Colombo Stock Exchange Market Review – 31st Oct 2016

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Colombo Stock Exchange Trade Summary 31-Oct-2016

Colombo bourse closed on negative note ahead of the monetary policy review. All Share index lost 15.62 index points or 0.24% to end at 6,409.23 while 20-scrip S&P SL index shed 12.44 index points or 0.35% to close the session at 3,559.92.

Price depreciations in Dialog Axiata (closed at LKR 11.50, -0.9%), Ceylon Guardian Investment (closed at LKR 116.10, -6.5%) and Commercial Leasing & Finance (closed at LKR 3.60, -2.7%) pinned the index in red zone.

Daily market turnover was LKR 142mn. Panasian Power emerged as the top contributor to the turnover with LKR 31mn underpinned by a single crossings of 10mn shares at LKR 3.00 per share. Commercial Bank (LKR 12mn), Hatton National Bank (LKR 11mn) and Alumex (LKR 11mn) were among top contributors.

Market breadth was negative where out of 208 counters traded, 84 slipped, 43 advanced while 81 remained unchanged. High investor activity was witnessed in Alumex and counter declined by 1.5% to LKR 20.00. People’s Leasing & Finance, Chevron Lubricants and Access Engineering were among highly traded counters.

Lanka Hospitals advanced to LKR 70.50 (+2.9%), subsequent to the dividend announcement. However, Commercial Bank declined by 0.5% to LKR 143.90 despite the first interim dividend of LKR 1.50 per share.

Foreign investors were net buyers with a net foreign inflow of LKR 6mn. Foreign participation was 6%. Net foreign inflows were seen in Asiri Hospital Holdings (LKR 4mn), Sampath Bank (LKR 3mn) and National Development Bank (LKR 2mn). Net foreign outflow was mainly seen in Dialog Axiata (LKR 5mn).

During the month of October, All Share index slipped by 125.54 index points or 1.9% while 20-scrip S&P SL index shed 57.40 index points or 1.6%. Daily average market turnover declined by 39%MoM to LKR 469mn. Foreign investors were net buyers with a net foreign inflow of LKR 1.2bn and foreign participation was 37%.

According to the data released by Department of census and statistics, the annual average inflation rate increased from 3.4% in September to 3.6% in October. The year-on-year change was 4.2% in October against the 3.9% recorded in September.
Source: LSL

Sri Lankan shares fall to 3-mth low ahead of monetary policy

Reuters: Sri Lankan shares ended Monday weaker at a three-month low in thin trade ahead of a monetary policy announcement by the central bank, as the prime minister's plan for improving the investment climate failed to cheer the market.

Sri Lanka's central bank is expected to keep its key interest rates steady later on Monday, a few days ahead of the national budget and the government's five-year policy.

Sri Lanka will introduce concessions on investments and a lower tax regime in its budget to boost faltering investment, generate jobs and remove obstacles to growth for start-up companies, Prime Minister Ranil Wickremesinghe said in an economic policy statement on Thursday.

However, investors continued to await the budget, as well as the central bank's key policy rates and corporate earnings.

"The lower volume and sideways trade will continue until the budget," said Hussain Gani, deputy chief executive at Softlogic Stockbrokers.

"Institutional investors are waiting to see if there would be capital gains tax, as the government proposed some time back, while others are waiting in case of surprises that could have an impact on stocks."

The benchmark index of the Colombo Stock Exchange ended down 0.24 percent, or 15.62 points, at 6,409.23, its lowest close since July 29.

Last week, the index fell 0.35 percent in its third straight weekly fall.

Monday's turnover was 142.4 million rupees ($962,812.71), less than a fifth of this year's daily average of 726.2 million.

Foreign investors were net buyers of 5.7 million rupees worth of equities on Monday, extending the net foreign inflow this month to 1.21 billion rupees.

They have sold a net 1.74 billion rupees worth of shares this year.

Sri Lanka's quarterly earnings season started two weeks ago, but most locally listed firms report in late October or early November. The national budget is set to be presented on Nov. 10.

Shares in Dialog Axiata Plc fell 0.86 percent while Ceylon Guardian Investment Trust Plc fell 6.45 percent and biggest listed lender Commercial Bank of Ceylon Plc fell 0.48 percent. 

($1=147.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Clarence Fernandez)

Colombo Stock Exchange Market Review – 28th Oct 2016

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Colombo Stock Exchange Trade Summary 28-Oct-2016

PM’s economic policy statement failed to uplift the sentiments in Colombo Bourse on Friday and the equities marked another lackluster trading session with indices closing in red. ASI edged lower by 13.65 index points (-0.2%) to close at 6,6424.85 while blue-chip S&P SL 20 index closed at 3,572.36 down by 11.70 index points (-0.3%). 

Resilience shown in Commercial Leasing (closed at LKR 3.70, +2.8%) and Ceylon Tobacco (closed at LKR 850.00, +0.4%) failed to negate the effects of losses in index-heavy Commercial Bank (closed at LKR 144.60, -1.1%), John Keells Holdings (closed at LKR 149.10, -0.4%) and Sri Lanka Telecom (closed at LKR 36.60, -1.1%).

Market breadth was negative where out of 204 counters traded, 83 slipped, 50 advanced while 71 remained unchanged. Among the losers were Piramal Glass (LKR 5.30,-3.6%) and John Keells Hotels (LKR 11.50,-1.7%). Both companies reported drop in profits in the earnings reports released yesterday.

Market turnover was mere LKR 288mn. Crossings each in Hatton National Bank - nonvoting (0.3mn shares at LKR 190.00) and Cargills Ceylon (~0.2mn shares at LKR 173.00) contributed 31% to the turnover. Accordingly Hatton National Bank - nonvoting (LKR 57mn), Access Engineering (LKR 39mn) and Cargills Ceylon (LKR 33mn) made the biggest contribution to days’ turnover.

Retail investor activity was mostly concentrated around John Keells Holdings, Access Engineering and Colombo Dockyard.

Foreign investors were net buyers today with a net foreign inflow of LKR 72mn. The top net inflows were seen in Hatton National Bank non-voting (LKR 57mn), Ceylon Cold Stores (LKR 19mn), Hemas Holdings (LKR 11mn) while top net foreign outflows were seen in Richard Pieris (LKR 16mn) and Colombo Dockyard (LKR 4mn). Foreign investor activity accounted for 21% of todays’ turnover.
Source: LSL

Sri Lankan shares edge down in dull trading ahead of govt budget

Sri Lankan shares ended weaker on Friday in thin trading, hovering near a 12-week closing low hit earlier in the week, as the prime minister's plan for improving the investment climate failed to bring cheer to the market.

Sri Lanka will introduce concessions on investments and a lower tax regime in its budget to boost faltering investment, generate jobs and remove obstacles to growth for start-up companies, Prime Minister Ranil Wickremesinghe said in an economic policy statement on Thursday.

However, investors continued to await the budget, as well as the central bank's key policy rates and corporate earnings.

"Statements will not help the sentiment anymore. The market is waiting to see some implementation of those policies," a stockbroker said asking not to be named.

The benchmark index of the Colombo Stock Exchange ended 0.21 percent, or 13.65 points, weaker at 6,424.85, near Monday's closing low, which was its lowest close since Aug. 1.

The index fell 0.35 percent for the week, recording its third straight weekly fall.

Friday's turnover was 288.6 million rupees ($1.96 million), less than half of this year's daily average of 729.1 million rupees.

Foreign investors were net buyers of 72.3 million rupees worth of equities on Friday, extending the net foreign inflow so far this month to 1.21 billion rupees.

They have sold a net 1.74 billion rupees worth of shares this year.

Sri Lanka's central bank is expected to keep its key interest rates steady on Monday, analysts said.

Sri Lanka's quarterly earnings season started two weeks ago, but most locally listed firms report in late October or early November. The national budget is scheduled to be presented on Nov. 10.

Shares in biggest listed Lender Commercial Bank of Ceylon Plc fell 1.09 percent while conglomerate John Keells Holdings Plc fell 0.40 percent. 

($1 = 147.6000 Sri Lankan rupees) 

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

Colombo Stock Exchange Market Review – 27th Oct 2016

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Colombo Stock Exchange Trade Summary 27-Oct-2016

Colombo bourse closed in opposite directions on Thursday with lackluster activity levels. All Share index advanced slightly by 3.61 index points or 0.06% to end at 6,438.50 while S&P SL20 edged lower by 1.76 index points or 0.05% to close at 3,584.06.

Gains recorded in Bukit Darah (closed at LKR 290.00, +3.7%), Dialog Axiata (closed at LKR 11.60, +0.9%) and Ceylon Guardian Investment Trust (closed at LKR 125.00, +6.3%) contributed positively to the index. However, price depreciation in Carson Cumberbatch (closed at LKR 184.00, -3.0%) and Commercial Bank (closed at LKR 146.20, -0.5%) impacted the index gains.

Daily market turnover was LKR 205mn with absence of negotiated deals. Dialog Axiata was the contributor to the turnover with LKR 24mn followed by Ceylinco Insurance (LKR 21mn), Tokyo Cement non-voting (LKR 15mn) and Tokyo Cement (LKR 11mn) respectively.

