Sri Lankan shares rise as investors pick blue chips; rupee steady

Reuters: Sri Lankan shares rose on Friday, hovering near a seven-week high hit earlier this week, as investors bought blue chips expecting better profits after hopes rose that a recent rate increase by the central bank would help improve the island nation's macroeconomic outlook.

The benchmark Colombo stock index was 0.7 percent higher at 6,523.78 at 0640 GMT, near its highest since June 14 hit on Wednesday. Turnover stood at 664.8 million rupees ($4.57 million).

"Market is up on renewed buying interest after yesterday's consolidation," said Atchuthan Srirangan, a senior research analyst at First Capital Equities (Pvt) Ltd.

On Thursday, the bourse ended lower on profit-taking, snapping five days of gains.

"The good thing is there is not much of selling pressure in the market. We will see market gaining with some consolidation in between," Srirangan said.

Shares have risen on hopes economic fundamentals would improve after the central bank last week raised its main interest rates by 50 basis points each in a surprise move aimed at curbing stubbornly high credit growth that is adding to concerns about inflationary pressures.

Stockbrokers said the market is waiting for an economic policy announcement from Prime Minister Ranil Wickremesinghe, scheduled later this month.

The Sri Lankan rupee, meanwhile, was steady as mild importer dollar demand was offset by selling of the greenback by foreign investors to buy bonds and stocks.

The spot rupee, which traded for the second straight session on Friday, was at 145.60/68 per dollar at 0648 GMT, a dealer said.

The spot rupee is usually managed tightly by the central bank, and market participants use the forward market levels for guidance on the currency.

One-week rupee forwards were at 145.75/85 per dollar, up from Thursday's close of 145.80/88.

Foreign investors have net bought 64.5 billion rupees ($443.30 million) worth of government securities from April 29 to July 27, after the IMF agreed to a $1.5-billion bailout package, central bank data showed. 

($1 = 145.6000 Sri Lankan rupees) 

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

Sri Lanka's Senkadagala Finance bonds rated 'BBB+(lka)'

ECONOMYNEXT - Fitch Ratings said Rs3.0 billion of senior debt of Sri Lanka's Senkakadagala Finance has been given a final rating of 'BBB+(lka)'.

The non-bank lender sold two and four year bonds with fixed and floating options.

The full statement is reproduced below:

Fitch Assigns Senkadagala Finance's Senior Debt Final 'BBB+(lka) '

Fitch Ratings-Colombo-04 August 2016: Fitch Ratings has assigned Senkadagala Finance PLC's (SFC: BBB+(lka)/Stable) issue of senior unsecured redeemable debentures of up to LKR3bn a final National Long-Term Rating of 'BBB+(lka) '.

The final rating is the same as the expected rating assigned on 13 June 2016, and follows the receipt of documents conforming to information already received. The amount has been increased to LKR3bn from LKR2bn.

The debentures will have tenors of two to four years and carry fixed and floating coupons. The debentures are to be listed on the Colombo Stock Exchange and the company plans to use the proceeds to fund loan growth, diversify its funding mix and reduce structural maturity mismatches.

KEY RATING DRIVERS

The proposed debentures are rated at the same level as SFC's National Long-Term Rating as they will constitute direct, unconditional, unsecured and unsubordinated obligations of SFC.

SFC's rating reflects the satisfactory credit profile that it has maintained through economic cycles, its relatively strong franchise amongst finance companies in Sri Lanka and access to longer-term institutional funding. These are counterbalanced by its deposit franchise and capitalisation, which are weaker than higher-rated peers.

RATING SENSITIVITIES

The rating on the proposed debentures will move in tandem with SFC's National Long-Term Rating.

SFC's rating could be downgraded if asset quality weakens, leading to a significant decline in capitalisation or excessive asset encumbrance. An upgrade of SFC's rating is contingent upon maintenance of stronger capitalisation and a more robust deposit franchise that would allow the company to expand in a better controlled manner.

Sri Lanka tea estate seeks 'Golden Shareholder' nod for dairy move

ECONOMYNEXT - Sri Lanka's Watawala Plantations Plc said it is awaiting approval from the government to sub-lease land for a diary venture.

Watawala Dairy Limited, incorporated on December 01, 2015, expects to build a dairy farm on 1,051 acres of land known as Lonach Estate.

"The transfer of assets and liabilities to Watawala Dairy Limited has not been completed pending approval from the Golden Shareholder," the firm said in a stock exchange filing.

Watawala, a privatized plantation, has land on a long-lease, and the government as the 'Golden Shareholder' has to approve changes, including diversification and sub-leases.

Watawala has already moved into palm oil.

In Sri Lanka, palm oil is taxed at import as part of moves to boost profits for rent-seeking farmers and on nationalist autarkist philosophy, making food especially for the poor more expensive.

