Sri Lankan stocks slip from one-week high; blue chips lead

Reuters: Sri Lankan shares ended slightly weaker on Monday, after hitting one-week closing highs in the previous session, led by falls in John Keells Holdings Plc and Commercial Bank of Ceylon Plc.

The main stock index ended 0.23 percent, or 16.48 points, weaker at 7,089.06, slipping from its highest close since Sept. 25 hit on Friday.

"The bourse opened the week on a negative note despite most counters gaining. This was due to dips on index-weighted counters," TKS securities said in a note to investors.

Foreign investors were net sellers of 60.99 million rupees ($431,940) worth of shares extending the year to date net forging outflow to 2.97 billion rupees.

"Foreign activity was fairly dormant with an outflow recorded for the day," TKS said.

Turnover was 641.1 million rupees, compared with this year's daily average of 1.12 billion.

Shares in conglomerate John Keells Holdings fell 1.06 percent, while Commercial Bank of Ceylon, the country's biggest listed lender, fell 0.50 percent. 

($1 = 141.2000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Anand Basu)

Sampath Bank to raise Rs7bn from listed debenture

(LBO) – Sri Lanka’s commercial bank sector player Sampath Bank is to raise 7.0 billion rupees from a listed debenture issue, the bank said in a stock exchange filing.

Sampath Bank has decided to issue 50 million debentures at 100 rupees each with an option, to issue up to a further 20 million debentures in the event of over subscription, subject to the necessary regulatory approvals.

The bank had two debenture issues in the past two years which raised 11.0 billion rupees.

Last week, a listed debenture offer for island’s state owned Bank of Ceylon was oversubscribed receiving over 8.0 billion rupees worth applications.

Sri Lanka must raise tax revenue, manage pressure on rupee: World Bank

ECONOMYNEXT – Managing pressure on the rupee and raising revenue to reduce the 2015 fiscal deficit are Sri Lanka’s immediate challenges, the World Bank has said in a new report on South Asia’s economic prospects.

“Structural challenges include increasing fiscal revenue and narrowing a persistent current account deficit linked to structural competitiveness issues in the export sector,” the bank said in its latest twice-a-year South Asia Economic Focus report.

Another challenge is that access to cheap funds is dwindling with the country approaching upper middle income status, so borrowing terms are seen as becoming more commercial, which could affect affordability.

That means with limited national savings compared to national investment, Sri Lanka needs to attract Foreign Direct Investment, the report said.

To sustain its high growth path Sri Lanka needs to increase growth in the manufacturing and export sectors, it said.

The World Bank forecast Sri Lanka’s growth will increase to 5.6 percent in 2016 due to higher public sector wages and higher disposable incomes.

But it warned that the looser fiscal stance behind this strong domestic demand is also putting pressure on the external balance.

“Maintaining the growth momentum will require higher tax revenue, rationalized public spending and greater competitiveness.” (

LAUGFS acquires second LPG ship

LAUGFS Maritime Services Ltd., the fully owned logistic arm of LAUGFS Gas PLC, announced the acquisition of their second LPG ship to provide logistic support for the growing LPG demand in the country. 

This latest acquisition comes as LAUGFS celebrates its 20-year anniversary this year, and will mark another important milestone as it strives to expand its presence further across the region. 

LAUGFS’s maiden acquisition of LPG ship MT ‘Gas Challenger,’ with a capacity to carry 3,500 m/tons of LPG, was made one year ago marking its entry into maritime business. 

This second acquisition with a total expected investment of $ 6 million, is named MT Gas Success and will have a capacity to carry 3,500 M/tons of LPG, which will increase logistic capabilities of the company.

“As a company that embodies a truly Sri Lankan identity, we have always focused on extending our horizons beyond national borders, carrying this identity to a regional and global sphere with our strategic business investments and interests,” remarked W.K.H. Wegapitiya, Chairman of LAUGFS Holdings.

He further stated: “Capitalising on the location-specific advantage of being in the center of Indian Ocean, we make our contribution to promote Sri Lanka as the energy logistic hub within the next three years.

Though we are an island nation surrounded with the Indian Ocean, and located in the closest vicinity of the international sea route, very little has been done to make our country a maritime hub. These vessels would not only cater to the domestic requirements of LAUGFS, but also would support regional demands.”

LAUGFS recently announced its ambitious plans to build the largest LPG storage facility within Hambantota Port area, which would act as the central LPG storage hub for the entire region, from which the LAUGFS vessels would deliver LPG to other markets in the region of South and South East Asia.

LAUGFS is one of the largest diversified business conglomerates and a trusted name in Sri Lanka. Founded in 1995, LAUGFS Holdings today has expanded across 20 industries, establishing a strong presence as a leader and pioneer in the power and energy, retail, industrial, services, leisure and the real estate sectors in the country. With over 4,000 employees and an annual turnover exceeding Rs. 28 billion, LAUGFS continues to expand, touching the lives of millions as a trusted Sri Lankan brand.
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Govt. to issue $ 75 m development bonds

The Central Bank has announced that it plans to sell $ 75 million worth of development bonds to foreign and local investors.

