Listing of Sri Lanka non-strategic investments may take a year, says Eran

(LBO) – Sri Lanka’s government is putting in place processes to list some of its non-strategic investments on the Colombo Stock Exchange, although this may not take place immediately, Eran Wickramaratne, deputy minister of Public Enterprise Development, told Lanka Business Online.

“Within a year that’s possible. But whatever we are doing, we want to do it properly and transparently and we are putting the processes in place,” he said.

In budget plans for 2016, the government said it wants to streamline its portfolio of investments and will exit partially or fully from investments in Lanka Hospitals, Hotel Developers PLC (Colombo Hilton), Hyatt Residencies, Waters Edge, Grand Oriental Hotel, Ceylinco Hospital and Mobitel by listing such investments on the Colombo Stock Exchange.

The government’s portfolio includes enterprises engaged in maintaining and controlling strategic infrastructure in power generation, transmission, ports, airports, water supply etc., as well as non-strategic investments in hotels, condominiums etc.

The government is also coming up with an institutional framework to manage investments in commercial ventures, Wickramaratne said.

“We are simultaneous looking at models in other countries and in the region, but we have to come up with a model that suits our needs,” he said. “If the government is investing in commercial enterprises, they can be managed by professionals who can make professional decisions.”

In terms of advisors for these processes, Harvard University’s Center for International Development recently supported holding the Sri Lanka Economic Forum, and advisors would be sought on a case by case basis, he said.

“We had the economic summit, and we had professors who could be consulted on economic matters.”

“It depends on what the area is. Different institutions, as the need is there, get local or foreign consultants. We are open to getting expertise wherever we think there is a gap,” he said.

Monetary Policy Review – January 2016 - Policy Rates Unchanged

 Broad money supply (M2b) continued to expand at a high rate with a year-on-year growth of 17.2 per cent in November 2015, following the growth of 17.0 per cent in the previous month. In November 2015, the net foreign assets (NFA) of the banking sector improved with the receipt of the proceeds of the International Sovereign Bond (ISB) of US dollars 1.5 billion issued on 27 October 2015. The issuance of the ISB also facilitated a reduction of net credit obtained by the government (NCG) from the banking sector during the month of November, while credit obtained by public corporations also declined. Meanwhile, credit extended to the private sector by commercial banks remained the key driver of broad money growth, recording an increase of 27.0 per cent (year-on-year) in November 2015, compared to the growth of 26.3 per cent in October. In absolute terms, the monthly increase in private sector credit was Rs. 91.2 billion, leading to a cumulative expansion in private sector credit of Rs. 647.7 billion during the first eleven months of 2015. 

In order to arrest the possible build-up of demand pressures on inflation through excessive credit creation, the Central Bank increased the Statutory Reserve Ratio (SRR) applicable on all rupee deposit liabilities of commercial banks by 1.50 percentage points to 7.50 per cent with effect from 16 January 2016. Accordingly, excess rupee liquidity in the domestic money market, which averaged around Rs. 90 billion in December 2015 and in the first two weeks of January 2016, declined to around Rs. 42 billion, on average, thereafter. The increase in SRR also induced an upward adjustment in market interest rates, and the growth of credit extended to the private sector by commercial banks is expected to decelerate in the period ahead, albeit with a time lag. 

In spite of the high growth of broad money, inflation remained subdued supported by low international commodity prices and broadly favourable domestic supply conditions. Colombo Consumers’ Price Index (CCPI, 2006/2007=100) based headline inflation decelerated to 2.8 per cent, on a year-on-year basis, in December 2015 from 3.1 per cent in November 2015, and annual average headline inflation was 0.9 per cent. Headline inflation based on the National Consumer Price Index (NCPI, 2013=100) decelerated to 4.2 per cent, on a year-on-year basis, in December 2015 from 4.8 per cent in the previous month, and registered a value of 3.8 per cent on an annual average basis. CCPI based core inflation edged up in December 2015, recording 4.5 per cent, on a year-on-year basis, in comparison to 4.3 per cent in the previous month. 

On the external front, export earnings contracted by 9.3 per cent in November 2015 causing a cumulative decline of 4.4 per cent during the first eleven months of the year. Import expenditure also recorded a decline of 11 per cent in November 2015, and the cumulative decline in expenditure on imports was 2.1 per cent during the first eleven months of 2015. Reflecting these developments, the deficit in the trade account narrowed for the fifth consecutive month in November 2015. Nevertheless, on a cumulative basis, the trade deficit expanded marginally by 1.0 per cent to US dollars 7,566 million during the first eleven months of the year. Earnings from tourism are estimated to have increased by 17.8 per cent during 2015, although workers’ remittances declined by 0.5 per cent during the year, mainly reflecting a decline of receipts from the Middle East. Gross official reserves were estimated at US dollars 7.3 billion by end 2015, while the Sri Lanka rupee, which depreciated by 9.0 per cent against the US dollar in 2015, recorded a marginal appreciation thus far during 2016. 