Gainers outweighed the losers 66 to 49, while 81 counters remained unchanged. High investor activity was witnessed in Teejay Lanka, Dunamis Capital, First Capital and Access Engineering.

Alumex advanced to LKR 20.60 but closed at LKR 20.50 (+0.5%) supported by favorable quarter results. Further, Keells Food Products declined to 159.80, -0.8% amid the profit decline in 2QFY17.

Foreign investors were net sellers with a net foreign outflow of LKR 18mn. Foreign participation was 21%. Net foreign outflows were seen in Commercial Bank non-voting (LKR 6mn), Teejay Lanka (LKR 5mn) and Chevron Lubricants (LKR 4mn). Net foreign inflow was mainly seen in Ceylon Tobacco (LKR 4mn).
Source: LSL

Sri Lankan shares edge up in dull trade ahead of govt budget

Reuters: Sri Lankan shares ended slightly firmer on Thursday, hovering near a 12-week closing low hit earlier in the week, in thin trade as investors awaited cues from the government budget and five-year plan as well as corporate earnings.

Prime Minister Ranil Wickremesinghe issued an economic policy statement in the parliament, giving some details of the government's future economic policies, during market hours on Thursday. Dealers said the market was assessing the prime minister's statement.

The benchmark index of the Colombo Stock Exchange ended 0.06 percent, or 3.61 points, firmer at 6,438.50. On Monday, the index had closed at its lowest level since August 1.

Thursday's turnover was 204.7 million rupees ($1.38 million), less than a third of this year's daily average of around 731.3 million rupees.

"Overall market is volatile and will move side ways until the budget," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd. "Uncertainty is there and investors are on wait-and-see mode."

Foreign investors sold a net 18.4 million rupees worth of equities on Thursday. The net foreign inflow for the past eleven sessions through Tuesday was 1.23 billion rupees.

They have sold a net 1.81 billion rupees worth of shares this year.

Sri Lanka's quarterly earnings season started two weeks ago, but most locally listed firms report in late October or early November. The national budget is scheduled to be presented on November 10.

Shares in Bukit Darah Company Plc jumped 3.72 percent while Dialog Axiata Plc rose 0.87 percent and Hatton National Bank Plc gained 0.75 percent. 

($1 = 147.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Colombo Stock Exchange Market Review – 26th Oct 2016

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Colombo Stock Exchange Trade Summary 26-Oct-2016

Colombo bourse witnessed another lackluster trading session on Wednesday with both indices closing on flat note. All Share index edged lower by 2.08 index points or 0.03% to end at 6,434.89 while S&P SL20 index slightly down by 1.65 index points or 0.05% to close at 3,585.82.

Losses recorded in Dialog Axiata (closed at LKR 11.50, -0.9%), Dipped Products (closed at LKR 85.10, -5.3%) and Commercial Credit & Finance (closed at LKR 59.20, -1.5%) impacted the index performance negatively.

Daily market turnover was LKR 312mn. John Keells Holdings emerged as the top contributor to the turnover with LKR 79mn underpinned by a single negotiated transaction of 0.5mn shares at LKR 150.00. Counter accounted for 25% of the total turnover. Sampath Bank (LKR 30mn), Lion Brewery (LKR 28mn) and Access Engineering (LKR 20mn) were among top contributors.

Market breadth was negative where out of 200 traded counters, 70 slipped, 50 advanced while 80 scripts remained unchanged.

Tokyo Cement attracted high investor interest and stock closed with a gain of 0.8% at LKR 61.40. Access Engineering, Teejay Lanka and Galadari Hotels were among highly traded counters.

People’s Leasing & Finance declined by 0.6% to LKR 18.10 subsequent to the dip in profit in September quarter. Moreover, Ceylon Cold Stores advanced to LKR 635.30 (+2.5%) supported by 49%YoY earnings growth in 2QFY17.

Foreign investors were net sellers with a net foreign outflow of LKR 50mn, after eleven sessions of inflows. Foreign participation was 29%. Net foreign outflows were seen in John Keells Holdings (LKR 75mn), Commercial Bank non-voting (LKR 8mn) and Teejay Lanka (LKR 1bn). Net foreign inflow was mainly seen in Lion Brewery (LKR 17mn).

Meanwhile, at the Treasury bill auction today, both six month and one year treasury rates increased by 2bps and 5bps to 9.48% and 10.24% respectively. Three month treasury bills were rejected by the CBSL. CBSL received bids amounting to LKR 45.6bn and it was decided to accept LKR 7.6bn worth of Treasury bills.
Source: LSL

Sri Lankan shares end slightly weak, hovering close to 12-wk low

Reuters: Sri Lankan shares ended slightly weaker on Wednesday, largely near a 12-week closing low hit earlier in the week, in dull trading as investors awaited cues from the government budget and five-year plan as well as corporate earnings.

Sri Lanka's quarterly earnings season started two weeks ago, but most of the firms listed locally reports in late October or early November. The national budget is scheduled to be presented on Nov. 10.

The benchmark index of the Colombo Stock Exchange ended 0.03 percent or 2.08 points weaker at 6,434.89. On Monday, the index hit its lowest close since Aug. 1 of 6,418.34.

Wednesday's turnover was 311.6 million rupees ($2.12 million), less than half of this year's daily average of around 734 million rupees.

"Everybody is waiting to see the budget and the government's policy statement," said Reshan Kurukulasuriya, chief operating officer of Richard Pieris Securities (Pvt) Ltd.

"This trend will continue until the budget."

Foreign investors sold a net 49.7 million rupees worth of equities on Wednesday, the first net foreign outflow in 12 sessions. The net foreign inflow for the past eleven sessions through Tuesday was 1.23 billion rupees.

They have sold a net 1.74 billion rupees worth of shares this year.

Shares in Dialog Axiata Plc fell 0.86 percent. 

($1 = 146.7000 Sri Lankan rupees) 

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

Sri Lanka shifts tyre plant location after land owner protests

ECONOMYNEXT – Sri Lanka has shifted the location of a proposed tyre plant by Ceylon Steel Corporation, for which Italy’s Marangoni will supply equipment from a closed plant, after protests by land owners.

The Ministry of Development Strategies and International Trade had originally proposed taking about 100 acres from private coconut estates in Gonapola, Horana, 5km from the southern expressway.

But objections from land owners meant that option was not feasible, the ministry has said.

Instead, a plot of land at Wagawatta, Horana, under the administration of the Board of Investment will now be given for the plant.

The factory is to be set up by the Ceylon Steel Corp with technical collaboration from Marangoni.

Sri Lanka Kelani Valley Plantations losses rise

ECONOMYNEXT – Sri Lanka’s Kelani Valley Plantations sank even further into the red in the September 2016 quarter with losses rising 90% to Rs168 from a year ago, according to interim accounts filed with the stock exchange.

Group sales of the firm, part of the Hayleys conglomerate, rose two percent to Rs1.5 billion but costs rose even more, including sharply higher finance costs.

The accounts showed lower sales in tea and rubber as the firm suffered from dry weather and the continuing commodities slump.

Kelani Valley Plantations reported a loss per share of Rs4.94 compared with a loss of Rs2.60 a year ago.

The tea business made a loss compared to a profit the year before while rubber profits were sharply lower.

The firm has three subsidiaries - Kalupahana Power Company (Private) Limited, Kelani Valley Instant Tea (Private) Limited and Mabroc Teas (Private) Limited.

Sri Lanka’s People’s Leasing & Finance Sept net down 9.8-pct

ECONOMYNEXT – People’s Leasing & Finance’s net profit for the September 2016 quarter fell 9.8% to Rs1.1 billion with lower earnings from its leasing and higher purchase business although interest income from loans grew.

Net interest income of the firm, a subsidiary of People’s Bank, fell 2.3% to Rs2.6 billion with interest income up 19.2% to Rs5.45 billion, while interest expenses rose 49.2% to Rs2.85 billion.

Net earned premiums rose 12.2% to Rs917 million and net fee and commission income rose 41.5% to Rs167 million, interim accounts filed with the stock exchange showed.

There was a sharp increase in net trading income to Rs78 million and a 44% increase in personnel expenses to Rs714 million.

People’s Leasing & Finance’s accounts showed value added tax rose 26.2% to Rs178 million.

Earnings per share for the September quarter were 74 cents. For the six months ended 30 September 2016 EPS was Rs1.44.

Palm oil propels Sri Lanka Watawala Sept profit to Rs309mn

ECONOMYNEXT – Watawala Plantations PLC more than doubled net profit in the September 2016 quarter to Rs309 million from a year ago largely owing to gains from its palm oil business.

Losses in the tea growing business increased while the group’s new dairy business made a modest profit.

According to interim results filed with the stock exchange, group sales rose five percent to Rs1.6 billion in the quarter.

Earnings per share for the quarter were Rs1.31. EPS for the six months ending 30 September 2016 were Rs2.31 with sales up two percent to Rs3.3 billion.

The accounts showed palm oil profits more than doubled in the September quarter while the tea business continued to make losses and dairy yielded a small profit.

“Our company continues to enhance the quality of its teas in order to gain a price advantage, while continuing to increase the palm oil yield,” Watawala Plantations Managing Director Vish Govindasamy told shareholders in a note accompanying the accounts.

