Sri Lanka stocks fall despite rate cut; rupee steady

Reuters: ** Sri Lankan shares ended weaker on Friday, snapping three straight sessions of gains, as foreign investors sold risky assets and the market shrugged off a widely expected rate cut by the central bank. 

** The rupee closed steady, market sources said. 

** Before the markets opened on Friday, the central bank cut its key interest rates to support its faltering economy as overall business and consumer confidence slumped in the wake of last month’s deadly bomb attacks. 

** Traders said the Easter day bombings and aftermath violence, and worries over slowing economic growth weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters last week. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The central bank chief said on Friday that he expected the economy to grow by 3% or less this year due to the impact of the deadly Easter bomb attacks, and the bank was preparing a downward revision to its earlier projection for 4% growth.

** The benchmark stock index ended 0.26% weaker on Friday at 5,310.95. It rose 0.3% for the week, recording its second straight weekly gain. The bourse has declined 12.25% so far this year. 

** The government’s pension fund has resumed investing in risky assets as the stock market is “extremely undervalued at the moment and is considered a good time to go into”, the central bank governor said. 

** Turnover was 167.8 million rupees ($952,327), less than a third of this year’s daily average of around 550.6 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors sold a net 11.4 million rupees worth of shares on Friday, extending the year-to-date net foreign outflow to 5.55 billion rupees worth of equities. 

** The rupee ended steady at 176.40/55 per dollar, compared with Thursday’s close of 176.40/50, market sources said. 

** Analysts expect the rupee to weaken further as money flows out of stocks and government securities. 

** The rupee fell 0.06% for the week but is up 3.5% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors bought a net 2.1 billion rupees worth of government securities in the week ended May 22, but the island nation saw a net foreign outflow of 19.1 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

($1 = 176.2000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Monetary Policy Review: No. 3 – 2019 The Central Bank of Sri Lanka Reduces its Policy Interest

Rates The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 30 May 2019, decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points to 7.50 per cent and 8.50 per cent, respectively. The Board arrived at this decision following a careful analysis of current and expected developments in the domestic economy and the financial market as well as the global economy, with the broad aim of stabilising inflation at mid-single digit levels in the medium term to enable the economy to reach its potential.

A dovish approach to monetary policy is observed globally 

Driven by a number of factors such as increased trade tensions, weakened business confidence and softened external demand, a slowdown in global economic growth is observed. This has prompted key advanced economies to become increasingly dovish, while several emerging market economies have also relaxed their monetary policy stance to support economic activity, given subdued inflation pressures. Meanwhile, despite the slowdown in global growth, international crude oil prices have remained elevated due to geopolitical uncertainties. 

Subpar economic growth is likely to be further affected by the Easter Sunday attacks

Following the modest growth in 2018, the economy is expected to have grown at a higher pace during the first quarter of 2019, mainly due to improved performance in Agriculture and Industry-related activities. However, the Easter Sunday attacks have affected confidence and sentiments of economic agents, particularly disrupting tourism and related activities. Although normalcy is gradually returning to economic activity, a lower than initially projected growth could be anticipated during 2019. 

Market lending rates remained downward rigid, despite the measures already taken 

Sizable liquidity injections through the reductions in the Statutory Reserve Ratio (SRR) along with appropriate and prudent open market operations (OMOs) have resulted in a reduction in the Average Weighted Call Money Rate (AWCMR) by around 50 basis points so far in 2019. Yields on Government securities have also adjusted downward sharply during the year. In the meantime, considering the high nominal and real interest rates on deposit and lending products, the Central Bank imposed maximum interest rates on deposit products in April 2019, thus reducing the cost of funds of financial institutions, enabling them to reduce lending rates and enhance credit flows to the real economy. 

In spite of liquidity injections, decline in AWCMR and yields on Government securities, as well as the recently introduced maximum interest rates on deposit products, market lending rates have failed to show any sign of commensurate downward adjustment.

Amidst elevated market lending rates, private sector credit contracted notably
Following a higher than projected credit expansion, particularly in the latter part of 2018, credit extended to the private sector by commercial banks contracted, in absolute terms on a cumulative basis, during the first four months of 2019. High market lending rates, sluggish growth in economic activity, subdued business confidence, as well as the settlement of arrears by the government on account of various projects which enabled repayments to the banking sector, were amongst the factors which contributed to this contraction. Driven by the slowdown in private sector credit, the year-on-year growth of broad money (M2b) also decelerated so far in 2019. 

Improvements in external sector conditions are observed, particularly in relation to the trade balance 

The trade deficit narrowed with increased performance in export earnings, while import expenditure declined sharply during the first three months of 2019 mainly in response to the flexible exchange rate policy maintained by the Central Bank ahead of adopting the proposed flexible inflation targeting monetary policy framework. The improvement in the trade deficit is likely to negate the adverse impact on the current account arising from the slowdown in services exports caused by the contraction in tourism in 2019. Nevertheless, it is expected that earnings from tourism would rebound with the support of improved security conditions and the relaxation of travel advisories by several key countries of origin of tourists, along with recently introduced policy measures and promotional campaigns to revive the sector. Meanwhile, the receipt of the sixth tranche under the Extended Fund Facility programme with the International Monetary Fund (IMF-EFF) in May 2019 is expected to boost investor sentiments. With these developments, the Sri Lankan rupee has recorded a cumulative appreciation of 3.7 per cent against the US dollar so far during the year. Gross official reserves are estimated at US dollars 7.2 billion at end April 2019, providing an import cover of 4.1 months. 

Despite transitory upticks, a threat to the inflation outlook is not anticipated for the medium term 

Headline inflation and core inflation, as measured by the year-on-year change in both Colombo Consumer Price Index (CCPI) and National Consumer Price Index (NCPI), showed some acceleration during the year, partly due to the lagged effect of the sharp depreciation of the rupee during 2018. With subdued aggregate demand and well anchored inflation expectations, the recent acceleration in inflation is projected to be short-lived. Accordingly, inflation is likely to remain in the desired 4-6 per cent range in 2019 and beyond, supported by appropriate policy measures. 

The monetary policy decision is expected to induce a reduction in market lending rates 

At the last review of the monetary policy stance, the Central Bank provided forward guidance of a possible policy relaxation, if the current trends in the global financial markets, trade balance, and credit growth continue. These trends have continued, and in addition, the economy has been affected by the Easter Sunday attacks and its adverse spillover effects on related sectors. Accordingly, the Monetary Board was of the view that a relaxation of the monetary policy stance is appropriate, and decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points to 7.50 per cent and 8.50 per cent, respectively. Along with the developments in the domestic financial markets so far during the year, the monetary policy decision to reduce policy interest rates is expected to induce a swift and sizable reduction in market lending rates. 

