Sri Lanka shares hit 2-wk closing low ahead of cbank rate review

Reuters: Sri Lankan shares closed at a two-week low in thin trade on Tuesday, led by blue chip shares, as concerns over economic growth and rising interest rates weighed on sentiment ahead of a decision on interest rates by the central bank.

The Central Bank of Sri Lanka is expected to raise key interest rates by at least 25 basis points late on Tuesday, a Thomson Reuters poll showed, as it seeks to reduce downward pressure on the fragile local currency.

The benchmark share index ended 0.5 percent, or 30.20 points, weaker at 6,031.85, its lowest close since March 16.

"There are no positive catalysts to push the market up. The index will come down further with foreign investors exiting intermittently and the expectation of further rate hike," said Yohan Samarakkody, head of research, SC Securities (Pvt) Ltd.

Rising debt, ratings downgrade and outlook revisions by rating agencies, slowing economic growth, a widening fiscal deficit, looming balance of payments crisis, and changes in budget proposals have dented investor sentiment, analysts said.

Rising yields on treasury bills following an unexpected rate hike by the central bank in mid-February have spurred investor appetite for fixed interest rate-bearing assets, dealers said.

Yields on t-bills are hovering near 29-month highs after jumping between 116 and 195 basis points since the central bank raised key policy rates by 50 basis points from a record low on Feb. 19.

Shares in conglomerate John Keells Holdings Plc fell 1.7 percent, while Distilleries Company of Sri Lanka Plc fell 2 percent.

Turnover was 273.6 million rupees ($1.85 million), its lowest since Feb. 11 and around a third of this year's daily average of 774.9 million rupees.

Foreign investors bought a net 52.8 million rupees worth of shares on Tuesday, but they have been net sellers of 2.06 billion rupees worth shares so far this year. 

($1 = 147.5000 Sri Lankan rupees) 

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

Sri Lanka shares fall ahead of policy meeting

Reuters: Sri Lankan shares fell on Monday from a more than three-week closing high hit in the previous session ahead of a central bank policy meeting, while concerns over economic growth and rising interest rates also dented sentiment.

The Central Bank of Sri Lanka is expected to raise its key interest rates by at least by 25 basis points on Tuesday, a Thomson Reuters poll showed, as it seeks to reduce downward pressure on the fragile local currency.

The benchmark share index ended 0.5 percent, or 30.40 points, weaker at 6,062.05, after posting its highest close since March 1 on Thursday. Sri Lankan markets were closed on Friday for a local holiday.

Foreign investors sold a net 58.3 million rupees ($396,060) worth of shares on Monday, extending their net selling so far this year to 2.12 billion rupees.

"Investors are very cautious and are waiting for the outcome of the policy meeting," said Reshan Kurukulasuriya, chief operating officer at Richard Pieris Securities Pvt Ltd.

Sri Lanka's economy is expected to expand 5.3 percent in 2016, government data showed last week, but analysts say tight monetary and fiscal policies may curb growth.

Rising yields on treasury bills following an unexpected interest rate hike by the central bank in mid-February, have spurred investor appetite for fixed interest rate-bearing assets, dealers said.

Yields on t-bills are hovering near 29-month highs after jumping between 116 and 195 basis points since the central bank raised key policy rates by 50 basis points from a record low on Feb. 19.

Lion Brewery Ceylon Plc shares fell 8.20 percent on Monday, while conglomerate John Keells Holdings Plc dropped 0.99 percent.

Turnover was 397.4 million rupees, a little more than half of this year's daily average of 784 million rupees.

Lackadaisical trend in Sri Lanka vehicle registrations in Feb: JB Sec.

(LBO) – The lackadaisical trend from January has continued into February with the 70 percent LTV rule, significant increases in tariffs, continuing weakness in the rupee, surprising strength in the Yen and rising interest rates have retarded volumes, JB Securities said in a research note.

Vehicle registrations February 2016

Motor car registrations recorded 2,897 units in Feb marginally up from 2,888 units a month ago and significantly down from 4,138 units 12 months ago. As a point of reference the number was 10,084 units in Nov and 14,544 units in Sep last year.

Brand new segment registrations recorded 1,066 units in Feb marginally up from 1,023 units the previous month and also down from 1,920 units recorded 12 months ago.

Maruti recorded 523 units in Feb recovering from its 20-month low of 255 units recorded the previous month but still lower than 1,496 units recorded 12 months ago. As a point of reference Maruti registrations recorded 5,631 units in Nov and 8,029 units in Sep last year.

Micro registrations also crashed to 182 units in Feb from 415 units the previous month but up from 142 units 12 months ago. Tata recorded 109 units of which 62 units were Nano Twist and 33 units were Indica.

Preowned car segment registrations recorded 1,831 units in Feb marginally down from 1,863 units a month ago and significantly down from 2,218 units 12 month ago.

