Sri Lankan rupee ends 19 pct down in 2018; bond outflows weigh

Reuters: ** The Sri Lankan rupee fell 19 percent in 2018, making it one of the worst performing currencies in Asia, as heavy foreign outflows from government securities weighed on the local currency.

** The rupee hit a record low for a seventh straight session on Monday on continued outflows of foreign funds mainly from government bonds as political uncertainty dented investor sentiment.

** The rupee hit an all-time low of 183.00 against the dollar in early trade, surpassing its previous record of 182.90 marked in the prior session, Refinitiv Eikon data showed. ** It has weakened about 5.4 percent since Sri Lanka’s political crisis began on Oct. 26, and lost 19 percent this year.

** The rupee ended at 182.80/183.00 per dollar, compared with 182.75/183.25 in the previous session.

** President Maithripala Sirisena appointed the cabinet of ministers from his rival party on Dec. 21 after he was forced to reinstate Ranil Wickremeinghe as prime minister, 51 days after he was sacked.

** The political crisis was expected to ease, though uneasy relations between the two men could cause fiscal problems, analysts have said. Parliament has approved 1.77 trillion rupees ($9.39 billion) to meet the first four months of expenditures in 2019 and avert a government shutdown from Jan. 1.

** Foreign investors have been net sellers of 13.3 billion rupees worth of stocks since the political crisis began. The bond market saw outflows of about 67.6 billion rupees ($370.21 million) between Oct. 25 and Dec. 26, central bank data showed.

** This year, there have been 22.8 billion rupees of outflows from stocks, while government securities suffered a net 159.8 billion rupees of outflows through Dec. 26, the latest data from the bourse and central bank showed.

** The Colombo stock index ended 0.62 percent firmer at 6,052.37 on Monday, but lost 5 percent for this year. Turnover was 288.5 million rupees, less than half of this year’s daily average of 834 million rupees.

** Credit agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating in early December, citing refinancing risks and an uncertain policy outlook.

($1 = 182.6000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Colombo Stock Exchange (CSE) nearly 6% down in 2018

By Duruthu Edirimuni Chandrasekera

The Colombo Stock Exchange (CSE) this year has seen a near 6 per cent index drop compared to 2017, data show.

CSE’s main All Share Price Index was down 5.51 per cent as at Thursday compared to a 2.26 per cent increase in 2017. There was a net foreign outflow with frantic foreign selling in the second half of this year. Foreign selling as at Thursday stood at Rs. 22.8 billion as opposed to foreign buying last year at Rs. 17.7 billion. Compared to last year, the net turnover had dropped to Rs. 199.4 billion against Rs. 220.6 billion in 2017, Thursday’s figures from the CSE show. Trading volumes at CSE have trimmed down drastically in line with the stock price plunges. This year the CSE was recording only a handful of big transactions.

So what’s in store for next year? Unless the same song is to be played next year, the government needs to intervene and administer this situation, analysts note.

“The Employees’ Provident Fund (EPF) must come back to the market as valuations are extremely attractive. This is a priority for next year,” Ray Abeywardena, President Colombo Stock Brokers Association told the Business Times. He pointed out that for the last four years none of the captive funds has invested in the CSE. Major share transactions by the EPF weren’t done since the current government came into power in 2015 for the first time. “Now this has to happen. This is my fervent wish for next year.”

The EPF has Rs. 2 trillion in assets under management. The current investment in the stock market by the EPF is around 2.5 per cent of the portfolio. The EPF bought Rs. 10.8 billion worth of shares during 2010 to 2015, the dark pump and dump era. Of this, Rs. 9.8 billion hadn’t to-date made any returns. So the new government treaded cautiously.

Foreign investors bought into Sri Lankan equities last year more than any other year in CSE’s history. This is a strong endorsement of the value proposition the stock market offers at present. Sri Lanka is presently being pegged by investors and market commentators around the world, as one of the most attractive frontier markets. “And the investment case for the Sri Lankan market is only getting stronger,” Mr. Abeywardena added.

The Central Bank (CB) in October has said that trade and investment guidelines have been agreed upon as preparation for the EPF becoming more active in the CSE. Then with the brief government change on October 26, CB met with trade unions to discuss this as some had opposed it.

Despite the Government signing an agreement with the Asian Development Bank in 2016 to facilitate the funds of the EPF to be invested in the CSE, nothing has happened so far. Some unions in August had urged the Government to go before the EPF members to verify their views on the ADB proposals to move the EPF to the private sector. “We wish to point out that the mechanism available with the Department of Labour to conduct (a) workplace level referendum could be made use of to ascertain the wish of the individual members of the fund,” the unions said in a joint statement.

www.sundaytimes.lk

Sri Lankan rupee hits record low; investors shrug off cenbank rate decision

Reuters: ** The Sri Lankan rupee fell to a record low for a sixth straight session on Friday on continued outflows of foreign funds mainly from government bonds as political uncertainty dented investor sentiment. 

** The central bank’s decision to keep the key monetary policy rates steady failed to boost the currency, which is hit by uncertainties after a 51-day political crisis.

** The rupee hit an all-time low of 182.90 against the dollar in early trade, surpassing its previous record of 182.35 marked in the prior session, Refinitiv Eikon data showed. It has weakened about 5.4 percent since Sri Lanka’s political crisis began on Oct. 26, and lost 19.1 percent so far this year. 

** The rupee ended at 182.75/183.25 per dollar, compared with 182.10/60 in the previous session.

** President Maithripala Sirisena appointed the cabinet of ministers from his rival party last week after he was forced to reinstate Ranil Wickremeinghe as prime minister, 51 days after he was sacked.

** The political crisis was expected to ease, though uneasy relations between the two men could cause fiscal problems, analysts have said. Parliament approved 1.77 trillion rupees ($9.39 billion) to meet four months of expenditures and avert a government shutdown from Jan. 1. 

** The Colombo stock index ended 0.05 percent weaker at 6,015.23 on Friday. Turnover was 389.2 million rupees ($2.13 million), less than half of this year’s daily average of 840 million rupees.

** Foreigners were net sellers of 69 million rupees of stocks on Friday. They have been net sellers of 13.4 billion rupees since the political crisis began. The bond market saw outflows of about 56.7 billion rupees between Oct. 25 and Dec. 19, central bank data showed. 

** Five-year government bond yields have risen 30 basis points since the political crisis began. 

** Credit agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating in early December, citing refinancing risks and an uncertain policy outlook.

($1 = 182.7000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka holds rates; credit up amid sterilized forex interventions

ECONOMYNEXT - Sri Lanka's central bank held rates in December at 9.0 percent, while credit to the state and private sector accelerated amid money printed to enforce fixed interest rates after intervening in forex markets to maintain a soft-pegged exchange rate.

"In spite of the increased cost of funds and tight liquidity conditions, the year-on-year growth of credit to the private sector accelerated since September 2018, partly reflecting the private sector advancing its activities in anticipation of measures by the government and the Central Bank to curb excessive import growth," the soft-pegged central bank said in its December monetary policy statement.

Liquidity runs short when the central bank intervenes in forex markets to defend a peg when a run is triggered on the rupee.

In a soft-peg the central bank then prints money to fill the liquidity shortage (sterilize the intervention) and stop rates from going up and slowing credit, triggering 'balance of payments' pressure.

Private credit had expanded by 79 billion rupees to 5,509 billion rupees in November, growing at an annual rate of 16.2 percent, up from 16.1 percent a month earlier.

In November the central bank also dumped tens of billions of rupees in the banking system through a reserve ratio cut and expanded the ability of banks to give loans from future deposits.

A soft-pegged central bank's monetary operations may appear as credit to government because Treasuries are used to print money into the banking system, despite budget deficits falling or not expanding.

Net credit to government from the banking system accelerated at an annual rate of 9.2 percent in October to 14 percent in November, data showed.

The SRR cut dumped 90 billion rupees in to the banking system in November to sterilize earlier interventions.

But interventions in the forex markets continued generating more shortages.

"The reduction of the Statutory Reserve Ratio (SRR) at the last monetary policy review in November 2018 released around Rs. 90 billion of rupee liquidity to the banking system," the monetary authority said.

"However, the liquidity deficit has widened thereafter, and the Central Bank continued its open market operations (OMOs) cautiously to manage liquidity on overnight, short term and long term basis as appropriate."

The central bank which was injecting printed money into banks at rates around 8.47 percent in the first week of November, injected new money at rates as low as 8.35 percent after a 50 basis point 'rate hike' to 9.0 percent from 8.50 percent and a cut in the reserve ration which dumped 90 billion rupees of liquidity in to the banking system.

Sri Lanka operates a highly unstable foreign reserve collecting soft-peg with the US dollar, involving a de facto external anchor with a shifting convertibility undertaking.

The regime suddenly shifts to a floating rate with a domestic anchor made up of a wide near-double-digit inflation target with unsterilized excess liquidity collected during the pegging period intact, sending the rupee sliding down forcing currency defence.

The central bank lost control of the peg in the first quarter of 2018, when the economy recovered, as it failed to mop up inflows (sterilize dollar purchases) and injected cash to generate excess liquidity in April.

