Sri Lanka Treasuries yields up for second week

ECONOMYNEXT - Sri Lanka's Treasuries yield rose across maturities at Wednesday's auction, with the three month yield rising 10 basis points to 9.27 percent, data from the state debt office showed.

The 12-month yield rose 09 basis points to 9.65 percent.

The debt office offered 2.0 billion rupees of 3-month bills, 8.0 billion rupees of 6-month bills and 10,000 billion rupees of 12-month bills.

However it accepted 15 billion rupees of six month bills, much higher than offered, and 5.0 billion rupees of 12-month bills and rejected all bids for 3-month bills.

Last Wednesday the six month yield rose 15 basis points to 9.17 percent and the 12-month yield rose 16 basis points to 9.54 percent. No 3-month bills were offered.

Treasuries yields fell sharply over the past month, though demand from some buyers fell away as yields fell below 10 percent.

Dealers say funding costs range from 9.00 to 9.25 percent at the moment.

Political uncertainty has also affected sentiment, and bond yields have also edged up, with trading volumes falling, dealers said.

There is also uncertainty over the new bond auction system, with fears that it could be used to coerce dealers and allow the central bank to engage in financial repression again.

The first bond auction also created uncertainty with auction yields around 20 basis points below the secondary market, leading to speculation that captive sources had been pressured to buy at high prices by the authorities.

Sri Lanka's central bank in general and its public debt department in particular has a history of engaging in financial repression and de-stabilizing the credit system, according to analysts who give early warning of its tendency to generate high inflation and balance of payments crises.

But Sri Lanka is now emerging from a balance of payments triggered by money printing and financial repression in 2015 and 2016 and budgets are improving.

However there can be temporary mis-matches between spending and revenues. In June private credit also picked up after being subdued for two months. State energy enterprises are also facing tigher finances in the face of thermal generation and higher import prices.

Analysts say it is important to allow credit demand or other factors to be signalled through prices, to create renewed demand.

Sri Lankan shares fall for third straight day; blue chips drag

Reuters: Sri Lankan shares fell for the third straight session on Wednesday, hitting their lowest close in more than four months, as investors sold heavyweights amid continuing uncertainty over a proposed tax reform bill.

The Colombo stock index fell 0.19 percent, or 12.05 points, to 6,383.27, its lowest close since April 18.

The index shed 4.3 percent since July 27 through Wednesday and has fallen in 17 out of 19 sessions due to lacklustre corporate earnings in the June quarter and speculation that the new tax reform bill might impose a tax on stock trading.

"Things are very slow. Even foreign side is slow as everybody is waiting for the tax bill to settle things," said Dimantha Mathew, head of research at First Capital Holdings.

Junior Finance Minister Eran Wickramaratne said on Thursday concerns over tax on share trading would be addressed before the proposed bill is passed. The bill is expected to be presented in the parliament on Friday.

Foreign investors bought shares worth a net 114.6 million rupees ($749,509.48) on Wednesday, extending the year-to-date net foreign inflow to 27.9 billion rupees worth of shares.

Turnover was 808.2 million rupees, less than this year's daily average of around 863.3 million rupees.

Shares of conglomerate John Keells Holdings Plc fell 0.9 percent, while both Melstacorp Ltd and Cargills (Ceylon) Plc lost 1.7 percent.

($1 = 152.9000 Sri Lankan rupees)

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

Union Assurance posts profit of Rs 175 mn in 2Q

Union Assurance (UA) reported steady progress in the life insurance business, reporting 19% growth in gross written premium for the second quarter of the current financial year, compared with the previous year. Profit amounted to Rs. 175 million compared with Rs. 119 million in 2016. Profit for the period does not include a surplus from the life business which is actuarially valued at year end.

As at June 30, 2017, UA’s life fund stood at Rs. 34 billion with a healthy solvency ratio indicating the financial strength of the business.

UA’s financial performance is underpinned by a continuous focus on innovation, brand management and people development.

Union Assurance is anchored by a team of experienced and dynamic professionals and is backed by a strong capital base and reinsurance partnerships with highly rated global reinsurers.

Celebrating 30 years of excellence in 2017, Union Assurance continues to invest in people, products and processes to become a true partner in successfor all our stakeholders.

www.dailynews.lk

‘Swedish investor to bail out CIFL depositors’

A Swedish investor has finally come forward to bail out the Central Investment and Finance Co Ltd (CIFL) depositors.

CIFL Depositors Association (CIFLDA) President Wijaya Gunawardane said that a representative of the Swedish company attended the annual general meeting (AGM) last Saturday at the Public Library. He then informed depositors of the details of the payment. This will be capital plus interest which would be paid in full within four years.

This proposal was approved by the majority of the deposit holders attending the AGM. Gunawardane said that this investor has been coordinated by the Central Bank of Sri Lanka who came forward to assist the depositors. The Swedish investor would either buy shares of the depositors or pay them cash. The whole process would be completed in less than three years.

“The Swedish company taking over CIFL and subsequently running it is a major boost to the local economy and a sigh of relief for the depositors who were in great difficulty due to this issue.”

On August 4, U. P. Alawattage, Director, Department of Supervision of Non Bank Financial Institutions, speaking to Daily News Business after a press conference, said that several local and foreign investors have positively responded to bail out three ailing finance companies including CIFL

He said that the three companies, CIFL, City Finance and The Standard Credit have some issues and the Central Bank has come forward to bail them out.

CIFL was initially registered as a public limited liability company on July 3, 1968. Subsequently it came under the ownership of Deepthi Perera of ASPIC Group in 2004. It became a public liability company in July 2011 and is currently listed on the CSE.

www.dailynews.lk

Ceylon Tea Brokers to raise Rs. 205 m via Rights to finance modern warehouse

Ceylon Tea Brokers Plc is to raise Rs. 205.2 million via a Rights Issue to finance a modern warehouse complex.

The Board of CTB on Friday resolved to issue 68.4 million shares via a three for five Rights Issue at Rs. 3 per share. The net asset value per share as at June 2017 was Rs. 2.15. The share price yesterday closed at Rs. 3.90.

The company said proceeds will be utilised to build a state-of-the-art warehousing complex with modern equipment and machinery to provide an effective and efficient service to clients while reducing costs and operating time.In May this year the company entered into a share sale agreement with Lanka Commodity Brokers to buy Logicare for Rs. 233 million and in July Logicare Ltd. signed a 39-year lease with the Sri Lanka Land Reclamation and Development Corporation for a plot of land in Muthurajawela.

For the quarter ended 30 June 2017, CTB posted a profit of Rs. 28 million as against a figure of Rs. 2.3 million. Revenue grew by 92% to Rs. 156 million.

The company’s current stated capital is Rs. 128 million represented by 114 million shares. Capital Alliance Holdings owns 81.35% stake in Ceylon Tea Brokers Plc. The public holding is 15% comprising 1,556 shareholders.

www.ft.lk