Dairy products are also taxed at high levels.

Colombo Stock Exchange offers online services through CDS e-connect

(LBO) – The Colombo Stock Exchange has launched CDS e-connect, a portal with an array of online services to Central Depository System account holders.

The CDS will match depositories from around the world in offering electronic services to account holders, a statement said. Many peer depositories in the Asian region currently provide similar facilities.

“Technology forms a vital component of the transformation process of capital markets around the world and it is important that the Sri Lankan capital market embraces the value technology offers to all stakeholders,” Renuke Wijayawardhane, chief operating officer of the CSE said.

“e-connect is yet another step in our effort to improve the infrastructure of the CDS,”

With CDS e-connect, account holders can access resources online (www.cdseconnect.lk) including transaction details, portfolio reports and past monthly statements.

For institutions such as margin providers, the ability to manage multiple user accounts through a single user ID is another key feature of this facility.

The technology for the e-connect service is provided by Millennium Information Technologies (MIT) who are a part of the London Stock Exchange Group. MIT are also the providers of the CDS system.

Nalin Fonseka, Head of CDS stated that this new online facility offers value and many technological benefits.

“It aims at bridging the gap between the CDS and account holders. e-connect will take accessing of CDS account transaction details to a new level because of the accessibility through personal computers, Tablet PCs or Mobile devices,” he said.

“Especially from the perspective of the foreign investors, this would provide a platform for them to verify both their account information and portfolio information, which simplifies the process to a large extent.”

The introduction of e-connect comes at the back of a number of other value added services and improvements to the technology provided by the CDS, including the launch of SMS alerts and eStatements.

List of services offered through CDS e-connect

• Alerts and notifications on:-

                            - Corporate actions due for the next market day
                            - Transactions/changes of portfolio

• Access to view all accounts registered under the client via a single user ID
• Access to view account balances
• Access to view transaction history for the past 6 months
• Access to view master file data available in the CDS system
• Access to view current monthly statement
• Access to view monthly statements for up to 6 months
• Request for additional monthly statements.

SBI Group to acquire 25% stake in First Guardian Equities

The SBI Group is to acquire a strategic 25% stake in First Guardian Equities through an investment via a private placement.

The MOU was signed by the Representative Director, President and CEO of SBI Holdings Yoshitaka Kitao and Managing Director and CEO of First Guardian Equities Rohan Goonewardene.

The SBI Group will be offered two representatives on the Board of First Guardian Equities. This transaction is due to be concluded shortly after obtaining the required regulatory approvals.

First Guardian Equities is a licensed trading member of the Colombo Stock Exchange and regulated by the Securities and Exchange Commission of Sri Lanka (SEC). It is the only stock brokerage in Sri Lanka with an international ISO 9001:2008 systems standardisation certification. Currently the Company is also in the process of obtaining a credit rating from a foremost international credit rating agency.

Managing Director Rohan Goonewardene said the involvement of First Guardian, with a world class entity such as the SBI Group, will soon enable its customers to experience an enhanced level of service options and excellence. Goonewardene was confident that this tie-up will not only bring mutual benefit to both institutions but will also be a tremendous boost and a vote of confidence to the country’s capital markets.

www.dailynews.lk

Ceylon Tea has lost its magic touch -Tea Brokers Chairman

Sri Lanka lost out on the so-called value addition that Sri Lanka enjoyed in the past which generated greater export earnings, Ceylon Tea Brokers Chairman Chrisantha Perera said.

This is even though the volume of exports was lower than some of the larger tea producing countries such as China and Kenya,he said.

“Sri Lanka has lost its established position as the highest value exporter. It will be noted that China with a total value of US$ 1.38 billion has surpassed the export value of tea from Sri Lanka of US$ 1.34 billion,Perera said in the company’s annual report for 2015/2016.

Commenting on developing trend in the global market, he mentioned that non tea producer countries such as UAE, Germany, Poland, UK and the USA appear to be establishing themselves as value added destinations not only for their domestic consumption, but more importantly for re-exports.According to Perera Sri Lanka does not appear to have the ability to penetrate into new markets effectively.

“It is important to realise that the oil rich Middle East Region and Russia which dominated our tea market in the past, may no longer be a factor to the same extent in the future. We therefore need to

widen our market horizons including new emerging possibilities such as China. It must be stressed that out of the five leading tea importing countries, namely Russia, Pakistan, UK, USA and Egypt, we have a significant presence only in Russia.” India so far this year has out-placed Sri Lanka as the largest supplier of tea to Russia with 11.67 metric tonnes during the first quarter of 2016 compared with 9.1 metric tonnes from Sri Lanka.

India also appears to be leveraging on trade ties with Iran. Iran, India and Afghanistan are reported to have agreed to revive a project to build a trading corridor that would connect Afghanistan to the Indian Ocean via Iran.

