Sri Lanka 01-year Treasuries yield falls

ECONOMYNEXT – The yield on one-year Sri Lankan Treasury Bills fell three basis points to 10.47 percent at an auction on Wednesday from last week, the public debt department of the Central Bank said.

The yield on six-month Treasury Bills eased one basis point to 10.29 percent, while the three-month bill yield remained steady at 9.60 percent, a statement said.

The debt office said it got 62.7 billion rupees worth of bids and accepted bids worth 30 billion rupees.

Anilana’s inflated pricing catches up

By Duruthu Edirimuni Chandrasekera

Anilana Hotels and Properties PLC (Anilana) which has negotiated with Sampath Bank PLC on a repayment schedule to settle its dues some time ago found its public offer application rejected by the authorities, informed sources said.

The company whose Initial Public Offering (IPO) was rejected by the Securities and Exchange Commission (SEC) in 2012 (during the now SEC Chairman Thilak Karunaratne’s earlier tenure in the same capacity) ultimately managed to raise Rs. 486.6 million after the application was approved during the then SEC Chairman Nalaka Godahewa’s time in 2013.

The SEC rejected Anilana’s IPO after accounting watchdog Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) which monitors company financial statements revealed how inflated Anilana’s balance sheet was that it led to their IPO application being rejected, SEC sources told the Business Times.

These are part of the International Financial Reporting Standards (IFRS) and SLAASMB was concerned by IFRS 13 which relates to fair value measurements, the source added.

Anilana’s IPO application had re-valued property at a substantial valuation. SLAASMB, after consulting the Chief Valuer didn’t accept Anilana’s argument that these are the correct estimates as they had bought these lands at a cheap price during the war and now their value had escalated SLAASMB told the SEC not to allow the IPO to proceed.

Defying all this, the IPO was granted the green light a year later and the company is now submerged in debt.

Anilana said that they will settle their overdue portion of the credit facilities at Sampath with an initial lump sum payment and made settlements in two installment on 5th and 9th May 2017 while promising remainder of the overdue balance on or before 31st July 2017.

The company was targeting largely up-market traveller segment with plans to become the leading hotelier in the East Coast.

Anilana in a stock announcement on Monday said the directors already made arrangements to settle Sampath Bank PLC on or before next month end, but didn’t reveal the action plan.

Sampath had published four notices on their Board resolutions to auction mortgaged property in a national daily mid this month – two pertaining to Anilana alone and two regarding Anilana and Eastern Development Enterprises (Pvt) Ltd.

Values of defaulted credit facilities as at February, the notice said amounted to a total of Rs. 1.323 billion, Rs. 404 million, Rs. 130 million, Rs. 744 million and Rs. 45 million.

The firm whose principal activity is developing hotels and properties and has mortgaged land is in Nilaveli, Passikudah and Vakarai.

Last year Dhammika Perera, businessmen and entrepreneur, was trying to buy Anilana’s Trincomalee Property, but the deal full through after the price quoted was too high. The Anilana team wasn’t available for comment.

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Constant Default Board entrees to be delisted from CSE

By Duruthu Edirimuni Chandrasekera

Sri Lanka’s capital market regulators are to take action against publicly listed firms that have a lackadaisical attitude towards rules and regulations.

The Colombo Stock Exchange (CSE) and the Securities and Exchange Commission (SEC) are mulling to strike off/delist errant firms that constantly enter the default board of the CSE, informed sources say.

Most firms enter the Default Board owing to non submission of annual or interim accounts. “The SEC wants to de list these companies who repeatedly offend and get onto the Default Board,” a source told the Business Times. He said that they’re mulling delisting those that enter this board consecutively for three years.

In 2013, 17 companies were transferred to the Default Board with effect from September that year due to Non-Submission of Annual Report 2012/2013.

They were Asia Capital, The Autodrome, Ceylon & Foreign Trades, Central Investments & Finance, C T Holdings, East West Properties, Huejay International Investments, PC House, People’s Merchant Finance, Radiant Gems International, Standard Capital, Asia Asset Finance, Orient Garments, PC Pharma, PCH Holdings, Ramboda Falls and Tess Agro.