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Sri Lanka stocks gain on hope of rate cut; rupee weaker

Reuters: ** Sri Lankan shares rose for the third straight session on Thursday on hope of a rate cut by the central bank later this week, while the rupee closed weaker on mild importer dollar demand, market sources said. 

** The central bank is widely expected to cut its key interest rates at a meeting on Friday, a Reuters poll showed, to support the economy after tourism and investment plummeted in the wake of Easter Sunday bombings. 

** Traders said the Easter day bombings and aftermath violence, and worries over slowing economic growth weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters last week. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The benchmark stock index ended 0.09% firmer on Thursday at 5,324.54. It rose 0.67% last week, recording its first weekly gain in three. The bourse has fallen 12% so far this year. 

** Turnover was 223.5 million rupees ($1.27 million), less than half of this year’s daily average of around 554.5 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors bought a net 42.4 million rupees worth of shares on Thursday, but they have been net sellers of 5.54 billion rupees worth of equities so far this year. 

** The rupee ended weaker at 176.40/50 per dollar, compared with Wednesday’s close of 176.25/35, market sources said. 

** Analysts expect the rupee to weaken further as money flows out of stocks and government securities. 

** The rupee fell 0.23% last week but is up 3.5% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors bought a net 2.1 billion rupees worth of government securities in the week ended May 22, but the island nation saw a net foreign outflow of 19.1 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

($1 = 176.3000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka stocks gain, rupee steady on hope of rate cut

Reuters: ** Sri Lankan shares rose on Wednesday while the rupee closed steady on hope of a rate cut by the central bank later this week, market sources said. 

** The central bank is widely expected to cut its key interest rates at a meeting on Friday, a Reuters poll showed, to support the economy after tourism and investment plummeted in the wake of Easter Sunday bombings. 

** Traders said the Easter day bombings and aftermath violence, and worries over slowing economic growth weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters last week. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The benchmark stock index ended 0.5% firmer on Wednesday at 5,319.83. It rose 0.67% last week, recording its first weekly gain in three. The bourse has fallen 12% so far this year. 

** Turnover was 181.4 million rupees ($1.03 million), nearly a third of this year's daily average of around 560 million rupees. Last year's daily average was 834 million rupees. 

** Foreign investors bought a net 35.4 million rupees worth of shares on Wednesday, but they have been net sellers of 5.58 billion rupees worth of equities so far this year. 

** The rupee ended steady at 176.25/35 per dollar, market sources said. 

** Traders said forward and swap markets were active due to anticipation of a rate cut on Friday. 

** Analysts expect the rupee to weaken further as money flows out of stocks and government securities. 

** The rupee fell 0.23% last week but is up 3.6% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors bought a net 2.1 billion rupees worth of government securities in the week ended May 22, but the island nation saw a net foreign outflow of 19.1 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka stocks snap 2 days of falls; rupee edges lower

Reuters: ** Sri Lankan shares snapped two consecutive sessions of falls on Tuesday in high turnover, led by Hatton Plantations Plc, while the rupee closed slightly weaker. 

** Traders said the Easter day bombings and aftermath violence, and worries over slowing economic growth weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters last week. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The International Monetary Fund (IMF) on May 14 approved the disbursal of a $164 million tranche of a loan programme, bringing the total disbursed to more than $1.16 billion. 

** The benchmark stock index ended 0.04% firmer on Tuesday at 5,293.49. It rose 0.67% last week, recording its first weekly gain in three. The bourse has fallen 12.5% so far this year. 

** Shares in Hatton Plantations, which accounted for 55% of the day’s turnover, jumped 29.5%. 

** Turnover was 1.81 billion rupees ($10.27 million), the highest since April 24 and more than three times this year’s daily average of around 561.9 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors bought a net 63.5 million rupees worth of shares on Tuesday, but they have been net sellers of 5.6 billion rupees worth of equities so far this year. 

** The rupee ended slightly weaker at 176.25/35 per dollar, compared with Monday’s close of 176.20/30, market sources said. 

** Analysts expect the currency to weaken further as money flows out of stocks and government securities. 

** The rupee fell 0.23% last week but is up 3.6% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors bought a net 2.1 billion rupees worth of government securities in the week ended May 22, but the island nation saw a net foreign outflow of 19.1 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

($1 = 176.2000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka vehicle registrations down in Apr 2019

LBO – Sri Lanka’s vehicle registrations were down in almost every category in April due to the New Year and Easter holidays and subsequent turmoil in the country post Easter Sunday bombings, a new report shows.

Total motor cars recorded 2,120 units in April down from 2,961 units in March and significantly down from 6,160 units 12 months ago, a report by research firm JB Securities said.

Brand new motor car registrations recorded 309 units in April down from 422 units in March and significantly down from 866 units 12 months ago. Small cars accounted for 87.4% of total registrations. Suzuki/Maruti accounted for 106 units – Celerio 36 units, Wagon R 69 units followed by Perudua recording 58 units. Financing share was 53.1% in line with the normal monthly average.

Pre-owned cars recorded 1,811 units in April down from 2,539 units in March and significantly down from 5,294 units 12 months ago. Small cars accounted for 94.1% of total registrations in this segment. Toyota is the segment leader accounting for 1,099 units – Vitz 986 units followed by Suzuki recording 515 units – Wagon R 336 units. Financing share was 54.5% in line with the normal monthly average.

Premium cars recorded 69 units in April significantly down from 160 units in March and 189 units 12 months ago. The brand-new segment accounted for 29 units of which Mercedes Benz accounted for 25 units – C class 20 units (many of them may have been imported on permits). The preowned segment recorded 40 units of which Mercedes Benz accounted for 12 units – C class 8 units and Audi recorded 20 units – A1 11 and A3 7 units.

Under notable premium cars (See second attachment) there was a sole BMW i8.Electric cars recorded a mere 2 units in April similar to the 2 units recorded in March but down from 9 units recorded 12 months ago.

SUVs recorded 432 units in April down from 488 units in March but up from 408 units 12 months ago. Brand new recorded 264 units and pre-owned the balance 168 units. MG was the category leader accounting for 96 units followed by Honda with 82 units – CR-V 65 units, Toyota with 72 units – C-HR 58 units and Mitsubishi with 46 units – Expander 34 units. In the premium SUV segment Range Rover recorded 24 units of which Sports accounted for 17 units. Financing share was 46.3% which was in line with the normal monthly average.

Hybrids recorded 595 units in April significantly down from 1,032 units recorded in March and 3,292 units 12 months ago. Hybrid cars recorded 556 units of which Suzuki accounted for 472 units – Wagon R 386 units and SUVs accounted for 38 units.

SUVs recorded 432 units

Vans recorded 529 units in April down from 632 units in March and 773 units 12 months ago. Preowned accounted for 522 units (98.6%) and mini vans accounted for 438 units (82.8%). Suzuki was the segment leader recording a share of 52.5%. Financing share was 67.3% in line with its normal monthly average.

