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

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

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

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

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

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

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

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

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

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

($1 = 144.0000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sunil Nair)

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

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

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

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

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

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

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

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

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

CSE downturn traced to global economic situation

By Hiran H.Senewiratne

The Colombo Stock Exchange (CSE) had fallen by 10 to 12 percent, which is not too bad compared to other stock exchanges in the region. The main reason for this setback is the current global economic scenario.

"This downturn is mainly due to the global scenario and has nothing to do with domestic issues. The main reasons are, the considerable drop in world oil prices, a probable US Federal Reserve adjustment on interest rates and printing of money by other countries. These factors have impacted many stock markets, president, Colombo Stock Brokers Association Ravi Abeysuriya said.

Under these circumstances, the CSE will continue to slip further in the future. However, Sri Lanka's situation is quite good compared to other stock markets in the region, Abeysuriya said.

He said major stock markets in the region, including the Chinese stock market, have dropped; the Chinese by 37 percent, Singapore 21 percent, Hong Kong 20 percent. "Sri Lanka is not badly affected compared to other markets in the region."

Abeysuriya said that many foreign investors are exiting the CSE and investing in other developed markets, due to this condition.

The low oil prices have affected many oil producing countries. Therefore, Saudi Arabia, Russia, Qatar and Venezuela said they would lead an effort to freeze output at January levels, he explained.

OPEC nations will freeze production at January levels, which were 43.1 million barrels of oil per day.This is interesting, considering January levels were a record and OPEC was producing 1 million barrels a day above demand, observers noted.

They added: "The stock market moved closer to equaling the dubious record of having had fallen for several consecutive market days at the beginning of the calendar year. Therefore, domestic and external factors continued to weigh on the market.

"In the calendar year of the CSE to date, shareholder wealth loss has been recorded at Rs 262.38 billion. The ASPI during this period has declined by 9.11 percent and the S&P by 11.33 percent.

"China's securities regulator also issued new rules to restrict the percentage of shares major shareholders in listed companies can sell every three months, in an attempt to stabilize markets. Shareholders are not allowed to sell more than 1 percent of a company's shares in that period.

The new measures came before the six-month share reduction ban on large shareholders which is set to expire this week.
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Fitch assigns Alliance Finance 'BB+(lka)' rating

Fitch Ratings Lanka has assigned Alliance Finance Company PLC (AFC) a National Long-Term Rating of 'BB+(lka)' with a stable outlook.

The agency has also assigned the company's outstanding senior unsecured debentures a National Long-Term Rating of 'BB+(lka)' and its outstanding subordinated debentures a National Long-Term Rating of 'BB(lka)'.

AFC's rating reflects its modest franchise, weak asset quality, lower capitalisation and higher risk appetite relative to peers.

The rating also captures strengthened management and controls stemming from an on-going organisational restructuring, which Fitch expects to help improve AFC's asset quality through better underwriting. Furthermore, the ratings take into account AFC's adequate profitability. AFC's exposure to three-wheeled vehicles remains high (37.2% of the total loan book at end-September 2016) and Fitch believes that this makes its portfolio more risky compared with that of its peers. The share of motor car financing increased to 19.4% at end-September 2016 from 16.5% at end-March 2015.

The company has also expanded into microfinancing (10% of the loan book at end-September 2016) after its gold loan book contracted to 4.3% at end-September 2016 from 15.6% at end-March 2014. The challenging operating environment and poor management of defaulted loans resulted in a sharp increase in non-performing loans (NPLs) from gold loans and three-wheeler leases in the financial year ended March 2014 (FY14) and FY15.
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United Motors profits double to Rs 1.48 bn

United Motors Group profit for the first nine months of 2015/16 doubled to Rs.1.48 billion in comparison to Rs. 723 million achieved for the same period last year.

Group Revenue for the first nine months increased by 50% to Rs.11.7 billion from Rs. 7.8 billion during the corresponding period last year, while the Group Net Asset Value per share rose to Rs.104.89. During the third quarter UML declared a first interim dividend of Rs.3 per share for the year 2015/16.

All companies within the Group have shown significant improvements in performance in comparison to the previous year. Despite challenging market conditions Mitsubishi sales both passenger and commercial segments have shown healthy growth during the year while the truck and bus segment showed a significantly higher contribution. UML's after sales division as well as the Valvoline lubricant division also performed well during the same period. United Motors fully owned subsidiary Unimo Enterprises Ltd, capitalized on the Perodua Axia the latest under 1000 cc car introduced by the company. The demand was very encouraging for the newly introduced 6 seat Diesel Multi-Purpose Vehicle (MPV), DFSK Glory as it was a completely new segment for the company. TVS Lanka also contributed by achieving its highest volumes for two wheeler and three wheeler sales with a significant increase in market share compared to the previous year.

Group CEO and Executive Director Chanaka Yatawara said he was happy that most strategic initiatives taken in the areas of products and services were paying off. The new products introduced during the year and the expansion of service facilities has given the company access to a greater segment of customers in the country resulting in increased sales and brand loyalty.

He further noted that the current market conditions have become challenging for the automotive sector due to the upward revision in duty, discontinuation of vehicle permits, increase in exchange rates and restrictions in obtaining 100% facility for leases. Despite this unfavourable situation UML Group plans to launch several new brands during the year to minimise the impact of the current situation while the company will also see the completion of the state-of-the-art workshop in Ratmalana, on a ten-acre property during 2016.
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