Though the peg stabilized around July and August after falling sharply, unsterilized excess liquidity was against built up including through rupee dollar swaps, triggering a renewed period of pressure. The rupee has since fallen to 180 to the US dollar.

In November interventions topped 500 million dollars, amid a political crisis, which added to uncertainty.

When a soft-pegged central bank mops up inflows (liquidity from dollar purchases), the peg strengthens by squeezing credit and outflows.

But when it injects cash through open market operations, credit expands and imports grow beyond dollar inflows generating balance of payments pressure and forcing the currency down.

There have been calls to reform the central bank's open market operations to make it more difficult for the central bank to generate monetary instability.

Critics have pointed out that the central bank cannot take the risks it did 15 or 20 years ago because Sri Lanka is now more exposed to international capital markets, and monetary instability is amplified by panicking foreign bond holders and credit downgrades, making it more difficult to recover from such periods.

The full statement is reproduced below:

Monetary Policy Review: No. 8 – 2018

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 27 December 2018, decided to maintain policy interest rates at their current levels. Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 8.00 per cent and 9.00 per cent, respectively. The Board considered current and expected developments in the domestic economy and the domestic financial markets as well as the global economic environment, with the broad aim of stabilising inflation at mid single digit levels in the medium term to enable the economy to achieve its potential growth.

Subpar economic growth continued in the third quarter of 2018 as well

As per the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy recorded a modest real GDP growth of 2.9 per cent, year-on-year, during the third quarter of 2018, compared to the revised growth of 3.6 per cent in the second quarter of 2018. As per the available economic indicators and other economic developments, real GDP growth is likely to be low in the fourth quarter of 2018 as well, before picking up gradually in 2019. The continued low economic growth reemphasises the need for implementing broad based structural reforms without further delay.

Notwithstanding the elevated market interest rates and rupee liquidity deficit, private sector credit growth accelerated

The reduction of the Statutory Reserve Ratio (SRR) at the last monetary policy review in November 2018 released around Rs. 90 billion of rupee liquidity to the banking system. However, the liquidity deficit has widened thereafter, and the Central Bank continued its open market operations (OMOs) cautiously to manage liquidity on overnight, short term and long term basis as appropriate. Given high credit growth and foreign exchange market developments, overnight interest rates in the money market have been maintained close to the upper bound of the policy rate corridor. Other market interest rates remained at elevated levels, both in nominal and real terms.

In spite of the increased cost of funds and tight liquidity conditions, the year-on-year growth of credit to the private sector accelerated since September 2018, partly reflecting the private sector advancing its activities in anticipation of measures by the government and the Central Bank to curb excessive import growth. Nevertheless, with the contraction in net foreign assets of the banking system, the year-on-year growth of broad money (M2b) remained within the expected levels.

Favourable outlook for inflation in the near term

Headline inflation, based on both the National Consumer Price Index (NCPI) and the Colombo Consumer Price Index (CCPI), remained in low single digit levels. Core inflation also remained subdued thus far in 2018. Recent downward adjustments to fuel prices and selected administratively determined prices, as well as the reduction of Special Commodity and telecommunication levies, along with the ongoing recovery in the agriculture sector are expected to impact favourably on inflation in the near term. 

Volatile global commodity prices, possible weather related disruptions to domestic supply chains due to unpredictable weather patterns, and the possible pass-through of the effect of the rupee depreciation in recent months to domestic prices pose risks to the inflation outlook. The current projections show that inflation, on average, will remain below 5 per cent in 2019 and stabilise in the range of 4-6 per cent thereafter with appropriate policy adjustments.

External sector continues to face international and domestic headwinds

The trade deficit widened further in the first ten months of 2018 with the expansion in import expenditure outpacing the growth of export earnings. However, a moderation in import expenditure is expected, in response to the measures adopted to curb imports of motor vehicles and non-essential goods as well as the impact of the depreciation of the rupee.

While earnings from tourism continued to grow, a slowdown in workers’ remittances was observed. In the financial account, both the government securities market and the Colombo Stock Exchange experienced net outflows of foreign investment, although marginal inflows have been observed in December.

The widening trade deficit, tight conditions in the global markets and excessive speculation in the domestic market exerted pressure on the exchange rate, and the Sri Lankan rupee depreciated by 15.9 per cent against the US dollar thus far during 2018 up to 27 December. Meanwhile, gross official reserves amounted to US dollars 7.0 billion at end November 2018, providing an import cover of 3.7 months.

Policy interest rates maintained at current levels

Although inflation remains subdued and economic growth remains below potential, the Monetary Board of the Central Bank was of the view that it is appropriate to continue the current monetary policy stance to stabilise overall economic conditions and domestic financial markets in a context where there has been an uptick in private sector credit as well as continued pressure on external reserves. Accordingly, 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.

Sri Lankan rupee hits record low; foreign outflows weigh

Reuters: ** The Sri Lankan rupee fell to a record low on Thursday amid dollar demand by state banks and continued outflows of foreign funds mainly from government bonds as political uncertainty dented investor sentiment.

** The rupee hit an all-time low of 182.35 the dollar in early trade, surpassing its previous record of 181.85 marked in the prior session. It has weakened about 5 percent since Sri Lanka’s political crisis began on Oct. 26, and lost 18.7 percent so far this year. 

** The rupee ended at 182.10/60 per dollar, compared with 181.80/182.00 in the previous session.

** President Maithripala Sirisena appointed the cabinet of ministers from his rival party last week after he was forced to reinstate Ranil Wickremeinghe as prime minister, 51 days after he was sacked.

** The political crisis was expected to ease, though uneasy relations between the two men could cause fiscal problems, analysts have said. Parliament approved 1.77 trillion rupees ($9.39 billion) to meet four months of expenditures and avert a government shutdown from Jan. 1. 

** The Colombo stock index ended 0.02 percent weaker at 6,018.19 on Thursday. Turnover was 338.1 million rupees, less than half of this year’s daily average of 840 million rupees.

** Foreigners were net sellers of 6.4 million rupees of stocks on Thursday. They have been net sellers of 13.3 billion rupees since the political crisis began. The bond market saw outflows of about 56.7 billion rupees between Oct. 25 and Dec. 19, central bank data showed. 

** Five-year government bond yields have risen 35 basis points since the political crisis began. 

** Credit agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating in early December, citing refinancing risks and an uncertain policy outlook.

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka vehicle registration down in Nov 2018

LBO - Vehicle registration momentum across most categories came down in the month of November relative to October 2018, a new report said.

Data compiled by JB Securities equities research shows total car registrations recorded 3,354 units in Nov down from 5,826 units in Oct but up from 2,400 units 12 months ago.

The measures taken by the fiscal authorities (increase of duty on small cars to a minimum of Rs 1.25 mn on 1 August) and margin requirements on car imports (100% margin from 19 Sep and 200% from 29 Sep) have finally taken effect,  the research firm said.

Brand new car registrations recorded 365 units in November down from 683 units in October and marginally up from 475 units 12 months ago.

Suzuki/Maruti accounted for 187 units of which Wagon R sold by the agents were 131 units. Financing share was 42.2% down from the normal monthly figure of 50-55% indicative of lesser credit financing these vehicles.

The full report is below

Vehicle registration momentum across most categories came down in the month of Nov relative to October. The measures taken by the fiscal authorities (increase of duty on small cars to a minimum of Rs 1.25 mn on 1 August) and margin requirements on car imports (100% margin from 19 Sep and 200% from 29 Sep) have finally taken effect.

• Total car registrations recorded 3,354 units in Nov down from 5,826 units in Oct but up from 2,400 units 12 months ago.
• Brand new car registrations recorded 365 units in Nov down from 683 units in Oct and marginally up from 475 units 12 months ago. Suzuki/Maruti accounted for 187 units of which Wagon R sold by the agents were 131 units. Financing share was 42.2% down from the normal monthly figure of 50-55% indicative of lesser credit financing these vehicles.
• Pre-owned car registrations recorded 2,989 units in Nov significantly down from 5,143 units in Oct but up from 1,925 units 12 months ago. The monthly registration figure is the lowest number for the year, contraction in Wagon R volumes to 665 units from an all time high of 2,846 units in July was the main contributor to the monthly decline. Toyota accounted for 1,544 units followed by Suzuki with 1,041 units. Financing share was 42.6% below the normal monthly average of 50-60% indicative of falling credit funding purchases in this segment.
• Premium branded motor cars recorded 158 units in Nov down from 207 units in Oct. Brand new accounted for a mere 28 units with Mercedes accounting for 11 units (C class 8 units) and BMW 9 units (5-series 4). Preowned accounted for 130 units of which Mercedes accounted for 31 units (C class 27 units), BMW accounted for 54 units (3-series 36 units) and Audi 45 units (A1 45 units, A3 10 units, A4 5 units).

Notable premium cars in Nov were a Porsche Cayenne-S, 3 Jaguar XF/XE and a Mercedes Benz C Coupe. In Oct there were 3 BMW i8s, 1 Jaguar XE, 1 Porsche 718 Boxter and 1 Ferrari 488 Spider.

