Sri Lanka shares down for sixth session; Brexit woes weigh

Reuters: Sri Lankan shares fell for a sixth straight session on Monday as investors turned cautious after the UK last week voted to leave the European Union.

The benchmark Colombo stock index ended down 0.81 percent at 6,318.21, its lowest close since April 11.

Sterling fell more than 2 percent, the euro took a hammering and stocks dropped again on Monday as Brexit drove investors to seek safety in the yen, gold and low-risk government debt.

"Market is down with the post-Brexit effects. There are no foreigners or big investors in the market. It's all in the hands of retailers," said Yohan Samarakkody, head of research, SC Securities (Pvt) Ltd.

Local negatives like high interest rates and lack of clarity on the proposed capital gains tax also had an impact on the market, he said.

Sri Lanka's cabinet on June 15 approved a proposal to reintroduce capital gains tax, especially on land sales.

Overseas funds offloaded 142.6 million rupees ($970,068) worth of equities on Monday, extending the year-to-date net foreign outflow to 6.17 billion rupees worth of shares.

Turnover stood at 566.2 million rupees, less than this year's daily average of around 747.2 million rupees.

Shares in Bukit Darah Company Plc fell 9.92 percent while Sri Lanka Telecom Plc fell 2.11 percent. Biggest-listed lender Commercial Bank of Ceylon Plc lost 0.90 percent.

($1 = 147.0000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Sri Lanka's Mihin Lanka losses total Rs17bn

ECONOMYNEXT - Sri Lanka's state-run carrier Mihin Lanka has lost 17 billion rupees over the past seven year, and has received a 15 billion rupee 'letter of comfort in 2015, a Finance Ministry report said.

Mihin Lanka was founded by ex-President Mahinda Rajapaksa and a close ally Sajin Vass Gunewardene, with tax-payer money and has made losses from day one.

The Finance Ministry report said it had been given a 15 billion rupee 'letter of comfort' in 2015 to continue operations.

President Rajapaksa also re-nationalised SriLankan Airlines driving out Emirates as managing shareholder which then generated large losses.

The finance ministry said in 2015/16 Mihin was expected to reduce losses to 938 million rupees, from 1.48 billion rupees a year earlier.

Total losses made so far was 17 billion rupees. Sri Lanka's state-owned enterprises are a major burden on society making large loses and providing an avenue for the elected ruling class to appoint highly paid director and stuff them with their supporters.

Tea production dips in first five months

Sri Lanka’s tea production for May 2016 was recorded at 30.6 mkgs, which was a 6% deficit when compared with the same period of 2015. The High Grown recorded a decrease of 1%, the Medium Grown recorded a decrease of 6%, whilst the Low Grown recorded a decrease 8%.

Sri Lanka’s tea production in the first five months of this year at 128 mkgs has recorded a decrease of 11% when compared with the same period of 2015, according to the John Keells Tea Market report.

Ex-Estate offerings comprising of 1.2 mkgs at this week’s auction met with significantly lower demand following quality. The overall quality of teas from the Western Planting districts showed a decline. The handful of Select Best Western High Grown BOP/BOPFs with a neat leaf appearance maintained whilst a major portion of the teas were lower.

The Nuwara Eliya BOPs were mostly easier, whilst a few selected invoices of BOPFs gained substantially on special inquiry. Uva/Udapussellawa BOP/BOPFs were irregular. The High and Medium Grown PF1 were irregular with some invoices gaining sharply on special inquiry. A few Low Grown CTC PF1s maintained whilst the others were somewhat easier. The BP1s were irregularly lower.

Good demand for the 2.7 Mkgs of Low Growns that were on offer despite the marginal drop in quality. Select Best BOP1/OP1s declined sharply, however the balance maintained las week’s price levels.

Select best and best OP/OPAs were firm, however poorer teas declined Rs.10/-. PEKOEs were steady, whilst the PEKOE1s gained Rs.5/- to Rs.10/-.

Select best BOPs shed Rs.10/- to Rs.15/-, whilst the best and below best types appreciated in value. Select best FBOPs were lower by Rs.10/- to Rs.20/-, however the balance were dearer by Rs.10/- to Rs.15/-. Select best FBOPF1s were firm, whilst the best and below best varieties gained in value. Tippy varieties were dearer to last.

There was fair demand from the Russian, Iranian, Saudi Arabian and Turkey.

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MAS Holdings to open in Haiti

"Mas Holdings", a Sri Lankan conglomerate specializing in manufacturing of clothing and lingerie, (1.2 billion turnovers, in 15 countries), announced plans to open plants in Caracol Industrial Park (PIC), said Sharda Amalean, Vice President, MAS.

A start date of the activities of the “Mas Holdings” will be announced after the completion of some usual formalities in Haiti.

This was spelled out by last week at a reception. National Society of Industrial Parks (SONAPI) Vice President, Philippe Debrosse, Director General of the SONAPI and Nonce Zéphyr, President of the Chamber of Commerce North, have welcomed this investment announcement in Haiti.

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Ad hoc policy changes jolt to Automobile Industry- Reeza Rauf

In the last couple of months or so the policies with regard to the automobile industry has been very ad hoc. Policies in the last 12-13 months have changes almost 14 times, said new Chairman Ceylon Motor Trader Association(CMTA), Reeza Rauf.

This ad hoc chances in policy especially in automobile industry is a very difficult task to cope with because the industry needs a lot of planning and forecasting. “Once a policy is implemented we work on that. This puts us in a very embarrassing situation in the eyes of our principals also,” he said.

Rauf said as brand new vehicle import agents they invest a lot of money in terms of maintaining showrooms and after sales spare part backups. “ It is not just selling cars, it is an industry on the hold. But unfortunately the policymakers do not see that. This is basically creating a total imbalance in the market. Automobile industry on the whole is a very volatile market,” he said.

The government has revamped the total duty structure. Initially they were accepting the manufacturers invoice value for duty calculation. The government must also understand that the import of brand new vehicles is a different industry altogether representing the manufacturer itself. He said with the unit rate tax valuation method introduced by the government a car beyond 1,500 CC increases by almost four million. A top end vehicle can go up by even 10 million.

Many franchise holders do not have vehicle below 1,500CC because 1,500CC is only available in the Japanese domestic market where used cars are being imported. The end result will be the entire market shifting towards used vehicle importers, he said.

Last year had been yet another year of challenge especially due to many changes that took place once again in the policy framework and the overall trade dynamics, said Gihan Pilapitiya outgoing Chairman, CMTA.

The CMTA was able to negotiate many of these changes at different times by pressuring the authorities to change most of them that were taken against the interests of CMTA member to create a level playing field in the industry, he said.

“Form an overall view point I am happy to note that the last year was among the best ever years for the automotive trade in Sri Lanka with the overall volumes increasing to almost 670,000 units and the majority of the companies in the trade announcing the best ever results. I am sure that all of us can be happy that some of our member companies who are present here today made the magical figure of 10 billion in terms of bottom line,” he said.

Pilapitiya however cautioned that , CMTA be mindful of the new challenges such as the importation of the zero mileage cars by used car channels with better options, government’s consideration for offering discounts for the valuation of used cars that has become and can become a major threat to the professionally set up franchise holders.

“In addition to this the preference given in the new tax structure for the less than 1500 CC cars, a segment predominantly held by the used car products should be of concern to all of us.Meanwhile I think that the CMTA needs to fight for the taxes to be based on non-other than the actual transacted values certified by the manufacturers, keeping away personal preferences,” Pilapitiya added.

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