Sri Lanka rupee firmer on dollar sales; stocks climb

Reuters : ** Sri Lanka's rupee closed firmer on Tuesday on banks' dollar sales from inward remittances and on behalf of foreign investors who are purchasing short-term bills, while stocks ended firmer. 

 ** The rupee closed at 180.90/15 per dollar, compared with Monday's close of 181.40/60, market sources said. On Jan. 3, the rupee dropped to an all-time low of 183.00 against the dollar. 

** The currency has appreciated 1.05 percent so far this year. 

 ** Investor confidence in Sri Lanka is stabilising after the country repaid a $1 billion sovereign bond in mid-January, Central Bank of Sri Lanka Governor Indrajit Coomaraswamy told Reuters on Monday. 

 ** However, investors maintained a cautious stance, awaiting cues about the government's borrowing and repayment of foreign loans, analysts told Reuters. The government paid $1 billion five-year sovereign bond borrowing this month. 

 ** Worries over heavy debt repayment after a 51-day political crisis have dented investor sentiment as the county is struggling to repay its foreign loans, with a record $5.9 billion due this year, including $2.6 billion in the first three months. The central bank chief on Jan. 14 said about $5 billion borrowing in the pipeline could help debt repayments. 

 ** The International Monetary Fund on Jan. 16 said it would resume discussions for further disbursal of part of a $1.5 billion loan amid investor worries of heavy debt repayments. 

** The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

** The rupee declined 4.3 percent since a political crisis started in October. That crisis had dented investor sentiment and delayed Sri Lanka's borrowing plans. 

 ** Sri Lanka was plunged into political turmoil when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move was unconstitutional. Wickremesinghe was reinstalled as premier. 

 ** A series of credit rating downgrades after the political crisis made it tough for the island nation to borrow as it faces record high repayments. 

 ** The Colombo Stock Index ended 0.4 percent firmer at 5,997.46 on Tuesday. The bourse dropped 0.16 percent last week, while the benchmark index lost 5 percent in 2018. 

** Turnover was 841.9 million rupees ($4.66 million), more than last year's daily average of 834 million rupees. 

 ** Foreign investors net sold 382.1 million rupees worth shares on Tuesday. They have been net sellers of 2.3 billion rupees worth of stocks so far this year and 15.6 billion rupees since the political crisis began on Oct. 26, 2018. 

 ** The bond market saw an inflow of 4.7 billion rupees in the week ended Jan. 23. But the market saw an outflows of 81.9 billion rupees between Oct. 25 and Jan. 23, the latest central bank data showed. 

($1 = 180.7000 Sri Lankan rupees) 

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

Sri Lanka’s USD200mn development bond issue undersubscribed

LBO – The issue of Sri Lanka development bonds amounting to 200 million US dollars have been undersubscribed with only 182 million dollars of bids received from investors.

Sri Lanka car registrations fell sharply amid currency, political crises

ECONOMYNEXT - New vehicle registrations had fallen sharply November and December when a political crisis gripped Sri Lanka and the rupee came under severe pressure, official data showed.

Sri Lanka's vehicle registration fell to 4,990 in September from 7,003 in August when the rupee came under pressure for a second time in 2018 amid a build-up of unsterilized excessive liquidity mainly from foreign asset purchases after the peg strengthen from a run triggered in April.

Sri Lanka imposed restrictions on car and other goods imports as the currency came under pressure. (Sri Lanka controls imports in 'Nixon-shock' move to protect soft-pegged rupee.)

In October, registrations rose to 5,826 motor cars, while motor cycle registrations rose to 30,889 from 23,914 a month earlier. Motor cycle registrations had averaged around 28,000 to 30,000 in the preceding months.

A political crisis was triggered on October 26, by President Maithripala Sirisena generating uncertainty in the economy and money markets.

In November when the largest foreign exchange market interventions on 500 million US dollars were made and the statutory reserve ratio was also cut injecting liquidity, motor car registrations fell to 3,354 units.

In December motor registrations had dropped to 2,669. Registrations may not correspond exactly to imports, though car dealers attempt not to keep large stocks.

Total vehicle registrations had fallen from 44,036 units in October to 31,358 units in November and to 30,327 units in December.

Motor cycle registrations fell from 30,889 units in October to 22,373 units in November and 22,943 in December.