Colombo Stock Exchange Market Review – 25th Oct 2016

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Colombo Stock Exchange Trade Summary 25-Oct-2016

Colombo stock market turned green on Tuesday with thinnest market turnover in 31 months. All Share index started the day at 6,417 mark and gained 18.63 index points or 0.29% to end at 6,436.97. High cap constituent, S&P SL20 index slightly gained 0.51 index points or 0.01% to end at 3,587.47.

Price gains in Ceylon Tobacco (closed at LKR 846.80, +2.0%), Sri Lanka Telecom (closed at LKR 37.00, +1.9%) and Bukit Darah (closed at LKR 279.60, +3.8%) drove the index up.

Daily market turnover was LKR 136mn. Renuka Agri Foods top the turnover list with LKR 34mn supported by a single crossing of 8.9mn shares at LKR 3.50 per share. Lion Brewery (LKR 16mn), Hatton National Bank (LKR 8mn), Lanka Orix Leasing & Company (LKR 6mn) and Ceylon Grain Elevators (LKR 5mn) were among top contributors.

Market breadth was positive where out of 207 traded counters, 65 advanced, 53 slipped while 89 remained unchanged.

High investor preference was seen in Watawala Plantations where counter advanced to LKR 20.70, +3.5% supported by favourable earnings release and dividend announcement. Company declared an interim dividend of LKR 0.65 per share. First Capital Holdings, Commercial Credit & Finance and Ceylon Grain Elevators were among highly traded counters.

Further, LKR 6bn debenture issue of Hatton National Bank was oversubscribed within few hours of opening for subscription today. Accordingly, the issue was closed today as per the prospectus.

Foreign investors continued to remain on the buy side for the eleventh consecutive session with a net foreign inflow of LKR 18mn. Foreign participation was 13%. Net foreign inflows were seen in Lion Brewery (LKR 16mn), Commercial Bank (LKR 5mn), Ceylon Grain Elevators (LKR 3mn) while net foreign outflow was mainly seen in Hatton National Bank (LKR 4mn).

Source: LSL

Sri Lankan shares recover from 12-wk low in dull trading

Reuters: Sri Lankan shares edged up on Tuesday from a 12-week closing low hit in the previous session, but trading volume slumped to a more than 2-1/2-year low as investors awaited cues from the government budget and five-year plan as well as corporate earnings.

Sri Lanka's quarterly earnings season started two weeks ago, but most of the firms listed locally reports in late October or early November. The national budget is scheduled to be presented on Nov. 10.

The benchmark index of the Colombo Stock Exchange ended 0.29 percent or 18.63 points higher at 6,436.97, edging up from Monday's close of 6,418.34, its lowest since Aug. 1. The index fell 0.54 percent last week, its second straight weekly loss.

Tuesday's turnover was 135.9 million rupees ($921,355.93), its lowest since March 17, 2014 and lower than a fifth of this year's daily average of around 736.2 million rupees.

"It was a very dull day. It's a waiting game now and nothing is happening," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"The equity market is dead and all are waiting for the government's five-year plan and the budget."

Stockbrokers said the market was also digesting political concerns over the resignation of the head of Sri Lanka's anti-corruption body on Oct. 17, a few days after President Maithripala Sirisena implied that the agency was favouring the rival party of his prime minister.

This is likely to delay one of the promises of Sirisena's coalition government, eliminating corruption, and could hurt business confidence, analysts said.

Foreign investors bought a net 17.6 million rupees worth of equities on Tuesday, in the eleventh straight session of net foreign inflows and bringing the total net inflows to 1.23 billion rupees over that period.

They have sold a net 1.74 billion rupees worth of shares this year.

Shares in Ceylon Tobacco Company rose 2 percent, while Carson Cumberbatch Plc rose 1.65 percent. 

($1 = 147.5000 Sri Lankan rupees) 

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

Colombo Stock Exchange Market Review – 24th Oct 2016

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Colombo Stock Exchange Trade Summary 24-Oct-2016

Colombo bourse slumped on week’s opening day as investors remained on the sidelines, awaiting direction from the budget. All Share index lost the way after reaching 6,449 in the opening minutes to closed at 6,418.34, down by 29.19 index points or 0.45%. Blue-chip constituent, S&P SL20 index dipped by 7.63 index points (-0.21%) to end at 3,586.96.

Ceylon Tobacco (closed at LKR 830.20, -2.0%) dragged the index down along with price depreciations in high caps namely, Sri Lanka Telecom (closed at LKR 36.30, -2.2%), Commercial Leasing & Finance (closed at LKR 3.60, -5.3%). Further, Chevron Lubricants declined by 1.8% to LKR 167.00 on the XD day.

Daily market turnover was LKR 301mn. Commercial Bank was the top contributor to the turnover with LKR 35mn followed by John Keells Holdings (LKR 34mn), Lanka Orix Leasing Company (LKR 29mn) and Sampath Bank (LKR 26mn).

Losers offset the gainers 91 to 29, while 77 scripts remained unchanged. High investor activity was witnessed in Lanka IOC and stock closed with loss of 1.5% at LKR 33.50. First Capital Holdings, John Keells Holdings, Lanka Orix Leasing Company and Hayleys Fabrics were among highly traded counters.

Meanwhile, LKR 7bn debenture issue of Commercial Bank was oversubscribed within few hours of opening for subscription today. Accordingly, the issue was closed today as per the prospectus. Lanka Walltiles declared an interim dividend of LKR 2.00 per share.

Foreign investors continued to bag stocks for the tenth consecutive session with a net foreign inflow of LKR 63mn. Foreign participation was 22%. Net foreign inflows were seen in Commercial Bank (LKR 35mn), Sampath Bank (LKR 16mn), Teejay Lanka (LKR 11mn) while net foreign outflow was mainly seen in Hatton National Bank (LKR 5mn).
Source: LSL

Sri Lankan shares hit 12-wk low as investors eye budget, 5-yr plan

Reuters - Sri Lankan shares closed Monday at their lowest in 12 weeks in lean trade as investors awaited cues from the central government budget and the five-year plan ahead of corporate results.

Sri Lanka's quarterly earnings season started two weeks back, but the bulk of locally listed firms will not report until late October or early November.

The national budget is scheduled to be presented on November 10.

The benchmark index of the Colombo Stock Exchange ended 0.45 percent or 29.19 points lower at 6,418.34, its lowest close since August 1. The index had fallen 0.54 percent last week, its second straight weekly loss.

"There is no improvement in the economic conditions and the uncertainty prevails, which is deterring the investors from taking long term position," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Market is waiting for the government's five-year plan and the budget. We see investors have switched to wait-and-see mode. Not many of them are looking at long term until some certainty comes into place."

Turnover stood at 301.3 million rupees ($2.05 million), less than half of this year's daily average of around 740 million rupees.

Stockbrokers said the stock market was also digesting political concerns over the resignation of the head of Sri Lanka's anti-corruption body on October 17, a few days after President Maithripala Sirisena implied that the agency was favouring the rival party of his prime minister.

This is likely to delay one of the promises of Sirisena's coalition government, eliminating corruption, and could hurt business confidence, analysts said.

Foreign investors bought a net 62.5 million rupees worth equities on Monday, extending the net foreign inflow for the past nine days to 1.21 billion rupees worth of shares.

They have sold a net 1.76 billion rupees worth of shares so far this year.

Shares in Ceylon Tobacco Company fell 2 percent after media reports suggested there could be a further hike in cigarette prices, while Commercial Leasing and Finance Plc lost 5.3 percent.

($1 = 146.9000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Vyas Mohan)

Colombo Stock Exchange Market Review – 21st Oct 2016

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Colombo Stock Exchange Trade Summary 20-Oct-2016

Colombo stock market wrapped the week’s operations in a positive note on Friday amid higher institutional participation. All Share index closed with a gain of 5.17 index points or 0.08% to end at 6,447.53 while 20-scrip S&P SL20 index closed at 3,594.59 with a slight gain of 1.42 index points or 0.04%.

Sri Lanka Telecom (closed at LKR 37.10, +2.8%) headed the index gains along with Lanka Orix Leasing Company (closed at LKR 81.00, +1.8%) and Asian Hotels & Properties (closed at LKR 59.20, +2.1%). Two illiquid counters namely, CT Holdings (closed at LKR 121.00, -3.2%) and Carson Cumberbatch (closed at LKR 182.00, -1.6%) negatively impacted the index performance.

Daily market turnover recorded a three week high of LKR 1.15bn supported by hefty crossings. Dialog Axiata was the top contributor to the turnover with LKR 270mn followed by Hemas Holdings (LKR 257mn), Panasian Power (LKR 225mn) and Hatton National Bank (LKR 102mn).

Negotiated deals were recorded in Dialog Axiata (20.8mn shares at LKR 11.60), Panasian Power (75mn shares at LKR 3.00), Hemas Holdings (1.9mn shares at LKR 107.00) and Watawala Plantations (1.0mn shares at LKR 20.00). Aggregate value crossings accounted for 60% of the turnover.

Market breadth was positive where out of 196 counters traded, 71 advanced while 57 declined. High investor activity was witnessed in Tokyo Cement non-voting, Access Engineering, John Keells Holdings and Teejay Lanka.