• SUV and crossover registrations accounted for 1,301 units in Nov down from 1,517 units in Oct but up from 576 units 12 months ago. Brand new vehicles accounted for 397 units – MG 136 units, Peugeot 89 units (3008 68 units), etc. and Pre-owned vehicles accounted for 767 units – Toyota 344 units (CH-R 338 units), Honda 258 units (Vezel 195 units), etc. This segment is continuing to show buoyancy due to a strong performance from Crossovers (see attachment titled ‘Selection of crossovers”) – vehicles with engines less than 1.5L comprise 94.5% of total volumes.
• Electrical car registrations recorded 6 units in Nov down from 5 units in Oct and 5 units 12 months ago. Nissan Leaf accounted for 3 units.
• Hybrid vehicle registrations recorded 1,585 units in Nov significantly down from 2,917 units in Oct and 2,039 units 12 months ago. Motor cars accounted for 1,369 units followed by SUVs accounting for 215 units. Suzuki hybrid cars recorded 948 units in the month down from 2,038 units the previous month and high 3,559 units in July.
• Van registrations recorded 451 units in Nov down from 713 units in Oct and 643 units 12 months ago. Mini vans (< 1,000cc) accounted for 338 units, the balance 113 units were accounted for by mid-size vans. Suzuki Every which is a minivan accounted for 208 units. Financing share was 57.6% down from the normal monthly figure of 65-70%.
• 3-wheelers recorded a low 1,314 registrations in Nov down from 1,932 units the previous month and 2,270 units 12 months ago. Bajaj continues to be the segment leader with a 90.9% share. Financing share was 71.5% in line with previous months.
• 2-wheelers registrations recorded 22,373 units in Nov down from 30,889 units in Oct and 28,334 12 months ago. Scooters accounted for 14,476 units with the balance 7,897 units being motor cycles. Honda continues its dominance in the scooter category with a 60.9% share and an overall segment share of 42% followed distantly by Bajaj, TVS and Yamaha with 14.6%, 15.6% and 16.5% segment share, respectively. Financing share was 73.6% in line with prior months.
• Pickup truck registrations recorded 207 units in Nov up from 146 units the previous months and 175 units previously. Tata recorded 120 units (Xenon 111 units) almost double its normal number claiming a 58% segment share. Financing share was 30.9% below prior month levels of 60% indicative of an institutional purchase of Xenon trucks.
• Mini truck registrations recorded 222 units in Nov down from 359 units in Oct and 334 units 12 months ago. Tata is the category leader with a 86.8% share. Financing share of 85.6% is in line with prior months.
• Light truck registrations recorded 233 units in Nov down from 336 units in Oct and 374 units 12 months ago. Mahindra is the category leader with a 79.1% share. Financing share was 85.8% in line with prior months.
• Medium truck (between 2 MT and 5 MT) registrations recorded 240 units in Nov down from 314 units in Oct and 355 units 12 months ago. Unlike in other truck categories in this category preowned units make up 47.5% of the total. Isuzu is the category leader with a 49.2% share. Tipper registrations recorded 29 units in line with previous months. Financing share was 89.6% in line with prior months.
• Heavy truck registrations recorded 152 units in Nov down from 167 units in Oct and 209 units 12 months ago. Tata is the category leader with a 45% share followed by Lanka Ashok Leyland with a 36.4%. Tipper registrations recorded 25 units significantly down from prior months. Financing share was 87.5% in line with prior months.
• Bus registrations recorded 130 units in Nov down from 201 units in Oct and 381 units 12 months ago. Lanka Ashok Leyland is the segment leader with a 45% share. Financing share was 76.9% lower than the normal monthly rate of 90% indicative of an institutional purchase.

Leapfrog group buys Sri Lanka Soflogic Life Insurance stake from FMO

ECONOMYNEXT - A 19-percent stake in Sri Lanka's Softlogic Life Insurance has been sold by the Netherlands-based FMO to the Leapfrog Investments group, which has a focus on Asia and Africa.

"This investment reveals our positive view of Sri Lanka's long-term trajectory, and its financial services industry," Leapfrog Chie Executive Andrew Kuper said in a statement.

Softlogic Chairman Ashok Pathirage said exiting partner FMO helped strenghten the firm.

He hoped the investment in his insurance unit woudl be the first of many investments in Sri Lanka.

The stake changed hands in two blocks, one of 35.6 million shares at 30.80 rupees each and the other of 35.6 million shares at 30.70 rupees each, down 19-20 percent from the previous, opening trade.

The total value of the 71.2 million shares traded was 2.18 billion rupees. The transaction amounted to a 19 percent stake in Softlogic Life Insurance, formerly Asian Alliance Insurance.

Sri Lanka’s Commercial Bank to raise Rs7.5bn through debenture issue

ECONOMYNEXT – Sri Lanka’s Commercial Bank of Ceylon said it plans to raise 7.5 billion rupees through a new debenture issue with an option to double the amount in the event of an oversubscription.

A statement said the bank will issue 75 million listed, unsecured, rated, redeemable subordinated Basel III compliant debentures at 100 rupees each with a non-viability conversion feature,making them hybrid instruments convertible into equity.
.
The debentures, which will have a minimum tenure of five years and maximum tenure of 10 year, are subject to shareholder and regulatory aproval.

Sri Lanka's Lighthouse Hotel in Rs450mn upgrade

ECONOMYNEXT – Sri Lanka’s Lighthouse Hotel said it will invest 450 million rupees to refurbish and upgrade rooms, public and service areas and plant and equipment next year.

A stock exchange filing said 63 out of 85 rooms of the Jetwing Lighthouse on the south coast will be upgraded from May to July 2019.

The remaining 22 rooms will be operational during the period, usually considered the ‘off-season’ when tourist arrivals fall.

The hotel will be fully operational by August 2019.

Sri Lankan rupee hits record low on foreign outflows

Reuters: ** The Sri Lankan rupee fell to a record low on Wednesday due to continued outflows of foreign funds mainly from government bonds as political uncertainty dented investor sentiment.

** The rupee hit an all-time low of 181.85 to the dollar in early trade, surpassing its previous record of 181.67 marked in the previous session. It has weakened about 4.8 percent since Sri Lanka’s political crisis began on Oct. 26, and lost 18.4 percent so far this year. 

** The rupee ended at 181.80/182.00 per dollar, compared with 181.50/70 in the previous session.

** President Maithripala Sirisena appointed a 30-member cabinet last week after he was forced to reinstate Ranil Wickremeinghe as prime minister, 51 days after he was sacked.

** The political crisis was expected to ease, though uneasy relations between the two men could cause fiscal problems, analysts have said. Parliament approved 1.77 trillion rupees ($9.39 billion) to meet four months of expenditures and avert a government shutdown from Jan. 1. 

** The Colombo stock index ended 0.09 percent weaker at 6,019.62 on Wednesday. Turnover was 670.9 million rupees, below this year’s daily average of 840 million rupees.

** Foreigners were net buyers of 344.7 million rupees ($1.9 million) of stocks on Wednesday. They have been net sellers of 13.3 billion rupees since the political crisis began. The bond market saw outflows of about 56.7 billion rupees between Oct. 25 and Dec. 19, central bank data showed. 

** Five-year government bond yields have risen 25 basis points since the political crisis began. 

** Credit agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating in early December, citing refinancing risks and an uncertain policy outlook.

($1 = 181.4000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; editing by John Stonestreet)

Sri Lankan rupee hits record low as foreign outflows continue

Reuters: ** The Sri Lankan rupee fell to a record low on Monday due to continued outflows of foreign funds from bonds and stocks as political uncertainty dented investor sentiment.

** The rupee hit an all-time low of 181.67 to the dollar in early trade, surpassing its previous record of 181.25 marked in the previous session. It has weakened about 4.7 percent since the political crisis began. The currency dropped 1.8 percent in November, and has lost 18.2 percent this year. 

** Sri Lankan President Maithripala Sirisena appointed a 30-member cabinet on Thursday, retaining control over the police while they investigate an alleged plot to kill him that triggered a row with the premier and led to a lengthy political crisis.

** The political crisis was expected to ease after Sirisena reinstated Ranil Wickremesinghe, whom he had ousted in October. The country plunged into a 51-day crisis following the ouster. However, a delay in appointing cabinet ministers dented sentiment, dealers said.

** Political paralysis remained the main concern for investors since Sirisena abruptly sacked Wickremesinghe and replaced him with Mahinda Rajapaksa, who failed to win a parliamentary majority and resigned on Dec. 15 as a government shutdown loomed.

** Sri Lanka’s parliament passed a 1.77 trillion rupee ($9.39 billion) vote on account on Friday to meet the expenditures of first four months to avert a government shutdown from Jan. 1.

** Wickremesinghe was sworn in as Sri Lanka’s prime minister on Dec. 16, making a remarkable comeback weeks after being ousted by Sirisena under controversial circumstances. 

** The Sri Lankan rupee strengthened early last week, while bond yields dropped as the political crisis appeared to ebb, but investors took a cautious stance to observe whether Sirisena and Wickremesinghe could work well together.

** Foreigners were net sellers of 5.6 million rupees ($30,888.03) worth of stocks on Monday. They have been net sellers of 13.7 billion rupees since the political crisis began on Oct. 26. The bond market saw outflows of about 56.7 billion rupees between Oct. 25 and Dec. 19, central bank data showed. 

