Sri Lankan shares hit more than 1-wk closing low as rising rates weigh

Reuters: Sri Lankan shares hit a more than one-week closing low on Tuesday, their fourth straight session of losses, as investors sold shares of blue chip companies such as John Keells Holdings Plc amid concerns over rising interest rates.

The Colombo stock index fell 0.2 percent to 6,127.49, slipping to its lowest close since Feb. 9.

"We have seen some interest on retail sector counters," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd. "Investors are mainly waiting for some positive news and now watching the direction of the fixed-income segment."

Yields on treasury bills rose 3 to 10 basis points at a weekly auction on Tuesday. They have risen 44 to 73 basis points since Oct. 7 to more than four-year highs, while the central bank has kept key policy rates on hold.

Conglomerate John Keells Holdings Plc dropped 0.6 percent, while Ceylon Tea Services Plc fell 11.1 percent.

Turnover stood at 300.4 million rupees ($1.99 million), less than half this year's daily average of 616.2 million rupees.

Foreign investors net bought 19.9 million rupees worth of equities on Tuesday, but have net sold 252.8 million rupees worth shares so far this year.

Investors are expected to wait for direction from the outcome of a sovereign bond issue, analysts said.

The Sri Lankan cabinet last week approved a $1.5 billion sovereign bond issue to repay loans and manage interest payments. 

($1 = 151.1500 Sri Lankan rupees) 

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

IFC invests Rs510mn in Sanasa Development Bank

(LBO) – Sri Lanka’s Sanasa Development Bank by way of a private placement has received 510.65 million rupees from International Finance Corporation (IFC) for the proposed fund raising of the Bank.

The bank said that the subscription agreement with IFC for the issue of 3,647,500 ordinary voting shares at 140 rupees per share amounting to a total investment of 510.65 million rupees was executed on February 17, 2017.

Sanasa Development Bank further said in a stock exchange filing that the investment by IFC does not require approval under the monetary board.

“It is within the permissible single shareholder limit stipulated for Licensed Specialized Banks,” Sanasa Development Bank said.

“The CBSL however via its letter dated October 20, 2016 has granted a “No Objection” for the investment by IFC.”

The issue of the said shares is subject to obtaining shareholder approval at a general meeting.

The directors of Sanasa Development Bank have resolved on December 15, 2016 to raise funds from several foreign institutional investors including IFC.

The bank proposed to issue 10,438,143 ordinary voting shares of the Bank at a price of 140 rupees per share resulting in 19.88 percent of the shares of the Bank.

The fund raisings via private placement and subordinated convertible loan facilities are expected to enhance Tier I and Tier II capital levels of the bank and further strengthen the bank’s capital adequacy ratios.

Colombo Stock Exchange Market Review – 20th Feb 2017

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Colombo Stock Exchange Trade Summary 20-Feb-2017

Colombo bourse extended losing streak for the third consecutive day amid price decline in blue-chips. All Share index shed 20.36 index points or 0.33% to end at 6,139.51 while 20-scrip S&P SL index edged lower by 5.56 index points or 0.16% to end at 3,538.07.

Blue-chips namely, Ceylon Tobacco (LKR 815.00, -1.8%) and John Keells Holdings (LKR 145.20, -1.2%) spearheaded the index decline along with price drop in Richard Pieris (LKR 8.10, -8.0%) on its XD.

Daily market turnover reached 729mn supported by negotiated deals which accounted for 46% of the turnover. Dunamis Capital was the top contributor to the turnover with LKR 264mn underpinned by a single crossing of 12mn shares (9.8% issued shares of CSEC) at LKR 22.00. Cargills (LKR 130mn), Hatton National Bank (LKR 92mn) and Hemas Holdings (LKR 86mn) made notable contribution.

Three negotiated deals were recorded in Cargills (0.3mn shares at LKR 195.00) and Tokyo Cement non-voting (0.4mn shares at LKR 54.00).

Losers outweighed the gainers 81 to 46, while 74 Stocks remained unchanged. Pan Asia Bank rights (LKR 0.30, +25%) attracted high investor preference on its renunciation. Central Investments & Finance, Richard Pieris & Company and Pan Asia Bank were among heavily traded counters.

Foreign investors stood on sell side with net foreign outflow of LKR 35mn. Foreign participation was 34%. Net foreign outflows were seen in Cargills (LKR 98mn), Hatton National Bank (LKR 39mn), and Overseas Realty (LKR 1mn). Net foreign inflows were mainly seen in Hemas Holdings (LKR 54mn) and Lanka Tiles (LKR 29mn).
Source: LSL

Sri Lankan shares fall for 3rd session; blue-chips down

Reuters: Sri Lankan shares hit a one-week closing low on Monday, as investors sold shares of blue chip firms such as Ceylon Tobacco Company Plc and John Keells Holdings Plc amid concerns over rising market interest rates.