Toyota recorded 689 units in Feb marginally down from 709 units in Jan and Suzuki recorded 666 units in the month marginally down from 673 units in Jan. Financing share was 64.3% recovering from 62.3% the previous month but still down from the high 60s in the previous 9 months.

Premium brands recorded 37 units in Feb (lowest in the past 24 months), lower than 37 units the previous months and 104 units 12 months ago.

Mercedes recorded 8 new units (C-class 2, E-class 2 and S-class 3) and 14 pre-owned units (C-class 5 units, E-class 3 units). BMW recorded 1 new unit (3- series 1) and 7 preowned units.

Electric cars recorded 155 units in Feb down from 173 units the previous months but up from a mere 13 units 12 months ago.

Nissan Leaf accounted for 147 of the units registered in Feb down from 165 units in Jan. Records show 2 Tesla Model S’ – this puts the total on the road at around 13 – not bad for Sri Lanka.

SUV registrations recorded 571 units in Feb marginally up from 563 units the previous month and down from 818 units 12 months ago.

Nissan maintained its leadership recording 183 units (Hybrid X trail 176), Mitsubishi recorded 96 units (Outlander 71, Montero 25), Toyota recorded 110 units (Prado 97, Harrier 10), Honda 81 units (Vezel 78).

This category has not witnessed the same level of deceleration that many other categories have witnessed primarily due to the strong performance of two hybrid models – Nissan X Trail Hybrid and Mitsubishi Outlander Hybrid.

What is also surprising is that 97 units of Prado were registered although they may have been imported a few months ago – these vehicles currently retail around LKR 15-20 million each, 40% have been bought for cash and the balance on finance.

Hybrid registrations recorded 2,004 units in Feb marginally up from 1,934 units the previous month and 2,727 units 12 months ago.

Suzuki Wagon R recorded 623 units marginally down from 630 units but significantly down from the record set in Sep of 1,638 units.

Toyota cars recorded 647 units marginally up from 624 units recorded the previous month but significantly down from the record set in Sep of 1,859 units – Aqua accounted for 205 units, Axio for 326 units followed by Prius accounting for 96 units.

Van registrations recorded 364 units in Feb marginally up from 360 units the previous month and 51% of the units recorded 12 months ago.

Toyota recorded 141 units in Jan significantly down from the record set in Sep of 585 units and Suzuki recorded 71 units also significantly down from the record set in Sep of 585 units. Financing share was 75%.

3-wheeler registrations recorded 2,909 units in Feb down from 3,468 units in Jan and 7,794 units 12-month ago. For brevity I will repeat what I said last month – this is the lowest monthly registration recorded in the past 5.5 years – similar low points were 3,577 units in May 2012 after the precipitous depreciation of the currency and 3,731 units in Nov 2009.

The combination of higher tariffs that increased the price of a 3-wheeler to LKR 600,000 and 70% LTV rule has increased the initial down payment to LKR 180,000 – a sum too large for most buyers.

Many 3-wheeler buyers view it as both a consumption and production asset, i.e. partly for their own use and partly to be used for hires to generate sufficient income to pay the monthly lease. Financing share recorded 84.7%.

2-wheeler registrations recorded 21,487 units in Feb marginally up from 21,397 units the previous month but down from 12-months ago of 25,155 units.

Hero that had performed exceptionally well towards the latter end of 2015 commanding a market share of over 30% has declined to 16.5%, Bajaj had regained its share to 34.1% in the month recovering from the mid-20s during the latter part of the year. Financing share increased to 60.2% one of the highest levels in the last 24 months.

Pickup truck registrations recorded 194 units in Feb down from 269 units the previous month and 518 units set 12 months ago.

Tata recorded a commanding market share of 64.9%, Mitsubishi saw a dramatic slump in demand for its L200 pickup. Financing share rebounded to 79.9% in line with its normal level.

Mini truck (payload < 1 MT) registrations were 747 units in Feb marginally down from 811 units in Jan and significantly down from 1,128 units recorded 12 months ago.

Tata the market leader recorded a share of 69.3% on lower volumes whilst Mahindra commanded a share of 26.6% a decline over 2015. Financing share remained a high 90.8%.

Lite truck (payload < 2 MT) registrations were 506 units in Feb marginally up from 504 units the previous month but up from 410 units recorded 12 months ago.

Mahindra is the market leader with a 65.8% share. Financing share remained at a high 90.7%.

Medium trucks (payload < 5 MT) registrations were 160 units in Feb similar to 159 units recorded the previous month but down from 222 units recorded 12 months ago.

Isuzu is the market leader with 38.8% followed by Mitsubishi with 18.8% and Tata with 17.5%. Financing share was a high 80.6%.

Heavy trucks (payload > 5 MT) registrations were 115 units in Feb up from 106 units the previous month but down from 116 units 12 months ago.

Tata was the market leader with a 49.5% share followed by Lanka Ashok Leyland with 37.6%. Financing share was 89.6%.

Buses recorded 189 units in Jan similar to 189 units the previous month and marginally down from 201 units recorded 12 months ago.