** The rupee ended at 181.50/70 per dollar, compared with 181.30/50 in the previous session. 

** Credit rating agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating early December, citing refinancing risks and an uncertain policy outlook, after Sirisena’s sacking of his prime minister in October triggered the political crisis.


** This year, there have been 23.1 billion rupees of outflows from stocks and 148.9 billion rupees from government securities, the latest data from the bourse and central bank showed.

** Moody’s downgraded Sri Lanka on Nov. 20 for the first time since it started rating the country in 2010.

** Five-year government bond yields have risen 22 basis points since the political crisis began, while yields on Sri Lanka’s dollar bonds due in 2022, which have risen around one percentage point to 8.0 percent through Dec. 14, fell 0.42 percent to 7.6 percent on Monday.

** The Colombo stock index ended 0.32 percent firmer at 6,025.12 on Monday. Turnover was 326.2 million rupees, well below this year’s daily average of 841 million rupees.

($1 = 181.3000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal, Editing by Subhranshu Sahu)

Softlogic Life Insurance, Lanka IOC in S&P Sri Lanka 20 Index

ECONOMYNEXT – The Colombo Stock Exchange (CSE) has included Softlogic Life Insurance and Lanka Indian Oil Corporation in the S&P Sri Lanka 20 index, which tracks the top 20 largest and most liquid stocks, in its latest revision.

Other companies included in the semiannual rebalancing of the index are Ceylon Tobacco Co., Nations Trust Bank and Union Bank of Colombo, , the CSE said in a statement.

They replace Ceylinco Insurance, Hemas Holdings, LOLC Holdings, Melstacorp and Vallibel One at the 2018 year-end index rebalance.

The exclusions and inclusions were announced by S&P Dow Jones Indices, effective from 24 December 2018 (after the market close of 21 December 2018).

The S&P SL 20 index includes the 20 largest companies by total market capitalization listed on the CSE that meet minimum size, liquidity and financial viability thresholds.

The constituents are weighted by float-adjusted market capitalization, subject to a single stock cap of 15%, which is employed to reduce single stock concentration.

The CSE said the S&P SL 20 index has been designed in accordance with international practices and standards.

Effective from 24 December 2018 the stocks in the S&P Sri Lanka 20 in alphabetical order are as follows.

No. COMPANY TICKER
1 Access Engineering PLC AEL.N0000
2 Aitken Spence PLC SPEN.N0000
3 Ceylon Tobacco Co. PLC CTC.N0000
4 Chevron Lubricants Lanka PLC LLUB.N0000
5 Commercial Bank of Ceylon PLC COMB.N0000 COMB.X0000
6 DFCC Bank PLC DFCC.N0000
7 Dialog Axiata PLC DIAL.N0000
8 Hatton National Bank PLC HNB.N0000HNB.X0000
9 John Keells Holdings PLC JKH.N0000
10 Lanka IOC PLC LIOC.N0000
11 National Development Bank PLC NDB.N0000
12 Nations Trust Bank PLC NTB.N0000
13 People's Leasing & Finance PLC PLC.N0000
14 Richard Pieris & Company PLC RICH.N0000
15 Sampath Bank PLC SAMP.N0000
16 Softlogic Holdings PLC SHL.N0000
17 Softlogic Life Insurance PLC AAIC.N0000
18 Teejay Lanka PLC TJL.N0000
19 Tokyo Cement Company (Lanka) TKYO.N0000TKYO.X0000
20 Union Bank of Colombo PLC UBC.N0000

Sri Lankan rupee hits record low on foreign outflows

Reuters: ** The Sri Lankan rupee touched a record low in early trade on Thursday and ended weaker amid pressure on the currency due to foreign outflows from bonds and stocks as uncertainty from a political crisis dented sentiment.

**Sri Lankan President Maithripala Sirisena appointed a 30-member cabinet on Thursday, retaining control over the police while they investigate an alleged plot to kill him that triggered a row with the premier and led to a lengthy political crisis.

** The political crisis was expected to ease after President Maithripala Sirisena reinstated Ranil Wickremesinghe, whom he had ousted in October. The country plunged into a 51-day crisis following the ouster. However, a delay in appointing cabinet ministers dented sentiment, dealers said.

** Political paralysis remained the main concern for investors since Sirisena abruptly sacked Wickremesinghe and replaced him with Mahinda Rajapaksa, who failed to win a parliamentary majority and resigned on Saturday as a government shutdown loomed.

** Wickremesinghe was sworn in as Sri Lanka’s prime minister on Sunday, making a remarkable comeback weeks after being ousted by President Sirisena under controversial circumstances. 

** The Sri Lankan rupee strengthened in early trade on Monday, while bond yields dropped as a seven-week political crisis appeared to ebb, but investors took a cautious stance to observe whether Sirisena and Wickremesinghe could work well together.

** Foreigners were net sellers of a net 1.8 billion rupees ($9.96 million) worth of stocks on Thursday. They have been net sellers of 13.5 billion rupees since the political crisis began on Oct. 26. The bond market saw outflows of about 56 billion rupees between Oct. 25 and Dec. 14, central bank data showed. 

** The rupee ended at 181.10/20 per dollar, compared with 180.50/70 in the previous session. 

** Credit rating agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating early December, citing refinancing risks and an uncertain policy outlook, after Sirisena’s sacking of his prime minister in October triggered the political crisis.

** This year, there have been 22.9 billion rupees of outflows from stocks and 148.2 billion rupees from government securities, the latest data from the bourse and central bank showed.

** The rupee had touched a record low of 181.00 to the dollar in the early trade on Thursday. It has weakened about 4.1 percent since the political crisis began. The currency dropped 1.8 percent in November, and has lost 17.8 percent this year. 

** Moody’s downgraded Sri Lanka on Nov. 20 for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances.

** Five-year government bond yields have risen 45 basis points since the political crisis began, while yields on Sri Lanka’s dollar bonds due in 2022, which have risen around a percentage point to 8.0 percent through Friday, fell 0.30 percent to 7.7 percent on Thursday.

** The Colombo stock index ended 0.57 percent weaker at 6,016.36 on Thursday. Turnover was 3.3 billion rupees, four times this year’s daily average of 844.7 million rupees.

($1 = 180.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Sunil Nair)

Sri Lankan rupee ends weaker as foreign outflows hurt

Reuters: ** The Sri Lankan rupee ended weaker on Wednesday amid pressure on the currency due to foreign outflows from bonds and stocks as uncertainty from a political crisis dented sentiment.

** The political crisis was expected to ease after President Maithripala Sirisena reinstated Ranil Wickremesinghe, whom he had ousted in October. The country plunged into a 51-day crisis following the ouster. However, delay in appointing cabinet ministers dented sentiment, dealers said.

** Political paralysis remained the main concern for investors since Sirisena abruptly sacked Wickremesinghe and replaced him with Mahinda Rajapaksa, who failed to win a parliamentary majority and resigned on Saturday as a government shutdown loomed.

** Wickremesinghe sworn in as Sri Lanka’s prime minister on Sunday, making a remarkable comeback weeks after being ousted by President Sirisena under controversial circumstances. 

** The Sri Lankan rupee strengthened in early trade on Monday, while bond yields dropped as a seven-week political crisis appeared to ebb, but investors took a cautious stance to observe whether Sirisena and Wickremesinghe could work well together.

** Foreigners were net sellers of a net 333.5 million rupees ($1.85 million) worth of stocks on Wednesday. They have been net sellers of 11.7 billion rupees since the political crisis began on Oct. 26. The bond market saw outflows of about 56 billion rupees between Oct. 25 and Dec. 14, central bank data showed. 

** The rupee ended at 180.50/70 per dollar, compared with 180.10/30 in the previous session. 

** Credit rating agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating early December, citing refinancing risks and an uncertain policy outlook, after Sirisena’s sacking of his prime minister in October triggered the political crisis.

** This year, there have been 21.1 billion rupees of outflows from stocks and 148.2 billion rupees from government securities, the latest data from the bourse and central bank showed.

** The rupee had touched a record low of 180.85 to the dollar on Nov. 28. It has weakened about 4.1 percent since the political crisis began. The currency dropped 1.8 percent in November, and has lost 17.5 percent this year. 

** Moody’s downgraded Sri Lanka on Nov. 20 for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances.

** Five-year government bond yields have risen 55 basis points since the political crisis began, while yields on Sri Lanka’s dollar bonds due in 2022, which have risen around a percentage point to 8.0 percent through Friday, fell 0.35 percent to 7.7 percent on Wednesday.

** The Colombo stock index ended up 0.06 percent at 6,050.95 on Wednesday. Turnover was 3.6 billion rupees, highest since Nov. 13 and more than four times of this year’s daily average of 834.1 million rupees.

($1 = 180.2000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez, Editing by Sherry Jacob-Phillips)

Sri Lankan rupee ends weaker on foreign outflows

Reuters: ** The Sri Lankan rupee ended weaker on Tuesday amid pressure on the currency due to foreign outflows from bonds and stocks as uncertainty from a lingering political crisis weighed on sentiment.

** The political crisis was expected to ease after President Maitthripala Sirisena reinstated Ranil Wickremesinghe, whom he ousted in October and plunged the country into a 51-day crisis.

