Sri Lankan stocks gain for third session; look for cues from budget

Oct 27 (Reuters) - Sri Lankan stocks rose for the third straight session on Monday to a more than one-week high, erasing losses earlier in the day on buying in diversified and banking stocks as investors waited for clarity from last Friday's 2015 budget announcement and cues from company earnings.

President Mahinda Rajapaksa, also the country's finance minister, unveiled a budget that sought to trim value-added tax and cut the deficit while providing a range of handouts, mainly for rural communities.

Sri Lanka's main stock index edged up 0.11 percent, or 7.60 points, to 7,221.08, its highest since Oct.17.

"No big changes as local retail investors are on the watch. They are looking for the proper direction from the budget," said a stockbroker asking not to be named.

The day's turnover was 986.4 million Sri Lankan rupees ($7.55 million), less than this year's daily average of 1.36 billion rupees.

Foreign investors sold a net 2.5 million rupees worth of shares on Monday. They have bought a net 10.81 billion rupees worth shares so far in the year, exchange data showed.

The gains were led by conglomerate John Keells Holdings Plc which rose 0.81 percent to 249.90 rupees, while Dialog Axiata Plc rose 1.67 percent to 12.20 rupees.

Shares in Commercial Bank of Ceylon Plc rose 0.69 percent to 159.80 rupees.

Stockbrokers said trading in local shares may be volatile in the near term due to the revised presidential poll schedule and a possible bottoming out of interest rates.

($1 = 130.7000 Sri Lankan rupee) 

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

Sri Lanka stocks close up 0.1-pct

Oct 27, 2014 (LBO) - Sri Lanka's stocks closed 0.11 percent higher with index heavy John Keells Holdings contributing most to the index gain, brokers said.

The Colombo benchmark All Share Price Index closed 7.60 points higher at 7,221.08, up 0.11 percent. The S&P SL20 closed 10.43 points higher at 4,014.22, up 0.26 percent.

Turnover was 986.45 million rupees, up from 870.70 million rupees last Friday with 90 stocks closed positive against 108 negative.

Nestle Lanka closed 1.00 rupee higher at 2,100.00 rupees with off market transaction of 210.00 million rupees changing hands at 2,100.00 rupees per share contributing 21 percent of the turnover.

Vallibel Power Erathna closed 40 cents higher at 7.00 rupees, attracting most number of trades during the day.

Foreign investors bought 374.85 million rupees worth shares while selling 377.37 million rupees worth shares.

Dialog Axiata closed 20 cents higher at 12.20 rupees and John Keells Holdings closed 1.90 rupees higher at 249.90 rupees, contributing most to the index gain.

JKH’s W0022 warrants closed flat at 73.00 rupees and its W0023 warrants closed 70 cents lower at 76.30 rupees.

Ceylon Cold Stores closed 12.10 rupees higher at 249.40 rupees and Carson Cumberbatch closed 4.20 rupees higher at 448.10 rupees.

DFCC Bank closed 2.90 rupees higher at 218.50 rupees.

Sri Lanka Chamber welcomes budget 2015

Oct 27, 2014 (LBO) –Sri Lanka’s Ceylon Chamber of Commerce welcomes the ‘National Budget of 2015’ which is presented to the parliament last week, the chamber said in a media release.

The Media Release by Ceylon Chamber of Commerce

The Ceylon Chamber of Commerce welcomes the commitment to continued fiscal consolidation in the Budget 2015, particularly the projected lowering of the deficit to 4.6%, which is supportive of macroeconomic stability.

Whilst there is a proposed 15% increase in government expenditure, given the slack in demand in the market recently, a degree of fiscal stimulus can be accommodated without substantial over-heating of the economy.

However, the Chamber encourages the authorities to act quickly and decisively if there are signs of significant deviation from the government’s commendable targets for inflation and the current account of the balance of payments.

Given the proposed changes in VAT, NBT and PAYE taxes and the fact that nearly two-thirds of the proposed new revenue for 2015 has been estimated to come from the refinance facility for collection of tax arrears, meeting the proposed revenue targets may remain a challenge.

It is encouraging to note the gradual shift in the nature of tax incentives away from blanket, long-term tax holidays towards alternatives that are more targeted, such as accelerated depreciation, tax holidays with defined time horizons, and tax concessions that are directly linked to the amount and type of new investments undertaken.

The Chamber welcomes the new initiatives to better link revenue and other state agencies and stronger integration of ICT in revenue collection.

It also supports the proposal to have a one-stop-shop service center at Sri Lanka Customs, which will contribute to improved trade facilitation. These measures will improve the ease of doing business in Sri Lanka, which is often more important than granting tax concessions.

The Chamber acknowledges the positive measures which have already been undertaken to promote exports, including entering into Free Trade Agreements (FTAs).

However, realizing the full potential of these would not be possible without a concerted effort at improving Sri Lanka’s export competitiveness. In this connection, we cannot overstate the importance of encouraging export-oriented foreign direct investment (FDI) into Sri Lanka.