At its meeting held on 25 January 2016, the Monetary Board observed that the policy adjustments made on the monetary and external fronts are still being transmitted gradually to the macro economy, and accordingly, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 6.00 per cent and 7.50 per cent, respectively. 

Sri Lankan shares fall ahead of policy rate decision

Reuters: Sri Lankan shares fell on Monday to snap a two-session winning streak ahead of the central bank's monetary policy decision later in the day and as investors worried over volatile global markets and rising returns on risk-free assets.

Six out of 11 analysts surveyed by Thomson Reuters expected the Central Bank of Sri Lanka to keep key policy rates steady, while the rest predicted a hike.

The central bank is scheduled to announce its monetary policy rate decision at 1400 GMT on Monday.

The main stock index ended 0.43 percent, or 27.41 points, lower at 6,354.83, after posting its highest close since Jan. 14 hit on Friday.

"The trend is a declining one and not necessarily on the local, but the global events also," said Danushka Samarasinghe, research head at Softlogic Stockbrokers in Colombo.

The index has fallen 7.83 percent so far this year as foreign investors, unnerved by global concerns over China's economy, have cut their exposure.

Foreign investors were net sellers of 10.5 million rupees ($72,967.34) worth of equities on Monday, extending the year-to-date net foreign outflow to 2.28 billion rupees.

The yield on one-year t-bills rose 32 basis points to a more than two-year high of 7.80 percent at a weekly auction on Wednesday. Analysts expect market interest rates to rise in tandem.

Turnover was 374.1 million rupees on Monday, well below this years daily average of 821.7 million rupees.

Shares of Lanka ORIX Leasing Company Plc fell 1.91 percent, conglomerate John Keells Holdings Plc dropped 0.70 percent and Commercial Bank of Ceylon Plc, the country's biggest listed lender, declined 0.77 percent. 

($1 = 143.9000 Sri Lankan rupees) 

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

Hirdaramani opens Rs.450 mn factory in Puthukkudiyiruppu

Hirdaramani Group opened their latest addition to the North, the Hirdaramani Clothing Puthukkudiyiruppu with an investment of Rs.450 million.

The new factory which employs over 1000 employees was opened by President Maithripala Sirisena yesterday.

"We have around 1,050 employees from this region working for us. It was when we opened our first factory in Vavuniya that we realised the dearth of employment opportunities for the youth in the North. Thus it has been our mission to push away into regions away from the Western Province so as to develop these areas. We may expand this company as we have in Vavuniya but it will all be in good time," Director, Hirdaramani Group, Janak Hirdaramani told Daily News Business. He also said that this endeavour while creating direct employment, to also create indirect job opportunities for the community in Mullaitivu such as occupation in terms of shops and transport. Through providing community members with a variety of job opportunities, the factory has been instrumental in supporting the recovery and development of Mullaitivu which is the largest and the most war-torn area in the north.

President Maithripala Sirisena was the Chief Guest of the opening of Hirdaramani factory.

Following the opening of its new factory, the Hirdaramani Group has become the only large-scale regular employer in the area, providing employees with stable incomes, a positive working environment, free meals and custom-made training programmes that strengthen their skill sets. Currently employing over 500 sewing machine operators (SMOs), the factory utilizes over 320 machines that deliver a monthly capacity of over 150,000 garments.
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Sharp reduction in vehicle registration in Dec

Vehicle registration momentum has come down in December with the reinstatement of the LTV rule and higher incidents of duty on vehicles, according to a JB Securities Report.

Total motor car registrations recorded 7,177 units in December down

from 10,084 units in November but significantly up from 4,311 units recorded 12 months ago.

Brand new car registrations recorded 5,015 units in December down from the record set in November of 6,732 units but significantly up from 1,939 units recorded 12 months ago. Small cars (< 1,000 cc) accounted for 95% of volumes. Maruti accounted for 3,882 units (mainly Alto) followed by Micro with 522 units (Panda), Tata with 215 units (Nano Twist and Indica) and Hyudai with 191 units (Eon). Financing share in small cars is a high 75%. The 70% LTV rule is applicable to approvals not disbursements, thus the high finance share in December may be due to the spill over of November leasing approvals.

Meanwhile pre-owned car registrations recorded 2,162 units in December significantly down from 3,352 units in November and down from 2,372 units recorded 12 months ago.

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