** Political paralysis remained the main concern for investors since Sirisena abruptly sacked Wickremesinghe and replaced him with Mahinda Rajapaksa, who failed to win a parliamentary majority and resigned on Saturday as a government shutdown loomed.

** Wickremesinghe sworn in as Sri Lanka’s prime minister on Sunday, making a remarkable comeback weeks after being ousted by President Sirisena under controversial circumstances. 

** The Sri Lankan rupee strengthened in early trade on Monday, while bond yields dropped as a seven-week political crisis appeared to ebb, but investors took a cautious stance to observe whether Sirisena and Wickremesinghe could work well together.

** Foreigners were net sellers of a net 785 million rupees ($4.37 million) worth of stocks on Tuesday. They have been net sellers of 11.4 billion rupees since the political crisis began on Oct. 26. The bond market saw outflows of about 56 billion rupees between Oct. 25 and Dec. 14, central bank data showed. 

** The rupee ended at 180.10/30 per dollar, compared with 179.90/180.00 in the previous session. 

** Credit rating agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating early December, citing refinancing risks and an uncertain policy outlook, after Sirisena’s sacking of his prime minister in October triggered the political crisis.

** This year, there have been 20.8 billion rupees of outflows from stocks and 148.2 billion rupees from government securities, the latest data from the bourse and central bank showed.

** The rupee hit a record low of 180.85 to the dollar on Nov. 28. It has weakened about 3.8 percent since the political crisis began. The currency dropped 1.8 percent in November, and has lost 17.1 percent this year. 

** Moody’s downgraded Sri Lanka on Nov. 20 for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances.

** Five-year government bond yields have risen 50 basis points since the political crisis began, while yields on Sri Lanka’s dollar bonds due in 2022 , which have risen around a percentage point to 8.0 percent through Friday, fell 0.4 percent to 7.6 percent on Tuesday.

** The Colombo stock index ended up 0.33 percent at 6,047.48 on Tuesday. Turnover was 979.2 million rupees, more than this year’s daily average of 822.3 million rupees.

($1 = 179.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez, Editing by Sherry Jacob-Phillips)

Sri Lankan rupee ends steady as political crisis nears end

Wickremesinghe sworn in as Sri Lanka's prime minister on Sunday

COLOMBO - The Sri Lankan rupee ended steady on Monday as political crisis in the South Asian island nation showed signs of easing after President Maithripala Sirisena reinstated the premier he had initially sacked in a widely criticised move, but foreign outflows from stocks weighed on sentiment.

Political paralysis remained the main concern for investors since Sirisena abruptly sacked Ranil Wickremesinghe from the prime minister's post and replaced him with Mahinda Rajapaksa, who failed to win a parliamentary majority and resigned on Saturday as a government shutdown loomed.

Wickremesinghe sworn in as Sri Lanka's prime minister on Sunday, making a remarkable comeback weeks after being ousted by President Sirisena under controversial circumstances.

The Sri Lankan rupee strengthened in early trade on Monday, while bond yields dropped as a seven-week political crisis appeared to ebb, but investors took a cautious stance to observe whether Sirisena and Wickremesinghe could work together.

Rajapaksa resigned soon after taking office and giving the country's president a political space to prevent an imminent government shutdown.

On Thursday, the Supreme Court ruled that President Sirisena's decision to dissolve parliament ahead of its term was unconstitutional, in a setback for the embattled leader in his dispute with an ousted prime minister.

If a budget is not approved by the parliament this month, the government might face a shutdown, government officials told Reuters.

Foreigners were net sellers of a net 18.1 million rupees ($100,723) worth of stocks on Monday. They have been net sellers of 10.6 billion rupees since the political crisis began on Oct. 26. The bond market saw outflows of about 56 billion rupees between Oct. 25 and Dec. 14, central bank data showed.

The rupee which traded slightly firmer in the early trade ended steady at 179.90/180.00 per dollar, compared with 179.90/180.10 the previous session.

Credit rating agencies Fitch and S&P downgraded Sri Lanka's sovereign rating last week, citing refinancing risks and an uncertain policy outlook, after Sirisena's sacking of his prime minister in October triggered the political crisis.

This year, there have been 20 billion rupees of outflows from stocks and 148.2 billion rupees from government securities, the latest data from the bourse and central bank showed.

The rupee hit a record low of 180.85 to the dollar on Nov. 28. It has weakened about 3.8 percent since the political crisis began. The currency dropped 1.8 percent in November, and has lost 17.1 percent this year.

Moody's downgraded Sri Lanka on Nov. 20 for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances.

Five-year government bond yields have risen 60 basis points since the political crisis began, while yields on Sri Lanka's dollar bonds due in have risen around a percentage point to 8.0 percent through Friday, fell 0.5 percent to 7.5 percent on Monday.

The Colombo stock index ended up 0.08 percent at 6,067.63 on Monday. Turnover was 133.8 million rupees, well below this year's daily average of 821.6 million rupees.

($1 = 179.7000 Sri Lankan rupees)

(Reporting by Ranga Sirilal and Shihar Aneez, Editing by Sherry Jacob-Phillips) 

Sri Lankan rupee ends lower on foreign sell-off on uncertainty

Reuters: ** The Sri Lankan rupee ended weaker on Friday amid pressure on the currency due to foreign outflows from bonds and stocks as uncertainty from a lingering political crisis weighed on sentiment.

** On Thursday, the Supreme Court ruled that President Maithripala Sirisena’s decision to dissolve parliament ahead of its term was unconstitutional, in a setback for the embattled leader in his dispute with an ousted prime minister.

** If a budget is not approved by parliament this month, the government might face a shutdown, government officials have told Reuters

** Foreigners were net buyers for the first time in 14 sessions on Friday, buying a net 56.6 million rupees ($314,969) worth of stocks. But they have been net sellers of 10.6 billion rupees since the political crisis began on Oct. 26. The bond market saw outflows of about 56 billion rupees between Oct. 25 and Dec. 14, central bank data showed. 

** The rupee ended at 179.90/180.10 per dollar, compared with 179.55/75 the previous session. 

** Credit rating agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating last week, citing refinancing risks and an uncertain policy outlook, after Sirisena’s sacking of his prime minister in October triggered the political crisis.

** This year, there have been 20 billion rupees of outflows from stocks and 148.2 billion rupees from government securities, the latest data from the bourse and central bank showed.

** The rupee hit a record low of 180.85 to the dollar on Nov. 28. It has weakened about 3.8 percent since the political crisis began. The currency fell 1.8 percent in November. It has lost 17.1 percent this year. 

** Moody’s downgraded Sri Lanka on Nov. 20 for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances. 

** The political paralysis remains the main concern for investors since Sirisena abruptly sacked Ranil Wickremesinghe as the prime minister and replaced him with Mahinda Rajapaksa, who was later voted out twice in parliament through confidence votes.

** Five-year government bond yields have risen 60 basis points since the political crisis began, while yields on Sri Lanka’s dollar bonds due in 2022 have risen around a percentage point to 8.21 percent since then.

** The Colombo stock index ended 0.04 percent up at 6,062.55 on Friday. Turnover was 296.8 million rupees, well below this year’s daily average of 824.6 million rupees.

($1 = 179.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez)

Sri Lankan rupee ends lower on foreign sell-off ahead of key ruling

Reuters: ** The Sri Lankan rupee ended a tad weaker on Thursday in dull trade amid pressure on the currency due to foreign outflows from bonds and stocks as a lingering political crisis weighed on sentiment ahead of a key ruling by the island nation’s Supreme Court.

** After the markets closed, the Supreme Court ruled that Sri Lankan President Maithripala Sirisena’s decision to dissolve parliament ahead of its term is unconstitutional, in a setback for the embattled leader in his dispute with an ousted prime minister.

** Foreigners sold a net 351.2 million rupees ($1.96 million) worth of stocks on Thursday, and they have been net sellers of 10.6 billion rupees since the political crisis began on Oct. 26. The bond market saw outflows of about 51.2 billion rupees between Oct. 25 and Dec. 5, central bank data showed. 

** The rupee ended at 179.55/75 per dollar on Thursday, compared with 179.50/60 in the previous session. 

** Credit rating agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating last week, citing refinancing risks and an uncertain policy outlook, after Sirisena’s sacking of his prime minister in October triggered the political crisis.

** This year, there have been 20 billion rupees of outflows from stocks and 143.4 billion rupees from government securities, the latest data from the bourse and central bank data showed.

** The rupee hit a record low of 180.85 per dollar on Nov. 28. It has weakened about 3.6 percent since the political crisis began. The currency fell 1.8 percent in November and dived 17 percent so far this year. 

** Moody’s downgraded Sri Lanka on Nov. 20 for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances. 

** The political paralysis remains the main concern for investors since Sirisena sacked Ranil Wickremesinghe as the prime minister and replaced him with Mahinda Rajapaksa, who was later voted out twice in parliament through confidence votes. A court has barred Rajapaksa and his cabinet from functioning in their positions after they refused to step down despite being ousted via two confidence votes.

** Five-year government bond yields have risen 60 basis points since the political crisis began on Oct. 26, while yields on Sri Lanka’s dollar bonds due in 2022 have risen around a percentage point to 8.21 percent since then.

** The Colombo stock index ended 0.41 percent higher at 6,060.20 on Wednesday. The turnover was 675.4 million rupees, less than this year’s daily average of 826.9 million rupees.

