Sri Lankan shares fall to 1-yr closing low, rate review in focus

Reuters: Sri Lankan shares fell for a second straight session on Thursday to a more than one-year closing low as expectations of an interest rate hike continued to drag down the market ahead of the central bank's monetary policy review.

The Colombo stock index closed down 0.3 percent at 5,979.85, its lowest close since March 15, 2016. The index breached a key psychological barrier of 6,000 in the previous session.

"There are no buyers as most of the local investors are on the sidelines awaiting the outcome of the policy review," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Sri Lanka's central bank could raise its key policy rates in the coming months if it skips a chance to tighten at its second monetary policy review of the year on Friday, a Reuters poll showed, two weeks after the International Monetary Fund called for further tightening.

Analysts said investors expected a rate hike.

Turnover stood at 616.4 million rupees ($4.1 million), less than this year's daily average of 671 million rupees.

The index has lost 2.1 percent since March 7, when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse dipped further into oversold territory on Thursday, with the 14-day relative strength index at 24.614 points versus Wednesday's 26.758, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 194 million rupees, raising the year-to-date net foreign inflow to 3.26 billion rupees in equities.

The treasury bill rates have risen between 33 to 77 basis points since July 28, when the central bank last raised the key interest rates.

Shares in Asian Hotel Properties Plc fell 2.9 percent, while Lanka ORIX Leasing Company Plc fell 0.8 percent and Sri Lanka Telecom Plc 0.9 percent.

($1 = 151.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lanka's NDB ends S&P ratings

ECONOMYNEXT - Standard and Poor's said it was confirming the 'B' long-term rating of Sri Lanka's National Development Bank and withdrawing at the lender's request.

"In our view, the bank has an adequate risk position for its size and business scale. However, the bank's aggressive growth and small branch network have resulted in a below-average - albeit improved - funding profile, and its capital and earnings profile remains weak," the rating agency said.

The full statement is reproduced below:

National Development Bank PLC 'B' Rating Affirmed; Rating Then Withdrawn At The Bank's Request

SINGAPORE (S&P Global Ratings) March 20, 2017--S&P Global Ratings said today that it affirmed its 'B' long-term and 'B' short-term issuer credit ratings on National Development Bank PLC (NDB). We then withdrew all the ratings at the bank's request.

The affirmed rating at the time of withdrawal reflected our expectation that NDB would maintain its satisfactory business and revenue diversification over the next 12 months. In our view, the bank has an adequate risk position for its size and business scale. However, the bank's aggressive growth and small branch network have resulted in a below-average--albeit improved--funding profile, and its capital and earnings profile remains weak.

The outlook on the long-term issuer credit rating was stable at the time of the withdrawal. The stable outlook reflected our view that NDB is relatively insulated over the next 12 months compared to peers from potential heightening of economic risks facing all financial institutions operating in Sri Lanka.

Although we expected no rating movement in the next one year, rating upside would have outweighed downside risks over the longer term, given that the bank plans to raise capital.

Sri Lanka 03-month Treasury Bill yield rises to 9.57-pct

ECONOMYNEXT – Yields on Sri Lankan Treasury Bills rose across the board at an auction on Wednesday, with the 03-month bill yield up 10 basis points to 9.57 percent, the public debt department of the Central Bank said.

The 06-months bill yield rose 07 basis points to 10.46 percent and the one-year bill yield rose 08 basis points to 10.82 percent, a statement said.

The public debt department got bids worth 39.4 billion rupees and accepted bids worth 4 billion rupees.