Sri Lankan shares hit more than 13-wk closing low

Reuters: Sri Lankan shares fell for a sixth straight session on Thursday, their lowest close in more than 13 weeks, led by losses in hotels and diversified stocks.

The Colombo stock index fell 0.21 percent to 6,571.48, its lowest close since May 3. The index slipped 1.6 percent in July, but has risen about 6 percent this year as of close of trade on July 31.

Shares of conglomerate John Keells Holdings Plc dropped 0.8 percent, while Trans Asia Hotel Plc fell 4.9 percent and Melstacrop Plc ended 1.67 percent weaker.

"Lack of foreign buying on the big counters dragged (down) the index," said Hussain Gani, deputy CEO of Softlogic Stockbrokers. "Foreigners are looking at the market positively, but the market did not have a spark today to boost sentiment."

Foreign investors net bought shares worth 112.9 million rupees on Thursday, extending their year-to-date net inflow to 26.5 billion rupees.

Turnover stood at 381.4 million rupees ($2.49 million), its lowest since July 26 and well below this year's daily average of around 893.3 million rupees.

Sri Lanka's central bank held policy rates steady before market hours on Thursday, and said tightening measures taken in the past are helping cool inflation and credit growth.

Investors in fixed-income assets may shift to equities as government bond yields are falling, analysts said.


Short-term treasury-bond yields fell between 41 basis points (bps) and 55 bps at a weekly auction on Wednesday.

In last week's auction, the weighted average yield on a 59-month bond dropped by 99 bps, while that on an 118-month bond fell by 78 bps. 

($1 = 153.4000 Sri Lankan rupees) 

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

Sri Lanka's Cargills enters into Agreement with Bank of China to promote cooperation

Sri Lanka's Cargills Group, the leading Retail and FMCG Company today announced that has entered into agreements with the Bank of China Limited.

In a stock market filing the retailing giant said the company entered into agreements with the Bank of China Limited to promote cooperation and strengthen business ties between the two entities.

Bank of China is the 4th largest bank in the world, and is the oldest bank in mainland China.

The entry of Bank of China - Colombo Branch is expected to enhance trade and investment between Sri Lanka and China, it said.

www.colombopage.com

SEC to take disciplinary action against brokers on capital adequacy

The capital market regulator, the Securities and Exchange Commission (SEC), yesterday said going forward disciplinary actions would be taken against the stockbrokers who do not adhere to the capital adequacy requirements introduced last year.

The SEC last year said each stockbroker would be required to maintain a risk-based capital adequacy ratio (CAR) of 1.2 times of the total risk, starting from March 2017, in addition to the existing minimum liquid capital of Rs.35 million.

During a meeting last week, the SEC approved to incorporate disciplinary action under the Stockbroker Rules of the Colombo Stock Exchange (CSE).

The stockbrokers, who fail to meet the CAR five times within 30 calendar days or seven times within three months, will be prohibited from carrying out purchases of securities and those who receive such prohibitions on three separate occasions will be suspended as a member of the CSE.

For a period of one month, the CSE and SEC will regularly monitor the stockbrokers who receive prohibitions until such brokers submit a capital augmentation or rectification plan and comply with the CAR.

The stockbrokers, who fail to comply with this within the given month, will be prohibited from carrying out all trading activities and within two weeks will have to inform their clients of non-compliance of the CARs, stop canvassing new clients and smoothly transfer the portfolios of clients to other stockbrokers or custodian banks and settle the dues to investors and creditors.

These non-compliant brokers will then be given further two months to submit a revised capital augmentation or rectification plan, which is acceptable to the CSE, and will be allowed to trade no sooner they comply with the CARs and other minimum standards under the Stockbroker Rules.

Those who fail to meet the requirements within these two months will then have their membership in the CSE as a stockbroker firm suspended, unless the CSE decides to waive such suspension with the approval of the SEC, subject to appropriate conditions.

www.dailymirror.lk

Sri Lanka state to exit Colombo Hilton, seek property developer

ECONOMYNEXT - Sri Lanka will sell a 51 percent stake in Hotel Developers, a state firm that owns the building in which Colombo Hilton is located, to an investor that can develop its land holdings.

A 4 percent stake in the firm will be distributed to employees free of charge, according to a cabinet decision.

An investment advisory firm will be appointed to seek and short list two to three suitable investors who can develop vacant land owned by the company. The firm has land across the road from the main building where a 'sports centre' is located.

The 51 percent stake will be offered on the stock exchange to the selected investor who will have to bid against each other.

A balance 45 percent stake will be offered at a fixed price through a public offering.

Hotel Developers Lanka Ltd is at the moment 100 percent owned by the Secretary to the Treasury.