Foreign investors stood on buy side for the ninth straight session with a net foreign inflow of LKR 234mn. Foreign participation was 49%. Net foreign inflows were seen in Hemas Holdings (LKR 206mn), Hatton National Bank (LKR 22mn) and Watawala Plantations (LKR 20mn). Net foreign outflow was mainly seen in Dialog Axiata (LKR 51mn). 

Source: LSL

Sri Lankan shares edge up on foreign buying, turnover hits near 3-wk high

Reuters: Sri Lankan shares ended slightly firmer on Friday, edging up from their lowest close in 1 month hit in the previous session, as foreign investors bought risk assets ahead of a flurry of corporate results and next month's national budget.

Sri Lanka's quarterly earnings season started last week but the bulk of locally listed firms will not report until late October or early November.

The national budget is scheduled to be presented on Nov. 10.

The benchmark index of the Colombo Stock Exchange ended 0.08 percent or 5.17 points firmer at 6,447.53, up from its lowest close since Sept. 20 hit on Thursday. The index fell 0.54 percent on the week, its second straight weekly loss.

Turnover stood at 1.15 billion rupees ($7.81 million), the highest since Oct. 3 and more than this year's daily average of around 741.5 million rupees.

"Today the market was a bit positive with some foreign inflows. Even though the quantity was low the foreign interest was there," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Stockbrokers said the stock market was also digesting political concerns over the resignation of the head of Sri Lanka's anti-corruption body on Monday, a few days after President Maithripala Sirisena implied that the agency was favouring the rival party of his prime minister.

This is likely to delay one of the promises of Sirisena's coalition government to eliminate corruption and could hurt business confidence, analysts said.

Foreign investors bought a net 233.8 million rupees worth equities on Friday, extending the net foreign inflow for the past nine days to 1.15 billion rupees worth of shares.

They have sold a net 1.82 billion rupees worth of shares so far this year.

Shares in Sri Lanka Telecom Plc rose 2.77 percent, while top conglomerate John Keells Holdings Plc ended steady. 

($1 = 147.2000 Sri Lankan rupees) 

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

Colombo Stock Exchange Market Review – 20th Oct 2016

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Colombo Stock Exchange Trade Summary 20-Oct-2016

Colombo equity market turned back to red on Thursday amid thin investor activity. All Share index closed with little change at 6,442.36, down by 2.03 index points (-0.03%) while 20-scrip S&P SL index dipped by 3.88 index points or 0.11% to end at 3,593.17.

Cargills (closed at LKR 171.70, -4.6%) drove the index performance down along with John Keells Holdings (closed at LKR 150.00, -0.7%) and Teejay Lanka (closed at LKR 46.00, -1.3%). Hemas Holdings (closed at LKR 107.00, +1.9%) and Dialog Axiata (closed at LKR 11.60, +0.9%) stood on other side of the equation.

Daily market turnover was LKR 365mn. ACL Cables emerged as the top contributor to the turnover with LKR 45mn followed by National Development Bank (LKR 37mn), Ceylon Tobacco (closed at LKR 32mn) and John Keells Holdings (LKR 31mn).

Negotiated dealings were recorded in Ceylon Tobacco (33,228 shares at LKR 847.00) and National Development Bank (0.15mn shares at LKR 163.00). Aggregate value of crossings accounted for 14% of the turnover.

Losers offset the gainers 67 to 63, while 71 scripts remained unchanged. Bogala Graphite was the most traded stock of the day and the counter closed at LKR 17.90, +1.7%. Lotus Hydro Power advanced to LKR 7.30 (+7.4%) supported by second interim dividend of LKR 0.50 per share (DY-6.8%). John Keells Holdings, Commercial Credit & Finance and Access Engineering were among highly traded counters.

Foreign investors were net buyers with a net foreign inflow of LKR 39mn while extending inflow streak to the eight straight session. Foreign participation was 32%. Net foreign inflows were seen in ACL Cables (LKR 38mn), John Keells Holdings (LKR 22mn) and Nations Trust Bank (LKR 13mn). Net foreign outflow was mainly seen in Lion Brewery (LKR 14mn).

Source: LSL

Sri Lankan shares close at 1-month low in thin trade

Reuters: Sri Lankan shares ended slightly weaker on Thursday, posting their lowest close in a month, as investors awaited next month's national budget and a flurry of corporate results.

The benchmark index of the Colombo Stock Exchange ended 0.03 percent or 2.03 points lower at 6,442.36, its lowest close since Sept. 20, in thin trading.

"Investors are waiting to see the outcome of the budget and quarterly results," said Atchuthan Srirangan, a senior research analyst with First Capital Equities (Pvt) Ltd.

"Market will move sideways until the budget," he said.

Stockbrokers said the market was digesting political concerns over the resignation of the head of Sri Lanka's anti-corruption body on Monday, a few days after President Maithripala Sirisena implied that the agency was favouring the rival party of his prime minister.

This is likely to delay one of the promises of Sirisena's coalition government to eliminate corruption and could hurt business confidence, analysts said.

Turnover stood at 365.03 million rupees ($2.50 million), well below this year's daily average of around 739.4 million rupees.

Foreign investors, who have sold a net 2.06 billion rupees worth of shares so far this year, bought a net 39.1 million rupees worth equities on Thursday.

Top conglomerate John Keells Holdings Plc ended 0.66 percent weaker while Cargills (Ceylon) Plc fell 4.61 percent.

Sri Lanka's quarterly earnings season started last week but the bulk of locally listed firms will not report until late October or early November.

($1 = 145.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)

Sri Lankan shares steady at 1-month closing low

Reuters: Sri Lankan shares ended steady at their lowest close in a month on Wednesday as investors cautiously awaited directions from next month's national budget and a flurry of corporate results.

The benchmark index of the Colombo Stock Exchange ended 0.02 percent firmer at 6,444.39, hovering at its lowest close since Sept. 20 hit in the previous session.

"Everybody is waiting for the budget and (and to see) if the government will impose capital gain tax on equities," said Hussain Gani, deputy CEO at Softlogic Securities.

"Institutional investors are holding their positions (given their) experience of many surprises in the last year budget."

Stockbrokers said the market was also gradually factoring in political concerns after the head of Sri Lanka's anti-corruption body resigned on Monday, a few days after President Maithripala Sirisena implied that the agency was favouring the rival party of his prime minister.

This is likely to delay one of the promises of Sirisena's coalition government to eliminate corruption and implement rule of law, and might also hurt business confidence, analysts said.

Turnover stood at 483.4 million rupees ($3.29 million), less than this year's daily average of around 741 million rupees.

Foreign investors, who have sold a net 2.1 billion rupees worth of shares so far this year, bought a net 147 million rupees worth equities on Tuesday. Top conglomerate John Keells Holdings Plc ended 0.67 percent firmer.

Sri Lanka's quarterly earnings season started last week but the bulk of locally listed firms will not report until late October or early November.

($1 = 146.9000 Sri Lankan rupees)

(Reporting by Shihar Aneez; editing by Mark Heinrich)

Colombo Stock Exchange Market Review – 19th Oct 2016

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Colombo Stock Exchange Trade Summary 19-Oct-2016

Colombo bourse closed flat on Wednesday amid the increase in treasury yields after six weeks. All Share index advanced to 6,461 mark in the morning session but closed the day at 6,444.39 with a gain of 1.52 index points or 0.02% while 20-scrip S&P SL index advanced by 5.31 index points or 0.15% to end at 3,597.05. 

Price gains in high caps, John Keells Holdings (closed at LKR 151.00, +0.7%), Commercial Leasing & Finance (closed at LKR 3.80, +5.6%), Commercial Bank (closed at LKR 146.50, +0.4%) spearhead the gains but losses in Asian Hotels & Properties (closed at LKR 58.00, -2.2%) & Sri Lanka Telecom (closed at LKR 35.90, -0.8%) impacted the index performance. 

Daily market turnover was LKR 483mn in absence of negotiated transactions. John Keells Holdings was the top contributor to the turnover with LKR 141mn followed by Hatton National Bank non-voting (LKR 37mn), Central Finance (LKR 29mn) and ACL Cables (LKR 26mn). 

High investor activity was witnessed in Central Investments & Finance (CIFL), subsequent to the monetary board’s approval on the resolution mechanism for repayment of depositors of CIFL and two other finance companies. According to Central Bank, once the repayment plan is legally finalized companies will be dealt with through applicable laws for liquidation. Stock hit intra-day low of LKR 1.20 but managed to closed at LKR 1.40 (-6.7%) before the imposition of trading halt.

Scripts of Bairaha Farms inclined to LKR 192.00 (+1.2%) supported by favorable earnings (+81%Yoy) for the September quarter. Furthermore, LB Finance quarter profits increased by 20%YoY and stock closed with a gain of 0.9% at LKR 128.00. Ceylon Grain Elevators, Bogala Graphite and John Keells Holdings were among most traded counters.

Market breadth was negative where out of 200 scripts, 70 slipped, 51 advanced while 79 remained unchanged.

