynews.lk

Fitch affirms Abans at ‘BBB+(lka) with Stable Outlook

Fitch Ratings has affirmed Abans PLC’s National Long-Term Rating at ‘BBB+(lka)’ with a Stable outlook. Fitch has also affirmed the National Long-Term Rating on Abans’ unsecured redeemable debentures at ‘BBB+(lka)’ and its outstanding commercial paper at National Short-term Rating of ‘F2(lka)’.

The ratings reflects Fitch’s expectation that the company will maintain net leverage, as measured by lease-adjusted net debt to operating EBITDAR (excluding Abans Finance PLC), below 5.5x, the level at which Fitch would consider negative rating action, over FY17-FY20 (financial year ending 31 March).

Abans’ leverage will be restrained by modest levels of capex and better working capital management amid the weakening operating environment. However, Fitch does not expect Abans’ credit profile to improve to the extent that positive rating action will be warranted, unless there is significant deleveraging.

www.dailynews.lk

ICRA Lanka assigns [SL]BB+ rating to Orient Finance Lanka Limited

ICRA Lanka Limited, a group company of Moody’s Investors Service has assigned the Issuer rating of [SL]BB+ with a stable outlook to Orient Finance.

ICRA Lanka has also assigned the issue rating of [SL]A-(SO)with a stable outlook to the Rs 1,000 million Rated Guaranteed Redeemable Debentures programme of OFP. The issuer rating assigned to OFP draws comfort from OFP’s parent company Janashakthi PLC’s support onfinancial, managerial and operational aspects along with its experienced Board and senior management team.

www.dailynews.lk

Fitch rates DFCC Bank’s Subordinate Debentures ‘A+(lka) (EXP)’

Fitch Ratings has assigned DFCC Bank PLC’s (DFCC; AA-(lka)/Negative) proposed subordinated debentures of up to LKR7bn an expected National Long-Term Rating of ‘A+(lka)(EXP)’. The proposed debentures, which will have tenors of five and seven years and carry fixed coupons, will be listed on the Colombo Stock Exchange. DFCC expects to use the proceeds to strengthen its Tier II capital base and manage maturity mismatches.

The final rating is subject to the receipt of final documentation conforming to information already received. The proposed subordinated debentures are rated one notch below DFCC’s National Long-Term Rating to reflect the subordination to senior unsecured debt.

www.dailynews.lk

Sri Lanka's Perpetual Treasuries profits up 434-pct to Rs5.1bn

ECONOMYNEXT - Perpetual Treasuries Limited, a primary gilt dealership, connected the family of a controversial former Sri Lanka central bank governor, has made a profit of 5.1 billion rupees for the year to March 2016 up 434 percent from a year earlier, published data show.

The firm reported capital gains of 5.2 billion rupees from bond trading in the year to March 2016, up 581 percent from 767 million rupees a year earlier, accounts published in Sri Lanka's Sunday Observer newspaper showed.

Under central bank regulations, all primary dealers have to publish their accounts.

Return on beginning-of-the-equity of 1,065 million was 481 percent.

Sri Lanka's bond markets were hit by a series of controversial bond auctions involving allegations rigging and insider dealing in 2015 and 2016 during the tenure of ex-Central Bank Governor Arjuna Mahendran.

Perpetual Treasuries is connected to Mahendran's son-in-law and he came under fire over conflicts of interest as long term bonds were sold at high rates where large volumes.

Sri Lanka's President Maithripala Sirisena declined to renew Mahendran's term of office amid the allegations, which became the focus of a parliamentary inquiry.

Mahendran has denied wrongdoing.

Interest income at Perpetual Treasuries rose 162 percent to 942.8 million rupees and interest expenses rose 132 percent to 589.1 million rupees, and net interest income rose 233 percent to 353 million rupees.

The majority of profits of a primary dealer however comes from capital gains. Primary dealers in government securities, bids at government bond auctions and sell them to other buyers making a margin.

The price of a government bond rise when interest rates falls and the price falls when interest rates go up.

When rates fall, a dealer with a portfolio can sell and make profits from bond bought at a higher interest rate (low price). Interest rate volatility provides opportunities for dealers to make gains by selling down their portfolio.

Concerns were raised that after selling government bonds at high interest rates (low prices) by accepting sharply higher volumes of bids from favoured dealers effectively rigging the auctions, the bonds were then dumped dealers at low rates (high prices) on the Employees Provident Fund, which was managed by the central bank.

Sri Lanka Treasuries yields fall sharply

ECONOMYNEXT - Sri Lankan Treasury Bill yields fell sharply at Wednesday’s auction with the 03-month bill down 16 basis points to 8.55 percent from 8.71 percent last week, data from the debt office showed.

The yield on the 06-month bill fell 30 basis points to 9.39 percent from 9.69 percent last week, the debt office, a unit of the central bank, said.

The yield on one-year bills fell 27 basis points to 10.11 percent from 10.38 percent last week.

The debt office got bids worth Rs85 billion and accepted bods of Rs21 billion.

Sri Lanka's Distilleries on negative credit watch

ECONOMYNEXT – Fitch Ratings said it has placed Distilleries Company of Sri Lanka PLC's National Long-Term Rating of 'AAA(lka)' on Rating Watch Negative (RWN) after a group share swap and restructuring that could increase borrowings and dividend payments.

The rating agency said that in the restructuring in the group in August 2016, Melstacorp (MC), a 100% subsidiary of Distilleries, issued new shares to Distilleries for which the maker of alcoholic beverages paid with a Rs24.8 billion promissory note.

Shareholders of Distilleries are due to swap their shares for shares in MC on 30 September 2016, after which Distilleries will become a fully owned subsidiary of MC.

“The RWN reflects the potential for an increase in financial risks to Distilleries,” a Fitch statement said.

“Fitch believes that this, combined with the risk of higher dividends to Melstacorp (MC) could lead to a weakening in Distilleries' credit metrics. Resolution of the RWN will depend on how the company manages the promissory note obligation and recapitalises the company.”

The full Fitch statement follows:

Fitch Ratings-Colombo-28 September 2016: Fitch Ratings has placed Distilleries Company of Sri Lanka PLC's (DIST) National Long-Term Rating of 'AAA(lka)' on Rating Watch Negative (RWN).

The rating action follows a restructuring in the group. In August 2016, Melstacorp (MC), a 100% subsidiary of DIST, issued new shares to DIST for which the maker of alcoholic beverages paid with a LKR24.8bn promissory note. Shareholders of DIST are due to swap their shares for shares in MC on 30 September 2016, after which DIST will become a fully owned subsidiary of MC.

The RWN reflects the potential for an increase in financial risks to DIST. Fitch believes that this, combined with the risk of higher dividends to MC could lead to a weakening in DIST's credit metrics. Resolution of the RWN will depend on how the company manages the promissory note obligation and recapitalises the company.

Fitch expects to resolve the RWN once we are able to fully assess DIST's capital structure. Although the company plans to complete various transactions impacting its capital structure in the next three months, a resolution of the RWN could take longer than the typical six-month period if these plans are delayed.

KEY RATING DRIVERS

Rising Financial Risks: The financial profile of DIST has weakened as it now has a LKR24.8bn liability due to the purchase of new MC shares. However, there has been no cash outflow and the company is looking at several alternatives to meet this obligation, including a new share issue by DIST. Following the share swap, DIST will have a negative net asset position as it will write down its investment in MC. In addition, dividends to MC from DIST could also increase, which could put pressure on DIST's rating.