He also added that the tea Industry needs to look at pragmatic solutions and implement decisions to make its presence felt in the ever expanding global tea market.

Solutions and opportunities are out there, but our ability to step out of our comfort zone and create constructive change by facilitating tangible expansion in export markets as well as taking proactive decisions are still to be seen. In this respect, he said adding that the country should urgently examine the hotly debated topic of making Sri Lanka a Tea Hub without compromising the inherent value of marketing Pure Ceylon Tea. Chrisantha Perera.

www.dailynews.lk

Pan Asia Bank posts Rs.943 mn PBT in 1H

Pan Asia Banking Corporation PLC increased its pre-tax profit by a strong 48% to Rs. 943 million for the six months ended June 30, 2016 (1H’16) from the same period last year on the back of a strong growth in core-banking operations and fee and commission based incomes.

The post-tax profit too followed suit and has increased by as much as 34% year-on-year (yoy) to Rs.604.0 million. The earnings per share rose to Rs.4.10 from Rs.3.08 a year ago.

The bank’s core-banking performance has been quite strong with net interest income growing by 28 percent yoy to Rs.2.34 billion but the rise in interest expenses exceeded the rise in interest income due to slower re-pricing of the loan book in the rising interest rate market compared to the rate offered for the deposits.

As a result the net interest margin has slipped to 4.11 percent from 4.34 percent in December 2015 demonstrating the pressure on the margins.Nevertheless the maintaining the margin above 4.0 percent is considered commendable amid rising funding cost.

The bank has also managed to expand its gross loans and receivables to customers by an annualized 12.8% or by Rs.5.5 billion during the 1H’16 to Rs.91.8 billion.

Total assets stood at Rs.120.8 billion, recording an increase of an annualized 24% during the 1H. Pan Asia Bank Director and Chief Executive Officer Dimantha Seneviratne said the 1H financial results is a clear testament of the bank’s ability to deliver consistent performance irrespective of the economic cycles.

“We have throughout been proactive in identifying the market developments. This enabled us to make early inroads in to certain segments and this has been the hallmark of our successful performance. We would continue to remain futuristic and make forward looking decisions to turn opportunity in to realities.

www.dailynews.lk

Overseas Realty records Rs. 1.5 b profit for 1st half 2016

Overseas Realty (Ceylon) PLC recorded a Group Profit after tax of Rs. 1,485 million, for the first six months ended 30 June.

The company recorded a revenue of Rs. 950 million from Property Leasing at the World Trade Centre (WTC) Colombo and expects to maintain good occupancy levels during 2016. Revenue from Other Services was Rs. 109 million which is an increase of 42% over the corresponding period of 2015. However, the revenue from apartment sales reduced from Rs. 733 million to Rs. 126 million due to non-recognition of revenue of Havelock City Phase 3 during this period. Phase 3 was launched in March 2016 and as at the quarter end around 25% of the Phase 3 units had been pre-sold. While construction of Havelock City Phase 3 is currently underway, pilling works for Phase 4 is scheduled to complete during 2016.

In addition to the developments in the Residential component, Havelock City is currently working on the design works for its Commercial complex. The Commercial complex will consist of a world class A grade Office Tower and a Shopping Mall built to international standards with a fusion of retail, dining and entertainment.

The Group Net Asset Value per Share as at 30 June stood at Rs. 32.39 and the Earnings per Share for the period stood at Rs. 1.66.

www.ft.lk

Tourist arrivals cross 1 million mark in July

Tourist arrivals crossed the 1 million mark in July reflecting a near 17% growth year on year.

This year’s end July performance is the best ever with 1.17 million tourists visiting, up by 16.7% from 1.0 million a year earlier.

India remains the largest source market with 200,508 arrivals, up 18% in the first seven months, followed by China with 168,473, up by 37%.UK came third with 110,649 arrivals up by 18% over the first seven months of 2015.

Tourist arrivals in July rose by 19% t0 209,351.
www.ft.lk

Expolanka Holdings’ 1Q top line up 7%

Via its strategic shift towards focus on growth sectors, Expolanka Holdings PLC has achieved revenue growth of 7% year-on-year (YoY) amidst challenges, thereby increasing its revenue for the first quarter of the 2016/17 financial year (1Q 2016/17) to Rs. 14,956 million.

According to unaudited figures released to the Colombo Stock Exchange (CSE), driven by good performances in its Logistics and Leisure sectors (with Ventures beings its other area of operations), the company also improved its operating profit (which excludes other incomes and finance cost) by 20% YoY to Rs. 400 million, for the three months which ended on 30 June 2016.

As a result of non-cash write down in passive investments held at the Group level, the Group Profit Before Tax (PBT) for the quarter was Rs. 378 million – a decrease of 6% YoY. The profit attributed to the equity holders for the quarter too declined by 18% YoY to Rs. 182 million.

