Sri Lankan shares end lower on selling by foreign investors

Reuters: Sri Lankan shares ended slightly weaker on Tuesday, hovering near a more than four-month closing low hit last week, as foreign investors sold diversified shares, brokers said.

Foreign investors turned net sellers for the first time in six sessions, selling shares worth a net 495 million rupees ($3.24 million), although they have net bought 27.5 billion rupees worth of equities so far this year.

The day’s turnover however touched the highest in more than one month at 1.6 billion rupees, well above this year’s daily average of around 859.8 million rupees.

“Market slipped on a few counters, but it looks healthy with over a billion rupee in turnover,” said Hussain Gani, deputy CEO of Softlogic Stockbrokers.

The Colombo stock index ended 0.2 percent lower at 6,398.79, near its lowest close since April 18 hit on Thursday.

Shares of Hemas Holdings Plc fell 3.68 percent, while Nestle Lanka Plc ended 0.4 percent weaker and conglomerate John Keells Holdings Plc lost 0.3 percent.

The index fell 0.42 percent last week, its sixth straight weekly fall, and has shed more than 4 percent since July 27 through Tuesday.

($1 = 152.7500 Sri Lankan rupees) 

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

Fitch affirms Bimputh Finance at BB(lka); outlook stable

Fitch Ratings Lanka has affirmed Bimputh Finance PLC’s National Long-Term Rating at ‘BB(lka)’. The Outlook is Stable.

KEY RATING DRIVERS

Bimputh’s rating reflects its small franchise compared with higher-rated peers and high-risk appetite stemming from its microfinance-dominated loan portfolio, which Fitch sees as risky due to the segment’s greater susceptibility to economic cycles. Fitch’s assessment also captures likely pressure on Bimputh’s capitalisation from high loan growth, which is forecast by management’s guidance, and limited funding diversity due to a heavy reliance on borrowings.

Fitch believes aggressive loan growth would pressure Bimputh’s capitalisation in the absence of any meaningful capital infusions. The company’s Fitch Core Capital ratio remained flat at 16.5% as at end-March 2017 and Fitch believes Bimputh would depend on its 94% owner, Daya Group, for capital infusions.

Fitch expects microfinance to remain Bimputh’s dominant product exposure, notwithstanding that this exposure declined to 63% of total lending in the financial year ending March 2017 (FY17), from 82% at FYE16, due to increased exposure to non-microfinance loans supported by corporate and personal loans. A challenging operating environment, together with prolonged drought and several floods, reduced loan growth to 39% during FY17, from 118% in FY16.

Fitch expects Bimputh’s assets quality to remain under pressure. The reported six-month non-performing loan (NPL) ratio increased to 3.0% at end-March 2017, from 0.8% at end-March 2016, due to microfinance defaults. However, the company maintains adequate provisioning levels for these NPLs.

Fitch believes weaker net interest margins from its business-model shift to a lower share of microfinance and higher funding costs could weigh on Bimputh’s profitability and increase its credit costs. We expect Bimputh to continue relying on wholesale borrowings due to its weaker deposit franchise relative to peers. Deposits made up only 30% of its funding at end-March 2017 and are highly concentrated among the top-20 deposit holders.

Bimputh is a small finance company accounting for 0.95% of licensed finance company and specialised leasing company sector assets at end-March 2017 (March 2016: 0.86%).

RATING SENSITIVITIES

Weaker capitalisation metrics may place downward pressure on the company’s ratings. Heightened risk appetite, indicated through aggressive loan growth or greater unprovided NPLs that increase capital impairment risks, could also lead to a downgrade of Bimputh’s ratings.

An upgrade is contingent on an improved franchise while sustaining credit metrics – in particular, capitalisation – similar to higher-rated peers, alongside a moderation of risk appetite.

Source: LBO

Sri Lanka motor car registrations rise to 3,221 units in July: JB

LBO - Sri Lanka’s motor car registrations rose to 3,221 units in July, up from 2,802 units in June, the highest monthly figure so far this year, JB Securities said in a research note.

Registrations are still down from a high of 14,544 units in September 2015.

‘Overall, brand new motor cars have increased by 17 percent month-on-month. Micro observed growth in the “Panda” car, Renault observed growth in the “KWID” and Tata observed the most significant growth in their “Nano Twist XTA,”’ the note said.

Pre-owned motor cars increased by 13.7 percent month-on-month. Toyota, Suzuki and Honda observed growth in pre-owned registrations.

Premium car registrations have declined from 94 units in June to 65 in July. “Brand new premium cars remained the same with Mercedes Benz leading the way with growth observed in the E-Class.”

Overall weak electric car registrations increased from 13 in June to 17 in July, with Nissan leaf recorded 13 registrations.

Three-wheelers observed a decline by 4.7 percent month-on-month to 1,787 units. Bajaj’s market share dropped from 94.6 percent to 92.1 percent.

Two-wheelers registered 30,226 units in July, a 10 percent increase month-on-month.

The note said, “130cc segment share improved from 79.4% to 80.8%. Honda’s dominant market share increased from 36.5% to 38%. Scooters increased from 14,846 to 17,893 in July, led by growth in Honda.”

Light trucks increased significantly by 55 percent in July to 177 units, while buses grew by 7.7 percent to 205 units, down from a high of 381 in March.