($1 = 179.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez)

Sri Lankan rupee ends lower as foreign sell-off continues

Reuters: ** The Sri Lankan rupee ended weaker on Wednesday, as foreign investors continued to exit from bonds and stocks as a lingering political crisis weighed on sentiment ahead of a key ruling by the island nation’s Supreme Court.

** The ruling, expected this week, will determine if the current parliament can continue the next year or whether an election should be held. The decision could help end the political crisis. 

** The Sri Lanka parliament on Wednesday passed a confidence vote to back controversially ousted prime minister, expecting the country’s president to reinstate him to prevent the ongoing political crisis and a possible government shut down.

** Foreigners sold a net 272.2 million rupees ($1.52 million) worth of stocks on Wednesday, and they have been net sellers of 10.3 billion rupees since the political crisis began on Oct. 26. The bond market saw outflows of about 51.2 billion rupees between Oct. 25 and Dec. 5, central bank data showed. 

** Foreign investors sold a net 17 billion rupees ($95.3 million) worth of government securities in the week ended Dec. 5, the highest weekly net outflow since the third week of February 2017. The stock market had net foreign outflows to the tune of 929.1 million rupees last week.

** The rupee ended at 179.50/60 per dollar on Wednesday, compared with 179.20/40 in the previous session. 

** Credit rating agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating last week, citing refinancing risks and an uncertain policy outlook, after President Maithripala Sirisena’s sacking of his prime minister in October triggered the political crisis.

** On Dec 5, Fitch downgraded Sri Lanka’s financial institutions and Sri Lanka Telecom, citing the sovereign downgrade.

** This year, there have been 19.7 billion rupees of outflows from stocks and 143.4 billion rupees from government securities, the latest data from the bourse and central bank data showed.

** The rupee hit a record low of 180.85 per dollar on Nov. 28. It has weakened about 3.6 percent since the political crisis began. The currency fell 1.8 percent in November and dived 17 percent so far this year. 

** Moody’s downgraded Sri Lanka on Nov. 20 for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances. 

** The political paralysis remains the main concern for investors. While Mahinda Rajapaksa and President Sirisena have failed to win support in parliament for their new government, the deposed prime minister Ranil Wickremesinghe’s coalition, which claims it does have majority support in parliament, has not been allowed to try to form a government.

** A lower court has stayed Rajapaksa and his cabinet functioning in their positions after they refused to step down despite ousted via two confidence votes.

** The central bank on Nov. 14 unexpectedly raised its main interest rates to defend the rupee, which has faltered as foreign capital outflows pick up due to the domestic crisis as well as rising U.S. interest rates.

** Five-year government bond yields have risen 50 basis points since the political crisis unfolded on Oct. 26, while yields on Sri Lanka’s dollar bonds due in 2022 have risen by more than a percentage point to 8.43 percent since then.

** The Colombo stock index ended 0.15 percent higher at 6,035.27 on Wednesday; but has declined 5.2 percent so far this year. 

** Stock market turnover was 904.4 million rupees, more than this year’s daily average of 827.6 million rupees.

($1 = 179.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez, Editing by Sherry Jacob-Phillips)

Sri Lankan rupee, stocks slide as political crisis spurs outflows

Reuters: ** The Sri Lankan rupee ended weaker on Tuesday, as foreign investors continued to exit from bonds and stocks as a lingering political crisis weighed on market sentiment ahead of a key ruling by the island nation’s Supreme Court.

** The ruling, expected this week, will determine if the current parliament can continue in the next year or an election should be held. The decision could help end the political crisis.

** Foreigners sold a net 165.7 million rupees ($928,812) worth of stocks on Tuesday, and they have been net sellers of 10 billion rupees since the political crisis began on Oct. 26. The bond market saw outflows of about 51.2 billion rupees between Oct. 25 and Dec. 5, central bank data showed. 

** Foreign investors sold a net 17 billion rupees ($95.3 million) worth of government securities in the week ended Dec. 5, the highest weekly net outflow since the third week of February 2017. The stock market had net foreign outflows to the tune of 929.1 million rupees last week.

** The rupee ended at 179.20/40 per dollar on Tuesday, compared with 179.00/20 in the previous session. 

** Credit rating agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating last week, citing refinancing risks and an uncertain policy outlook, after President Maithripala Sirisena’s sacking of his prime minister in October triggered the political crisis.

** On Wednesday, Fitch downgraded Sri Lanka’s financial institutions and Sri Lanka Telecom, citing the sovereign downgrade.

** This year, there have been 19 billion rupees of outflows from stocks and 143.4 billion rupees from government securities, the latest data from the bourse and central bank data showed.

** The rupee hit a record low of 180.85 per dollar on Nov. 28, surpassing its previous low of 180.50 hit the previous day. It has weakened about 3.3 percent since the political crisis began. The currency fell 1.8 percent in November and has slid 16.5 percent so far this year. 

** Moody’s downgraded Sri Lanka on Nov. 20 for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances. 

** The political paralysis remains the main concern for investors. While Mahinda Rajapaksa and President Sirisena have failed to win support in parliament for their new government, the deposed prime minister Ranil Wickremesinghe’s coalition, which claims it does have majority support in parliament, has not been allowed to try to form a government.

** A lower court has stayed Rajapaksa and his cabinet functioning in their positions after they refused to step down despite ousted via two confidence votes.

** The central bank on Nov. 14 unexpectedly raised its main interest rates to defend the rupee, which has faltered as foreign capital outflows pick up due to the domestic crisis as well as rising U.S. interest rates.


** Five-year government bond yields have risen 40 basis points since the political crisis unfolded on Oct. 26, while yields on Sri Lanka’s dollar bonds due in 2022 have risen by more than a percentage point to 8.31 percent since then.

** The Colombo stock index fell 0.29 percent to 6,026.26 on Tuesday. It rose 0.83 percent last week after a 1.5 percent rise in the previous week. It has declined 5.4 percent so far this year. 

** Stock market turnover was 689.3 million rupees ($3.86 million), less than this year’s daily average of 827.3 million rupees.

($1 = 178.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sai Sachin Ravikumar)

Sri Lanka bourse asked to mandate electronic dividend payments

ECONOMYNEXT - Sri Lanka's central bank has called upon the Colombo Stock Exchange to ask listed companies to pay dividends through electronic means and stop issuing paper cheques, an official said.

"We encourage and request the CSE to consider the possibility of mandating use of electronic payment methods currently available," Central Bank Governor Indrajit Coomaraswamy told an Asia-Pacific forum of central depositories in Colombo.

Coomaraswamy said a committee set up to find ways to reduce physical cheque payments found that dividend payments by listed firms made up a large volume of cheques still issued in the country.

Some were for very small amounts, he said.

Coomaraswamy said the central bank was setting up a central counterparty and fully electronic trading platform for government securities.

There is a central depository for government securities, but trading was also done manually.

Sri Lanka's Colombo Stock Exchange set up a central depository and automated trading platform in 1991, in a first for the region at the time.

Fitch downgrades Sri Lanka Insurance Corp to IFS 'B'

ECONOMYNEXT – Fitch Ratings said it has downgraded the Insurer Financial Strength (IFS) rating of Sri Lanka Insurance Corporation (SLIC) to 'B' from 'B+' with a stable outlook.

A statement said the rating action follows the downgrade of Sri Lanka's Long-Term Local-Currency Issuer Default Rating (IDR) to 'B' from 'B+'. SLIC's IFS rating is constrained by Sri Lanka's Long-Term Local-Currency IDR.

The full statement follows:

Fitch Ratings-Hong Kong-05 December 2018: Fitch Ratings has downgraded the Insurer Financial Strength (IFS) rating of Sri Lanka Insurance Corporation (SLIC) to 'B' from 'B+'. The Outlook is Stable.

The rating action follows the downgrade of Sri Lanka's Long-Term Local-Currency Issuer Default Rating (IDR) to 'B' from 'B+' (see "Fitch Downgrades Sri Lanka to 'B'; Outlook Stable," dated 3 December 2018 on www.fitchratings.com). SLIC's IFS rating is constrained by Sri Lanka's Long-Term Local-Currency IDR.

The 'AA+(lka)' National IFS rating on SLIC was not covered in this review.

KEY RATING DRIVERS

SLIC's IFS rating is constrained by the Long-Term Local-Currency IDR on the sovereign as a result of the insurer's concentration of operations in Sri Lanka as well as its fairly sizeable government debt holdings. Fitch believes the higher sovereign risk will also undermine the operating environment for domestic insurers.

SLIC's rating reflects the company's favourable domestic business profile as well as good financial performance and capital position. These strengths are partially offset by significant investments in sovereign-related securities, non-core subsidiaries and high exposure to equities in its investment portfolio.

RATING SENSITIVITIES

Further downgrade of Sri Lanka's ratings will lead to a downgrade of SLIC's Insurer Financial Strength rating.

The IFS rating may also be downgraded if there is:

- significant weakening in SLIC's market position

- deterioration in the non-life combined ratio to well above 100% for a sustained period (2017: 95%)

- weakening in SLIC's importance to the government, increased state pressure for higher dividend pay-outs that weakens capitalisation or a significant increase in non-core investments.