The firm was expropriated while being a listed entity. It is not known whether compensation was already paid to shareholders who were expropriated.

The divestment plan makes no mention of expropriated shareholders.

Sri Lanka to divest Hyatt building

ECONOMYNEXT - Sri Lanka is to sell a 100 percent stake in Canwill Holdings (Pvt) Ltd, a state company which owns Colombo's Grand Hyatt project.

The cabinet of ministers had decided to sell a 100 percent stake to a strategic investor. At the moment it has no workers and there are no plans to give shares to employees.

Canwill Holdings is 45.09 percent owned by Sri Lanka Insurance Corporation, 27.03 percent by Litro Gas Lanka Ltd, and 27.03 percent by Employees Provident Fund.

Canwill Holdings owns the Grand Hyatt project through Sinolanka Hotels and Spa (Pvt) Ltd. Canwill also has another subsidiary Helanco Hotels and Spa (Pvt) Ltd, which owns a site where a Hyatt Regency was expected to be built in Hambantota.

Helanco Hotels stock will be transferred to SLIC, Litro Gras and EPF in the proportion of the parent to separate the two projects. The Hambantota project will be divested separately.

A transaction advisor will be appointed to seek prospective investors and short list two to three investors who will bid for the 100 percent stake on the Colombo Stock Exchange.

The Hyatt hotel in Colombo is built on a troubled real estate project initiated by the failed Ceylinco group, which was expropriated by the Rajapaksa administration.

It is not clear whether buyers who had made advance payments for apartments had been compensated.

Sri Lanka Monetary Policy Review – July 2017 - Policy rates Unchanged

Monetary Policy Review: No. 5 – 2017 

The Monetary Board, at its meeting held on 02 August 2017, was of the view that the current monetary policy stance is appropriate and decided to maintain the policy interest rates of the Central Bank of Sri Lanka at their present levels. 

In arriving at the above decision, the Monetary Board took into consideration current and expected developments in the domestic and international macroeconomic environment and the need to maintain inflation at mid-single digit levels over the medium term. 

The outlook for global growth appears to be firming according to the latest update of the World Economic Outlook of the International Monetary Fund (IMF) in July 2017. The Sri Lankan economy is expected to record a modest recovery in the forthcoming quarters following the low growth witnessed in the first quarter of 2017. The recovery of the agriculture related activities and the positive performance of the industry and services related activities together with the reinstatement of GSP+ facility are expected to contribute to economic growth.

The Colombo Consumer Price Index (CCPI, 2013=100) and the National Consumer Price Index (NCPI, 2013=100) based headline inflation (year-on-year) moderated at a faster pace in the recent months, in spite of supply side disruptions encountered in May 2017, mainly on account of the floods. A similar trend was observed in core inflation as well during this period. Inflation is expected to ease further towards the end of 2017 and stabilise thereafter due to the tight monetary policy stance maintained since the end of 2015 and the dissipation of the ‘one-off’ impact of the tax structure on inflation.

However, monetary expansion continued to remain high in May as well as in June 2017. While monetary growth was mainly driven by the expansion in domestic credit, net foreign assets (NFA) of the banking system also positively contributed to this expansion. Meanwhile, private sector credit that was growing at an elevated level during 2016 and early 2017, indicates clear signs of deceleration in recent months, although at a slow pace. In view of high nominal and real interest rates prevailing in the market, it is expected that growth of monetary and credit aggregates would moderate further during the remainder of the year. The recent decline in the yields on government securities is expected to gradually transmit to other market interest rates in the forthcoming period. 

In the external sector, export performance continued to improve in May 2017 led by agricultural exports. However, the continued increase in expenditure on imports has caused a further widening of the cumulative trade deficit. Tourist arrivals and earnings from tourism improved in June 2017, albeit at a slower pace, while workers’ remittances continued to slow during the first half of 2017 on account of prevailing economic and geopolitical uncertainties in the Middle East. Nevertheless, the capital market, both government securities and the Colombo Stock Exchange (CSE), witnessed a noticeable influx of foreign funds (on a net basis) from March 2017. Meanwhile, Sri Lanka received the third tranche of the IMF-Extended Fund Facility (EFF) amounting to US dollars 167.2 million. Reflecting these developments, gross official reserves stood at US dollars 6.7 billion as at end July 2017. Renewed investor confidence and anticipated direct investment inflows are expected to further strengthen the external sector outlook. Meanwhile, the Sri Lankan rupee depreciated against the US dollar by 2.6 per cent by end July 2017. 

In view of the above, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 7.25 per cent and 8.75 per cent, respectively.

The release of the next regular statement on monetary policy 

will be on 26 September 2017.