Likely to Raise Equity: DIST does not plan to borrow to meet the promissory note obligation and plans to raise new equity, which could contain DIST's leverage within acceptable levels for its 'AAA(lka)' rating. However, if DIST borrows to meet the promissory note obligation, leverage as measured by net adjusted debt to EBITDAR could increase to above 3.0x.

Historically Conservative Capital Structure: DIST has until now adopted a conservative capital structure as reflected in its low leverage of 0.8x at the end of the financial year to March 2016 (FYE16). The leverage calculation also takes into account group debt guaranteed by DIST. DIST's borrowings are entirely short-term in nature and fund working capital requirements. Although the company may raise new equity to satisfy the promissory note, MC's growth plans could rely on increased dividends from DIST, which will restrict DIST's free cash generation.

Resilient Business Profile: DIST continues to be the market leader in alcoholic beverage production in Sri Lanka due to its strong brands, which drive demand and access to retail points across the island. As of the latest published statistics, DIST produced 67% of Sri Lanka's hard liquor. We expect profitability to remain healthy with EBITDAR margin of over 35% in the medium term (41% in FY16), supported by DIST's ability to pass on tax increases to the consumer.

KEY ASSUMPTIONS

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

- Revenue to grow by mid-single digits over the next three years

- EBITDAR margin to moderate to 37% by FY20

RATING SENSITIVITIES

The resolution of the RWN will depend on the details of DIST's capital structure, which could take longer than the typical six month period if its plans are delayed. This will also be dependent on the plans obtaining the necessary approvals from the shareholders and SEC.

Negative: The Negative Watch could result in a downgrade if DIST increases its financial leverage to meet its promissory note obligation. The rating may be downgraded by multiple notches if DIST adopts a more shareholder-friendly distribution policy to its new parent, MC.

Sri Lanka’s JKH launches 2nd luxury apartment block

ECONOMYNEXT – Sri Lanka’s John Keells Holdings group said it plans to build a second high-rise luxury apartment block after the success of the first one, half of whose floor space has already been sold.

Pre-bookings for ‘The Suites at Cinnamon Life’, the second residential tower to be built as part of a 4.5 million square foot integrated resort by JKH unit Waterfront Properties (Private) Limited, have exceeded 15%, a statement said.

The 196 apartments in the second residential tower, which will rise 39 stories to a height of 136 meters, are priced at US$400,000 upwards.

Construction of the US$850 million integrated resort project is by a consortium of contractors headed by Hyundai Engineering and Construction.

It includes an 800-room luxury Cinnamon hotel, a shopping and entertainment mall, office spaces, food and beverage outlets, ballroom, and conferencing, theatre and banqueting spaces with capacity for 5,000 people designed to cater to MICE (Meetings, Incentives, Conferences, and Events) tourism.

Suresh Rajendra, President, Property Sector of JKH, said the project is scheduled for completion in the latter part of 2019 and will be operational in early 2020.

Roshani Moraes, Executive Vice President, Property Sector of JKH, said over 50% of the floor space of the first residential tower ‘The Residence at Cinnamon Life’ has already been sold.

“Given our success with the first tower, we decided on the second tower,” she told a news conference.

“It’s almost like an investment tower. The two-bed roomed apartments will have the greatest demand for rental purposes. Apartments in our older properties have outperformed the market in rental returns and capital appreciation.”
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Other properties of JKH’s property arm include the Monarch and Emperor at Crescat City; Onthree20; and its latest completed project, 7th Sense - Gregory’s Road.

Moraes said a 30-storey office tower is also planned which could be an investment instrument.

“We are offering investment opportunities in the commercial space, which thus far have been available only on a rental basis with the exception of one or two floors in other developments,” she said.

Krishan Balendra, President of JKH’s Leisure Sector, said the integrated facility will have the largest banqueting and conferencing facility in Colombo with the group targeting the MICE market.

“We running two five-start hotels – Cinnamon Grand and Cinnamon Lakeside and we know we don’t have conferencing and entertainment facilities for regional conferences or even very big weddings, for instance from India.”

Monetary Policy Review – September 2016 - Policy rates unchanged

According to the Department of Census and Statistics (DCS), the Sri Lankan economy is provisionally estimated to have grown by 2.6 per cent, year-on-year, during the second quarter of 2016 compared to the growth of 7.0 per cent recorded in the same period of 2015. Meanwhile, growth in the first quarter 2016 was revised to 5.2 per cent.

In the second quarter of 2016, Services related activities grew by 4.9 per cent while Industry related activities recorded a moderate expansion of 2.2 per cent. Agriculture related activities, which were affected by adverse weather conditions, recorded a contraction of 5.6 per cent in the second quarter of the year. A combination of improvements in the Purchasing Managers’ Index (PMI) and business confidence as well as favourable base effects in the fourth quarter of 2016 are expected to contribute to a rebounding of growth in the second half of the year.

On the external front, the deficit in the trade account expanded marginally by 0.7 per cent, year-on-year, during the first seven months of 2016 as the decline in export earnings was greater than the contraction in the expenditure on imports. Strengthening the external position, earnings from tourism increased by an estimated 16.0 per cent during the first eight months of the year, while workers’ remittances increased by 4.5 per cent during January-July 2016. In addition to the confidence gained from the Extended Fund Facility of the International Monetary Fund (IMF-EFF), increased investment inflows on account of government securities as well as other financial flows to the government helped to stabilise the domestic foreign exchange market. Reflecting these developments, gross official reserves were estimated to have improved to US dollars 6.6 billion by end August 2016, while the Sri Lankan rupee has recorded a marginal depreciation thus far during 2016.

Reflecting the normalisation of domestic supply conditions as well as the suspension of the implementation of certain changes to government tax policy, inflation declined further in August 2016, on a year-on-year basis. Core inflation also moderated on a year-on-year basis, reflecting the impact of the latter effect.

In the monetary sector, broad money expansion continued to remain high at 17.8 per cent in July 2016, on a year-on-year basis, compared to 17.0 per cent recorded in the previous month. The expansion in monetary aggregates was mainly driven by credit flows to the private sector and the government from the banking system, while credit to public corporations continued to contract during the month. The growth of credit granted to the private sector by commercial banks was at 28.5 per cent, year-on-year, in July 2016, compared to 28.2 per cent in the previous month. Market interest rates, which increased in response to monetary tightening measures of the Central Bank, are expected to slow down credit expansion in the months ahead.

Considering the above developments, the Monetary Board, at its meeting held on 27 September 2016, was of the view that adequate measures are currently in place to contain monetary expansion at levels supportive of maintaining the macroeconomic balance while facilitating economic activity. Accordingly, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 7.00 per cent and 8.50 per cent, respectively.


Sri Lankan shares post 3-wk closing high as banks gain on rate decision

Reuters: Sri Lankan stocks closed higher on Wednesday, hitting a more than three-week closing high, led by gains in banking stocks after the central bank held the key monetary policy rates steady.

The central bank's widely expected decision earlier on Wednesday to hold the rates steady suggested that policy makers were keen to support a slowing economy even as they kept a tight leash on rampant credit growth.

Treasury bill yields fell for the second session at Wednesday's auction. They fell between 16-33 basis points.

Analysts said they expected the stock index to rise this week due to the fall in the return on fixed income assets.

The bank has tightened policy three times since December.

The benchmark index of the Colombo Stock Exchange ended 0.45 percent, or 29.03 points, up at 6,512.32, its highest close since Sept.6.

After four straight weekly losses, the index had posted a weekly gain of 0.10 percent last week.

"Investors are in a positive mood and sentiment is slowly improving with foreign buying," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Holding rates is just another confidence booster at a time the market has had a turnaround."