Anilana Hotel and properties, Tess Agro Swadeshi Industrial works and East West Properties were transferred last week.

The Asian Development Bank (ADB) with which the government entered into an agreement last year for a loan of US$250 million from the Ordinary Capital Resources Fund of the Bank to implement the Capital Market Development Programme (CMDP) has also strongly advocated this decision, he added.

Under the CMDP it is desired to develop efficient, stable and transparent capital markets that are a highly proficient conduit for resource mobilsation and that are grounded in a strong legal and regulatory framework. Increasing the capacity and size of the capital market through enhanced market facilitation, demand measures and supply measures are also identified as objectives of the CMDP. The ADB is pushing toward s progressive proposals.

The proposed loan by ADB will be disbursed in two tranches of approximately $125 million each, based on the accomplishment of the policy actions relevant for each of the tranches. The Ministry of Finance will be the executive agency of the programme whereas Central Bank, SEC, Sri Lanka Insurance Board and Sri Lanka Accounting and Auditing Standards Monitoring Board will be the implementing agencies.

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Sri Lankan stocks end steady; cbank rate move, foreign buying boost sentiment

Reuters: Sri Lankan shares closed little changed on Friday, but sentiment was positive as the central bank kept key policy rates steady and as foreign investors bought diversified shares such as Hemas Holdings Plc and John Keells Holdings.

The banking regulator said the current monetary policy, which was in line with forecasts, was appropriate as it expected the economy to recover in the second half of the year.

The Colombo stock index ended 0.01 percent firmer at 6,715.33, but fell 0.05 percent on week.

"Unchanged policy rates could be one reason for the positive and healthy atmosphere that was there today," said Dimantha Mathew, head of research, First Capital Holdings PLC.

"It was a very active day with all retail, high networth institutional and foreign investors trading in the market."

Turnover was 2.7 billion rupees ($17.64 million), nearly three times this year's daily average of 921.1 million rupees.

Foreign investors net bought 257.7 million rupees ($1.68 million) worth of shares, extending the year to date net foreign inflow to 21.1 billion rupees worth of equities.

Shares of conglomerate John Keells ended 1.2 percent firmer, while Ceylinco Insurance Plc rose 6.7 percent and Hemas Holdings closed up 1.9 percent.

The markets will be closed on Monday for Id-Ul-Fitr or the Ramzan Festival Day. Normal trading will resume on Tuesday. 

($1 = 153.1000 Sri Lankan rupees) 

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

Sri Lanka Monetary Policy Review – June 2017 - Policy rates Unchanged

Monetary Policy Review: No. 4 – 2017 

With due consideration to the prevailing and evolving domestic and international macroeconomic environment, the Monetary Board, at its meeting held on 22 June 2017, was of the view that the current monetary policy stance is appropriate and decided to maintain the policy interest rates of the Central Bank of Sri Lanka at their present levels. 

The decision of the Monetary Board is consistent with the objective of maintaining inflation at mid-single digit levels over the medium term and thereby facilitating a sustainable growth trajectory. The rationale underpinning the monetary policy stance is set out below. 

According to the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy has grown by 3.8 per cent (year-on-year) in the first quarter of 2017. Growth in the first quarter was weighed down by the impact of unfavourable weather conditions, particularly on agriculture related activities. The performance of industry related activities was largely driven by the continued expansion in construction, while services related activities recorded a moderate growth. The economy is expected to recover during the second half of the year. 

Following the increasing trend in the first quarter of 2017, year-on-year headline inflation, based on both Colombo Consumer Price Index (CCPI, 2013=100) and National Consumer Price Index (NCPI, 2013=100), moderated during the months of April and May, as envisaged. Core inflation has also displayed a similar trend. As the impact of the revisions to the tax structure and weather-related supply disruptions is expected to dissipate in the period ahead, inflation is projected to moderate to mid-single digits by the end of 2017, and stabilise thereafter.