Ashok Leyland is the market leader with a share of 41.3%. Financing share was 85.7%.

Lanka Walltiles to expand into other businesses

By Duruthu Edirimuni Chandrasekera

The Lanka Walltiles PLC (LWL), manufacturer and exporter of wall tiles has plans for expand into other businesses, officials said. ”We want to add another production line and expand into related businesses,” an official told the Business Times.

LWL group bottomline more than doubled to 119 per cent year on year (YoY) in Q3 FY 16 to Rs. 829 million, but this was owing to the Rs. 100 million as the deferred taxation in expectation of corporate tax reduction in the budget. The official said that since this didn’t happen, the Rs. 100 million will be reversed in the 4Q. The tile and associated item segment which was up by 107 per cent YoY pushed this growth.

The aluminum and packaging products played a prominent role in boosting the profit before tax in the 3Q growing 66 per cent and 118 per cent to Rs. 102 million and Rs. 69 million respectively. According to the official, there’s a buoyant demand for construction that would assist LWL’s bottomlines to continue to be stable. He also said that they want to sustain the exports and there’s a strategy to expand LWL’s exports to Queensland, Australia as there’s a boom in the housing market there.

www.sundaytimes.lk

Prime Minister orders an investigation into CSE power failure

(LBO) – Sri Lanka’s Prime Minister has ordered an investigation into the sudden power failure reported recently at the Colombo Stock Exchange.

“Every stock exchange should have back-up power to operate. Today foreign investors asked us how they invest in a market where there is no power to operate,” Premier Ranil Wickremesinghe said.

“That is our biggest issue now. They are more concerned on that; not on our proposed taxes (Capital Gains Tax). This tax is even there in London.”

A power outage resulted in a temporary trading halt of 17 minutes at CSE on 16 March 2016 and the trading was halted at 9.58 am in the morning and restored at 10.15 am.

However, the CSE said trading and all other operations at the CSE have continued for the rest of the day with no interruption.

Sri Lanka sells US$375mn in short term dollar paper, bonds

ECONOMYNEXT - Sri Lanka has sold 375 million dollars in 3 and 6 month paper and 1 and 2 year dollar denominated bonds at an auction Wednesday, where yields edged up, data from the state debt office showed.

The debt office sold 10.3 million dollars 3 month bills at 472.12 basis points fixed, down from 475 basis points on March 09.

The debt office also sold 38.88 million dollars in six month paper, at a floating rate of 407.14 basis points above 6-month London Interbank Offered rate. On March 09, five month paper was sold at 381.22 basis points above Libor.

In one year bonds, 203.46 million dollars were old at 439.2 basis points above 60month Libor, up from up from 430.89 basis points above Libor on March 09.

In 2-year bonds 71 million dollars' worth were sold at 448.73 basis points, higher than 444.58 basis points above Libor paid for 2 years and 1 month paper on March 09.

About 0.04 million dollars of 1 year bonds were also sold at a fixed rate of 525 basis points.

The Sri Lanka Development Bonds are sold to resident and non-resident investors who can hold dollar assets, under Sri Lanka law.

Watawala Plantations, Duxton Asset Management invest in Sri Lankan dairy farm

ECONOMYNEXT – Singapore-based fund manager Duxton Asset Management has tied up with Watawala Plantations to set up a Sri Lankan dairy farm with an investment of 11.5 million US dollars, aiming to improve local yields and replace imported milk products.

Vish Govindasamy, Group Managing Director of Sunshine Holdings, the parent firm of Watawala, said he expects a return on investment of about 17 percent, with the farm using imported cows and expertise on an estate where tea cultivation is no longer profitable.

The two companies will invest total equity of over six million US dollars in almost equal proportions and raise the remaining funds as debt.

The farm, on Lonach Estate, Ginigathhena, will import about 1,000 milking cows and produce about 30,000 litres of milk when running by the end of year, up from 1,500 litres of milk a day now.

“We have to build the farm and import the cows and get them acclimatized to the climate,” he told a news conference.

“Lonach Estate has a lot of workers and because tea is not doing well now, we unable to give them work,” he said. “With the farm coming, we can grow different types of feed stock which means more people will be employed.”

Desmond Sheehy, co-founder and Chief Investment Officer of Duxton Asset Management, said the fund mainly invests in the agricultural field, being the largest investor in dairy in Australia and having also invested in tea in India.

A subsidiary, Watawala Dairy Ltd., will run the dairy farm and will use imported, very efficient cows, and farming expertise to improve local farm practices, he said.

Duxton manages assets of 690 million dollars of which 460 million dollars in agricultural investments

“The dairy operation is expected to further diversity and strengthen the revenue streams of Watawala Plantations, which has benefitted from strategic diversification into palm oil,” a statement said.

“Once in full operation Watawala Dairy will expand its herd to 1,000 dairy cows and is forecast to generate over a billion rupees in revenue from the fourth year of operation” with significant potential for further expansion, it said.