Foreign investors bought a net 73.2 million rupees worth of shares on Wednesday. But they have been net sellers of 2.96 billion rupees worth of equities so far this year.

Turnover stood at 1.05 billion rupees, well above this year's daily average of 754.7 million rupees.

Shares in biggest listed lender Commercial Bank of Ceylon Plc rose 1.4 percent while conglomerate John Keells Holdings Plc rose 0.59 percent. 

($1 = 146.0000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan shares end at 2-week closing high; blue chips lead

Reuters: Sri Lankan stocks ended slightly firmer on Tuesday to a two-week closing high led by blue chips, amid foreign outflows and tax hike concerns.

Foreign investors sold a net 22.3 million rupees worth of shares on Tuesday extending the year-to-date net forging outflow to 3.03 billion rupees worth of equities.

The International Monetary Fund (IMF) on Friday said Sri Lanka's government, which has failed to raise taxes as promised when it received a $1.5 billion loan from the lender in June, needs to implement a tax reform package without further delay.

The reform package will include raising taxes to increase the government revenue and reduce fiscal deficit.

The benchmark index of the Colombo Stock Exchange finished up 0.07 percent, or 4.35 points, at 6,4783.29.

After four straight weekly losses, the index posted a weekly gain of 0.10 percent last week.

Turnover stood at 895.8 million rupees, more than this year's daily average of 752.2 million rupees.

Shares in conglomerate John Keells Holdings Plc rose 1.2 percent, while Commercial Credit and Finance Plc jumped 11 percent and Sri Lanka Telecom Plc rose 0.7 percent.

($1 = 146.0000 Sri Lankan rupees) 

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

Oxford Business Group produces infographic on Sri Lanka

Country eyeing higher levels of foreign investment across the economy

An infographic produced by the global publishing, research and consultancy firm Oxford Business Group (OBG) charts Sri Lanka’s journey towards global integration and its efforts along the way to boost broader-based Foreign Direct Investment (FDI).

OBG’s infographics are essential, at-a-glance tools that provide readers and viewers with a facts-and-figures summary of a market’s latest economic development. Brief and to the point, they complement the in-depth, sector-by-sector coverage in OBG’s country reports.

Data shows that FDI into Sri Lanka increased more than three-fold in the decade to 2014, with infrastructure the top recipient.

OBG’s infographic noted tourism’s rising contribution to GDP, with foreign arrivals up 18% in 2015 and expected to more than double by 2020. It also highlighted the positive impact that strong tourism growth was having on real estate, especially hotel supply, with stock rising by 35.7% in the three years to 2014 and further luxury developments in the pipeline.

Sri Lanka’s strategic position on the main sea trade routes of Europe and Asia continues to give the country a competitive edge, OBG found, with the country set to build on its status as a shipping and trans-shipment hub. The infographic noted that export throughput rose by 29.8% in the five years to 2015.

Further analysis of the country’s economy is available in Oxford Business Group’s latest publication, The Report: Sri Lanka 2016. The report is a vital guide to the many facets of the country, including its macroeconomics, infrastructure, banking and other sectoral developments. It also contains interviews with leading representatives. The Report: Sri Lanka 2016 is available in print and online.

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia and Latin America and the Caribbean. Through its range of print and online products, OBG offers comprehensive and accurate analysis of macroeconomic and sectoral developments, including banking, capital markets, insurance, energy, transport, industry and telecoms.

The critically-acclaimed economic and business reports have become the leading source of business intelligence on developing countries in the regions they cover. OBG’s online economic briefings provide up-to-date in-depth analysis on the issues that matter for tens of thousands of subscribers worldwide. OBG’s consultancy arm offers tailor-made market intelligence and advice to firms currently operating in these markets and those looking to enter them.
www.ft.lk

Sri Lanka’s Commercial Bank kicks off operations in Maldives

(LBO) – Sri Lanka’s Commercial Bank of Ceylon today started operations of its subsidiary in Male, Maldives, the bank said in a stock exchange filing.

Commercial Bank of Maldives private limited is a fully-fledged banking subsidiary which is set up in partnership with a Maldivian company.

The bank last year said the partner Maldivian group of companies is involved in businesses ranging from financial services, hotel and tourism and retailing.

Commercial Bank said it would invest in a 55 percent stake in this banking subsidiary with the remaining 45 percent owned by the partner company.

The new bank is to offer individuals and corporate entities in the Maldives a variety of financial services including savings and current accounts, FDs, ATMs, remittances, housing and other loans.

Sri Lankan companies operate hotels in the Maldives, a large number of Sri Lankans are employed in the Maldivian hospitality industry, and Sri Lanka provides services to Maldivian visitors in many spheres including education and healthcare.

Overseas Realty to raise Rs7.3bn in rights issue for Havelock City

(LBO) – Sri Lanka’s Overseas Realty is to raise 7.3 billion rupees by way of a rights issue, the company said in a stock exchange filing.

The company is to issue 355 million new ordinary shares at 20.50 rupees each in the ratio of two new shares for every five shares held.

The proceeds will be utilized to invest in the mixed development project of Havelock City Pvt Ltd.

The rights issue is subject to obtaining the listing approval of the stock exchange and the approval of shareholders at a General Meeting of the Company.

The current stated capital of the company is 11.2 billion rupees.

Overseas Realty engages in land and property business with the development of property for investment, property management and restaurant operation.

Sri Lankan shares end flat amid foreign outflows

Reuters: Sri Lankan stocks ended steady on Monday, as gains in financial shares were offset by losses in consumer staples, amid foreign outflows and tax hike concerns.

Foreign investors sold a net 183 million rupees worth of shares on Monday extending the year-to-date net forging outflow to 3.01 billion rupees worth of equities.

The International Monetary Fund (IMF) on Friday said Sri Lanka's government, which has failed to raise taxes as promised when it received a $1.5 billion loan from the lender in June, needs to implement a tax reform package without further delay.

The reform package will include raising taxes to increase the government revenue and reduce fiscal deficit.

The benchmark index of the Colombo Stock Exchange ended flat, dropping 0.2 points to 6,4789.94.

After four straight weekly losses, the index posted a weekly gain of 0.10 percent last week.

"Nothing much happened today. But the good thing was that the buying interest was there," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd, adding that the liquidity shortage in the market was "temporary".

Turnover stood at 614.1 million rupees, less than this year's daily average of 752.2 million rupees.

Consumer stocks such as Ceylon Tobacco Company Plc slid 1 percent, while Ceylon Cold Stores Plc fell 2.33 percent, bringing down the overall index. Overseas Realty Plc dived 8.30 percent.

Meanwhile, shares in Commercial Leasing and Finance Plc jumped 8.11 percent while Commercial Bank of Ceylon Plc rose 0.71 percent.

($1 = 146.0000 Sri Lankan rupees) 

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

Sri Lanka’s CIFL awaits response from German investor for bailout

(LBO) – Sri Lanka’s troubled Central Investment and Finance Company says they are awaiting a response from a prospective German investor indicating their future plan of action to revive CIFL.

In a stock exchange filing, the company said they submitted all clarifications to the investor delegation who visited the island recently.

A high level delegation from Vandell Financial Services arrived in Sri Lanka last week to discuss opportunities of investing in the troubled finance company.

The delegation also met President and Finance Minister in addition to other fact finding missions to regulatory authorities.

“The investors have expressed their desire to acquire 100% of the ownership of the company,” the company said.

“We have now submitted all the clarifications to the Investor delegation and awaiting their response from them in the form of a MOU indicating the future plan of action setting the milestones in reaching the final objective of reviving CIFL and handing over the management to the new investors.”