Sri Lanka's rupee came under pressure from around April 2018 as the central bank stopped mopping up inflows in the first quarter and pumped the banking system of liquidity by an expansion of domestic assets purchases.

The rupee fell from 153 to 161 to the US dollars in the first run, and to 182 in the second run which followed a liquidity spike in August/September.

The falling rupee makes imports expensive compared wages and reduces living standards.

IOC Sri Lanka unit December quarter loss widens to Rs987mn

ECONOMYNEXT – Losses at Indian Oil Corporation’s Sri Lankan unit widened sharply to 987 million rupees in the December 2018 quarter from a year ago, interim accounts filed with the stock exchange showed.

Quarterly sales of Lanka Indian Oil Corporation (LIOC) rose 4.5 percent to 23 billion rupees while cost of sales rose 5.7 percent to 23 billion rupees, during the period.

LIOC lost 1.85 rupees per share in the December 2018 quarter compared with a loss of 64 cents per share a year ago.

LIOC’s share was trading at 21.50 rupees Monday morning, down 1.50 rupees or 6.5 percent from last week.

In the nine months to 31 December 2018, LIOC’s loss per share fell to one rupee from 1.22 rupees the year before with net loss down to 533 million rupees from 652 million rupees.

The December quarter accounts showed LIOC’s was carrying stock worth 10.5 billion rupees, down from 18.8 billion rupees in the September 2018 quarter.

Sri Lanka plantation stocks fall after new pay deal

ECONOMYNEXT- Sri Lanka's publicly traded commercial farms which grow tea, rubber and oil palm, saw prices fall after a new pay deal which industry spokesman said may increase wages by 350 million to 450 million a year on average for each company.

The regional plantation companies announced a collective agreement with trade unions over the weekend which will raise the daily wage of a plantation worker from 500 rupees to 700 rupees.

Voting shares of 10 of 18 listed plantation companies fell Monday.

Udapussellawa Plantations share closed at 29.40 rupees on Monday, down 2.50 rupees from Friday's close, after trading as low as 28.50 rupees

Talawakelle Tea Estate share fell 6.39 percent or 3.70 rupees to 54.20 rupees.

Hatton Plantation shares fell 60 cents to 7.20 rupees, Bogawantalawa Tea Estates down 70 cents to 12.90 rupees and Balangoda Plantations down 1 rupee to 16.20 rupees at Monday's close.

Plantation companies which currently have on average around 7,000-8,000 workers each, are expected to pay out an extra 350-450 million rupees annually after the pay deal, a spokesperson for the Planters' Association which represents estate managers said.

The twenty plantation companies, employing around 154,000 workers, may have to pay up to 9 billion rupees more in labour costs under the new agreement, the association said. Eighteen are publicly traded.

The latest agreement was signed at 11am Monday.

Unions had initially demanded 1,000 rupees in daily wages. Some unions had blocked roads in plantation areas in protest on Sunday and Monday morning, demanding the 1,000 rupees.

In the previous deal, workers got a basic salary of 500 rupees, an attendance allowance of 60 rupees, a productivity incentive of 140 rupees and a price share supplement of 140 rupees.

The new deal has 700 rupees in basic salary, and 50 rupees price share supplement.

A worker would also get 40 rupees for every extra kilo plucked above the 18 kilogramme 'plucking norm' of the field, up from 28.75 rupees in the earlier deal.

The farms grow a mix of crops including, tea, rubber, oil palm and coconut. Tea is the most labour intensive.

There were some concerns that incentive payments aimed at boosting productivity and attendance had been dropped.

Children of plantations worker families are leaving the sector to areas including services where labour is scarce or there had been productivity gains and pay is higher.

Sri Lanka's rupee had been depreciated from 149.80 at the end of 2016, to 182 by the end of 2018, which tends to increase the nominal price of commodities helping offset part of the increase in wages.

Sri Lanka's small holder tea farmers, who own farms and not driven by unions, produce the bulk of tea in the island now. Plantations firms are also trying out models involving contracting out fields.

Tea is mostly exported and is subject to global demand and and also the underlying strength of the US dollar to which Sri Lanka's rupee is loosely pegged.

The rupee however depreciates permanently due to the lack of a consistent monetary policy to support any exchange rate targeting.