3-wheelers recorded 1,068 units in April significantly down from 2,192 units in March and 1,469 units 12 months ago. Bajaj is the dominant category leader with a 93.3% share. Financing share was 70% in line with the normal monthly average.

2-wheelers recorded 22,753 units in April down from 26,851 units in March and significantly down from 29,855 units 12 months ago. Brand new accounted for 98.5% of the category. Scooters recorded 14,925 units in the month down from 17,196 units the previous month. Honda is the category leader accounting for a 45.7% share followed by Yamaha with a 21.8% share, TVS with 16.7% and Bajaj with 13.0%. Financing share was 74.4% in line with the normal monthly average.

Pickup trucks recorded 72 units in April down from 127 units in March and 123 units 12 months ago. Brand new accounted for 66 units and the balance 6 units were preowned. Tata accounted for 52.8% of the segment followed by 36.1% by Toyota. Financing share was 69.4% in line with the normal monthly average.

Mini trucks recorded a low 83 units in April down from 202 units in March and significantly down from 390 units 12 months ago. Brand new accounted for 68 units and the balance 15 units were preowned. Tata recorded a 86% share in the brand new segment. Financing share was 81.9% in line with the normal monthly average.

Light trucks recorded 163 units in April down from 252 units in March and significantly down from 290 units 12 months ago. Brand new units accounted for 146 units and the balance 7 units were preowned. Mahindra claimed a 94.5% share in the brand-new market primarily through its Bolero Maxi truck. Financing share was 84%.

Medium trucks recorded 170 units in April slightly down from 208 units in March and significantly down from 325 units 12 months ago. Brand new accounted for only 59 units, the balance 111 units are preowned. Isuzu is the segment leader with a 58.8% share. Financing share was 81.2% in line with the normal monthly average.

Heavy trucks recorded 109 units in April slightly down from 138 units in March but significantly down from 205 units 12 months ago. Brand new units accounted for 106 units. Tata was the dominant segment leader accounting for 62.3% share. Financing share was 84.4% higher than the more recent monthly average but in line with the medium-term monthly average.

Buses recorded 90 units in April slightly up from 76 units in March but significantly down from 211 units 12 months ago. Brand new accounted for 53 units and the balance 37 were preowned units. In the new segment Lanka Ashok claimed a 71% share. Financing share was 83.3% in line with the normal monthly average.

Hand tractors recorded 237 units in April up from 141 units in March and 175 units 12 months ago.

Large tractors recorded 338 units in April up from 307 units in March and marginally up from 334 units 12 months ago. Tafe is the market leader accounting for 46.8%. Financing share was 87.9% higher than the recent monthly average of in the mid-70s.

Sri Lanka's Elephant House net down as interest costs bite

ECONOMYNEXT - Profits of Sri Lanka's Ceylon Cold Stores, which has interests in retailing and fast moving consumer goods, fell 9 percent to 528 million rupees in the March 2019 quarter from a year ago with finance costs rising, interim accounts showed.

reported earnings of 5.56 rupees per share for the quarter. For the year to March 2019, the group reported earnings of 13.79 rupees per share on total profits of 1.31 billion rupees, down from 2.56 billion rupees

Ceylon Cold Stores stocks closed at 595.00 rupees, down 1.90 rupees.

Revenue grew 17 percent to 15.5 billion rupees and cost of sales grew at a faster 15 percent to 13.7 billion rupees, allowing gross profit to grow 28 percent to 1.8 billion rupees.

A segment breakdown showed manufacturing revenue up 7.6 percent to 3.9 billion rupees from 3.6 billion rupees a year earlier, while retail sales rose 20 percent to 11.6 billion rupees from 9.6 billion rupees.

Manufacturing finance cost was 214 million rupees from 680 million rupees a year earlier and retail finance cost rose to 432 million rupees to 31 million rupees.

Net finance cost rose 1,067 percent to 236 million rupees from 20 million rupees a year earlier.

Bank overdrafts grew from 3.08 to 7.43 billion rupees during the year and another 1.6 billion short term borrowings came in during the year.

The firm has invested in a new confectionary plant and has been expanding stores.

Sri Lanka’s Piramal Glass March net profit doubles, exports up

ECONOMYNEXT - Profits at Sri Lanka’s Piramal Glass Ceylon PLC went up by 108 percent to 192 million rupees in the March 2019 quarter from a year ago helped by stronger export sales, interim accounts showed.

The firm reported earnings of 20 cents per share for the quarter. The share was trading unchanged at 3.50 rupees, Friday.

For the full year to 31 March 2019, Piramal Glass reported earnings of 36 cents on total profits of 346 million, up marginally from a year ago.

Revenue for the March quarter grew by nine percent to 1.9 billion rupees. Cost of Sales grew at a slower three percent to 1.4 billion rupees helping gross profits grow at a faster 32 percent to 512 million.

Quarterly net finance cost was 81 million rupees.

The export market kept its upward momentum with sales up 27 percent to 2,708 million rupees in 2019 from 2,136 million rupees in 2018.

“This growth is attributed to the new markets developed in many countries namely Malaysia, Africa, Vietnam and Myanmar,” a company statement said.

Net Assets per Share went up by 19 cents to 4.68 rupees this year.

Sri Lanka’s Serendib Hotels March quarter net profit growth flat

ECONOMYNEXT – Net profits at Sri Lanka’s Serendib Hotels group were virtually flat at 156 million rupees in the March 2019 quarter from a year ago, interim accounts showed, with sharply higher administrative costs although tax expenses were lower.

Quarterly sales rose seven percent to 688 million rupees with cost of sales up nine percent to 128 million rupees and gross profit up seven percent to 560 million rupees.

Earnings per share were 1.40 rupees. The share last traded at 13.90 rupees.

EPS for the year to 31 March 2019 of Serendib Hotels part of the Hemas group, fell to 35 cents with net profit down 67 percent to 39 million rupees while sales were up 11 percent to two billion rupees.

The accounts showed sharply higher administrative and sales and marketing expenditure while income tax expenses fell 95 percent to 2.6 million rupees.

Serendib Hotels group owns and manages four properties; Avani Bentota Resort & Spa, Club Hotel Dolphin Waikkal, Hotel Sigiriya, and Lantern Beach Collection Mirissa.

Malinga Arsakularatne, executive director of Serendib Hotels group, said annual finance costs doubled to 100 million rupees from the year before.

This was owing to interest on loans taken to buy the Lantern Beach Collection, along with a loss from revaluation of the US dollar loan at Serendib Hotels PLC and interest cost on loans carried by Lantern Beach Collection.