Sri Lanka's NSB, PLC downgraded to 'B' on political crisis, falling rupee

ECONOMYNEXT - Sri Lanka's state-run National Savings Bank and People's Leasing has been downgraded to 'B' from 'B+' by Standard and Poor's, a rating agency due to an ongoing political crisis triggered after Mahinda Rajapaksa was appointed Prime Minister which had pushed up yield on bonds and a weak rupee.

"We lowered the long-term issuer credit rating on NSB and PLC to reflect S&P Global Ratings' view that the Sri Lankan banking sector is facing escalated stress following political turmoil, slowdown in pace of reforms, and slower economic growth than we expected," Standard and Poor's said

"The downgrade also factors in weakening of the sovereign's external position given that weak rupee and rising bond yields have reduced the government's ability to access international capital markets.

"We also believe that the Sri Lankan government no longer has the financial ability to provide extraordinary support to its banking system in a stress scenario."

The bank downgrade comes in the wake of a cut in Sri Lanka's sovereign rating to 'B' from 'B+' on the ongoing political crisis.

S&P kept at 'B' rating on privately owned DFCC Bank unchanged.

The full statement is reproduced below:

National Savings Bank, People's Leasing Downgraded To Reflect Heightened Economic Risk

- We have lowered our long-term sovereign credit rating on Sri Lanka by one= notch to 'B', reflecting reduced prospects of reform under the fractious political environment, which we expect to be protracted.

The country's external financing conditions has also deteriorated as a weak rupee and high yields constrain the government's access to international capital markets.

- In our view, a slow economy, fractious political environment, and the sovereign's weakened external position have led to heightened economic risk for Sri Lankan financial institutions.

- We are lowering the long-term issuer credit rating on NSB and PLC to 'B' from 'B+'.

-At the same time, we are affirming the long-term issuer credit rating on DFCC Bank at 'B'. We are also affirming the 'B' short-term ratings on the three Sri Lankan financial institutions.

- The outlook on the long-term rating for all these entities are stable, reflecting the stable outlook on the sovereign.

SINGAPORE (S&P Global Ratings) Dec. 4, 2018--S&P Global Ratings said today that it had lowered its long-term issuer credit rating on National Savings Bank (NSB) and People's Leasing & Finance PLC (PLC) to 'B' from 'B+'. At the same time, we affirmed the long-term issuer credit rating on DFCC Bank at 'B'. The outlooks on the long-term ratings are stable. In addition, we affirmed our 'B' short-term issuer credit rating on all the three entities.

We also lowered the issue rating on NSB to 'B' from 'B+'; PLC has no outstanding debt securities.

We lowered the long-term issuer credit rating on NSB and PLC to reflect S&P Global Ratings' view that the Sri Lankan banking sector is facing escalated stress following political turmoil, slowdown in pace of reforms, and slower economic growth than we expected. We affirmed the ratings on DFCC despite the higher risk from the operating environment because the bank's capital assessment already captures these risks at the current rating level.

We lowered the sovereign rating on Sri Lanka based on our assessment that the current political standoff has weakened the sovereign's external financing conditions and reduced the likelihood that further reforms will improve Sri Lanka's macroeconomic fundamentals and institutionalize sustainable policy frameworks over the next 12-18 months.

The downgrade also factors in weakening of the sovereign's external position given that weak rupee and rising bond yields have reduced the government's ability to access international capital markets. We also believe that the Sri Lankan government no longer has the financial ability to provide extraordinary support to its banking system in a stress scenario.

We consider it unlikely that Sri Lankan financial institutions would be immune to rising credit pressure on the sovereign and the broader operating environment. In our view, this weakened external position of the sovereign has heightened imbalances in the operating environment for the banks.

We expect the external financing pressure faced by the sovereign to hurt the broad economy, including the banking system. This accentuates the economic risk for banks in Sri Lanka. Continued high loan growth at about 16% (annualized) for first half of 2018, despite the economy slowing down sharply to 3.3% (in 2017), adds to the imbalance.

We have witnessed increasing credit stress for banks in Sri Lanka, partly due to lower-than-expected GDP growth. The asset quality for these banks has deteriorated more than we expected. The banks' nonperforming loans (NPLs) rose to 3.6% by end-August 2018, from 2.5% at end-2017 (compared with our expectation of 3%-3.2% by end-2018). Slower GDP growth, a depreciating rupee, and rising interest rates have partly contributed to this increase. Given the heightening economic risk, we expect NPLs to rise further to 4.5%-5% over the next 12-18 months, but remain within our tolerance level for a BICRA 9 system.

The increased economic risk would also require banks to maintain higher risk-adjusted capital to take care of the additional risk in the system.

Sri Lankan banks are already seeing higher pricing for their external funding, which could negatively affect their profitability. We believe the large state-owned banks may be required to tap the external markets at higher costs to finance the sovereign's bond repayments. In a low-probability and high-impact downside scenario, if the political turmoil escalates or prolongs, uncertainty could spread to the banking sector and cause funding stress or liquidity outflows.

PEOPLE'S LEASING & FINANCE PLC

The rating on PLC reflects the credit profile of the People's Bank group, of which PLC is a core entity. The rating on PLC is equalized with the group's credit profile.

We have revised PLC's stand-alone credit profile (SACP) to 'b' due to the worsening operating environment. PLC's dependence on wholesale funding and its concentration in commercial vehicle financing also constrain the rating. The company's moderate capital and earnings temper these weaknesses.

The stable outlook on PLC reflects our expectation that PLC will remain a core entity of the People's Bank group at least for the next 12 months because commercial vehicle leasing will remain a large and profitable business for the group.

We don't see any upside potential for the rating over the next 12 months.

We may downgrade PLC if the People's Bank group's capitalization reduces substantially.

NATIONAL SAVINGS BANK

The rating on NSB reflects our view that the Sri Lankan government will almost certainly provide extraordinary support to the bank in a stress situation.

We have revised NSB's SACP to 'b' from 'b+', due to the worsening operating environment. Our assessment of the SACP benefits from the bank's superior funding and liquidity metrics. A statutory guarantee on 100% of deposits and a requirement to invest 60% of deposits in government securities support the bank's liquidity and funding. NSB's low risk-adjusted capital ratio tempers the strength.

The stable outlook on NSB reflects the outlook on its parent, the government of Sri Lanka. We expect the bank's critical role and link to the government to remain unchanged over the next 12 months.
The most likely change (up or down) to our rating and outlook on NSB will be from a change in the creditworthiness of the government of Sri Lanka.

DFCC BANK

The rating on DFCC reflects the Sri Lanka-based bank's limited deposit base and weak capitalization. DFCC's satisfactory business position, earnings, and asset quality temper these weaknesses. We assess the bank's SACP as 'b'.

Our stable outlook on DFCC Bank reflects our view that the bank will maintain its credit profile despite tough operating conditions in Sri Lanka over the next 12 months.

We may lower the rating on DFCC if the bank's risk-adjusted capital ratio declines below 3%. This could happen if DFCC's profitability is lower or if its loan growth exceeds our expectations.

We are unlikely to upgrade DFCC over the next 12 months.

BICRA SCORE SNAPSHOT
Sri Lanka

                              To                From
Anchor                        b+                bb-
BICRA Group                   9                 8
Economic risk                 9                 8
 Economic resilience          Very high risk    Very high risk
 Economic imbalances          Very high risk    High risk
 Credit risk in the economy   Very high risk    Very high risk
Industry risk                 8                 8
Institutional framework       Very high risk    Very high risk
 Competitive dynamics         High risk         High risk
 System-wide funding          Very high risk    Very high risk
Trends
 Economic risk trend          Stable            Stable
 Industry risk trend          Stable            Stable
Government Support            Uncertain         Supportive


RATINGS SCORE SNAPSHOT

National Savings Bank
                             To                From
Anchor                       b+                bb-
Business position            Adequate (0)      Adequate (0)
Capital and earnings         Very weak (-2)    Very weak (-2)
Risk position                Adequate (0)      Adequate (0)
Funding                      Above avg (+1)    Above avg (+1)
Liquidity                    Strong            Strong
SACP                         b                 b+
Support                      0                 0
Group                        0                 0
GRE support                  Critical/         Critical/
                             Integral (0)      Integral (0)
Additional factors           0                 0

Issuer credit rating         B/Stable/B        B+/Stable/B


People's Leasing & Finance PLC
                             To               From
Anchor                       b-               b
Business position            Strong (+1)      Strong (+1)
Capital and earnings         Moderate (0)     Adequate (0)
Risk position                Adequate (0)     Adequate (0)
Funding                      Adequate (0)     Adequate(0)
Liquidity                    Adequate         Adequate 
Comparable Rating Analysis   0                0
SACP                         b                b+
External Influence           0                0
Group Influence              0                0
Government Influence         0                0
Guarantees or   Other External Influences   0                0
Issuer credit rating         B/Stable/B       B+/Stable/B


DFCC Bank

                            To                 From
Anchor                      b+                 bb-
Business position           Adequate (0)       Adequate (0)
Capital and earnings        Weak (0)           Weak (-1)
Risk position               Adequate (0)       Adequate (0)
Funding                     Below avg (-1)     Below avg (-1)
Liquidity                   Adequate           Adequate 
SACP                        b                  b
Support                     0                  0
Group                       0                  0
GRE support                 0                  0
Additional factors          0                  0
Issuer credit rating        B/Stable/B         B/Stable/B

Fitch downgrades Sri Lanka Telecom to 'B' on sovereign downgrade

ECONOMYNEXT – Fitch Ratings said it has downgraded Sri Lanka Telecom PLC's (SLT) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to 'B' from 'B+' with the outlook remaining stable.