Monetary expansion remained at elevated levels by end April 2017, driven by the expansion in domestic credit channelled to both the public and private sectors from the banking system. The growth of credit to the private sector continued to decelerate gradually. A further deceleration in the growth of credit to the private sector is anticipated, given the prevailing high nominal and real lending rates in the market. The recent expansion in credit obtained by state owned business enterprises (SOBEs) poses a risk to the behaviour of overall domestic credit, reflecting the need to address concerns in relation to the financial performance of key SOBEs. Meanwhile, a decline in net credit obtained by the government (NCG) was observed in the month of April 2017. The continuation of the government’s revenue based fiscal consolidation process and inflows to the government on account of foreign borrowings appear to have reduced the pressure on interest rates in the government securities market substantially. 

Despite improved export performance in March and April 2017, a sustained increase in import expenditure resulted in a wider cumulative trade deficit. Tourism related foreign exchange inflows grew on a cumulative basis, and the decline in tourist arrivals observed in the month of May 2017 is expected to be temporary. Workers’ remittances recorded a slowdown in the first four months of the year, and any further escalation of geopolitical tensions in the Middle East could adversely affect such inflows in the period ahead. A net foreign inflow was observed in the government securities market since March 2017, while inflows to the Colombo Stock Exchange (CSE) also displayed a positive trend. The Central Bank continued to absorb foreign exchange from the domestic market since March 2017 to build up international reserves. In line with these developments and the successful issuance of the International Sovereign Bond as well as the receipt of syndicated loan proceeds by the government, gross official reserves improved to above US dollars 7.0 billion by mid-June 2017. Meanwhile, the Sri Lankan rupee has depreciated against the US dollar by 2.3 per cent during 2017 up to 21 June. 

Against this backdrop, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 7.25 per cent and 8.75 per cent, respectively.

Sri Lankan shares slip from 17-mth high ahead of cbank rate review

Reuters: Sri Lankan shares fell on Thursday in low turnover, retreating from a 17-month closing high, as investors awaited the central bank's monetary policy review.

The central bank is expected to keep its key policy rates steady at more than three-year highs, a Reuters poll showed. The policy announcement is due on Friday at 0200 GMT.

Investors are worried of a possible rate hike, said Jaliya Wijeratne, CEO, First Capital Equities (Pvt) Ltd.

"Only a few counters traded today. Buyers want top blue chip John Keells Holdings, but sellers were not ready to sell at the price buyers wanted."

Keells, outperforming the overall index, ended 0.7 percent firmer.

The Colombo stock index fell 0.3 percent to 6,714.73, slipping from its highest close since Jan. 7, 2016 hit in the previous session.

Turnover was 495.5 million rupees ($3.2 million), about half of this year's daily average of 905.7 million rupees.

Foreign investors sold a net 14.6 million rupees ($95,362) worth of shares on Thursday, but they have been net buyers of 20.86 billion rupees of equities so far this year.

Shares of Ceylinco Insurance Plc lost 6.7 percent, while Hemas Holdings Plc ended 2.3 percent weaker, and BRAC Lanka Finance Plc fell 15.5 percent. 

($1 = 153.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Amrutha Gayathri)

Sri Lankan shares close at 17-mth high ahead of cbank review

Reuters: Sri Lankan shares rose on Wednesday to a 17-month closing high, on gains in financials and food and beverage stocks, ahead of the central bank's policy review later in the week where interest rates are expected to be held steady.

The Colombo stock index gained 0.38 percent at 6,731.25, its highest close since Jan. 7, 2016.

Foreign investors bought a net 259.1 million rupees ($1.7 million) worth of shares on Wednesday, extending the year-to-date net foreign inflow to 20.88 billion rupees in equities.

Turnover was 903.2 million rupees ($5.9 million), compared with this year's daily average of 909.3 million rupees.

"We are getting into a bullish territory again after a slowdown," said Dimantha Mathew, head of research, First Capital Holdings PLC.

"Investors do not expect a rate hike this month and they wait for the policy rate announcement. The overall market is bullish with the hope of no rate hike."

The central bank is expected to keep its key policy rates steady on Friday, a Reuters poll showed.

Shares of conglomerate John Keells Holdings Plc rose 1.2 percent, while Hatton National Bank Plc ended 1.2 percent higher. 

($1 = 153.2000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)