Sri Lanka’s Cargills Bank upgraded to 'A-(lka)', Union Bank to 'BBB-(lka)'

ECONOMYNEXT - Fitch Ratings Lanka said it has upgraded the National Long-Term Ratings of Cargills Bank Ltd (CBL) to 'A-(lka)' from 'BB(lka)' and Union Bank of Colombo (UB) to 'BBB-(lka)' from 'BB+(lka)' with stable outlooks.

The rating actions, which follow Fitch's periodic review of Sri Lanka's small and mid-sized bank peer Group, maintained the negative outlook on the banking sector, given expected challenging operating conditions in 2019, a statement said.

“Fitch expects the banks' ratings to be weighed down by their high-risk appetites as they pursue
above-sector loan expansion in the medium term, which will pressure their already-thin capital
buffers,” it said. “The ratings also take into account these banks' small franchises.”

The full rating report follows:

Fitch Ratings-Colombo-23 May 2019: Fitch Ratings Lanka has upgraded the National Long-Term
Ratings of Union Bank of Colombo PLC (UB) to 'BBB-(lka)' from 'BB+(lka)' and of Cargills Bank Ltd (CBL) to 'A-(lka)' from 'BB(lka)'. The Outlooks are Stable.

The agency has also affirmed the National Long-Term Ratings of Amana Bank PLC, Nations Trust Bank PLC (NTB), Pan Asia Banking Corporation PLC (PABC), SANASA Development Bank PLC (SDB) and Housing Development Finance Corporation Bank of Sri Lanka (HDFC).

A full list of rating actions is at the end of this commentary.

KEY RATING DRIVERS

NATIONAL RATINGS

The rating actions follow Fitch's periodic review of Sri Lanka's small and mid-sized bank peer
group. The agency maintains the negative outlook on Sri Lanka's banking sector, as we expect
challenging operating conditions to persist in 2019.

Fitch expects the banks' ratings to be weighed down by their high-risk appetites as they pursue
above-sector loan expansion in the medium term, which will pressure their already-thin capital
buffers. The ratings also take into account these banks' small franchises.

Fitch expects credit risks to linger in 2019 due to the banks' exposure to the more susceptible
customer segments at a time when the country faces domestic and external challenges.

The banks' profitability metrics are likely to remain weak owing to high impairment losses and effective taxes.

PABC, HDFC, Amana and CBL need to raise equity to meet the enhanced capital requirements by
end-2020; capital raising could be more difficult for these banks than for larger peers.

UB
The upgrade of UB's rating reflects its risk profile, which has improved in the previous few years, as
indicated by a more diversified loan book, increased profitability and higher-than-average
capitalisation. The rating also takes into account the bank's small franchise and still-high exposure to vulnerable customer segments.

The bank's loan composition has become more diversified, with corporate, SME and retail loans
accounting for 48%, 33% and 19%, respectively, of total loans at end-2018. Loan growth slowed to 6% in 2018, but we believe loan momentum could re-accelerate in the medium term.

UB's reported gross non-performing loan (NPL) ratio rose to 3.7% in 2018 (2017: 2.7%), with its subsidiary - UB Finance Co. Ltd - which contributes about one-third of group NPLs, remaining a significant drag on group asset quality.

UB's capital position in terms of its Fitch Core Capital ratio of 15.4% at end-2018 is stronger than that of similarly rated peers. We believe UB would be able to sustain comfortable capital buffers and meet regulatory minimum capital requirements with access to capital from major shareholder

- Culture Financial Holdings, an affiliate of Texas Pacific Group, has 70% in UB - through the
exercise of warrants if required.

UB's profitability metrics improved in 2018, with operating profit/risk-weighted assets rising to
1.5% (2017: 1.1%, 2016: 1.1%, 2015: 0.6%), aided by better net interest margins which helped offset high impairment costs. We expect the improving trend to continue in 2019, albeit slowly, in light of the still-challenging operating environment.

CBL

The multiple-notch upgrade of CBL's rating follows Fitch's assessment of support from its ultimate parent, CT Holdings PLC (CTH), and our expectation that the bank is likely to receive extraordinary support from its ultimate parent, if needed.

Our assessment takes into account operational integration, as seen through the use of Cargills
Food City outlets to expand the bank's operations, shared brand name and a capital infusion of
LKR5.8 billion by the group in 2016. However, we believe support from the parent could be
constrained by the bank's large size, as its assets represent 130% of group equity. Furthermore,
the regulator has restricted the parent's voting rights to 30% despite its majority 53% effective
stake in CBL.

CTH is a large local conglomerate with businesses in retail and wholesale distribution, fast-moving consumer goods and real estate. The group's leading supermarket chain benefits the bank
through the strong 'Cargills' brand and group synergies, with the latter likely to improve over the
long term.

CBL's intrinsic financial strength is considerably weaker than the support assessment.

NTB

NTB's ratings reflect its higher-than-peer product concentration, with leasing and credit cards
forming 20% and 11%, respectively, of its loan book, and modest franchise, with 2.8% of system
assets at end-2018.

NTB's high-risk appetite is characterised by its exposure to the susceptible consumer, retail and
SME segments, and sustained strong loan growth of 20% in 2018 (2017: 24%, 2016: 23%). We
expect the bank's loan momentum to remain strong in the medium term.

Fitch expects the bank's capitalisation to moderate on rapid loan growth, but for the bank to retain adequate capital buffers commensurate with its risk profile. Profitability, as measured by
operating profit/risk-weighted assets, is likely to remain stronger than that of similarly rated peers due to better net interest margins stemming from NTB's exposure to high-margin loans.

PABC

PABC's rating reflects pressure on the bank's capital due to downside risks from asset quality and earnings. The ratings also reflect PABC's high-risk appetite, as seen through its predominant
exposure to the retail and SME segments, which accounted for 51% and 33%, respectively, of total loans.

PABC's Fitch Core Capital ratio of 11.4% at end-2018 was one of the lowest in the peer group and is further affected by still-high unprovisioned NPLs relative to peers. The bank's total capital ratio of 13.3% was not much higher than the minimum regulatory requirement of 12.5% for non
domestic-systemically important banks. We believe the bank would need to raise at least LKR6.5
billion in equity to meet the regulatory minimum capital requirement of LKR20 billion, as we
believe earning retention alone will not be sufficient.

PABC's asset quality remains weaker than that of peers, with a reported gross NPL ratio of 5.4% at end-2018, reflecting its predominant exposure to vulnerable segments.

SDB

SDB's rating reflects its weak capital buffers, high-risk appetite and small franchise.
Fitch believes it would be challenging for the bank to maintain adequate capital buffers that are
commensurate with its risk appetite in light of its weak profitability and in the absence of sufficient capital infusions. The bank aims to maintain strong loan expansion in the medium-term after a rapid 24% CAGR over 2014-2018.

SDB's Tier 1 and total capital ratios declined to 11.0% and 12.5%, respectively, by end-2018. The planned Basel III-compliant local-currency subordinated debt worth an equivalent USD10 million should help relieve short-term pressure on the bank's total capital ratio, which was at the
regulatory minimum.

