Sri Lankan shares edge down amid high turnover

Reuters: Sri Lankan shares ended slightly weaker on Thursday amid heavy buying by foreign investors, but traders said sentiment was likely to remain positive after the central bank kept key policy rates unchanged last week.

The Colombo Stock Index ended 0.06 percent weaker at 6,459.66, snapping an eight-session win streak.

Shares in Ceylon Tobacco Company Plc fell 1.3 percent, while DFCC Bank Plc dropped 2.9 percent.

Losses were, however, capped by gains in Melstacorp Ltd , which climbed 1.9 percent, and conglomerate John Keells Holdings Plc, which rose 0.3 percent.

“Small volume of selling in CTC dragged the market down,” said Dimantha Mathew, head of research at First Capital Holdings.

“The positive trend due to declining market interest rates will continue.”

Turnover stood at 1.5 billion rupees ($9.77 million), more than last year’s daily average of 915.3 million rupees.

Foreign investors net bought shares worth 1.3 billion rupees on Thursday. Foreign investors net bought 18.5 billion rupees worth equities in 2017, and 633.5 million rupees worth stocks in 2016.

The index rose 2.26 percent in 2017, posting its first annual increase in three years. It fell 9.7 percent in 2016.

Since March 2017, treasury bill rates have fallen between 188 and 216 basis points though end-December, mainly driven by foreign investors buying treasury bonds, resulting in declining market interest rates.

The country’s 2018 economic growth trajectory is likely to help boost market sentiment, analysts said.

Sri Lanka’s economic growth in 2018 is forecast at 5-5.5 percent, bouncing back from an anticipated four-year low of less than 4 percent last year, central bank Governor Indrajit Coomaraswamy said on Wednesday. 

($1 = 153.6000 Sri Lankan rupees) 

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

FC Research forecasts steady phase for banking sector

First Capital Research (FC Research) expects the banking sector to have a steady phase during 2018E-20E with stable credit growth, improving GDP growth supporting lower Non Performing loans and lower interest rate volatility leading to stable NIMs, it said in a statement issued yesterday.

First Capital Research expects the banking sector universe to provide 25% average return over a one-year period exceeding the expected market return.

Credit growth to stabilize at 16%-18%: FC Research expects private sector credit growth to slow down to remain stable at 16% during 2018E gradually increasing to 18% through 2019E-2020E on improving GDP growth backed by progressing external sector performance levels and lower impairment due to better credit quality resultant to more business-related credit compared to consumer credit.

Interest rate stability to be mirrored in spreads: First Capital Research expects the banking sector interest spreads to stabilize in 2017E and thereon backed by the implementation of Inflation Targeting Framework, improved government revenue streams, increased foreign inflows into government securities market, introduction of Liability Management Bill to stabilize the interest rate and rate of inflation while the flexible exchange rate policy further supports it.

BASEL III Capital requirements satisfied:

Core and total capital adequacy ratios were maintained at 12.2% and 15% where the regulatory minimums were 5% and 10% respectively. Larger banks in the sector have already taken necessary steps to raise capital thus meeting the BASEL III capital requirement. This move ensures more stability and paves way for the industry to be more resilient and better poised for future growth.
www.dailynews.lk