Sri Lankan shares end weaker; rising rates weigh

Reuters: Sri Lankan shares edged down for a fifth straight session on Friday to a near 2-yr low in thin trade as concerns over rising interest rates and a ratings downgrade pushed investors away from risk assets, traders said.

Sri Lanka's benchmark share index closed 0.06 percent lower, or 3.50 points, at 6,057.22, the lowest close since April 7, 2014.

Its next support level is expected to be 5,800 points, analysts said.

"Declining trend is continuing with the selling pressure remaining. There are no buyers to take up the huge quantities which are to be sold," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"Increasing interest rates and negative sentiment are continuing with the unclear policy outlook."

On Wednesday, Fitch Ratings downgraded the ratings of some listed blue chip firms and strategic state firms. The ratings agency downgraded Sri Lanka's sovereign rating to B-plus from BB-minus on Monday.

The index remained in oversold territory for the ninth straight session, with the 14-day relative strength index at 18.647 on Friday, compared with Thursday's 18.840, Thomson Reuters data showed.

A level between 70 and 30 indicates the market is neutral.

Yields on treasury bills have risen between 54 and 105 basis points to a more than two-year high since the central bank raised the policy rates by 50 bps on Feb. 19.

Turnover stood at 334.4 million rupees ($2.32 million), less than half this year's daily average of 708.2 million rupees.

Foreign investors were net buyers for the sixth straight session, purchasing 42.8 million rupees worth of shares.

Shares in Commercial Leasing & Finance Plc fell 5.13 percent, while Bukit Darah Plc dropped 2.64 percent. 

($1 = 144.1500 Sri Lankan rupees) 

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

More SOEs expected to be listed on the stock market

By Hiran H.Senewiratne

The Colombo Stock Exchange (CSE) is expecting more and more State Owned Enterprises (SOE) to be listed in the market, where, currently, only a minimal number of such SOEs are listed, its Chief Executive Officer Rajeeva Bandaranaike said.

"If state owned enterprises are listed, it will certainly be a boost to the market. We are now expecting a large number of state owned enterprises to be listed at the CSE. At present the market is a little down but will pick up soon, Bandaranaike told The Island Financial Review at the launch of the CSE educational portal yesterday.

He said that this year, along with new Initial Public Offerings (IPOs), some state owned enterprises will also be listed on the CSE. "It is important for the country to have an active stock market in the region, he explained.

"The volumes will be low without much foreign participation but if the sentiment is right, I think the market can really move up from domestic activity alone, with SOEs coming in the future, Bandaranaike said.

Catering to a growing interest among the pubic in improving skills and knowledge related to the capital market, the CSE officially launched a portal which delivers content in English, Sinhala and Tamil. It adds a new dimension to the CSE’s investor education initiative, offering learning material at the click of a button.

Chairman, CSE, Vajira Kulathilake said that the launch of the educational portal is a landmark initiative in 2016. It is a partnership with thinkCube System (Pvt) Limited. "This would help to facilitate financial literacy and investor education is a key focus at the CSE, he said.

"We believe that this new online portal will offer the Sri Lankan public a convenient and proactive source of the capital market related learning, "Kulathilake said.

CEO thinkCube Mithila Mendis said that they are privileged to partner a prestigious institution, such as the CSE, in an exercise which is visionary and will result in benefits, like information being imparted to every person from school children to all levels of investors.

"We will be upgrading all information with the assistance of the CSE with updated technology, he said.
www.island.lk

HNB to expand overseas

By Ishara Gamage

Ceylon Finance Today: Sri Lanka's second-biggest privately owned lender by assets Hatton National Bank (HNB) Plc is ready for next generation digital transformation, acquisitions and overseas expansion, the bank's Chief Executive Officer (CEO) Jonathan Allas said on Wednesday (2nd).

Alles, who's also the Chairman of Sri Lanka Banks Association, said that HNB, which has a 51% stake in HNB Grameen Finance (Pvt.) Ltd., said they will be planning to list its micro finance entity during this year.

"We are extremely satisfied with HNB Grameen's performances and HNB as a parent company is a major funding arm of HNB Grameen," he said. "SME and micro lending is our main focus. HNB together with HNB Grameen Finance (Pvt) Ltd is ready to speed up our SME and micro lending network," Alles said.

Addressing an HNB investor forum, he said that they are willing to invest over two billion rupees to achieve the Bank's digital transformation within the next three years.

"Sri Lankan consumers move online, retail banks will have to follow. We are fully committed to fulfil our customer aspirations. We will be moving into kiosk type operations to complement our 'brick and mortar' presence which will also cut down the need for drastic capital funding", said Alles.

He also said the expansion of the branch network is not going to be a major ambition going forward unless if there were highly profitable strategic locations.

HNB which account for over 10% Sri Lankan banking sector market share are also looking at possible banking and finance sector acquisitions. "Sri Lanka needs a few larger banks to show our banking strength globally. As a group HNB has the required potential to acquire certain strategic businesses", he said.

Alles said they were already lending in the Maldives and also to South East Asia's developing economies like Cambodia, whilst planning to open a representative office in Myanmar.

"We had loaned around 100 million in dollar loans to health, hotel and micro finance sector institutions in those countries in partnership with other lenders, he said. Alles said the margins in dollar loans to the Maldives were higher than in Sri Lanka and closer to 7%.

He also said after carefully evaluating Myanmar's socioeconomic and investment situation, they have a plan to open a representative office in Myanmar. HNB may also look at "placing debt or taking equity stakes in companies" in the Asia-Pacific region.