The rating agency in a statement also confirmed SLT's National Long-Term Rating at 'AAA(lka)' with a Stable Outlook, and also confirmed the national rating at 'AAA(lka)' on its seven billion rupee debt programme.

The rating action follows Fitch's downgrade of Sri Lanka's Long-Term Foreign- and Local-Currency IDRs to 'B' from 'B+'.

The full Fitch statement follows:

Fitch Ratings - Singapore,Colombo - 05 December 2018: Fitch Ratings has downgraded Sri Lanka Telecom PLC's (SLT) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to 'B' from 'B+'. The Outlook is Stable.

The agency has affirmed SLT's National Long-Term Rating at 'AAA(lka)' with a Stable Outlook.
We have also affirmed the national rating at 'AAA(lka)' on the LKR7 billion debt programme.

The rating action follows Fitch's downgrade of Sri Lanka's Long-Term Foreign- and Local-Currency IDRs to 'B' from 'B+' (see "Fitch Downgrades Sri Lanka to 'B'; Outlook Stable," dated 4 December 2018 on www.fitchratings.com).

SLT's IDRs are constrained by Sri Lanka's IDRs as per Fitch's Government-Related Entities Rating Criteria, as the state holds a majority stake in SLT directly and indirectly, and exercises significant influence on its operating and financial profile. SLT's second-biggest shareholder, Malaysia's Usaha Tegas Sdn Bhd at 44.9%, has no special provisions in its shareholder agreement to dilute the government's significant influence over SLT.

SLT's standalone credit profile, assessed by Fitch at 'BB', is stronger than that of its owner, reflecting the company's market-leading position in fixed-line services and second-largest position in mobile, along with its ownership of an extensive optical-fibre network. The standalone profile is also underpinned by its mid-single-digit percentage growth prospects, moderate estimated 2018 FFO adjusted net leverage of 1.7x and stable operating EBITDAR margin.

KEY RATING DRIVERS

Strong State Linkages: Fitch sees SLT's status, ownership and control by the Sri Lankan sovereign as 'Strong'. The state's ownership gives it significant influence over operating and financial policies. We view the support record and expectations for the likelihood of state support for SLT as 'Strong', given its strategic importance in expanding the country's fibre infrastructure. Historically, SLT has not required tangible financial support due to its healthy financial profile.

State's Incentive to Support: Fitch sees the socio-political implications of a default by SLT as 'Moderate' due to the presence of three other privately owned telcos. However, it could affect the fixed-line market because SLT acts as a policy company to invest in fibre networks across the island to support the government's vision of fibre-based internet for all households.
Fitch also sees the financial implications of a default as 'Strong', as a financial default by SLT may have an impact on the availability and cost of financing options for other government-related entities.

High Capex, Negative FCF: We expect SLT to have negative free cash flow (FCF) during 2019-2020 (estimated 2018 negative FCF of LK2 billion-3 billion) as cash flow from operations may be insufficent to fund large capex plans to expand the fibre infrastructure and 4G mobile networks. SLT's 2019 capex is likely to remain high, at around 28%-30% of revenue, as it aims to complete its 4G population coverage to around 95% by end-2019.

We expect SLT to continue to invest in expanding fibre coverage as it aims to connect about 1 million homes by 2020-2021, from an existing 70,000 homes currently enable. Typically, SLT would need to lay fibre for at least 2 million homes to half of the households to be connected.

We expect SLT's fibre investments to have low returns due to the country's low broadband tariffs. Dividends are likely to remain around LKR1.6 billion-1.8 billion in the next two to three years.

Data Drives Growth: We expect revenue to grow by a mid-single-digit percentage during 2019-2020 (barring any tax shocks), driven by data and fixed-broadband growth. We expect 4G smartphone penetration to improve from the current 25% with the proliferation of cheaper Chinese phones. Revenue rose strongly by 6.5% in the first nine months of 2018, driven by fixedbroadband and mobile usage after a temporary usage slump in 2017 due to higher taxes on oice and data. We expect the government's recent announcement on the removal of floor rates for voice call charges to have only a limited impact on growth.

Industry Consolidation, M&A Risk: We believe the recently announced merger between Hutchison Telecommunications Lanka (Private) Ltd and Etisalat Lanka (Private) Ltd is likely to relieve some competitive pressures that have undermined telecom companies' revenue and EBITDA growth in recent years. The merger is pending regulatory approval. Industry consolidation is likely to provide some relief from pricing pressure, especially in the data segment where telcos have not been able to fully capture the strong growth in data traffic.
SLT's National Long-Term Rating could come under pressure if it were to carry out a debt-funded acquisition of the smallest telco - Bharti Airtel Limited's (BBB-/Stable) Sri Lankan subsidiary, Airtel Lanka. However, any rating action will be based on the acquisition price, funding structure, and the financial and operating profile of the combined entity.

Stable Sector Outlook: Fitch's outlook for the Sri Lankan telco sector is stable as we expect the mean net leverage for SLT and mobile market leader, Dialog Axiata PLC (AAA(lka)/Stable), to remain stable at around 1.4x in 2019. We expect the sector's cash generation to improve, driven by higher mobile and broadband data usage, which will be insufficient, however, to fund the large capex requirement, leading to negative FCF. We also expect average operating EBITDAR margins to remain stable at around 34% (2018 estimate: 34%), driven by improving economies of scale in the data and home broadband segment, offsetting the negative impact of the changing revenue mix.

DERIVATION SUMMARY

SLT's standalone rating reflects its moderate financial profile and strong market position in the fixed-line industry segment, and second-largest position in the mobile market. SLT has lower exposure to the crowded mobile market and more diverse service platforms than Dialog.

However, Dialog has a larger revenue base and better operating EBITDAR margin than SLT, while SLT's forecast FFO adjusted net leverage and FCF profile are worse than that of Dialog.

SLT has a larger operating scale and a wider EBITDAR margin than Hemas Holdings PLC (AA-(lka)/Stable), which is a diversified conglomerate with exposure to pharmaceuticals, fastmoving consumer goods, leisure and transport. Hemas is the largest private retail pharmaceutical distributor in the country and the second-largest home care and personal care manufacturer. Hemas's FFO adjusted net leverage is likely to be better than SLT's over the medium term.

KEY ASSUMPTIONS

Fitch's Key Assumptions Within Our Rating Case for the Issuer

- Revenue to grow by the mid-single-digit percentage, driven by fixed-broadband and mobile data services in 2018-2019.

- Capex/revenue to remain high at around 28%-30% as SLT expands its fibre and 3G/4G networks.

- Operating EBITDAR margin to remain stable at around 29%-30%.

- Effective tax rate of 28%.

- Dividend payout of LKR1.6 billion-1.8 billion.

RATING SENSITIVITIES

Developments That May, Individually or Collectively, Lead to Positive Rating Action

- An upgrade in Sri Lanka's IDRs would result in corresponding action on SLT's IDRs;

- A weakening of links between SLT and the sovereign could result in SLT's Local-Currency IDR being upgraded above Sri Lanka's Local-Currency IDR. However, SLT's Foreign-Currency IDR will remain constrained by Sri Lanka's Country Ceiling of 'B'

There is no scope for an upgrade as SLT is at the highest rating on the Sri Lankan national ratings scale.

Developments That May, Individually or Collectively, Lead to Negative Rating Action

- A downgrade of Sri Lanka's IDRs would result in corresponding action on SLT's IDRs;

- A debt-funded acquisition of a smaller operator could threaten SLT's National Long-Term Rating, depending on the acquisition price and the financial profile of the combined entity.
For the sovereign rating of Sri Lanka, the following sensitivities were outlined by Fitch in its Rating Action Commentary of 4 December 2018:

The main factors that, individually or collectively, might lead to positive rating action are: - Improvement in external finances supported by higher non-debt inflows, or a reduction in external sovereign refinancing risks from an improved liability profile

- Improved policy coherence and credibility

- Stronger public finances, underpinned by a credible medium-term fiscal strategy

The main factors that could lead to negative rating action, individually or collectively, are:

- Further increases in external funding stresses that threaten the ability to repay external debt

- Continued political uncertainty that contributes to a loss of investor confidence, possibly affecting the macroeconomic outlook

- A deterioration in policy coherence and credibility that leads to an increase in general government debt and deficit levels.

LIQUIDITY AND DEBT STRUCTURE

Strong Access to Local Banks: At end-September 2018, SLT's liquidity - cash of LKR12 billion and committed undrawn bank lines of LKR13.5 billion - was sufficient to fund its short-term debt of LKR13.5 billion. We expect SLT to refinance its short-term debt in light of its access to local banks. It has demonstrated a solid track record of accessing capital from local banks and capital markets. Total debt was about LKR53 billion, out of which about 25% was denominated in US dollars.