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

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

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

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

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

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

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

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

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

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

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

($1 = 143.9500 Sri Lankan rupees) 

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

SEC reconsiders minimum public float rule: CSE

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

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

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

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

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

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

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

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

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

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

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

FC Capital Market App launched

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

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

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

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

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

About First Capital :

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

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

www.dailynews.lk

CSE fully geared to enhance investor confidence - Chairman

By Zahida Rizvi


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

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

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

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

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

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

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

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

www.dailynews.lk

ComBank posts Rs 11.9 bn net profit for 2015

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

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

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

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

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

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

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

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

DFCC posts healthy growth

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

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

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

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

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

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

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

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

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

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

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

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

Namal Acuity Value Fund declines

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

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

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

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

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

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

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

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

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

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

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

www.dailynews.lk

Sri Lanka HNB group December net flat

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The full rating report follows:

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

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

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

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

KEY RATING DRIVERS

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

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

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

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

KEY ASSUMPTIONS

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

- Revenue to increase due to improved consumer purchasing power.

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

RATING SENSITIVITIES

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

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

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

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

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

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

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

- EBITDA margin sustained above 10%

LIQUIDITY

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

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

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

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

Sampath was raising new capital.

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

The full statement is reproduced below:

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

Global Credit Research - 24 Feb 2016

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

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

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

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

All the ratings have a stable outlook.

RATINGS RATIONALE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

FMO is mandated lead arranger for the deal.

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

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

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

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

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

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

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

LOLC will also get technical assistance for capacity building.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sri Lanka vehicle purchases plunge after tax hike, leasing controls

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sri Lanka Treasuries auction fails despite rate hike

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

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

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

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

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

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

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

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

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

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

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

Governor R W Rajapathirana: That is correct…

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

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

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

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

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

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

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