The German investors would infuse 5 billion rupees to revive CIFL, according to the President of CIFL Depositors Association, media reports said.

The delegation has also shown interest in investing in the Northern and Eastern Provinces.

Lanka IOC eyes Indonesia lubricant market

(LBO) -Lanka IOC says they are exploring the option of exporting lubricants to some of the regional countries and hope to enter the Indonesian market soon.

“As of now we are already exporting to the Maldives and are thinking of a few other countries,” Shyam Bohra, managing director Lanka IOC said at the introduction of its “Global Container” packaging for SERVO Lubricants, Thursday.

“We are looking to enter Indonesia by the end of the year.”

Currently there are 13 players in the Sri Lankan market and the total consumption is 49,000 tonne per year.

“We are pleased to introduce the Global Container concept to Sri Lanka. With this we expect a sales growth of 2-3 percent,” Bohra said.

“Our market share is 17 percent at the moment and we are looking at increasing it to 20-25 percent in the next five years.

Lanka IOC blends Servo brand of lubricants at lube blending plant, Trincomalee and is the only private oil company other than the state-owned Ceylon Petroleum Corporation (CPC) that operates over 199 retail petrol/diesel stations in Sri Lanka.

Sri Lankan shares up for third straight session on blue chips

Reuters: Sri Lankan stocks edged up for a third straight session on Friday posting a more than one week closing high, led by gains in large cap shares amid investor appetite for stocks that took a hit earlier in the week due to a proposed tax increase.

The International Monetary Fund (IMF) said on Friday that Sri Lanka's government, which has failed to raise taxes as promised when it received a $1.5 billion loan from the lender in June, needs to implement a tax reform package without delay.

The IMF also said that central Bank should be ready to tighten monetary policy further if inflation or credit growth continue to rise.

The benchmark index of the Colombo Stock Exchange ended 0.22 percent or 14.27 points higher at 6,479.21, its highest close since Sept. 14.

The index gained 0.10 percent this week, after four straight weeks of losses.

"Interest in blue chips is continuing," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd. "Investors are no longer on wait-and-see and are starting to buy in to the stocks."

Foreign investors bought a net 112.6 million rupees worth of shares on Friday. But they have been net sellers of 2.83 billion rupees worth of equities so far this year.

Turnover stood at 886.3 million rupees, more than this year's daily average of 753 million rupees.

Shares in Distillers Company of Sri Lanka Plc rose 4.69 percent while Asian Hotel Properties Plc jumped 7.14 percent, driving the overall index higher.

The bourse had hit a more than seven-week low on Tuesday as selling pressure on stocks that were expected to take a hit from a proposed tax increase weighed on sentiment.

($1 = 146.0000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan shares rise on blue chips; foreign outflow hits 7-mth high

Reuters: Sri Lankan stocks hit a one-week closing high on Thursday, led by blue chips as investors picked up beaten down counters, even as foreign investor outflow touched a seven-month high, mainly due to selling in shares of National Development Bank.

The benchmark index of the Colombo Stock Exchange ended 0.21 percent higher at 6,464.94, its highest close since Sept.15.

"Index turned green today with sudden buying interest in blue chip counters," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd. "Buying interest is there mainly in diversified shares."

Foreign investors sold a net 6.38 million shares in National Development Bank, ahead of a change in its top management, Mathew said. NDB ended 1 percent higher.

Foreign outflow hit its highest since Feb. 19 as offshore investors sold a net 867.8 million rupees ($5.95 million) worth of equities on Thursday, extending the year to date net foreign outflow to 2.94 billion rupees worth shares.

Turnover stood at 2.09 billion rupees, more than twice this year's daily average of 752.3 million rupees.

Shares in conglomerate John Keells Holdings Plc rose 0.9 percent, while Ceylon Tobacco Company Plc gained 1.3 percent, driving the overall index higher.

The bourse hit a more than seven-week low on Tuesday as selling pressure on stocks that were expected to take a hit from a proposed tax increase weighed on sentiment. 

($1 = 146.0000 Sri Lankan rupees) 

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

Infrastructure: Port city to transform Colombo, boost facilities

(LBO) – Sri Lanka’s planned Port City project says its vision is to offer a modern and sustainable lifestyle without comprising services delivered to attract high net-worth individuals in the region.

Several hectares of public parks will increase facilities available to the public and the amount of commercial office space in Colombo will quadruple, officials said.

“We want to create a South Asian hub attractive to high net-worth individuals to set up a second home to live, work and play while also incorporating into the hub a world class business and financial centre, luxury residences, entertainment and lifestyle destinations,” Liang Thow Ming, chief sales and marketing officer, CHEC Port City Colombo (Pvt) Ltd said.

“Our city will be a blue and green city with a high quality environment founded on latest sustainable concepts and practices.”

He was speaking at the LBR LBO Infrastructure Summit 2016 themed “Realizing The Transformative Power of The Western Region Development: Opportunities and Challenges.”

Sri Lanka’s government officially informed the Chinese investors of resuming the construction of the Port City project in capital Colombo, in March 2016, one year after its suspension.

The project was under water for a long period of time as the new administration questioned project approvals by the last regime.

The Port City is to be constructed between the Southern edge of the new Colombo South Port and the Fort Lighthouse. The total area of sea to be reclaimed is 252 hectares.

The Port City is expected to boost the local economy by generating millions of dollars upon its completion and generate over 80,000 jobs and includes a marina and yacht club, a central boulevard, a sea view apartment complex and a five-star hotel, shopping and entertainment center, office space, a mini golf course, and many other modern facilities.

Thow Ming says the projects challenge is to have reliable and integrated infrastructure solutions where you connect water, energy and waste loops to reduce losses, increase recycling and recovery.

“We need to create the best balance between management on a central and a local level.”

“Use the eco cycle model as a tool to integrate infrastructure solutions and gain synergies integrate centralized systems for Port City i.e. waste handling of recyclables and water reservoirs.”

It will also use local solutions on a building level when optimal like energy solutions users’ awareness concerning their actions and the consequences they have are achieved through education and information on all levels, he added.

Textured Jersey changes its name to Teejay Lanka

(LBO) – Sri Lanka’s Textured Jersey, a leading knitted fabric company, has officially changed its name to Teejay Lanka with effect from 15th September 2016.

The company said in a stock exchange filing that the name change had the shareholder approval through a special resolution at the Annual General Meeting.

Sri Lanka nationwide inflation slows to 4.5-pct in August

ECONOMYNEXT – Nationwide inflation in Sri Lanka in August 2016 fell to 4.5% from 5.8% in July 2016, on a year-on-year basis, the Department of Census and Statistics said.

The National Consumer Price Index (NCPI) fell by 1.6% to 113.3 index points in August 2016 from 115.2 index points in July 2016 mainly due to the decrease in prices of items in the Food category.

Prices of vegetables, green chillies, sugar, coconut, sprats, rice, dhal and red onions decreased during the month, a statement said.

Within the Non-food category prices in Health; Communication; and Recreation and Culture subcategories decreased during August 2016.

Prices in the Clothing and Footwear; Furnishing, Household Equipment and Routine Household Maintenance, Transport, Restaurants and Hotels and Miscellaneous Goods and Services sub-categories increased during August 2016.

Prices of Alcoholic Beverages and Tobacco increased in August 2016 while prices in the Education sub-category remained unchanged during the month.

“The NCPI Core inflation, which reflects the underlying inflation in the economy decreased to 6.0% in August 2016 from 6.8% in July 2016, on year-on-year basis,” the statement said.