Foreign investors continued to remain on buy side for the seventh straight session with a net foreign inflow of LKR 147mn. Foreign participation was 36%. Net foreign inflows were seen in John Keells Holdings (LKR 126mn), ACL Cables (LKR 26mn), Commercial Bank (LKR 20mn) while net foreign outflow was mainly seen in Commercial Bank non-voting (LKR 18mn).

Meanwhile, at the treasury bill auction, three month rate increased by 5bps to 8.60% and six month rate advanced to 9.46% (+7bps). One year treasury yield improved by 8bps to 10.19%. CBSL received bids amounting to LKR 41.8bn and it was decided to accept LKR 4.2bn worth of Treasury bills.
Source: LSL

Commercial Bank’s Rs5bn debenture issue opens on Oct 24

(LBO) – Sri Lanka’s Commercial Bank of Ceylon second issue of debentures for 2016 is to open on 24th October, the bank said in a statement.

The Bank is seeking to raise 5 billion rupees with an option to increase it by a further 2 billion to strengthen its Tier II capital and to raise long term funds for expansion.

The Listed, Rated, Unsecured, Subordinated, Redeemable Debentures in the denomination of 100 rupees will be offered in two tenures – Type A with a five year tenure and Type B with a 10 year tenure, the Bank said.

The five-year debentures will carry a fixed interest rate of 12 percent p.a. (AER 12.36%) payable semi-annually, while the ten-year debenture will offer a fixed interest rate of 12.25 percent p.a. (AER 12.63%), also payable semi-annually.

The minimum subscription per application is 10,000 rupees or 100 debentures. Applications in excess of the minimum subscription should be in multiples of 10,000 rupees or 100 debentures.

The debentures are rated AA- (lka) by Fitch Ratings Lanka Limited. Commercial Bank’s National Long-Term Rating has been affirmed at AA (lka)/Stable by Fitch Ratings Lanka Limited. The Investment Banking Division of Commercial Bank of Ceylon PLC is the Manager to the Issue.

More details of the debenture issue can be obtained from the prospectus on the Bank’s website www.combank.lk and the CSE’s website www.cse.lk and are available at all stockbrokers.

The issue will close in 14 market days of its opening date unless oversubscribed before the closing date.

Sri Lanka’s Fitch rates Seylan Bank senior debt A-(lka)(EXP)

Fitch Ratings has assigned Seylan Bank PLC’s (A-(lka)/Stable) proposed senior debenture issue of up to LKR8bn a National Long-Term Rating of ‘A-(lka)(EXP)’.

The debentures will have tenors of three and four years and carry fixed and floating coupons. The debentures are to be listed on the Colombo Stock Exchange, and the bank plans to use the proceeds to fund loan growth, strengthen its funding mix, reduce structural maturity mismatches, and reduce its short-term borrowings.

The final rating is subject to the receipt of final documentation conforming to information already received.

KEY RATING DRIVERS

Seylan Bank’s senior debt is rated at the same level as its National Long-Term Rating, as the debentures rank equally with other senior unsecured obligations.

The National Long-Term Rating of Seylan Bank reflects Fitch’s expectation of state support due to its state shareholding – which came about in the aftermath of the bank’s crisis in December 2008 – and a higher share of banking-sector deposits relative to some peers. Seylan Bank has a lower support-driven rating than its larger peers, due to its smaller market share. Fitch believes Seylan Bank’s standalone financial strength has improved, reaching the same level as it support-driven rating.

RATING SENSITIVITIES

Seylan Bank’s senior debt ratings will move in tandem with its National Long-Term Rating.

A downgrade of Seylan Bank’s rating could result from a reassessment of state support and a substantial reversal in recent improvements to its asset quality, together with a weakening financial profile. In the absence of changes to Fitch’s support assessment, an upgrade of Seylan Bank’s rating would be contingent on further improvements in its standalone profile through improved asset quality and provisioning, stemming mainly from recovery of legacy NPLs.

An upgrade would also be contingent upon Seylan Bank maintaining other credit metrics in line with higher-rated peers.

Fitch rates DFCC Bank subordinate debentures final A+(lka)

Fitch Ratings has assigned DFCC Bank PLC’s (DFCC; AA-(lka)/Negative) Basel II-compliant subordinated debentures of up to LKR7bn a final National Long-Term Rating of ‘A+(lka)’.

The final rating is the same as the expected rating assigned on 27 September 2016 and follows the receipt of documents conforming to information already received.

The debentures, with 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.

KEY RATING DRIVERS

The subordinated debentures are rated one notch below DFCC’s National Long-Term Rating to reflect the subordination to senior unsecured debt.

DFCC’s rating captures its developing commercial banking franchise and still-high capitalisation. Its weaker asset-quality compared with better-rated peers weighs on its rating. The Negative Outlook on DFCC’s National Long-Term Rating reflects weakening capital buffers that stem from weaker asset-quality metrics, increased loan growth and below-average internal capital generation.

RATING SENSITIVITIES
The ratings on the debentures will move in tandem with DFCC’s National Long-Term Rating.

Sri Lanka’s HNB to raise Rs6bn from listed debenture

(LBO) – Sri Lanka’s Hatton National Bank is to raise 6.0 billion rupees from a listed debenture issue, the bank said in a stock exchange filing.

The bank has decided to issue rated, subordinated, unsecured, redeemable debentures worth 5.0 billion rupees with an option to go up to 6.0 billion rupees.

NDB Investment Bank will be managing the debt issue while Acuity Partners will be co-managing the issue.

Date of opening of the subscription list is 25th October 2016.

Chevron Sri Lanka unit Sept net up 20-pct

ECONOMYNEXT - Chevron Lubricants Lanka’s September 2016 quarter net profit rose 20 percent to just over a billion rupees from a year ago, helped by lower base oil prices and increased consumption owing to a surge in vehicle imports.

Sales rose 8 percent to Rs3.2 billion, with the cost of sales rising at a slower rate, according to interim accounts filed with the stock exchange.

The accounts showed lower distribution costs and administrative expenses during the September 2016 quarter.

Earnings per share for the quarter rose to Rs4.17 from Rs3.48 the year before.

In the nine months to 30 September 2016, EPS rose to Rs11.82 from Rs9.89 a year ago.

The company has said it has benefitted from lower base oil prices and increased consumption owing to the sharp increase in vehicle imports.

Sri Lanka Fitch gives HNB's debt Final 'A+(lka)' rating

ECONOMYNEXT - Fitch Ratings Lanka said it has given Hatton National Bank's (HNB) proposed Basel II-compliant subordinated debentures of up to Rs6 billion a final National Long-Term Rating of 'A+(lka)'.

The debentures, which will have tenors of five and seven years, and carry fixed coupons, will be listed on the Colombo Stock Exchange. HNB expects to use the proceeds to strengthen its Tier II capital base, a statement said.

The proposed subordinated debentures are rated one notch below HNB's National Long-Term Rating to reflect the subordination to senior unsecured debt.

“HNB's National Long-Term Rating reflects its strong domestic franchise, satisfactory capitalisation and strong performance, which are counterbalanced by a higher risk appetite as seen in the sustained high loan growth that has put pressure on its funding and liquidity profile,” Fitch said.

The ratings on the debentures will move in tandem with HNB's National Long-Term Rating.

Sri Lanka Fitch downgrades PABC, confirms ratings of 04 small, mid-size banks

ECONOMYNEXT - Fitch Ratings Lanka has downgraded Pan Asia Banking Corporation's (PABC) National Long-Term Rating to 'BBB-(lka)' from 'BBB(lka)', saying above-industry loan growth had weakened its capitalisation.

The Outlook on PABC was revised to Stable from Negative, the rating agency said in a statement after Fitch's periodic review of Sri Lanka's small and mid-sized bank peer group.

The agency has also revised the Outlook on the National Long-Term Rating of Union Bank of Colombo (UB) to Positive from Stable, and affirmed its rating at 'BB+(lka)'.

The National Long-Term Ratings on Nations Trust Bank PLC (NTB), SANASA Development Bank PLC (SDB) and Amana Bank PLC (Amana) have been affirmed with a Stable Outlook.

The full report follows:

Fitch Ratings-Colombo-17 October 2016: Fitch Ratings Lanka has downgraded Pan Asia Banking Corporation PLC's (PABC) National Long-Term Rating to 'BBB-(lka)' from 'BBB(lka)'. The Outlook is revised to Stable from Negative. The agency has also revised the Outlook on the National Long-Term Rating of Union Bank of Colombo PLC (UB) to Positive from Stable, and affirmed its rating at 'BB+(lka)'. The National Long-Term Ratings on Nations Trust Bank PLC (NTB), SANASA Development Bank PLC (SDB) and Amana Bank PLC (Amana) have been affirmed with a Stable Outlook. A full list of rating actions is at the end of this commentary.

KEY RATING DRIVERS

NATIONAL RATINGS AND SENIOR DEBT

The rating actions follow Fitch's periodic review of Sri Lanka's small and mid-sized bank peer group.

The banks' operating environment has become more challenging - as signalled by the downgrade of the sovereign Long-Term Issuer Default Rating to 'B+' from 'BB-' on 29 February 2016. Fitch expects increased volatility in operating conditions to add pressure on the banks' credit metrics.