SDB's profitability, as measured by operating profit/risk-weighted assets, has weakened in the last three years (2018: 1.7%, 2017: 1.9%, 2016: 2.0%), burdened by rising credit costs and a high operating-cost structure.

SDB's reported gross NPL ratio increased to 2.6% in 2018, from 2.1% in 2017, but remains better than that of most similarly rated peers. Nevertheless, the bank's increased appetite for large ticket-size SME lending could pose asset-quality risk if the weak operating conditions are
prolonged.

HDFC

HDFC's rating reflects the bank's high-risk appetite, limited access to capital markets and
weaker-than-average asset quality and profitability owing to its large exposure to low- and
middle-income customers, who are susceptible to economic and interest-rate cycles.

HDFC's Fitch Core Capital ratio improved to 18.9% in 2018, helped by capital retention.
Nevertheless, we regard the bank's capitalisation profile as weak in light of its substantial
unprovisioned NPLs and limited capital market access. We believe the bank will need to raise
around LKR2.7 billion to meet the LKR7.5 billion enhanced minimum capital requirement by
end-2020.

Amana

Amana's rating reflects its small and developing franchise and high-risk appetite that stems from
its focus on the SME and retail segments, which collectively formed 70% of gross advances at
end-2018. Amana, which constituted 0.7% of system assets at end-2018 (2017: 0.6%), is Sri Lanka's only fully Sharia-compliant bank. The Positive Outlook on Amana's rating reflects our expectation of continued improvement in its profitability and capitalisation metrics.

We expect Amana's profitability as measured by operating profit/risk-weighted assets, to be
supported by its strong net interest margin due to its high share of current and savings accounts in
its deposit base (2018: 41% of deposits).

Amana's capitalisation remains healthy, with a Fitch Core Capital ratio of 19% at end-2018 (2017: 22%) following a capital infusion in 2017. We estimate that the bank would require another equity infusion of around LKR8 billion to meet the minimum regulatory capital requirement by end-2020.

DEBT RATINGS

NTB's Basel II Sri Lanka rupee-denominated subordinated debentures and Basel III-compliant Tier 2 Sri Lanka rupee-denominated subordinated debentures are rated one notch below the bank's National Long-Term Rating to reflect their subordinated status and higher loss-severity risks relative to senior unsecured instruments. The Basel III-compliant debentures would convert to equity upon the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka.

PABC and HDFC's senior debentures carry the same rating as their National Long-Term Ratings, as they rank equally with their other unsecured obligations.

PABC's Basel II Sri Lanka rupee-denominated subordinated debentures are rated one notch below its National Long-Term Rating to reflect the notes' subordination to senior unsecured creditors.

RATING SENSITIVITIES

NATIONAL RATINGS

UB

Capital impairment risk, stemming from sustained rapid loan expansion and asset-quality
deterioration, could pressure UB's rating. We do not see any near-term upside to the rating given
downside risks to capitalisation, asset quality and profitability.

CBL

CBL's rating is sensitive to changes in CTH's credit profile. CBL's rating is also sensitive to a change in Fitch's opinion around the ability or propensity of CTH to extend extraordinary support in a timely manner. CBL's rating could be downgraded if growth of the bank's balance sheet
significantly exceeds that of CTH, which has the effect of diminishing the parent's ability to provide support. A significant dilution of CTH's ownership that reduces the parent's propensity to provide support to the bank could also trigger a negative rating action.

NTB

Increased capital impairment risk through sustained rapid loan expansion or asset-quality
deterioration could result in a downgrade of NTB's rating. An upgrade is contingent on lower
product concentration, higher capitalisation and a more stable funding profile, alongside progress
in building a stronger franchise.

PABC

PABC's rating would be downgraded if loss-absorption buffers were to deteriorate, either through a greater share of unprovisioned NPLs, aggressive loan growth or weaker earnings. We do not see any near-term upside for PABC's rating, as the bank may face difficulty in sustaining adequate capital buffers.

SDB

SDB's rating could be downgraded if there is a continued deterioration in capitalisation, either
through aggressive loan growth or greater unprovisioned NPLs. An upgrade would be contingent
on sustaining better capital buffers, moderation of risk appetite and sustainable asset quality and
profitability improvements.

HDFC

HDFC's rating could be downgraded if capitalisation were to deteriorate for a sustained period,
either through aggressive loan growth or higher unprovisioned NPLs. An upgrade would be
contingent on moderation of risk appetite and a sustained improvement in asset quality and
profitability.

Amana

Sustained improvement in Amana's financial profile, characterised by better profitability and
capitalisation, alongside an enhanced franchise, could lead to an upgrade of the bank's National
Long-Term Rating. Increased risk appetite, such as through excessive growth that deteriorates
loss-absorption buffers, could put downward pressure on the rating.

DEBT RATINGS

Subordinated and senior debt ratings will move in tandem with the banks' National Long-Term
Ratings.

The rating actions are as follows:

Union Bank of Colombo PLC
National Long-Term Rating upgraded to 'BBB-(lka)' from 'BB+(lka)'; Outlook Stable
Cargills Bank Ltd
National Long-Term Rating upgraded to 'A-(lka)' from 'BB(lka)'; Outlook Stable
Nations Trust Bank PLC
National Long-Term Rating affirmed at 'A(lka)'; Outlook Stable
Basel II-compliant subordinated debentures affirmed at 'A-(lka)'
Basel III-compliant subordinated debentures affirmed at 'A-(lka)'
Proposed Basel III-compliant subordinated debentures affirmed at 'A-(lka)(EXP)'
Pan Asia Banking Corporation PLC
National Long-Term Rating affirmed at 'BBB-(lka)'; Outlook Stable
Senior debenture rating affirmed at 'BBB-(lka)'
Basel II-compliant subordinated debenture rating affirmed at 'BB+(lka)'
SANASA Development Bank PLC
National Long-Term Rating affirmed at 'BB+(lka)'; Outlook Stable
Housing Development Finance Corporation Bank of Sri Lanka
National Long-Term Rating affirmed at 'BB+(lka)'; Outlook Stable
Senior debenture rating affirmed at 'BB+(lka)

Sri Lanka’s JKH group March net profit down 68-pct

ECONOMYNEXT – Sri Lanka’s John Keells Holdings group net profit fell 68 percent to 3.2 billion rupees in the March 2019 quarter from a year ago, interim accounts showed.

Quarterly sales rose eight percent to 36.2 billion rupees over the period while cost of sales rose by 10 percent to 27.5 billion rupees with gross profit virtually flat at 8.6 billion rupees.

Earnings per share for the March 2019 quarter were 2.41 rupees. The share closed at 138 rupees Friday, down 50 cents or 0.4 percent.