Sri Lanka Treasury Bill yields ease at auction

ECONOMYNEXT – Sri Lankan Treasury Bill yields eased at Wednesday’s auction with the 03-month bill falling to 8.71% from 8.75% at the auction of 7 September when they were last sold, data from the debt office showed.

The six-month yield fell to 9.69% from 9.71% and the one-year yield fell 10.38% from 10.39%.

The debt office, a unit of the Central Bank, got bids worth Rs51 billion and accepted Rs15.9 billion worth of bids.

Fitch rates Nations Trust Subordinated Debt ‘A-(lka)(EXP)’

Fitch Ratings has assigned Nations Trust Bank’s proposed Basel II-compliant subordinated debentures of up to Rs 5 bn an expected National Long-Term Rating of ‘A-(lka)(EXP)’.

The proposed debentures will mature in five years and carry fixed and floating coupons. The debentures are to be listed on the Colombo Stock Exchange. NTB plans to use the proceeds to support its Tier 2 capital base, diversify its funding mix and reduce structural maturity mismatches.

The final rating is subject to the receipt of final documentation conforming to information already received.The proposed subordinated debentures are rated one notch below NTB’s National Long-Term Rating to reflect the subordination to senior unsecured creditors.

NTB’s ratings reflect its expanding franchise, improved efficiency and its high and increasing exposure to products and customer segments that are more susceptible to economic cycles. The Outlook is Stable.
www.dailynews.lk

‘Foreign investors with eye on future buying local undervalued stocks’

By Hiran H.Senewiratne

"Many foreign investors are currently buying undervalued, good local stocks that have a future market potential in emerging and frontier markets. Therefore, the Colombo Stock Exchange (CSE) is becoming a popular investment destination for such investors, Colombo Stock Brokers Association (CSBA) president Ravi Abyesuriya said.

"At this juncture the CSE is not moving to the expected level and most local retail investors are not active in the market. However, foreign investors who are mainly investing in emerging and frontier markets, like Sri Lanka, are now a main visible factor, Abeysuriya told The Island Financial Review yesterday.

He said foreign investors are using the current opportunity to the maximum while Sri Lankan investors are merely looking at the market without buying such undervalued stocks. "Therefore, it indicates the net foreign inflow has increased considerably, which is a great indication that foreign investors are more active than the local investors, he elaborated.

"At present, locals do not a see that the market is moving or growing but the industry has great potential to grow as we have a lot of catching up to do when compared to our regional peers, he added.

"Due to market fluctuations, we see the small retailers panicking, whereas the foreign investors are quite positive and they are making use of the opportunity to the maximum under this scenario. Therefore, with the current government economic policies we could anticipate real growth in the market, Abyesuriya explained.

CSE's Head of Market Development, Niroshan Wijesundera told The Island Financial Review that where foreign investors are concerned they are more active than local retail investors.

He said that that from August 1 to September 15, net foreign inflow was Rs 2.3 billion, which is a positive development where the CSE is concerned.

Marketing Manager, Candor Equities Limited Buddhika Payoe said yesterday that the market's foreign investor activities seem to be very strong as they were on the buying side, while the local retail investor market sentiment is quite low due to rumoured political developments, the VAT issue and many more factors.

Yesterday, the CSE recorded a turnover of Rs 459 million, while the All Share Price Index went down by 20.50 points and the Sand P SL 20 by 4.87 points. "When we study yesterday's market it is clear that foreign investor participation is significant due to poor local investor behaviour, he said.

The main contributors to yesterday's turnover were, Distilleries Rs 90.8 million, HNB Rs 55.6 million and Textured Jersey Rs 44.7 million. These were heavily traded stocks with good market potential, which have been bought by foreign investors, Payoe said. The number of shares traded yesterday were 34,209,933.

Meanwhile JKSB said of yesterday’s CSE trading:

ASPI: 6,429.94 (-20.50 pts; -0.32%); Val T/O: Rs. 459mn (US$3.15mn); Vol T/O: 34.2mn; Trades: 4,737

Advance/decline ratio: 62/111 ; Top gainer: MSL.N (+16.19%); Top loser: JKH.W (-41.38%)

Highlights:

• The ASPI ended lower amid subdued market turnover. Selected banking, food & beverage, manufacturing, diversified, and finance counters led activity levels with trading in DIST accounting for 20% of turnover for the day.

• Banks, Finance, & Insurance was the most actively traded sector (-0.24%)

• Stores & Supplies was the best performing sector (+1.89%), supported by gains on EBCR (+3.99%)

• Motors was the worst performing sector (-3.50%), dragged down by a decline in UML (-2.90%)

www.island.lk

Sri Lankan shares recover after four sessions of losses

Reuters: Sri Lankan shares edged up on Wednesday following four straight sessions of losses, as investors shrugged off the impact of a proposed increase in value added tax to pick up battered shares, amid high turnover.

The bourse hit a more than seven-week low on Tuesday as selling pressure on stocks that were expected to take a hit from the proposed tax increase weighed on sentiment.

The government proposed last week to raise the value added tax (VAT) to 15 percent from 11 percent.

The benchmark Colombo stock index ended 0.34 percent higher at 6,451.61.

"Market is up with the renewed interest from the institutional and high net worth investors," said Yohan Samarakkody, head of research at SC Securities (Pvt) Ltd.

"Investors have capitalised on the oversold counters and the fundamentals have not changed."

Turnover stood at 1.43 billion rupees ($9.81 million), well above this year's daily average of 744.5 million rupees.

Foreign investors net bought 28.9 million rupees worth of equities on Wednesday. They have net sold 2.1 billion rupees worth of shares so far this year.

Shares of conglomerate John Keells Holdings Plc rose 1.14 percent while Ceylon Insurance Plc jumped 5.30 percent and Sri Lanka Telecom Plc rose 2.70 percent.

The biggest listed lender Commercial Bank of Ceylon Plc rose 0.07 percent.

($1 = 145.8000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lanka to trade repos electronically: regulator

ECONOMYNEXT - Sri Lanka is considering electronic trades for repurchase and reverse repurchase deals in government securities, increasing transparency, the central bank which regulates bond markets said.

Repo and reverse repo deals involving a sale and buy back of bonds, for tenors shorter than the maturity.

All primary dealers and commercial banks carry out outright transactions in Treasury bills and bonds on a platform provided by Bloomberg from August.

Over-the-counter trades above 50 million rupees have to be reported within 30 minutes.

"Accordingly, all stakeholders have now begun to yield the benefits arising from the transparency, price discovery and liquidity created through this trading platform in the market," the central bank said.

The regulator said public price data released will be increased to twice a day from the current once a day.

"As the next stage, the Central Bank is now considering to introduce the repurchase/reverse repurchase transactions to this electronic bond trading platform," the central bank said.

Sri Lanka wants to refurbish 30 oil tanks in Trincomalee with IOC

ECONOMYNEXT - Sri Lanka's state-run Ceylon Petroleum Corporation wants to refurbish 30 tanks with Lanka IOC, for fuel storage and distribution, Minister Chandima Weerakkody said.

The tank farm in Trincomalee, built by the British during World War II was unused until they were leased to Lanka IOC, a unit of Indian Oil Corporation in 2002 as part of a privatization deal, giving Indians a presence in the strategic port.

Weerakkody said he had submitted plan to jointly refurbish and use 30 of the 102 tanks in the farm.

Most of the tanks were well preserved and only the pipelines needed to be built he said.

The ousted Rajapaksa administration indicated that it would 'take back the tanks' from Lanka IOC.