Fitch believes capitalisation is the main problem for the banks, due to weakening capital buffers from rapid loan-book growth and high exposure to retail and SME segments, which are more susceptible to deteriorating economic conditions. PABC and Amana are yet to meet the LKR10bn minimum capital requirement set by the regulator. Fitch believes capital-raising may also be a challenge amid increased country risk.

The downgrade of PABC's National Long-Term Rating reflects the continued deterioration in its capitalisation following above-industry loan growth (2015: 37% versus 21% for the industry, 2014: 27.2% versus 13.7%). The rating factors in Fitch's expectation of an equity infusion, as PABC is required to increase its minimum regulatory capital to LKR7.5bn by 1 January 2017 and LKR10bn by 1 January 2018. Fitch believes that the bank's earnings retention alone is not likely to be sufficient to achieve the capital standards, despite improved profitability.

PABC's regulatory NPL ratio improved to 4.4% at end-June 2016, from 5.7% at end-2014, mostly due to high loan growth, although the stock of NPLs also decreased marginally. ROA improved to 1.1%, from 0.6%, due to better revenue generation stemming from higher business volumes.

The Positive Outlook on UB's rating reflects the structural changes taking place through a shift in the risk profile of the bank's loan book. This stems from a higher exposure to corporates as opposed to SMEs in the past, which could support better asset quality. However, UB continued to sustain rapid loan growth of 51.5% in 2015 and 20.5% in 1H16. This could put pressure on asset-quality if not managed.

UB's rating reflects its still-small franchise, weak profitability and higher capitalisation compared with that of its peers. The bank accounted for just 1% of sector assets in 1H16 and is among the smallest licensed commercial banks in the sector. UB's profitability in terms of ROA has been gradually increasing (1H16: 0.67%, 2015: 0.41%), but remains low relative to peers. Fitch expects capitalisation to decline to levels more comparable with that of its peers in the medium-term, alongside rapid loan growth. Its Fitch Core Capital ratio decreased to 19.8% in 1H16, after being boosted to 35.8% at end-2014 following an LKR11.4bn capital injection from an affiliate of Texas Pacific Group (TPG). However, Fitch expects the bank to sustain stronger capitalisation in the medium-term than in the past.

UB reported a sharp decline in its gross NPL ratio to 2.90% in 1H16, from 3.55% at end-2015 and 8.25% at end-2014. This figure excludes NPLs at its subsidiary, UB Finance Company Ltd (UBF), formerly a distressed company. UBF accounted for 31.3% of the groups' total NPLs at 1H16. UBF's asset quality remains a significant drag on the group's asset quality, even though it has been improving.

NTB's ratings reflect its moderate franchise, high product concentration and declining capitalisation. The bank's product concentration relative to peers remain high, with leasing accounting for 23% of gross loans at end-June 2016, and credit cards accounting for 11%. Fitch believes these exposures could put pressure on NTB's asset quality. The bank's reported gross NPL ratio improved to 2.8% at end-June 2016, from 4.2% at end-2014, due mainly to recoveries and write-offs in the leasing portfolio. The ratio of the bank's reserves for impaired loans/gross loans stood at 1.7%, which was lower than that of its peers.

The bank's capitalisation, as measured by the Tier 1 regulatory capital ratio, decreased to 10.7% by end-June 2016, from 13.2% at end-2015 (end-2014: 14.2%). Fitch believes capitalisation could deteriorate further amid loan growth and the absence of capital-raising activity. A sustained decline in capitalisation could put pressure on NTB's ratings.

Fitch expects NTB's net interest margin (NIM) to moderate in the near-term due to the rising interest-rate environment and planned increase in exposure to lower-yielding customer segments. The bank's cost structure remains high compared with peers due to branch expansion, but we expect this to moderate with process improvements the bank has undertaken. NTB's low cost current account savings account (CASA) improved to 31% of overall deposits by end-June 2016, from 25% at end-2013, but lags behind that of higher-rated peers.

SDB's rating captures the bank's high-risk appetite in terms of its substantial exposure and rapid loan growth to the retail and lower-end SME segments. Fitch believes a capital injection would support SDB's rating, as internal capital generation is not likely to be sufficient to cushion the decline in capitalisation as a result of rapid loan book expansion. SDB's reported gross NPL ratio decreased to 2.34% in 1H16, from 3.76% at end-2014, largely due to rapid loan growth as the stock of NPLs remained flat. Fitch expects asset quality to deteriorate as the loans season. The bank continues to benefit from above-average NIM stemming from its loan book exposures, although the contraction in its NIM has lowered SDB's profitability.

The affirmation of Amana's National Long-Term Rating reflects our expectation that the bank will increase its capital to meet the minimum level as directed by the Central Bank of Sri Lanka. In July 2015, the regulator granted approval for an extended timeline to comply with the minimum capital requirement which requires a minimum of LKR7.5bn and LKR10bn to be achieved by 1 January 2017 and 1 January 2018, respectively.

Amana's rating reflects its small and developing domestic franchise and limited operating history. It also captures Amana's relatively high-risk appetite, primarily indicated through rapid growth in the retail and SME segments. This could put pressure on the bank's asset quality if economic conditions deteriorate. Amana's NPL ratio has remained at less than 1% since end-December 2015, supported by rapid loan book growth, while absolute NPLs have moved up moderately. Fitch deems the placement of Amana's excess funds in overseas financial institutions to be less liquid than domestic government securities although tenors on these placements have been shortened. The bank has maintained a stable CASA base relative to peers, with a CASA of over 50%.

PABC's and NTB's senior debentures carry the same rating as their National Long-Term ratings, as they rank equal with other unsecured obligations.

SUBORDINATED DEBT

PABC's and NTB's old-style Basel II Sri Lanka rupee-denominated subordinated debt is rated one notch below their National Long-Term Ratings to reflect the subordination to senior unsecured creditors.

RATING SENSITIVITIES

NATIONAL RATINGS AND SENIOR DEBT

An upgrade of PABC's rating is contingent upon the bank achieving a sustained and significant improvement in its capitalisation, alongside a moderation in risk appetite. PABC's rating would be downgraded if loss-absorption buffers further deteriorate, either through aggressive loan book growth or greater share of unprovided NPLs.

The upgrade of UB's rating is contingent upon the bank's ability to manage the risk that could stem from continued high loan growth, with a sustained improvement in asset quality and better risk management. The upgrade would also depend on an improvement in UB's still-developing franchise alongside sustainable and improved performance similar to higher-rated peers. Capital impairment risks stemming from sustained rapid loan expansion or deterioration in asset quality could put pressure on UB's rating.

An upgrade of NTB's rating is contingent upon the bank lowering product concentration, significantly improved capitalisation and enhanced funding stability, alongside progress in building a strong commercial banking franchise. Weaker capitalisation or an increased risk appetite, as evident through aggressive loan growth and weaker asset quality, could result in a downgrade

SDB's rating could be downgraded if there is a continued deterioration in capitalisation, either through aggressive loan growth or greater unprovided NPLs. An upgrade would be contingent upon moderation of its risk appetite and sustainable improvements in asset quality and profitability.

Amana's rating may be downgraded if it fails to satisfy regulatory minimum capital requirements in a timely manner. A rating upgrade is contingent upon the expansion of Amana's franchise and improved and sustained financial profile, similar to higher-rated peers.

Senior debt ratings will move in tandem with the banks' National Long-Term Ratings.

SUBORDINATED DEBT

Subordinated debt ratings will move in tandem with the banks' National Long-Term Ratings.

The rating actions are as follows:

Pan Asia Banking Corporation PLC

National Long-Term Rating downgraded to 'BBB-(lka)' with a Stable Outlook, from 'BBB(lka)' with a Negative Outlook

Senior debenture rating downgraded to 'BBB-(lka)', from 'BBB(lka)'

Subordinated debenture rating downgraded to 'BB+(lka)', from 'BBB-(lka)'

Union Bank of Colombo PLC

National Long-Term Rating affirmed at 'BB+(lka); Outlook revised to Positive from Stable

Nations Trust Bank PLC

National Long-Term Rating affirmed at 'A(lka)'; Stable Outlook

Basel II-compliant subordinated debentures affirmed at 'A-(lka)'

Proposed Basel II-compliant subordinated debentures affirmed at 'A-(EXP)(lka)'

SANASA Development Bank PLC

National Long-Term Rating affirmed at 'BB+(lka)'; Stable Outlook

Amana Bank PLC

National Long-Term Rating affirmed at 'BB(lka)'; Stable Outlook

Sri Lanka president accepts bribery chief's resignation

ECONOMYNEXT - Sri Lanka President Maithripala Sirisena informed his cabinet on Tuesday that he decided to accept the bribery commission director general's resignation after he questioned her integrity.

Maithripala Sirisena is due to make a fresh appointment shortly.

During Tuesday's closed-door cabinet meeting, Sirisena sought to explain his frustration with the bribery commission headed by Dilrukshi Wickramasinghe, the FCID and the CID.

The President was particularly miffed that there were 15 rookie police investigators invited to watch senior minister A. H. M. Fowzie being questioned by the bribery commission.

The president has vehemently denied that he was trying to protect former defence secretary Gotabhaya Rajapaksa who was summoned to court last month to answer allegations that he defrauded the state of Rs11,400 million.