Dipped Products posts Rs.7.5 bn turnover

Dipped Products Group posted Rs 7.5 billion turnover during the quarter ended June 30, 2017, a 37 percent increase from a year ago. Group profit before tax (PBT) for quarter improved to Rs. 93 million.

The Hand Protection segment contributed Rs 4 billion to the revenue, 23 percent higher than the previous year. The sector was able to grow its sales across global markets consistently by developing high quality products catering to customer specific needs. Furthermore the newly commenced Universal glove operations improved its Capacity utilization as a result of customer orders picking up during the quarter. However due to steep increase in latex prices the contribution to PBT from the segment dropped to Rs. 24 mn.

Plantation segment reported Rs. 3.5 billion in revenue and a PBT of Rs. 69 million. Plantation segment performance was affected by adverse weather conditions and restrictions on weedicides.

www.dailynews.lk

Overseas Realty records Rs 1.7 bn profit in 1H

Overseas Realty (Ceylon) PLC recorded a Group profit after tax of Rs. 1,693 million for the six months ended June 30, 2017, an increase of 14% over the corresponding period last year.

Revenue of Rs. 1,028 million was recorded from Property Leasing at the World Trade Centre (WTC) Colombo, an increase of 8% over the corresponding period of last year and the company expects to maintain good occupancy levels during 2017.

Revenue from Other Services was Rs. 136 million, an increase of 25% over the previous period.

However, Revenue from Apartment Sales has not been recognized yet, since the construction of Havelock City Phase 3 has not reached the required completion level.

While construction of Havelock City Phase 3 is currently underway, piling works of Phase 4 was completed in June 2017.

Construction of Phase 4 is scheduled to commence this month.

As at end June 2017, around 38% of Phase 3 units have been pre-sold.

Piling works of the Havelock City Commercial Development commenced in June 2017 and is expected to be completed in March 2018.

The Group Net Asset Value per Share as at June 30, 2017, stood at Rs 28.64 and the Earnings per Share for the period stood at Rs. 1.38.

www.dailynews.lk

Sri Lanka's Union Place property sold for a billion rupees

ECONOMYNEXT - Colombo City Holdings, a publicly traded company said it had reached a deal to sell 66.81 perch land with a building in Union Place, in Sri Lanka's capital Colombo for a billion rupees.

The property will be bought by Vision Care Optical Services (Pvt) Ltd.

Colombo City Holdings, owns 117.75 perches of land with two buildings which were re-valued at 1,298 million rupees in the 2016 annual report. The main building with 28,498 square feet was valued at 6,250 rupee per square feet on a replacement cost basis.

The land was valued at 10 million rupees per perch, up from 8.0 million in 2015.

The stock closed down 15.8 rupees at 950 rupees on Monday.

Sri Lanka's Dankotuwa Porcelain says workers down tools

ECONOMYNEXT - Sri Lanka's Dankotuwa Porcelain Plc, said workers have stopped work over a pay dispute.

The firm said in a stock exchange listing that a work stoppage started on July 27 over a collective agreement.

The management was in the process of minimizing its impact, the firm said without elaborating.

Sri Lanka Treasuries yields fall sharply again across maturities

ECONOMYNEXT – Yields on Sri Lankan Treasury Bills fell sharply across the board at an auction Wednesday with the 03-month bill yield down 41 basis points to 9.03 percent from 9.44 percent last week, the Central Bank’s public debt department said.

The yield on the 06-month bill fell 55 basis points to 9.16 percent at the auction from 9.71 percent last week, it said in a statement.

The one-year bill yield fell 51 basis points to 9.48 percent from 9.99 percent last week.

The debt office said it got bids worth Rs126 billion and accepted bids worth Rs31 billion.

Floods cause June quarter loss at Sri Lanka’s Hayleys Fabric

ECONOMYNEXT – Floods which disrupted production caused Sri Lanka’s Hayleys Fabric to make a loss of Rs25 million in the June 2017 quarter compared with a net profit of Rs33 million a year ago.

Sales were flat at Rs2 billion, according to interim results filed with the stock exchange by the fabric manufacturer previously named Hayleys MGT Knitting Mills, a unit of the Hayleys group.

It reported a loss per share of 12 cents compared with earnings per share of 17 cents a year ago. The share last traded at Rs16.

Hayleys Fabric said in a statement its plant was forced to shut down in the last week of May because of the flooding of Kalu Ganga while in June most of the employee homes were under water for several days leading to heavy absenteeism.

The factory also usually makes a loss in April owing to traditional new year holidays and plant closure for maintenance.

The company said it has a full order book and hopes to recover in the second quarter.