EPS for the year to March 2019 fell to 11.13 rupees with net profit down 27 percent to 15.3 billion rupees while sales rose 12 percent to 135.5 billion rupees.

JKH’s finance costs shot up 900 percent to 1.2 billion rupees.

A company statement said the lower quarterly profit was mainly due to the one-off surplus and optimal surplus transfer in 2017/18 by the Life Insurance business, Union Assurance (UA), which cumulatively amounted to seven billion rupees.

The annual life insurance surplus of UA was 1.1 billion rupees in 2018/19.

“Profits of UA were further impacted by mark-to-market losses on its equity investment portfolio due to a decline in the stock market,” the statement said.

JKH’s hotel business was impacted by lower occupancies in the city hotels sector due to the increase in room inventory within Colombo and the closure of Cinnamon Hakuraa Huraa Maldives for the construction of a new hotel.

JKH’s property business was impacted since the previous year included a one-off revenue recognition at Rajawella Holdings Limited on the sale of leasehold rights and lower fair value gains on investment property in 2018/19 in comparison to 2017/18.

“The performance for the quarter also included an exchange loss at the holding company as a result of the appreciation of the rupee, in comparison to an exchange gain in the fourth quarter of 2017/18.”

Sri Lanka's Cinnamon Life project costs rise amid delay

PROGRESS: The structural works of Cinnamon Life is complete.

ECONOMYNEXT - Cinnamon Life, promoted by Sri Lanka's John Keells Holdings Plc, said cost were up 10 from the original 805 million US dollars and the commercial, hotel and residential development would be completed by 2021.

"The date for project completion now takes into account the staggered opening of some elements of the project and completion of all works including the detailed interior design work," Chairman Krishan Balendra told shareholders.

"Accordingly, the completion dates of the residential and office towers will be March 2020, whilst the operations of the hotel and retail mall are expected to commence in March 2021."

In 2013 the project was expected to finish in 2018.

The 805 million US dollar estimated was without taxes and interest costs he said.

In 2013, the firm said the cost is estimated at 820 million US dollars.

At the time the rupee was at 131 to the US dollar. Since then the central bank has busted the rupee to 176 to the US dollar, through a combination of policy errors and deliberate real effective exchange rate targeting.

The central bank with its unstable soft-pegged exchange rate is perhaps the biggest economic challenge to the people, analysts have said now that a 30 - year civil war has ended.

John Keells said its apartments priced in dollars was seeing weaker demand after a recent rupee collapse.

The pre-sales of the Residential Towers; "The Suites of Cinnamon Life" and "The Residencies at Cinnamon Life" was 65 percent of total floor area, despite the general slowdown in the residential market.

"Given the steep depreciation of the Rupee and the political disruption in the country during the last quarter of 2018, the traction on the apartment and office sales has been subdued," Balenda said. "The momentum is expected to improve as completion draws nearer.

The total revenue from the sales of the residential apartments and 10 floors of the commercial office space of the "Cinnamon Life" project is estimated to be 250 million US dollars.

The dollar sale price however hedges the US dollar borrowings. The repayments of a 395 million US dollar loan has been had also been delayed to match the delay, he said.

Sri Lanka’s Dialog Axiata stems voice revenue decline, data grows strongly

ECONOMYNEXT – Sri Lanka’s dominant mobile phone operator Dialog Axiata has said it managed to stem the fall in voice revenue in 2018 while data sales rose strongly.

“While local voice revenues remained stable, the emerging segments of mobile broadband, fixed and digital services contributed significantly to the overall profile,” Dialog Axiata group chief executive Supun Weerasinghe said.

Mobile broadband sales rose 32 percent in 2018 from the year before while revenue from fixed and digital services grew 29 percent, he said.

“Revenue growth combined with our continued focus on operational improvements led to group EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) growing 28 percent year-on-year to 43.5 billion rupees for the 2018 financial year,” he told shareholders in the company’s annual report.

Dialog Axiata group EBITDA margin rose slightly to 39.8 percent in 2018 from the previous year.

The annual report’s operations review said that despite the continued threat from ‘Over-the-Top’ (OTT) services, voice revenue experienced only a moderate decline of one percent in 2018 from the year before.

New customer acquisitions from aggressive regional campaigns and successful new product launches supported the sustenance of voice revenue, it said.

“Data revenue continued its strong growth momentum during the year to record a growth of 32 percent year-on-year driven by continued increase in smartphone penetration, 4G device penetration supported by rapid 4G conversion, coverage expansion and upgrades to data related infrastructure.”

Weerasinghe said that in 2018, Dialog’s mobile business continued to strengthen its market leadership, adding about a million subscribers to reach a mobile subscriber base of 13.8 million as at December 2018, up eight percent from the previous year.

Sri Lanka’s Hemas Holdings March quarter net profit up 47-pct

ECONOMYNEXT – Sri Lanka’s Hemas Holdings group net profit rose 47 percent to 863 million rupees in the March 2019 quarter from a year ago with its consumer business in the red and lower earnings from healthcare while tourism profits almost doubled.

Hemas Holdings group chief executive Steven Enderby said they were concerned about the impact of April suicide bombings of churches and hotels and communal unrest on domestic consumer demand.
.
Quarterly earnings per share were 1.45 rupees, interim accounts showed. The share was trading at unchanged at 69 rupees

In the financial year to 31 March 2019, EPS was 5.65 rupees with net profit up 25 percent to 3.4 billion rupees and sales up 29 percent to 64 billion rupees

Quarterly sales rose almost seven percent to 16 billion rupees in the March 2019 quarter from a year ago while cost of sales rose 4.4 percent to 10.4 billion rupees with gross profit up 11.7 percent to 5.6 billion rupees.

The accounts showed the Hemas group consumer business slipped into the red in the March quarter with a loss of 70 million rupees compared with net profit of 110 million rupees the previous year.

Net profits from Hemas group’s healthcare business, its biggest, were slightly lower at 503 million rupees in the quarter while profit from its hotel and travel business almost doubled to 403 million rupees.

Profit from the group’s mobility business fell sharply to 59 million rupees from 146 million rupees the year before.

“Profitability during the fourth quarter was challenging due to duty increases coupled with currency devaluations impacting the price of raw materials,” Hemas Holdings group chief executive Steven Enderby said.

“Marketing and trade spends were higher in the quarter as we invested behind the line-up of relaunches brought to market during late Q3.”

Enderby said Hemas group’s healthcare business profits fell during the year but began to recover in the fourth quarter when the rupee appreciated by four percent against the US dollar.

Hemas pharmaceutical distribution saw strong sales growth stemming from the latest addition of new principals last year and continued efforts to improve the existing portfolio.

“However, the impact of price regulation and significant currency depreciation continues to compress margins,” Enderby said.

“Additionally, the increase in interest costs from working capital funding added to pressure on earnings.”