Sirisena told his cabinet that in his outburst on Wednesday, he had only spoken about the "indignity" allegedly suffered by three ex-navy admirals who were charged along with Gotabhaya Rajapaksa.

Contrary to popular belief, Sirisena has insisted that his problem with the government of Prime Minister Ranil Wickremesinghe was the failure of the administration to well and truly nail Gotabhaya for all his alleged sins.

Dilrukshi Wickamasinghe's resignation has helped both sides to save face and move on, and salvage the unity government, sources close to both sides said on Tuesday.

Prime Minister Ranil Wickremesinghe, who is currently in Belgium, is known to be following developments at home closely.

However, the release by his office of a picture of him tasting gourmet chocolates in Brussels while a dangerous row raged in Colombo was seen as in poor taste.

Enjoying the sweet treats with the Prime Minister was Law and Order minister Sagala Ratnayake whose actions are being questioned after President Sirisena's highly publicised public outburst against the police.

Speaker Karu Jayasuriya, who is also the Chairman of the Constitutional Council, which appoints chairmen and members of independent commissions established in line with the 19th amendment to the constitution, has tried to defuse tensions by glossing over the main issues.

"Several chairmen and members questioned if higher echelons of government had any concerns about the work," the Speaker said in a statement issued on Monday

Bribery commission DG Wickramasinghe became the first member of an independent body to resign in protest over interference by the executive into the work of the anti-graft commission, whose independence is guaranteed by the constitution.

The Speaker did not refer to Wickramasinghe's resignation, but said there was no disagreement between Sirisena and Wickremesinghe over the functioning of the independent bodies.

Jayasuriya urged all independent bodies to continue their work, saying the people had high hopes that the institutions will deliver results.

Killer profits for Sri Lanka primary dealer from bids made with central bank funds

ECONOMYNEXT - Sri Lanka's Perpetual Treasuries Plc, a primary dealer in government securities, had placed bids of tens of billions of rupees at bond auctions without funds of their own and defaulted on cash borrowed from the central bank, a leaked report said.

Perpetual Treasuries had won bids for 42 billion rupees at a controversial bond auction in March 2016 and defaulted on 11 billion rupees taken from the Central Bank, a draft investigation report published on LankaTruth, an online publication said.

Naked Bets

The report, which the central bank acknowledged had been leaked, said placing bets of tens of billions of rupees at auction without money to cover them, endangered the entire government securities market.

The March 2016 bond auctions were among the most controversial, as the state debt office, a unit of the central bank, offered 65 billion rupees of bonds and accepted 127 billion rupees sending yields soaring.

Rates later plunged giving billions of rupees of profits to the buyers as the prices on the underlying bonds rose.

The report said Perpetual Treasuries made profits of 4.6 billion rupees in April and May 2016 buying bonds at rates as high as 14.68 percent partly leveraged with central bank money borrowed at 8.0 and 8.50 percent and selling them off.

This means Perpetual had been borrowing money from the central bank at lower rates and loaning it back to the state at almost the double the rate, pocketing profits on the way.

Critics had said that offering smaller amounts at an auction, misleading the market and then accepting more bids amounts to a rigging of the auction and favouring those with inside knowledge.

The first such large scale auction came to public attention in February 2015, though volumes had been varied earlier. In that auction, where Perpetual also figured, money from state-run Bank of Ceylon was used.

Controversial Auction

Perpetual Treasuries, is a firm connected to Arjun Aloysius, son-in-law of Sri Lanka's former Central Bank Governor Arjuna Mahendran who had denied wrong doing.

At an auction on March 29, 2016, the central bank offered 40 billion rupees of bonds, but sold 27 billion rupees of bonds over the original volume, giving 26.4 billion rupees of securities to Perpetual, the report shows.

The leaked investigation report showed that after offering 10 billion rupees of 14-year bonds (maturing in 2030) in March 2016, the central bank actually sold 28.7 billion rupees worth of bonds, giving Perpetual Treasuries 10.31 billion rupees of securities, the entire volume it had asked for and more than the total offered in the maturity.

In 10-year bonds maturing in 2026, it was given 7.6 billion rupees of securities, after upsizing the volume sold from 10 billion to 17 billion rupees. Perpetual had bid for 10.3 billion rupees.

Perpetual was also given 8.45 billion rupees in 9-year bonds maturing in 2025, after it subscribed for 8.6 billion. A total of 21 billion rupees of 2025 bonds were sold after only offering 10 billion at first.

Perpetual only bid a billion rupees and got only 50 million rupees in four-year bonds, where 10 billion was offered and 10.2 billion sold.

The longer the tenor, the larger the capital gains (and big losses to the state) to be made when rates fall.

In a March 31 auction, Perpetual had not submitted any bids for short tenure two- and four-year bonds. But it had got 15 billion rupees of 12-year bonds maturing in 2028, after bidding for 15.7 billion rupees. For five-year bonds the firm had bid 5.1 billion rupees and got 625 million rupees of securities.

No Funds

The money for the winning bids had to be paid on April 01.

The probe report said the firm had to pay 36 billion rupees for the bonds, but it did not have enough funds.

Perpetual Treasuries had asked for 22 billion rupees at an open market operations (OMO) cash auction where the central bank gives overnight liquidity (printed money) against securities, for banks and dealers who may face a cash shortfall.

During the day on April 01, Perpetual had also borrowed 19.98 billion from an intra-day liquidity facility, which has to be settled by the end of the day.

The investigation report said Perpetual was unable to provide securities of 11.1 billion rupees to fully cover its bid at the OMO auction to get the cash.

The primary dealer had then defaulted on the 11 billion rupees from the intra-day liquidity facility. The firm had been fined for both actions.

The report did not say whether it was the first time a bank or a dealer had defaulted on an intra-day liquidity loan and also failed to provide securities to cover a deal at the OMO auction.

Risky Deals

The investigation report said Perpetual Treasuries had made large bids at auctions without enough funds to cover them, hurting the entire market.

"Such high risk taking can result in a stand alone PD (a primary dealer not connected to a commercial bank) facing liquidity and settlement risks causing negative consequences on the confidence of the government securities market," the report noted.

Perpetual Treasuries had made profits of 4.6 billion rupees in April and May 2016, by borrowing from the central bank's windows, the report said.

From April 01 to April 08 2016, Perpetual had borrowed 66 billion rupees from the Central Bank to fund its portfolio. It was 75 percent of the total borrowings by all primary dealers.

From January 2015 to May 2016, Perpetual had made profits of 9.8 billion rupees, the report said.

The profits were also booked by selling the bonds to Pan Asia Bank, DFCC and the EPF. In the case of DFCC and Pan Asia, the firm had bought back securities, sometimes on the same day, which needed to be probed further, the report said.

The report also recommended a deeper probe of the activities of the EPF.

Sri Lanka's new Central Bank Governor Indrajit Coomaraswamy had already stopped the practice of misleading the market by announcing low volumes and accepting bids for much higher amounts and has said auctions would be further reformed after looking at international best practices.

The central bank said last Friday that its governing board "noted with concern the sharp disparity in the performance of primary dealers" and "certain issues related to the pattern of trading activities."

Meanwhile a probe report by Sri Lanka Parliament's committee on public enterprises is also due to be submitted to the speaker later this month.

Entrust, 3 Sri Lanka finance company depositors to be repaid: central bank

ECONOMYNEXT - Sri Lanka's Central Bank said customers of Entrust Securities, a primary dealer in government securities, and three finance companies will be repaid.

The Central Bank said Rs8.5 billion of investments made at Entrust Securities by 24 funds and investors, which were not covered by government securities, will be repaid.

At The Standard Credit Finance Ltd., City Finance Corporation Ltd. and Central Investments and Finance Plc, Rs4,848 million will be repaid to 11,878 depositors "annually from 2017 over a reasonable period of time with a fair interest rate during this repayment period", the Central Bank said.

The Central Bank said Entrust was made insolvent by fraudulent activities.

The Central Bank said it will set up a new enforcement division in the department of non-bank financial institutions to take legal action against directors and managers who engage in fraud.

"Furthermore, action will be taken to address lapses in the Central Bank, and to strengthen regulatory and supervisory mechanisms on priority basis to ensure the safety and soundness of existing institutions," the Central Bank said.

The full statement is reproduced below:

Central Bank resolves four insolvent financial institutions to protect depositors and promote the financial system stability

As announced to the public on 10.10.2016, the Monetary Board at its meeting held on 14.10.2016 considered resolution issues pertaining to a number of non-bank financial institutions in the context of relevant legal provisions in the interest of protecting the public trust in the financial system. Accordingly, the Monetary Board approved a resolution mechanism for repayment of depositors of three finance companies and legitimate investors in government securities-linked investments in Entrust Securities PLC.

The three finance companies are The Standard Credit Finance Ltd., City Finance Corporation Ltd. and Central Investments and Finance PLC. All three companies got into a chronic financial position in 2008 and 2009 due to fraud and mismanagement of funds and, therefore, these companies did not have assets to pay off deposits. All restructuring efforts made by the Central Bank, from time to time, could not produce envisaged results as those who managed these companies failed to arrange an infusion of new capital.