However Weerakkody said no cabinet papers were passed to that effect, though there were 'draft papers' he said.

Sri Lanka valued its relationship with India, he said.

There was a possibility of developing the tanks under Ceylon Petroleum Storage Terminals Ltd, a common user facility jointly owned by CPC and Lanka IOC.

Sri Lanka's Asian Alliance to become Softlogic Life Insurance

ECONOMYNEXT - Sri Lanka's Asian Alliance Insurance PLC is to change its name to Softlogic Life Insurance PLC following the Softlogic Holdings group’s deal to sell its general insurance unit to Canada-based FairFAx Financial group.

Asian Alliance Insurance said in a stock exchange filing that it has called for an extraordinary general meeting on 11 October 2016 to approve the change of name.

Softlogic Group retained the fast-growing life business of Asian Alliance when it entered into an agreement with FairFAx Financial group to sell the general insurance unit of Asian Alliance Insurance.

Expolanka travel unit, Funtime target corporate entertainment market

ECONOMYNEXT – Classic Travel, a unit of Sri Lanka’s Expolanka Holdings group, has teamed up with show business expert Imran Saibo of Funtime targeting the corporate travel and conference tourism market.

The partnership, the brainchild of Saif Yusoof, Managing Director of Classic Travel, recognizes the opportunity of combining the two firms to offer new experiences in both business and leisure travel along with entertainment and conferences, a statement said.

“The potential of such an alliance is obvious when considering the growing MICE market,” said Yusoof, referring to the Meetings, Incentives, Conferences, and Events (MICE) type of tourism.

“This collaboration of Classic with its strong corporate travel base and Funtime with its creative talents in the field of corporate entertainment means that we are going a step further in offering complete leisure and lifestyle solutions.”

Classic Travel is a part of Expolanka Holdings PLC whose interests cover logistics and leisure while Funtime Pvt Ltd. is an event production company.

“With the amalgamation of Classic and Funtime, we are building a formidable combination of travel, leisure and entertainment solutions,” said Saibo.

Sri Lanka's Industrial Asphalts says flooding ‘manmade disaster'

ECONOMYNEXT – Floods which disrupted operations in May 2016 were a ‘manmade disaster’, Sri Lanka’s Industrial Asphalts (Ceylon) (IAC) has told shareholders.

The firm’s premises at New Nuge Road, Peliyagoda, on the banks of the Kelani River north of Colombo were affected by the flooding in and around the capital.

“It is very important to note that the company’s land at Peliyagoda was not affected by the flooding due to its location or the contours of the land but due to a manmade disaster,” managing director G. Ramanan told shareholders in the annual report.

“All rainwater from the property is discharged to the adjoining canals. The water from the canal in turn is pumped out to the Kelani river. The canal has no direct link to the river,” he said.

When the area experienced historically record high rainfall, the canal’s two pumps were unable to cope while one of the pumps was out of service, he said.

This resulted in the canal water level rising above the company’s outlet pipes, effectively blocking the sole rainwater discharge channel, Ramanan said.

“All rainwater falling within IAC’s premises remained within the premises, resulting in the flood.”

Ramanan said IAC is gradually getting back to normal and that the total impact of the floods would be felt in the next financial year.

The company, which makes bituminous products and surface coatings for industry and household use, including road construction and maintenance, made a net loss of Rs11.2 million in the year to 31 March 2016 compared with a profit of Rs3 million the year before.

Sales rose to Rs78 million from Rs67 million. It reported a loss per share of Rs16.87 compared with earnings of Rs4.56 the year before.

IAC’s auditor, chartered accountants Cecil Arseculeratne & Company, has given a qualified opinion of the annual accounts.

They said spending by a related firm, Britex (Pvt) Ltd., set up recently, have an impact on IAC’s financial statements which it was unable to assess.

“Since we have no access to such records of Britex (Pvt) Ltd. we are not able to quantify the impact of such transactions to the Industrial Asphalts (Ceylon) PLCs’ financial statements,” the auditors said.

It drew the attention of shareholders to the management view on the matter disclosed in related party transactions note No.29.1 in the financial statements.

According to the note, Britex was formed with no direct shareholding by IAC with the aim of doing product development encompassing the latest developments in paints and coatings in the specific segments IAC has been operating in.

IAC has gradually lost its market dominance to new entrants who have been successfully introducing products that compete with and have replaced its own range of paints, the note said.

This prompted the common shareholding directors to “ring-fence” the new product development under Britex, which started early in the last financial year.

The note said the initial response to new products and coatings had been good and the firm had planned out a promotional campaign to introduce the new products.

“Unfortunately, the product tests of Britex’s initial development initiatives were not positive and there were significant setbacks,” it said.

“We could not bring to market the new products as fast as we wanted but there was no way to stop the advertisements.”

Total cost of such spending was Rs1.8 million and was done independent of IAC with no current or future spending to be incurred by IAC either as reimbursements or in any other manner the note said.

Sri Lanka vehicle registration see slight upturn in August

ECONOMYNEXT - Sri Lanka's vehicle registrations rose to 41,798 units in August from 35,775 in July, with motorcycles picking up to 29,365 units from 25,025 units, an analysis of vehicle registry data shows.

Total registrations were sharply down from 51,161 unit a year earlier.

JB Securities, an equities brokerage in Colombo said motor car registrations picked up 3,011 units from 2,596 units a month earlier, but was down from 9,107 units a year earlier.

Sri Lanka's vehicle registrations came down with a sharp increase in taxes and credit restrictions were slapped on motor cars, after vehicle imports were singled out for blame when a bout of money printing triggered a balance of payments crisis.

In country where Mercantilism has almost completely overshadowed economics, balance of payments trouble is routinely blamed on fuel imports. But this time with low prices, Mercantilists could not blame fuel imports for the currency collapse. Gold is a secondary target.

The rupee fell from 131 to 146 during the current balance of payments crisis, lowering the living standards permanently and pushing up domestic prices.

Analysts say car imports were a key 'escape valve' for money printed by the central bank in 2015, helping partly check domestic inflation and an asset price bubble, but the currency collapse pushed up all prices anyway.

Meanwhile JB Securities data showed mini truck registration have picked up to 1,448 units in August up from 1,148 reaching pre-crisis levels.

Three wheeler registrations rose to 4,355 units from 3,692 units in July, but remains sharply down from 9,107 units reached a year earlier.

Many three wheelers and motor cycles were bought by blue collar workers including tradesmen, raising living standards, but the new administration's policies have put vehicles further out of reach of the less affluent, critics say.

Sri Lankan shares fall for 4th straight session; VAT proposal weighs

Reuters: Sri Lankan shares fell for a fourth straight session on Tuesday, led by large caps, as selling pressure on stocks expected to take a hit from a proposed tax increase weighed on sentiment.

The benchmark Colombo stock index ended 0.32 percent weaker at 6,429.94, its lowest close since Aug. 1. It fell 0.34 percent last week, its fourth straight weekly loss.

A government proposal last week to raise the value added tax (VAT) to 15 percent from 11 percent hit sentiment on Tuesday.

"The downtrend continued today also. The selling pressure is there mainly on the shares that could be affected by the tax," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Going forward, we don't think this trend of correction will last long."

Turnover stood at 458.6 million rupees ($3.15 million), less than this year's daily average of 740.4 million rupees.

Foreign investors net bought 145.4 million rupees worth of equities on Tuesday. They have net sold 2.1 billion rupees worth of shares so far this year.

Distilleries Company of Sri Lanka fell 1.67 percent, with foreign investors buying a net 132,693 shares in the company on Tuesday.