The reduction of electricity tariffs is welcome given that high energy prices are a key factor affecting competitiveness of Sri Lankan enterprises. Moving forward, the Chamber recommends the implementation of a transparent and market-reflective energy pricing mechanism, rather than ad-hoc adjustments.

We also recommend that attention is placed on addressing the quality of electricity supply, particularly issues of power brown-outs and fluctuations, and efficiently meeting the emerging needs of industries.

The Chamber is encouraged by the increased attention to education contained in the Budget 2015, and its emphasis on strengthening Sri Lanka’s potential as a knowledge economy.

The Chamber particularly welcomes the proposals to invest a further Rs. 15 billion in school laboratories; to introduce a scheme of school-based teacher recruitment; to expand skill development and vocational training; and to establish new faculties and degree programmes in science, technology, management and multi-disciplinary studies across several universities in the country.

The Chamber observes that while many of the spending proposals on education are focussed on enhancing access and affordability, a stronger focus on improving the quality and relevance of education at all levels is a critical pre-requisite to increase productivity and competitiveness in order to achieve the ‘Vision 2020’. In this regard, we emphasize the importance of taking a pragmatic approach of public, mixed and private provision of education, training and skills development.

Measures for further public investment in irrigation and reservoir development contained in the budget are welcome, particularly in light of difficulties faced by communities across Sri Lanka during the recent drought.

Additionally, the proposal to improve the availability of water in areas affected by the kidney disease ‘CKDu’ will contribute to the longer-term health and well-being of these communities, which in turn strengthens their economic potential.

Given the changing demography of Sri Lanka’s population and the associated challenges in expanding social safety nets, the Chamber recognises the need for introducing pension schemes as envisaged in recent budgets including Budget 2015.

However, the Chamber cautions against pension systems that are non-contributory and that are occupation-specific, as they could lead to fragmented schemes that experience difficulty in making steady payments, and are expensive and unwieldy to administer. A pension scheme that is professionally managed and sufficiently robust to meet the financial obligations of an ageing population is desired. While recognizing the hardships faced by senior citizens in a low interest environment, we urge the authorities to exercise caution in implementing the proposal for offering a 12% interest on deposits in state banks, to avoid creating distortions that could have a negative impact on the financial sector. Moving forward, the financial needs of senior citizens should be addressed through the development of pension products.

While substantial new financial allocations have been made for various government institutions and development programmes, the Chamber emphasizes the need to accompany them with reform of the operating structures of the institutions utilizing these funds so that the envisaged outcomes can be better realized.

Overall, while acknowledging that any budget must be seen in a policy continuum, and is one in a series of ongoing measures to reach national economic goals, the Chamber observes that the proposals contained in the Budget 2015 must be complemented with measures that help achieve the economic transformation envisaged by the government in its ‘Vision 2020’ and ‘Five Hubs’ strategies.

To achieve this transformation it is also important to avoid the current over-emphasis on subsidies and welfare transfers that have the unintended consequence of keeping people in low productivity and low income-generating economic activities.

Finally, the Chamber encourages the initiation of work towards an accrual-based accounting system for government finances, with a view to full implementation by the year 2020, in line with best practices adopted by other middle-income countries.

Sri Lanka’s vehicle importers’ head explains reduction in vehicle prices

There will be a marked decrease in the prices of motorcars and vans under the below 1000 cc engine capacity due to the new simple tax system introduced through the 2015 Budget proposals, chairman of the Vehicle Importers’ Association of Sri Lanka, Sampath Merinchige told adaderanabiz.lk.

He added that though there could be a slight downward trend in the prices of hybrid and Japanese car, it would not be that significant.

However, they are looking to provide the maximum concessions on these vehicles, said Merinchige.

“There was a great demand for vans. We were unable to import and cater to the demand. The government has taken this into consideration and reduced the duty by about one-thirds. Hence, there are greater opportunities to import vans in the future,” he said.

He added that the vehicle importers had urged the government to implement a simpler taxation on vehicle imports to Sri Lanka and that this request has been implemented through this budget.

According to Sampath Merinchige, this simplified taxation on vehicle imports would reduce the tax evasions and thus increase the government coffers.

The Deputy Secretary to the Finance Ministry told adaderanabiz.lk yesterday that the customs duty on motorcars would decrease by around 20 to 25 per cent and on vans by around 25 to 65 percent due to the new tax amendments imposed through the 2015 Budget proposals.

Deputy Secretary S.R. Attygalle told adaderanabiz.lk that these Budget proposals would be effective from midnight on 24 October and that the prices of motorcars and vans would definitely decrease.

“A special tax has been introduced through this Budget which includes all the duties in the import of motorcars and vans. Hence, the prices of these vehicles would definitely decrease,” said Attygalle.

According to this new tax amendment, the 202 per cent duty on the import of motorcars below 1000 cc engine capacity has been reduced to 173 per cent.

Accordingly, the import duty on small motorcars would decrees by around 29 per cent.