“It is noteworthy that the strategic focus on growth sectors has delivered a resilient financial performance in the first quarter of 2016/17 even amidst challenges,” Group CEO Hanif Yusoof said. “With ongoing developments such as the possible restoration of GSP Plus to the EU and other macro related developments, we intend to capitalize on the emerging growth opportunities, both locally as well as regionally.”

Expolanka Group, which now operates in the three spheres of Logistics, Leisure and Ventures, after divesting its non-core assets to focus greater on growth sectors, experienced top line growth in Logistics and Leisure during the first quarter of the 2016/17 financial year.

In Logistics, the Group increased its revenue by 5% YoY to Rs. 12,405 million for the quarter – a noteworthy performance considering the surge in air freight shipments in the corresponding quarter of the previous year. Both air and ocean freight recorded double digit volume growth while the Group’s core markets in India, Bangladesh and Sri Lanka performed well, fuelled by healthy volume growth in the US trade lane. Indonesia, Vietnam and Hong Kong (the Far East) recorded notable performances, thereby contributing to the overall sector growth. In addition, cost rationalization exercises and global procurement efforts conducted over the past few years have yielded results boosting bottom line growth of the sector.

The Leisure sector experienced Revenue growth of 64% YoY, improving its top line to Rs. Rs. 1,383 million with the Group’s outbound business travel operations recording positive results, building further on the growth that the sector showed throughout last year. Expolanka Holdings will continue to focus its attention towards growing the Leisure Sector.

The Ventures sector recorded a revenue of Rs. 1,167 million during the quarter. Non-recurring charge of Rs. 48 million related to restructuring cost affected the PBT of the segment.

Expolanka Holdings PLC has been in operation since 1978 and has a workforce of over 2800 employees. Headquartered in Colombo, Sri Lanka, the Group’s network spans more than 20 countries in Asia, Africa, USA and the Middle East. 

www.ft.lk

Sri Lanka's Sampath Bank to seek US$100mn from syndicated loans

ECONOMYNEXT - Sri Lanka's Sampath Bank will seek up to $100 million of 3-to-5 year funds this year to meet loan demand and supplement domestic deposits, Chief Executive Aravinda Perera said.

Perera said the bank may see up to 25 percent loan growth if deposit targets could be met this year.

The bank was focussing more on small and medium clients this year and reducing emphasis on corporate lending, he said.

Sampath had repaid syndicated loans taken earlier and it only had some short-term foreign borrowings, he said.

Bloomberg Newswires said the bank was already in the market for a $50 million syndication, with responses due by August 26.

A bank that finances credit from real deposits does not cause any balance of payments pressure.

Foreign currency shortages comes when the government spends money from Treasury bills sold to the central bank, when maturing Treasury bills are bought by the central bank with printed money, or when primary dealers buy bond or banks fund loans with money from the reverse repurchase window.

Central Bank releases summary trading statistics on Government Securities Secondary market information for the first time

Click here to view or download 

Government Securities Secondary Market 

Trade Summary 03.08.2016

As a further policy measure to develop the government securities market, the Central Bank from today has commenced releasing summary trading statistics on actual trading of government securities in the secondary market. From August 1, 2016, all primary dealers have been required to undertake inter-primary dealer trades in the trading platform arranged by the Central Bank through the Bloomberg which is a major international financial trading and information electronic platform. 

Further, all primary dealers will report all outright sales of government securities of value in excess of Rs. 50 mn to investors to this platform within 30 minutes of each transaction. Accordingly, the Central Bank will monitor these transactions on an on-going basis and summary of trading information consisting of yield rates and volume by each series of securities traded will be published in the Central Bank website in the format as annexed below. The Central Bank plans to release such information twice a day, at noon and close of the day, in due course when the reporting system is fully operative. This information will help investors to study the current status of government securities market conditions along with other financial market and economic information and make more informed decisions in relation to their investments. The availability of such market information will further promote transparency, price discovery and outreach of the government securities market in parallel to other financial markets. In due course, outright secondary market sales of government securities by non-primary dealer banks to their customers also will be brought into this system.  

In addition, the Central Bank has commenced procurement process for setting up a dedicated electronic trading platform along with Central Counter party System which will provide market information on real time basis similar to other developed financial markets and further develop the government securities market to international standards. Meanwhile, several measures are in the process to strengthen the regulation and supervision of the market in line with international standards. For this purpose, the regulation and supervision of the government securities market has been assigned to the Department of Supervision of Non-bank Financial Institutions whereas the Public Debt Department will undertake functions relating to issuance, registry, market development and debt management. These policy initiatives are expected to promote fair market practices and yield benefits of the government securities market to all participants.