The company said last month that it would rejig a share ownership with Melstacorp, its 100 percent-owned subsidiary.

The reorganisation will occur after Sept. 30.

Shares of Ceylon Tobacco Company Plc fell 1.07 percent, while the biggest listed lender Commercial Bank of Ceylon Plc declined 1.13 percent. 

($1 = 145.7000 Sri Lankan rupees) 

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

Sri Lankan shares hit 7-wk closing low; Distilleries down

Reuters: Sri Lankan shares fell for a third straight session on Monday to post their lowest closing level in seven weeks, led by Distilleries Company of Sri Lanka due to selling by foreign investors ahead of a change in company ownership.

The benchmark Colombo stock index ended 0.34 percent weaker at 6,450.44, its lowest close since Aug. 1. It fell 0.34 percent last week, its fourth straight weekly loss.

A government proposal to raise the value added tax (VAT) also weighed on sentiment.

The government said last week the cabinet has approved a proposal to increase VAT to 15 percent from 11 percent with some amendments, a move halted by the Supreme Court earlier.

Distilleries fell 4 percent, with foreign investors selling a net 13,600 shares in the company on Monday.

The company said last month that it would rejig a share ownership with Melstacorp, which is its 100 percent-owned subsidiary.

In a 180-degree share swap, Melstacorp would become the holding company, while Distilleries Company would become a subsidiary of Melstacorp.

Investors would be allotted four shares of the new parent company for each share of Distilleries after the reorganisation, it said.

The reorganisation will occur after Sept. 30.

"Distilleries dragged the market due to foreign selling. Investors are also not sure how the VAT hike would impact the corporate earnings," a stockbroker said asking not to be named.

Turnover stood at 328.5 million rupees ($2.26 million), less than half of this year's daily average of 742.1 million rupees.

Foreign investors net bought 63.9 million rupees worth of equities on Monday. They have net sold 2.25 billion rupees worth of shares so far this year.

Lanka ORIX leasing Company Plc fell 1.31 percent, while the biggest listed lender Commercial Bank of Ceylon Plc declined 0.42 percent. 

($1 = 145.1000 Sri Lankan rupees) 

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

Sri Lankan shares post over 6-wk closing low on VAT hike concern

Reuters: Sri Lankan shares posted their lowest closing level in more than six weeks on Thursday, as a government proposal to raise the value added tax (VAT) weighed on markets.

The government on Wednesday said the cabinet has approved a proposal to increase the VAT to 15 percent from 11 percent with some amendments, a move halted by the Supreme Court earlier. The hike is expected to be implemented after parliamentary approval later this month.

The benchmark Colombo stock index ended 0.31 percent weaker at 6,472.47, its lowest close since Aug. 1. It fell 0.34 percent for the week, its fourth straight weekly loss. Both the stock and foreign exchange markets will be closed on Friday for a holiday.

"It was a very dull day as investors are waiting for directions. But the VAT decision was a bit of a concern for investors," said Yohan Samarakkody, head of research at SC Securities (Pvt) Ltd.

Turnover stood at 301.2 million rupees ($2.07 million), less than half of this year's daily average of 744.6 million rupees.

Foreign investors were net sellers of 19.9 million rupees worth of shares on Thursday, extending the net foreign outflow so far this year to 2.31 billion rupees worth of equities.

Shares of Ceylon Tobacco Company Plc dropped 1.2 percent, while conglomerate John Keells Holdings Plc dropped 0.5 percent.

Sri Lanka Telecom Plc fell 1.6 percent, while Dialog Axiata Plc declined 0.9 percent.

($1 = 145.4000 Sri Lankan rupees) 

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

Dialog Axiata seeks buyers for 30% stake

Axiata Group, Malaysia’s biggest mobile-phone operator, is seeking to trim stakes in some of its overseas operations in deals that could raise as much as $700 million.

The Kuala Lumpur based company is seeking a buyer for about 11 percent of Indonesian unit PT XL Axiata, which has a market value of $2.2 billion, according to the people.

It is also selling as much as 30 percent each of listed Sri Lanka unit Dialog Axiata Plc and closely held Cambodian subsidiary Smart Axiata sources said, asking not to be identified because the information is private.

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Sri Lanka police arrests Entrust Securities officials over Rs4.2bn fraud

ECONOMYNEXT - Sri Lanka's financial crimes police have arrested five persons connected to Entrust Securitas, a regulated primary dealer in government bonds, over a 4.2 billion rupees fraud, a media report said.

Sri Lanka's Daily Mirror newspaper said Dharmapriya Bandara Dassanayake (Chairman), Chanuka Ratwatte (managing director), Romesha Dushanthi Senarath (Executive Director), Sanjeewa Dayaratne and Niloshan Romelo Mendis (Director).

The five persons were remanded by court until September 28.

Entrust Securities is now managed by state-run National Savings Bank. The firm is alleged to have mis-appropriated funds of a provident fund in state-run Ceylon Electricity Board, and several funds of the Central Bank of Sri Lanka, which is the regulator.

Sri Lankan shares edge down on VAT hike concern

Reuters: Sri Lankan shares closed marginally lower on Wednesday, posting their lowest closing level in nearly six weeks, as a government proposal to raise the value added tax (VAT) hurt market sentiment.

The government on Wednesday said the cabinet has approved a proposal to increase the VAT to 15 percent from 11 percent with some amendments, a move halted by the Supreme Court earlier. The hike is expected to be implemented after parliamentary approval later this month.

The benchmark Colombo stock index ended 0.24 percent lower at 6,492.74, its lowest close since Aug. 4.

"Investors are worried about the VAT hike. Profit-taking was also there," said Atchuthan Srirangan, a senior research analyst with First Capital Equities (Pvt) Ltd.

Turnover stood at 749.9 million rupees ($5.15 million), in line with this year's daily average of 747.2 million rupees.

Foreign investors, who have been net sellers of 2.29 billion rupees worth of shares so far this year, were net buyers of 407.3 million rupees worth of equities on Wednesday.

Shares of Distilleries Company of Sri Lanka Plc fell 4.38 percent, while Ceylon Tobacco Company Plc dropped 1.21 percent. 

($1 = 145.5000 Sri Lankan rupees) 

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

Sri Lanka to charge 15-pct VAT on air tickets, houses, healthcare, milk products

ECONOMYNEXT -Sri Lanka will tax air tickets, housing, sweetened milk and healthcare at 15 percent under in value added increases approved by the cabinet of ministers.

There will be some exemptions for outpatient treatment, dialysis and medical tests, Information Minister Gayantha Karunathilake said.

A 15 percent VAT will also be imposed on tobacco and telecom services. Sri Lanka already has charges high levels of taxes around 30 percent on telecom services.

VAT will also be charged on air tickets from an airport in Sri Lanka to a foreign airport.

The changes will be gazetted and also passed in parliament, Minister Karunathilake said.

Sri Lanka T-bill yields steady at auction

ECONOMYNEXT - Sri Lanka's Treasury Bill yields remained steady at Tuesday's auction with the central bank not accepting bids for 03-month bills, data from the state debt office showed.

The 6-month yield remained at 9.71% with the debt office receiving bids worth Rs16.6 billion and accepting only a billion rupees.

The 12-month yield remained at 10.39% with the debt office getting Rs30.5 billion worth of bids and accepting bids of only Rs12.3 billion.

UDA acquires Cargo Boat property

The Megalopolis and Western Development Ministry has sent a letter to Cargo Boat Development Company mentioning that the Urban Development Authority has taken action to acquire the above property to develop as a multi-storey car park.