Enderby said Hemas was “reviewing every cost to see how we can reduce losses from the decline in tourist arrivals” after the April bombings.

“We are also concerned about the impact of the terrorist events and communal unrest on domestic consumer demand.”

Sri Lanka stocks slip in thin trade; rupee edges up

Reuters: ** Sri Lankan shares fell for the second straight session on Monday in thin trading volume amid worries over economic slowdown and lack of investor appetite for risky assets. 

** Traders said the Easter day bombings and aftermath violence weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters on Tuesday. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The International Monetary Fund (IMF) on May 14 approved the disbursal of a $164 million tranche of a loan programme, bringing the total disbursed to more than $1.16 billion. 

** The benchmark stock index ended 0.07% weaker on Monday at 5,291.49. It rose 0.67% last week, recording its first weekly gain in three. The bourse has fallen 12.6% so far this year. 

** Turnover was 444.6 million rupees ($2.52 million), less than this year’s daily average of around 548.6 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors bought a net 183.1 million rupees worth of shares on Monday, but they have been net sellers of 5.7 billion rupees worth of equities so far this year. 

** The rupee ended slightly firmer at 176.20/30 per dollar, compared with Friday’s close of 176.30/45, market sources said. 

** Analysts, however, expect the currency to weaken as money flows out of stocks and government securities. 

** The rupee fell 0.23% last week but is up 3.6% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors bought a net 2.1 billion rupees worth of government securities in the week ended May 22, but the island nation saw a net foreign outflow of 19.1 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

($1 = 176.2000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka stocks snap 5 days of gains in light trade; rupee steady

Reuters: ** Sri Lankan shares snapped five straight sessions of gains on Friday in low trade amid worries over economic slowdown and lack of investor appetite for risky assets. 

** Traders said the Easter day bombings and aftermath violence weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters on Tuesday. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The International Monetary Fund (IMF) on May 14 approved the disbursal of a $164 million tranche of a loan programme, bringing the total disbursed to more than $1.16 billion. 

** The benchmark stock index ended 0.2% weaker on Friday at 5,295.11. But it rose 0.67% for the week, recording its first weekly gain in three. The bourse has fallen 12.5% so far this year. 

** Turnover was 283.6 million rupees ($1.61 million), around half of this year’s daily average of around 549.8 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors sold a net 70.2 million rupees worth of shares on Friday, extending the year-to-date net foreign outflow to 5.9 billion rupees worth of equities. 

** The rupee ended steady at 176.30/45 per dollar, market sources said. 

** Analysts, however, expect the currency to weaken as money flows out of stocks and government securities. 

** The rupee fell 0.23% during the week but is up 3.6% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors sold a net 433.2 million rupees worth of government securities in the week ended May 15, extending net foreign outflow to 21.2 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

($1 = 176.3000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka stocks edge up in light turnover; rupee up

Reuters: ** Sri Lankan shares closed slightly firmer on Thursday and extended gains into a fifth session, but trading volume slumped to a near five-month low amid worries over economic slowdown and lack of investor appetite for risky assets. 

** Traders said the Easter day bombings and aftermath violence weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters on Tuesday. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The International Monetary Fund (IMF) on May 14 approved the disbursal of a $164 million tranche of a loan programme, bringing the total disbursed to more than $1.16 billion. 

** The benchmark stock index ended 0.19% firmer on Thursday at 5,305.80. It fell 1.28% last week. 

** Turnover was 83.5 million rupees ($473,490), the lowest since Jan. 4 and well below this year’s daily average of around 552.6 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors sold a net 8.4 million rupees worth of shares on Thursday, extending the year-to-date net foreign outflow to 5.8 billion rupees worth of equities. 

** The rupee ended 0.2% firmer at 176.30/45 per dollar, compared with Wednesday’s close of 176.65/80, on exporter dollar sales, market sources said. 

** Analysts, however, expect the currency to weaken as money flows out of stocks and government securities. 

** The rupee gained 0.1% last week and is up 3.4% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors sold a net 433.2 million rupees worth of government securities in the week ended May 15, extending net foreign outflow to 21.2 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

($1 = 176.3500 Sri Lankan rupees) 

(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Subhranshu Sahu)

Sri Lanka stocks inch higher in thin trade; rupee weaker

Reuters: ** Sri Lankan shares closed slightly higher on Wednesday, extending gains into a fourth session, but trading volume slumped to a near three-week low. 

** Traders said the Easter day bombings and aftermath violence weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters on Tuesday. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The International Monetary Fund (IMF) on May 14 approved the disbursal of a $164 million tranche of a loan programme, bringing the total disbursed to more than $1.16 billion. 

** Sri Lanka’s economy should still grow 3.5% this year and there has not been a revision yet, the IMF added on Thursday. 

** The benchmark stock index ended 0.08% firmer on Wednesday at 5,295.68. It fell 1.28% last week. 

** Turnover was 127.4 million rupees ($721,404), the lowest since May 3 and well below this year’s daily average of around 557.8 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors sold a net 30 million rupees worth of shares on Wednesday, extending the year-to-date net foreign outflow to 5.8 billion rupees worth of equities. 

** The rupee ended 0.23% weaker at 176.65/80 per dollar, compared with Tuesday’s close of 176.25/40, market sources said. 

** Analysts expect the currency to weaken as money flows out of stocks and government securities. 

** The rupee gained 0.1% last week and is up 3.4% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors sold a net 433.2 million rupees worth of government securities in the week ended May 15, extending net foreign outflow to 21.2 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

($1 = 176.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka Bank of Ceylon net down 12-pct in March; balance sheet shrinks

ECONOMYNEXT - Profits at Sri Lanka's state-run Bank of Ceylon, the country's largest commercial bank fell 12 percent in the March 2019 quarter to 4,179 million rupees as credit losses picked up and loans contracted, interim accounts showed.

Interest income grew 17 percent to 54.9 billion rupees and interest expenses grew at a slower 12.6 percent to 35.7 billion rupees, helping net interest income grow 26.3 percent to 19.1 billion rupees.

Loans contracted 2.1 percent to 1,429 billion rupees from December to March.

Credit losses grew 60 percent from a year earlier to 3,916 million rupees.

From December to March gross non-performing loans grew to 4.66 percent from 3.62 percent.

Fee income grew 24.6 percent to 2,249 million rupees.

Group gross assets fell 2.5 percent to 2,254 billion rupees. At bank level gross assets fell 2.7 percent to 2,207 billion rupees.

But net assets grew 3 percent to 125 billion rupees. Capital adequacy fell to 14.21 percent from 14.58 percent over the three months.

Sri Lanka’s Teejay Lanka March quarter profit up, cotton yarn prices stabilise

ECONOMYNEXT – Teejay Lanka’s net profit rose three percent to 3.4 million US dollars in the March 2019 quarter from a year ago as the cost of its main raw material, cotton yarn, stabilised and product prices were raised.