Where vans are concerned, the 175 per cent duty on cargo vans and the 126 per cent duty on 13 to 20 seater vans have been slashed by 100 per cent. 

www.adaderana.lk

Sri Lanka Seylan Bank to issue Rs. 6bn debenture issue

Oct 27, 2014 (LBO) – Sri Lanka, Seylan Bank to issue debenture to raise six billion rupees which will be listed on the Colombo Stock Exchange and a formal application is to be submitted shortly, the bank said in a stock exchange announcement.

The bank plans to offer about 30 million rated senior unsecured redeemable debentures at 100 rupees each.

The bank says it plans to issue another 30 million of said debenture in the event of an over subscription.

The interest rate options and the tenors are to be decided by the board of the bank and will announce prior to the opening of the issue.

The bank issued a listed five debenture issue in early last year and raised two billion rupees.

It offered a fixed rate of 15.5 percent payable annually, a 15 percent fixed rate payable semiannually and a fixed rate 14.5 percent payable monthly.

Capital Market boost expected from tax-linked budget proposals

by Sanath Nanayakkare

The tax exemptions granted to Unit Trusts in Budget 2015 are an incentive given to the Capital Market, financial analysts said at a KPMG-organized session featuring Budget Highlights in Colombo, a few hours after the budget was presented on October 24.

According to this proposal, profit and income arising or accruing to any Unit Trust from investments made, on or after 1, January 2015, in USD deposits or USD denominated securities listed in any foreign stock exchange, will be exempt from income tax.

Meanwhile, First Capital Research in its executive summary on Budget 2015 said, "The electricity tariff reduction will be a positive sign for the overall Capital Market while strong infrastructure development may assist the construction related companies. Certain concessions granted to the plantation sector may also be beneficial to the Capital market."

Another proposal beneficial to the Capital Market is the exemption from taxation on the interest or discount accruing or arising to any person from investment in any Corporate Debt Security issued by the Urban Development Authority, on or after 1 January 2015.

Apart from that, concessionary tax rates granted to the manufacturing sector are seen as a measure to boost competitiveness. According to this proposal, income tax rate payable on profits and income out of local sales by any local manufacturer who has commenced the business of manufacturing during the years of 1970 -1979 and sustained competitiveness in imports, will be reduced by 10%.

Meanwhile, Royalty Payment proposal on IT/BOP will have a positive impact on startups.Profits and income arising or accruing to any company, partnership or body of persons outside Sri Lanka, from any payment made by way of royalty as a specific requirement of any IT/BPO company in Sri Lanka, will be exempt from income tax for a period of two years, from the commencement of such IT/BOP company.

The concessionary tax rate granted to employees is seen as a measure to boost domestic consumption. According to this proposal, maximum income tax rate applicable to all employees will be 16%. Currently, this maximum rate of 16% is applicable only to certain professionals. Effective from 1 April 2015, deductions under PAYE tax will be as follows;

Customs duty and CESS rates to be revised related to the importation of machinery are expected to encourage modernization of industries in BOI companies, where machinery used for more than 10 years and is disposed of, will be granted duty exemption.

Concessionary duty permits to be issued to high-income-earning Sri Lankans working overseas for the importation of motor vehicles to the value of 60% of foreign currency would encourage them to remit money to Sri Lankan banks.

Proposed reduction on import tax on trucks and lorries could have a significant impact on logistical operations, while the 25% Customs-based tax reduction on electric cars is meant to promote the use of electric cars as a way of reducing carbon emissions and saving money on fueling-up.
www.island.lk

Duty change will have little impact on car prices

The re-structuring of import taxes on motor vehicles has had a minimum impact on the prices of cars, but van prices should come down considerably, figures compiled by vehicle importers’ association showed yesterday.

The association compiled the new tax rates under a single charge after President Mahinda Rajapaksa announced in his budget speech the abolition of a plethora of levies and replacing them with single tax.

Under the new system, small hybrid cars will be taxed at 57.5 percent of the CIF value, marginally down from the overall tax rate of 59.74 percent charge earlier.

President Rajapaksa said the new tax structure will earn an additional 5,000 million rupees for the government.

Gasoline powered small cars with an engine capacity of less than 1,000 cc will be taxed at 172.5 percent, down from an effective rate of 201.67  percent earlier. However, the minimum tax of 650,000 rupees applicable on each car means the duty reduction will have little impact on low-end Indian-made cars.

The biggest beneficiary, however, will be vans, with both diesel and gasoline powered vans now charged at 97.75 percent compared to 175.22 percent earlier. The tax cut on vans should see a new flood of these vehicles which were discouraged by the huge taxes in recent years.

Price of a hearse should also come down with a generous tax reduction in this category of slow moving vehicles. A mid-range hearse should now attract a tax of 172 percent, down from 201.67 percent levied earlier. The government had last year removed taxes on modified sports cars used for racing.

Three wheel scooters have had their tax slightly changed in the current budget. The tax of trishaws  go up from 119.76 percent to 120.75 percent. 

www.island.lk