Sri Lankan shares recover from 10-mth closing low on bargain-hunting

Reuters: Sri Lankan shares rose on Tuesday, recovering from a more than 10-month closing low hit in the previous session, as investors picked up battered blue chips after the central bank held its key policy rates steady, brokers said.

However, concerns over rising market interest rates continued to weigh on sentiment, they added.

The central bank kept its key rates steady for a sixth straight month, but flagged possible "corrective measures" in the months ahead in a sign further tightening might be on the cards to temper inflation pressures and safeguard a fragile rupee.

The Colombo stock index ended 0.4 percent firmer at 6,093.04, snapping two consecutive sessions of declines.

Bargain-hunting was seen in the later part of the session with investors picking up blue chips, said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

Sri Lankan stocks, which have been declining since October, have been hurt by political uncertainty arising from a decision of the ruling coalition parties to contest local polls separately, and on worries over a rise in market interest rates.

Yields on treasury bills rose 2-8 basis points at a weekly auction on Tuesday.

Market turnover was 500.4 million rupees ($3.33 million), less than this year's daily average of 620.7 million rupees.

Foreign investors, who have been net sellers of 1.18 billion rupees worth of shares so far this year, net bought 110.6 million rupees worth of equities on Tuesday.

Shares of John Keells Holdings Plc rose 1.20 percent, Nestle Lanka Plc gained 2.56 percent and Sri Lanka Telecom Plc climbed 3.53 percent.

Hemas Holdings Plc gained 2.92 percent, Dialog Axiata Plc climbed 0.96 percent and Ceylon Tobacco Company Plc rose 0.36 percent. 

($1 = 150.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

Colombo Stock Exchange Market Review – 7th Feb 2017

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Colombo Stock Exchange Trade Summary 07-Feb-2017

Central Bank’s decision to maintain the current policy rates pushed the Colombo bourse higher on Tuesday. All Share index gained 24.73 index points (0.41%) to end at 6,093.04. Similarly, high cap constituent, S&P SL20 index advanced by 11.76 index points or 0.46% to close at 3,478.08.

Nestle (LKR 2,000.00, +2.6%) spearheaded index gains along with John Keells Holdings (LKR 143.60, +1.2%), Sri Lanka Telecom (LKR 35.20, +3.5%) and Hemas Holdings (LKR 105.00, +2.9%).

Daily market turnover was LKR 500mn. Hemas Holdings contributed majority of the turnover (LKR 104mn) underpinned by a single crossing of 0.7mn shares at LKR 104.00. Swisstek (LKR 96mn), Teejay Lanka (LKR 83mn) and John Keells Holdings (LKR 64mn) made notable contribution.

Negotiated deals were recorded in Swisstek (1.3mn shares at LKR 67.00), Teejay Lanka (LKR 0.9mn shares at LKR 38.00) and John Keells Holdings (0.2mn shares at LKR 144.50). Aggregate value accounted for 44% of the turnover.

Market breadth was positive where out of 200 stocks traded, 81 advanced, 49 slipped while 70 remained unchanged. High investor preference was seen in Teejay Lanka and John Keells Holdings. Teejay Lanka advanced to LKR 38.90, +3.7%. Hemas Holdings, Dialog Axiata and Access Engineering were among heavily traded stocks.

Foreign investors stood on buy side with a net foreign inflow of LKR 111mn. Net foreign inflows were seen in John Keells Holdings (LKR 51mn), Hemas Holdings (LKR 30mn), Nestle (LKR 28mn) while net foreign outflow was mainly seen in National Development Bank (LKR 4mn). Foreign participation was 52%.

Meanwhile, at the Treasury bill auction today, yields advanced across the board. Three month treasury rate increased by 8bps to 9.16% and six month treasury rate increased by 2bps to 10.07%. One year yield advanced by 5bps to 10.47%. CBSL offered LKR 27bn worth Treasury bills and the auction was oversubscribed by 2.1 times with bids received amounting to LKR 57.5bn. It was decided to accept LKR 19.9bn worth of treasury bills.

Source: LSL

Sri Lanka Monetary Policy Review: No. 1 – 2017 - Policy rates unchanged

Contributed by both food and non-food inflation, headline inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI, 2013=100), increased to 5.5 per cent in January 2017 from 4.5 per cent in December 2016. Core inflation, based on CCPI, also accelerated to 7.0 per cent in January 2017 from 5.8 per cent in December 2016. Headline inflation and core inflation, based on the National Consumer Price Index (NCPI, 2013=100), which is available with a time lag, also reflected an upward trend in December 2016, recording 4.2 per cent and 6.7 per cent, respectively, on a year-on-year basis. In spite of the increase in inflation in recent times, which is mainly attributed to the impact of tax adjustments and the adverse weather conditions, inflation is projected to remain in mid-single digit levels, on average during the year supported by appropriate supply side and demand management policies.

Meanwhile, the year-on-year growth of credit extended to the private sector by commercial banks remained high at 21.9 per cent by end 2016. Although the growth of credit has somewhat eased from the peak of 28.5 per cent observed in July 2016, credit disbursements in absolute terms remain high in spite of the substantial upward adjustments in nominal and real interest rates. Mainly as a result of the growth of credit to the private and public sectors, broad money growth (M2b) remained at the elevated level of 18.4 per cent, on a year-on-year basis, at end 2016. It is anticipated that the growth of monetary and credit aggregates would gradually moderate during 2017, towards a level consistent with the anticipated real economic growth and mid-single digit inflation.

In the external sector, the cumulative deficit in the trade balance expanded further to US dollars 8.2 billion during the first eleven months of 2016 from US dollars 7.6 billion during the corresponding period in 2015, as a result of increased import expenditure, amidst the contraction in export earnings. Earnings from tourism and workers’ remittances continued to dampen the adverse impact of the trade deficit on the overall balance of payments. Earnings from tourism were estimated to have increased by 14.0 per cent to around US dollars 3.4 billion during 2016, while workers’ remittances increased by 3.7 per cent to US dollars 7.2 billion during the year. The realisation of foreign direct investment (FDI) inflows was below expectations in the first nine months of the year, while there were some outflows of foreign investments from the rupee denominated government securities market. Gross official reserves were estimated at US dollars 5.5 billion by end January 2017 compared to US dollars 6.0 billion by end 2016. Reflecting the developments in the external sector, the Sri Lankan rupee, which depreciated by 3.8 per cent against the US dollar in 2016, depreciated further by 0.5 per cent thus far during 2017.

Considering the above, the Monetary Board, at its meeting held on 06 February 2017, was of the view that the economy is gradually responding to the stabilisation measures adopted by the Central Bank and the government since late 2015. However, close monitoring of macroeconomic developments is necessary in the period ahead, with a view to adopting further corrective measures, if required. The Board was also of the view that, at this stage, the monetary policy stance of the Central Bank is appropriate and decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 7.00 per cent and 8.50 per cent, respectively.