The property which is at Janadhipathi Mawatha, Colombo 1,owned by Cargo Boat Development Company was purchased by the company in January 2010 to develop a multi storey car park.
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Kotagala Plantations to raise Rs 800 mn

Kotagala Plantations is to issue 80,000,000 ordinary shares at a price of Rs.10 per share by way of a Rights Issue in the proportion of two new ordinary shares for every one existing issued ordinary share.

The funds realized from the Issue will be utilized to settle outstanding statutory liabilities and to meet working capital requirements.The stated capital of the company is Rs 680,000,010 and the Rights Issue of Shares will not be underwritten.

The rights issue of shares is subject to approval SEC and shareholder approval at an Extraordinary General Meeting.
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Sri Lankan shares end higher; blue-chips lead

Reuters: Sri Lanka's benchmark index edged up on Tuesday to recover from a seven-week closing low hit in the previous session, led by blue-chips, but investors stayed on the sidelines amid confusion over falling bond yields.

The benchmark Colombo stock index ended up 0.2 percent at 6,508.09, edging up from its lowest close since Aug. 1 hit on Friday. The bourse fell 0.68 percent last week, posting its third straight weekly loss.

"The index ended higher amid lacklustre turnover levels. The diversified, banking, finance, manufacturing and leisure sectors saw market activity," John Keells Stockbrokers said in a note to investors.

Analysts said they expect shares to rise after results of the central bank's weekly treasury bill auction last Wednesday showed yields fell between 23 and 34 basis points, with the benchmark 91-day treasury bill yield falling for the first time since July 8.

However, investors stayed on the sidelines as some banks offered higher yields for fixed-income assets, they said.

The yield held steady on Tuesday at the weekly auction.

Foreign investors who are net sellers of 2.7 billion rupees worth of shares so far this year, were net buyers of 96.8 million rupees worth of equities on Tuesday.

Turnover stood at 323.8 million rupees ($2.24 million), less than half of this year's daily average of 747.2 million rupees.

Shares of Sri Lanka Telecom Plc rose 1.37 percent while Lanka ORIX Leasing Company Plc gained 4.55 percent.

Shares of Ceylon Tobacco Company Plc rose 0.65 percent while Asian Hotels Properties Plc was up 3.66 percent and biggest listed lender Commercial Bank of Ceylon Plc gained 0.79 percent. 

($1 = 144.8000 Sri Lankan rupees) 

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

Big listings seen as needed to arrest CSE drift

By Hiran H.Senewiratne

The Colombo Stock Exchange (CSE) will receive a huge boost if big private and public sector entities list in the market. If that happens only, the current lacklustre movement of the market will move away to a more vibrant market scenario, CSE chairman Vajira Kulatilaka said.

"The CSE needs big listings of public and private sector entities in order to attract foreign fund managers in overseas countries. At this juncture, it is just drifting on. Otherwise, few big public or private companies come on board by way of an Initial Public Offering (IPO) for the market to pick up well, Kulatilaka told The Island Financial Review.

The CSE chairman said that if some big private sector companies are listed in the CSE it would put the CSE in a prime position in the region, because most foreign and local investors will eye CSE activities. "Until then the market will slowly but steadily move, he said.

Meanwhile, yesterday the CSE was not a happening market due to the long weekend. 

Accordingly, the total turnover reached rupees 303 million and the All Share Price Index went down by 3.5 percent, while the S&P SL 20 or Milanka Price Index went up by 6 points.

Volume-wise, the highest contributing companies were JKH Rs 44 million, Dialog Rs 27 million and ACL Cables Rs 26 million, while the number of shares traded during the day was 20 million, CSE sources said.

"Today, it was mainly retail activity and we didn't see aggressive buying or selling in the market even though there were opportunities in the market, Candor Equities Marketing Manager Buddhike Payoe said."The market is stagnant and investors are awaiting some direction, he added.After market closure, the Central Bank's weekly treasury bill auction results showed rates falling 23 percent to 34 basis points. The benchmark 91-day treasury bill rates fell for the first time since July 8.Dealers said the reduction in rates will help attract investors into stocks.

Meanwhile, JKSB said about yesterday's CSE trading:

ASPI: 6,494.86 (-7.03 pts; -0.11%); Val T/O: Rs. 303mn (US$2.09mn); Vol T/O: 20.0mn; Trades: 4,637

Advance/decline ratio: 107/63 ; Top gainer: JKH.W (+57.89%); Top loser: CTEA.N (-16.71%)

• The ASPI ended lower amid weak market turnover. Selected banking, diversified, manufacturing, telco, and food & beverage counters led activity levels with trading in JKH amounting to 15% of total turnover.

• Banks, Finance, & Insurance was the most actively traded sector (+0.21%)

• Chemicals & Pharmaceuticals was the best performing sector (+1.04%), supported by gains on HAYC (+4.06%)

• Trading was the worst performing sector (-4.05%), dragged down by a decline in BRWN (-3.23%)

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Sri Lankan shares end down, dragged by large caps

Reuters: Sri Lanka's benchmark index fell for the third straight session on Friday, dragged down by large caps, as investors stayed on the sidelines amid confusion over falling bond yields, stockbrokers said.

The benchmark Colombo stock index ended 0.11 percent lower at 6,494.86, its lowest close since Aug. 1. The bourse had fallen 0.68 percent last week, posting its third straight weekly loss.

"Downward trend is continuing as investors are still in profit-taking mode," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd. "We believe the downtrend and the low turnover is shortlived."

Analysts said they expected shares to rise after results of the central bank's weekly treasury bill auction on Wednesday showed yields fell between 23 and 34 basis points, with the benchmark 91-day treasury bill yield falling for the first time since July 8.

However, the index fell as there is confusion on the bond yields, brokers said. The t-bill yields fell, and short term fixed deposit yields have been higher, attracting some investors in share markets to fixed assets, dealers said.

Foreign investors net sold 28.3 million rupees ($195,037.90) worth of shares on Friday, extending the year-to-date net foreign outflow to 2.77 billion rupees worth of equities.

Turnover stood at 303.2 million rupees, less than half of this year's daily average of 749.7 million rupees.

Shares of Nestle Lanka Plc fell 2.42 percent, while Carson Cumberbatch Plc fell 2.49 percent. 

($1 = 145.1000 Sri Lankan rupees) 

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

Sri Lankan shares hit more than 1-mth closing low; large caps down

Reuters: Sri Lanka's benchmark index hit a more than one-month closing low on Thursday, dragged down by large cap shares, as investors largely stayed on the sidelines amid confusion over falling bond yields, stockbrokers said.

The benchmark Colombo stock index ended 0.09 percent lower at 6,501.89, its lowest close since Aug. 1.

Analysts said they expected shares to rise after results of the central bank's weekly treasury bill auction on Wednesday showed yields fell between 23 and 34 basis points, with the benchmark 91-day treasury bill yield falling for the first time since July 8.

"Many investors are confused because while t-bill yields are coming down, the short term fixed-deposit rates offered by banks are very high," said Prashan Ferbando, COO at Acuity Stockbrokers.

Foreign investors net sold 22.7 million rupees ($156,444) worth of shares on Thursday, the first time in seven sessions, extending the year-to-date net foreign outflow to 2.77 billion rupees worth of equities.

Turnover stood at 758.4 million rupees, slightly higher than this year's daily average of 752.4 million rupees.

Shares of Ceylon Tobacco Company Plc fell 0.50 percent, while Ceylon Cold Stores Plc ended 1.53 percent lower and John Keells Holdings Plc lost 0.67 percent. 

($1 = 145.1000 Sri Lankan rupees) 

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