As a result, these companies became insolvent and were out of business since then. The Entrust Securities PLC, a company with a primary dealer license to trade government securities, got into a chronic liquidity and insolvency crisis during latter part of 2015 as a result of fraudulent use of funds placed by customers for investment in government securities. The Central Bank on January 4, 2016 suspended the Board of Directors of the Entrust and vested its operations in the National Saving Bank to protect the investors.

The Monetary Board reviewed the lack of progress so far and took cognizance of the fact that there was no further room to revive these companies to enable them to repay depositors and investors in the foreseeable future. Given the long-delay involved so far, the Monetary Board approved the company resolution plans submitted by the Department of Supervision of Non-banking Financial Institutions to repay deposits and investments annually commencing from 2017 over a reasonable period of time with a fair interest rate during this repayment period.

In the case of the three finance companies, repayment will cover Rs. 4,868 mn of nearly 11,878 depositors. In the case of the Entrust, investments secured with government securities amounting to Rs. 3,100 mn belonging to 107 investors will be settled in the coming weeks. In respect of unsecured investments in the Entrust amounting to Rs. 8,508 mn belonging to 24 individuals and entities, government securities will be allocated and be repaid under the repayment plan to be implemented with the managing support of the Seylan Bank PLC.

The Central Bank will complete the required administrative procedures and communicate details to all those depositors and investors. Once the repayment plan is legally finalized, those companies will be dealt with through applicable laws for liquidation. The Monetary Board is of the view that this is the only option that now remains as there are no assets in these companies and no investors have been willing to revive these companies and repay above depositors and investors.

As part of the resolution plans, the Central Bank will set up a new Enforcement Division in the Department of Supervision of Non-bank Financial Institutions to institute legal action against Directors and managers who have been responsible for the fraud and misappropriation of funds and to make every effort to recover such funds from them. In the case of the Entrust, the law enforcement authorities, in association with the Central Bank, have already initiated legal actions. The Enforcement Division will also introduce a routine procedure to take legal action against parties who have committed similar fraudulent practices in existing companies, in the event such instances are detected by the examination staff. Further, action will be taken to address lapses in the Central Bank and to strengthen regulatory and supervisory mechanisms on a priority basis to ensure the safety and soundness of existing institutions.

However, it is important to stress that the regulation and supervision do not mean a guarantee for each and every deposit and investment made by the public in banks and financial institutions. Those who make such deposits and investments and those who undertake businesses based on these funds are primarily responsible for their business decisions regarding prudent management of their funds. In fact, almost all funds placed in the above distressed companies have been mobilized through unauthorized financial products. Even large depositors and investors have been negligent in not undertaking the normal due diligence on risks and return, despite being sufficiently knowledgeable and skillful to do so. The responsibility of the Central Bank is only to provide an external safeguard through regulation and supervision to the extent permitted in law while facilitating institutions to carry on their businesses essential for the economy and general public in a safe and sound manner in a stable financial system.

Therefore, all those who are stakeholders to these resolution plans are kindly requested to co-operate with the Central Bank in order to end this long-standing issue in the public interest. In the event of non-cooperation, the Central Bank will have no option but to reluctantly permit these companies to be wound up under the law.

Colombo Stock Exchange Market Review – 18th Oct 2016

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Colombo Stock Exchange Trade Summary 18-Oct-2016

Colombo stock market concluded the trading session in a strong support level on Tuesday despite the lackluster investor activity. All Share index started the session with a gain of 17 index points but failed to sustain the momentum and the benchmark index closed with a loss of 9.82 index points (-0.15%) at 6,442.87. High caps constituent, S&P SL20 index shed 6.70 index points (-0.19%) to close at 3,591.74.

Blue-chips namely, John Keells Holdings (closed at LKR 150.00, -0.7%), Sri Lanka Telecom (closed at LKR 36.20, -1.6%) and Ceylon Beverage Holdings (closed at LKR 600.00, -7.4%) pinned the index in negative territory. Gains were recorded in Lanka Orix Leasing & Company (closed at LKR 81.50, +1.8%) and People’s Leasing & Finance (closed at LKR 18.40, +1.7%).

Daily market turnover reached LKR 390mn, supported by crossings in selected high caps. Negotiated deals were recorded in John Keells Holdings (0.36mn shares at LKR 151.00), Hatton National Bank (0.2mn shares at LKR 227.00) and Dialog Axiata (2mn shares at LKR 11.50). Aggregate value of crossings represented 32% of the turnover.

Accordingly, John Keells Holdings emerged as the top contributor to the turnover with LKR 70mn followed by Central Finance (LKR 60mn), Hatton National Bank (LKR 50mn) and Dialog Axiata (LKR 36mn).

Losers outweighed the gainers 69 to 58, while 81 scripts remained unchanged. John Keells Holdings, Commercial Credit & Finance, Teejay Lanka and Ceylon Grain Elevators were the most traded stocks during the session.

Meanwhile, Lee Hedges announced an issue of shares by way of a sub-division in the proportion of one into five. Nevertheless, stock declined by 3.4% to LKR 407.00 with thin volumes.

Good Hope advanced by 13.4% to LKR 1,476.10, subsequent to share repurchase announcement made by four companies namely, Good Hope, Indo Malay, Selinsing and Shalimar. Price of Indo-Malay remained unchanged at LKR 1,429.60 while Selinsing and Shalimar ended the day without trades.

Foreign investors stood on the buy side with a net foreign inflow of LKR 98mn. Foreign participation was 38%. Net foreign inflows were seen in Hatton National Bank (LKR 46mn), Dialog Axiata (LKR 32mn) and ACL Cables (LKR 13mn). Net foreign outflow was mainly seen in CIC Holdings (LKR 12mn).

Source: LSL

Sri Lankan shares fall for 7th session to post 1-mth closing low

Reuters: Sri Lankan shares fell for a seventh straight session on Tuesday and posted their lowest close in a month as cautious investors awaited a flurry of corporate results and next month's national budget, while fresh political concerns also weighed on sentiment, brokers said.

The benchmark index of the Colombo Stock Exchange ended 0.15 percent weaker at 6,442.87, its lowest close since Sept. 20.

"Investor sentiment will be the same until the budget next month. The market is also concerned about political stability after the president's speech last week," said a stockbroker, asking not to be named.

The head of Sri Lanka's anti-corruption body resigned on Monday, days after President Maithripala Sirisena implied her agency was favouring the rival party of his prime minister.

This is likely to delay one of the promises of Sirisena's coalition government of eliminating corruption and implementing rule of law and might have an adverse impact on business confidence, analysts said.

Turnover stood at 389.6 million rupees ($2.65 million), compared with this year's daily average of around 743 million rupees.

Foreign investors, who have sold a net 2.24 billion rupees worth of shares so far this year, bought a net 98.2 million rupees worth equities on Tuesday.

Blue chips John Keells Holdings Plc fell 0.66 percent, while top fixed-line phone operator Sri Lanka Telecom Plc dropped 1.63 percent.

Sri Lanka's quarterly earnings season started last week but the bulk of locally listed firms will not report until late October or early November.

($1 = 146.7500 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Colombo Stock Exchange Market Review – 17th Oct 2016

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Colombo Stock Exchange Trade Summary 17-Oct-2016

Colombo bourse slumped for the sixth consecutive session on Monday amid low market activity. All Share index conclude the day with a loss of 29.85 index points or 0.46% at 6,452.69 while 20-scrip S&P SL index lost 16.68 index points or 0.46% to end the day at 3,598.44. 

Price drops in high caps namely, Commercial Bank (closed at LKR 146.00, -1.4%), John Keells Holdings (closed at LKR 151.00, -0.7%) and People’s Leasing & Finance (closed at LKR 18.10, -2.2%) drove the index performance to the negative territory.

Daily market turnover fell to a six week low of LKR 291mn. Expolanka Holdings was the top contributor to the turnover with LKR 82mn underpinned by two crossings of 11mn shares at LKR 6.50. Counter accounted for 28% of the day’s turnover. John Keells Holdings (LKR 36mn), Ceylon Grain Elevators (LKR 12mn) and ACL Plastics (LKR 12mn) were among top contributors.

Market breadth was negative where out of 200 scripts, 111 slipped, 25 advanced while 64 remained unchanged.

High investor activity was witnessed in Hayleys Fabric & Teejay Lanka, subsequent to the Premier’s visit to Brussels to discuss on GSP+. Hayleys Fabric remained at LKR 17.80 and Teejay Lanka declined by 1.7% to LKR 46.00. Further, Ceylon Grain Elevators, Access Engineering and Sinhaputhra Finance preference share witnessed high investor activity.

Foreign investors were net buyers with a net foreign inflow of LKR 1mn. Foreign participation was 13%. Net foreign inflows were seen in Expolanka Holdings (LKR 2.0mn), John Keells Holdings (LKR 1.4mn), Vidullanka (LKR 0.9mn) while net foreign outflow was mainly seen in Central Industries (LKR 1.0mn).

Meanwhile, according to External Sector Performance report published by CBSL, trade gap has reduced by 10%YoY to USD 541.6mn in July 2016 amid 6.6%YoY drop in imports. Tourism earnings improved by 19.1% while workers’ remittances recorded a drop of 4.4% in July 2016.

Source: LSL