The Sri Lankan fabric supplier’s sales in the quarter were up 15 percent to 49 million dollars, interim accounts filed with the stock exchange showed.

Growth in profits and sales were higher in Sri Lankan rupee terms, owing to currency effects. The rupee fell sharply against the dollar in 2018 but recovered somewhat this year.

March quarterly earnings per share were 86 Sri Lankan cents. Teejay Lanka’s share closed at 29.90 rupees Thursday, down 20 cents or 0.7 percent.

In rupee terms, Teejay Lanka’s net profit rose 19 percent to 606 million rupees in the March 2019 quarter from a year ago with sales up 35 percent to 8.8 billion rupees.

Stock brokers Bartleet Religare Securities said strong performance in Teejay Lanka’s Indian unit aided the top line growth which is mainly owing to the expanded capacity resulting in volume growth and on improved utilization rates.

“USD top line too witnessed an increase of 15 percent year-on-year to USD 49 million, however a three percent appreciation in the Sri Lanka rupee would have limited further growth in the group’s top line, we believe.”

In the financial year to March 2019, Teejay Lanka said EPS was 2.65 rupees with sales up 29 percent to 31.8 billion rupees and net profit up 17 percent to 1.9 billion rupees.

Teejay Lanka Chairman Bill Lam said in a statement described the year as “a very successful” one for Teejay, in which the group overcame challenging global market conditions through capacity expansion and internal measures.

“Prices of our main raw material, cotton yarn, increased in the beginning of the year and stabilised during Q4. Dyes and chemical costs increased significantly due to the challenges faced by the suppliers,” he said.

“We also saw utility prices increase during the year which was directly attributable to the global movement of fuel prices. Through process improvements and price revisions on finished goods, we were able to mitigate part of the cost escalation.”

Sri Lanka and London Stock Exchange in MOU to promote bond trading

ECONOMYNEXT - London Stock Exchange Group and Colombo Stock Exchange has signed a memorandum of understanding to help develop an offshore market for rupee and dollar bonds.

LSEG said it will help CSE with developing a debt market and an offshore market in rupee bonds and FTSE Russell guidance in capital market classification and index inclusion.

Sri Lanka this year sold 2.4 billion US dollars of sovereign bond which are also traded in London.

Nikhil Rathi, CEO, London Stock Exchange Plc and Director of International Development, LSEG the memorandum of understanding will pave the way to work with the CSE and bring greater investments to the country.

Ray Abeywardena, the Chairman of CSE said: “Our two institutions share an excellent working relationship built on trust and mutual respect, which has paved the way for successful engagements in multiple initiatives over the years. The foray that we are jointly forging today is an extension of that relationship.

"The scope of the MoU paves the way for a number of new avenues of cooperation between the CSE and LSEG along with our respective depositories and will immensely advance CSE’s visibility and connectivity to international markets," CSE chairman Ray Abeywardena said.

Mark Field UK Minister of State for Asia and the Pacific, Sri Lanka's High Commissoner in London Manisha Gunasekara, Central Bank Governor Indrajit Coomaraswamy, Governor, Ranel T. Wijesinha, Chairman, Securities and Exchange Commission of Sri Lanka and Rajiva Rajeeva Bandaranaike, CEO, Colombo Stock Exchange were at the signing.

Sri Lanka's EPF enters stock market with blood in the streets

By Chandeepa Wettasinghe


ECONOMYNEXT - Sri Lanka's 2.3 trillion rupee state-managed Employees' Provident Fund, has returned to the Colombo Stock Exchange, Central Bank Governor Indrajit Coomaraswamy said with the benchmark index hitting seven year lows.

"The EPF has bought shares in one company last week," Governor Coomaraswamy told EconomyNext.

The governor said that EPF policy does not allow him to disclose the new investment.

Coomaraswamy said one of the main reasons for the EPF to enter the secondary stock market was due to the market currently being at a seven-year low, following a market crash after Easter Sunday bombings.

On May 16, Sri Lanka's stocks were valued at a price to earnings multiple of 8.3 times on historical earnings, though banks and some other firms are taking a beating, with forward multiples set to fall, though there are value stocks to pick, analysts say.

Stocks have been hit by political unrest, liquidity shortages and a slowing economy.

Coomaraswamy declined to name the stock EPF was buying, though there was speculation that Dialog Axiata, Piramal Glass or John Keells Holdings may have been the target.

"The Monetary Board has approved the EPF Investment Committee to purchase shares in a small list of companies, which will be added to as time goes on," Coomaraswamy said.

"The investments will be made cautiously. The Monetary Board has approved the Investment Committee to invest up to 6 percent of the portfolio in equity."

At the end of 2018, around 92 percent of the 2.3 trillion rupee fund was invested in government securities, 3.3 percent in equity, 1.9 percent in corporate bonds and 1.5 percent in fixed deposits.

The fund was growing by around 300 billion rupees a year, while government borrowing requirements are shrinking, Coomaraswamy said.

"The new investment policy framework is still being finalized, and we are adding new things to it from time to time," he said.

"We can't invest more in fixed deposits, because that may interfere with our monetary policy stance," he said.

"That narrows the options we have for investment."

Coomaraswamy had in the past months described the Sri Lankan stock market as going through a 'fire sale'.

The EPF largely stayed off the market, except for some sporadic sales, after coming under fire for being a 'buyer of last resort' around 2011 in particular at peak valuations amid charges of corruption by dealers.

Sri Lanka Singer group in the red in March quarter

ECONOMYNEXT - Singer (Sri Lanka) Plc, a consumer durables group which also has a financing arm made an eight million rupee loss in the March 2019 quarter, against a profit of 153 million rupees a year earlier, amid weak sales growth and higher financing costs.

The group, a unit of Hayleys Plc, reported a loss of 0.02 cents per share for the March quarter. In the 12 months to March the group reported earning 67 cents per share on total profits of 799 million rupees.

Gross revenues grew 2.9 percent to 14.0 billion rupees in the March quarter from a year earlier, and cost of sales rose 1.4 percent to 9.7 billion rupees.

Direct interest grew 25 percent to 349 million rupees.

Gross profits grew 5.2 percent to 3.9 billion rupees.

Selling and administration expenses grew 14.9 percent to 2.9 billion rupees.

"Additional adverse impacts such as rupee devaluation, increased borrowings due to import restrictions and imposition of 100 percent Letter of Credit margins, higher impairment costs arising from new accounting standards and new levies on financial sector hampered growth potential and profit earnings," Singer said in a statement.

Impairment losses on trade receivables grew to 340 million rupees from 199 million rupees.

The group interest costs, which include its finance company unit, rose to 804 million rupees from 554 million rupees a year earlier.

But there was an exchange gain of 169 million rupees, compared to a loss of 32 million rupees last year.