"Going overseas is good for revenue growth, however, our main focus is in Sri Lanka', said Alles. HNB reported a net profit of Rs 3.6bn (-2% YoY) for 4Q2015, and Rs 10.6bn (+7% YoY) for 2015. Net interest income was RS 30bn (+14% YoY) in 2015, supported by a 25% YoY gross loan growth to RS 519bn. The Bank is expecting to grow its loan portfolio 15 % in this year, backed by small and medium enterprises and personal banking.

HNB's lending portfolio was expected to remain about 60 % to retail and 40 % among corporates, saw growth prospects in term loans and leases, Alles said. Leasing vehicles picked up sharply from Rs 24 to 40 billion. He said car leases have already slowed due to Central bank restrictions. However, they were seeing a pick-up in housing loans. "Higher state sector salaries and a planned tax cut and increasing disposable income, will......provide a greater potential for personal loans," he predicted.

NIM for the quarter was 4.31%, down from 4.85% in 4Q2014, while 2015 NIM was 4.37% (vs. 4.63% in 2014). HNB's non-interest income grew 9% YoY, driven by a 23% YoY growth in net fee and commission income, and a 22% YoY increase in premium income from HNB Assurance.

There was a trading gain of Rs 361mn vs. a loss of Rs 442mn in 2014. However, HNB's gains from financial investments declined to Rs 298mn from Rs 1.5bn in 2014. Impairment charge for 2015 was Rs.1bn (-60% YoY), due to an improvement in asset quality as Non-performing loan ratio improved to 2.43% from 3.16% in 2014.

During 2012/13 financial year the bank wrote off over two billion rupees worth of pawning loans. "We have learned lessons from the past and now our pawning portfolio has almost come down to 3% of our total loan portfolio, bank officials said.

HNB recorded an expense growth of 14% YoY, driven by 13% YoY growth in personnel expenses and a 30% YoY increase in HNB Assurance's claims expenses.

According to banking sector analysis, HNB remains well capitalized with a Tier I ratio of 10.99% and a total capital ratio of 13.10%.
www.ceylontoday.lk

CDL delays releasing 4Q results

The Board of Directors of Colombo Dockyard PLC (CDL) has informed that they are unable to publish the unaudited financial statements for the fourth quarter of the financial year 2015.

In a statement to Colombo Stock Exchange CDL explained that they entered into contracts with customers for the purpose of manufacturing and delivering new ships. "However, due to adverse global economic conditions, particularly due to the drop in oil prices, customers have indicated their inability to proceed with some orders on the originally agreed terms and conditions." The Board having obtained professional advice, are negotiating with the customers with regard to the above matters. Hence, the Board is unable to publish the unaudited financial statements for the fourth quarter of the financial year 2015 at present, until finalization of such negotiations.

The CDL states that the Board will keep its shareholders and the investing public fully informed of any future developments and material information relating to this matter. (SS)
www.dailynews.lk

AIA Sri Lanka reports strong 2015 results

The Board of Directors of AIA Insurance Lanka said Gross Written Premium (GWP) of the continuing operations, the main life insurance business, grew by 16 per cent to Rs 8,433 million, driven by strong growth in regular premium new business.

Revenue of the continuing operations grew by LKR 415 million to LKR 12,218 million, with increase in net earned premiums partially offset by unrealised investment losses in unit-linked funds due to movements in the equity market.

Profit after tax on continuing operations increased by 15 per cent to LKR 303 million from LKR 263 million due to increase in interest income from fixed income investment.

Consolidated profit after tax, including operating results and realised gain from divestment of the discontinued general insurance operations, was LKR 1,491 million.

AIA Sri Lanka Chief Executive Officer Shah Rouf said: "The year was a key milestone in our Company's journey as we implemented our strategic decision to fully focus on realising the exciting opportunities in the life insurance market, one in which we recorded significant growth.

I am particularly pleased to say that growth came from meeting customer needs through new products as well as improving our distribution reach and capabilities, in both our Agency and Bancassurance channels."
www.dailynews.lk

LOLC Group invests US$35 mn in four Male hotels

LOLC Group will invest on star class hotels and apartments in the Maldives under their associated company, Browns Hotels & Resorts. Construction will begin this year.

LOLC Managing Director and CEO Kapila Jayawardene told ‘Daily News’ that they have already obtained land for the four projects on long term leases.

He said that they will build one business hotel in the capital Male.This will offer both apartments and rooms and will be a mixed development project and planned to be built and operated though a partner in the Maldives. “We see a demand for long stay guests in the Maldivian capital and this is the reason why we invested in an apartment style hotel.”

The two other hotels will be built on two separate Islands. The first resort hotel will be a 90 roomed hotel and the second will be a 120 roomed resort type hotel and both will be accessible via sea plane.

The total investment for the three projects will be in the excess of US$ 20 million dollars.

Browns Leisure Consultant Ajith Jayamanne said that in addition to these three hotels the company has also embarked on another mega hotel project.

“This is to build a 420 roomed resort hotel close to an Island in the capital Male.” He said the company is aggressively looking at expanding their foot print in the Maldives and willlook at other investment to the leisure sector as well.

The investment for the 420 room hotel is expected to be in the excess of US$ 15 million bringing the total investment to US$ 35 million dollars.

LOLC Group’s Leisure sector was grouped under our subsidiary Browns Hotels & Resorts in 2014. Following the divestment of LOLC Leisure to Browns Investments (BI), the latter is now the controlling shareholder of the Group’s Travel and Leisure entities.The Group now has nine properties in its portfolio both locally and internationally with 1,200 keys upon completion.

The Eden Resort & Spa, Dickwella Resort & Spa, Paradise and Resort & Spa as well as the latest addition, The Calm Resort & Spa in Passikudah are among the Group’s leading leisure resorts. 
www.dailynews.lk