The Public Debt Department of Central Bank will issue $ 75 million in Sri Lanka development bonds of one year, three years three months and four years eight months tenor to eligible investors for subscription at a rate of either US Dollar six month LIBOR plus a margin (floating rate) or at a fixed rate to be determined through competitive bidding.

Minimum investment is $ 100,000 with additional investments in multiples of $ 10,000. The bonds are exempted from income tax paid in Sri Lanka.The issue will be open for subscription from 8 to 15 October and has a Date of Settlement of 19 October 2015.

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Sri Lanka up five notches in Global Competitiveness Report

Please click here to read or download 
 - The Global Competitiveness Report 2015–2016

(LBO) – Sri Lanka has moved up five ranks to 68 from 73 in a global index of the world’s most competitive economies for the year 2015-16.

The Global Competitiveness Report 2015-2016 assesses the competitiveness of 140 world economies.

The report, which serves as a reference point for investors worldwide, comes in a year of economic disappointment in emerging markets, whose aggregate growth rate fell from three times that of advanced economies in 2013 to just double in 2015.

Emerging and developing Asia, the report says now accounts for some 30 percent of global gross domestic product, with China alone accounting for 16 percent.

In contrast, no member of the South Asian Association for Regional Cooperation (SAARC) features in the top 50.

India leads the way at 55, followed by Sri Lanka 68, Nepal 100 (up two), Bhutan 105 (down two), Bangladesh 107 (up two) and Pakistan 126(up three).

From China to Brazil, the blistering economic progress of past years has eased as global growth has cooled to its slowest pace since the depths of the global recession in 2009.

Switzerland came in at first for the seventh time running, with Singapore second, the report found.

Southern Europe, India and Germany all charted significant progress in the rankings.

Mixed outlook for market indices – Research

The macro fundamental outlook of Sri Lanka’s stock market, which had been affected by the uncertainty due to a lack of clear policy direction that prevailed in the political front subsequent to the change in Government, now remains mixed, with more positive bias, a top securities research firm said last week.

According to a new Strategy report published by CT CLSA Securities (Pvt) Limited titled ‘Beginning of a Five-Year Express Drive’, despite United National Party (UNP) led coalition government securing victory at the General Elections, the market is currently undergoing a post-election correction, exacerbated by downturn in global markets, led by China, while a consumer sector driven rally in recent times is expected to largely cool off in the near term. Sri Lanka’s stock market indices ASPI and S&P SL20 has declined by 2% and 4% in 2015 Year-to-Date (YTD) respectively compared to sharp gains of 23% and 25% respectively witnessed in the year 2014.

“Declines in commodity prices, particularly oil, are depressing investor appetite for risky assets amid concerns related to global economic health. Prospects for most frontier Asian economies, including Sri Lanka are however brighter than its counterparts in the Middle East and Africa, as net commodity importers,” the report said.

It added that amongst frontier markets, whilst Sri Lanka rates low in scale and liquidity, it also offers relative stability and steady growth. Further, the Sri Lankan stock market is not as closely correlated with global emerging markets and thereby remains relatively insulated.

Foreign participation, which contributed around 30% of total market activity in 2015YTD has resulted in a net foreign outflow of US $22mn in 2015YTD compared to a net foreign inflow of US$169mn 2014.

The report further predicts that treasury bill yields are expected to increase after hitting a record low in 2014, Sri Lanka Rupee is expected to depreciate around 6% by end 2015 and close at Rs.139/US$ while government’s budget deficit to GDP is expected at 5.0% in 2015E (vs. 5.8% in 2014) largely due to reduction of public expenditure.

Here are some key insights extracted from the report:

• Banking & Finance sector: growth to continue primarily driven by SME, micro and mortgage coupled with margin improvement on expected near term higher interest rates. Likely to be impacted by currency volatility with some select players poised to benefit due to maintaining their FCBU operational profits in foreign currency. Upside exists for select LCBs, amid better growth prospects and lower than sector valuations

• Consumer sector : consumer driven rally to largely cool off in the near term with the current momentum of higher spending expected to wane in

1H2016E, led by anticipated tightening measures. High import costs from weaker currency to be partly mitigated by soft commodity prices

• Manufacturing sector: stocks with strong brands and operating efficiencies to benefit from overall pickup in economic activity. Record high margins enjoyed by most are likely to stabilize amid weaker currency and uptick in interest rates.

• Hotel sector: trading at premium valuations. Rising room supply – notwithstanding record high tourist arrivals – and weakening currencies of key tourism markets pressuring both occupancy and Average Room Rates (ARRs).

• Increase in rates on the back of fiscal tightening measures and high global market volatility to result in a market slowdown in the near term.

• With corporates recording strong earnings growth in 1H2015 (+18% YoY), the growth trajectory is expected to continue, supported by favourable policy measures to create near term buying opportunities.

• Current market valuation of ~10X 2015E appear fair in view of ~20% YoY earnings growth.
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