The Colombo stock index fell 0.33 percent to 6,139.51, slipping for a third straight session to its lowest close since Feb. 13.

"Blue-chips brought the market down. The profit-taking is still continuing and investors are more on a wait and see approach," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"The buying interest is there, but at a lower level. So investors are waiting to buy at cheaper rates."

Shares of Ceylon Tobacco Company Plc fell 1.83 percent, while conglomerate John Keells Holdings Plc dropped 1.22 percent.

Turnover stood at 728.9 million rupees ($4.83 million), more than this year's daily average of 625.5 million rupees.

Foreign investors offloaded a net 34.88 million rupees worth of equities on Monday, extending the year-to-date net foreign outflow to 272.7 million rupees worth of shares.

The market will remain slow for the next few days and many investors will wait for directions from a sovereign bond issue, Mathew said.

The Sri Lankan cabinet last week approved a $1.5 billion sovereign bond issue to repay loans and manage interest payments.

Yields on treasury bills are hovering at a more than four-year high. 

($1 = 150.8300 Sri Lankan rupees) 

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

US bond rate increase good for CSE; not so much for local bonds

Despite being one of the poorest performing markets in the region, Sri Lanka’s stock market which has been in the doldrums has attracted a lot of foreign buying interest since of late.

This heavy investor participation stems mainly from the rate increase in the US bond market. While the rates going up is seeing foreign funds shifting back to the US from frontier markets such as Sri Lanka, a small component of their corresponding funds which invest in stock markets are being ploughed into the Colombo Stock Exchange (CSE), analysts say.

There has been continuous foreign selling in local bonds and as at January 1, 2017 it was US$ 2 million. The new regime under Donald Trump is trying to strengthen the US Dollar and luring back funds to the US.

Atchuthan Srirangan, Senior Research Analyst First Capital Equities noted that on the back of all this, this month’s foreign inflow at CSE was Rs. 600 million as at February 8. Mr. Srirangan said that in the year to date the total foreign participation so far is more than 50 per cent of CSE’s turnover, while for the same period last year it’s 38 per cent.

But why put cash in the CSE?

That’s due to most shares at the CSE trading at 4x their price to Earnings Ratio (PER) which has made these bargain counters for foreign investors. Foreign fund managers say that CSE is a good investment this year owing to superior earnings projections, low valuations and the potential for better earnings.

From January 1 to 8 February, foreigners bought Rs. 7.67 billion and sold Rs. 8.63 billion. While the net outflow is Rs. 1.026 billion, analysts note that some foreign selling was done to foreigners themselves.

Analysts say that a considerable foreign play was done by Norway’s $830 billion sovereign wealth fund, locally managed by Lynear Wealth Management. The fund has been increasing its focus on emerging countries but only has about 4 per cent of its assets managed externally. Negotiated deals were recorded in many counters early this month – mostly blue chips and mid-caps bought by foreign funds — Hatton National Bank (0.7 million shares at Rs. 227) and Commercial Bank (0.2 million shares at RS. 145). The aggregate value of crossings accounted for 45 per cent of the turnover. Subsequent to its scrip dividend announcement, Sampath Bank attracted high investor preference where stock price increased to Rs. 267 up by 0.8 per cent.

On February 2, foreign investors stood on the ‘buy’ side with a net foreign inflow of Rs. 90 million. Net foreign inflows were seen in Commercial Bank at Rs. 29 million, Sampath at Rs. 29 million, Melstacorp at Rs. 17 million while net foreign outflows was mainly seen in Seylan Bank (Rs. 5 million). Foreign participation was 66 per cent.

Hemas Holdings saw 2.8 million shares crossed at Rs. 104 on February 2. Its main buyer in 3Q17 was Morgan Stanley and Co: International PLC. But Franklin Templeton Investment Funds had reduced its position in Hemas during the same period.

Overseas Realty Rights Issue saw a 24 per cent acquisition by Jilansu Tao Shing Pee Education Foundation on February 3. Foreign investors were net buyers with a new foreign inflow of Rs. 27 million on this day and net foreign inflows were mainly seen in Sampath Bank Rs. 35 million, Melstacorp Rs. 13 million and Tokyo Cement non-voting Rs. 12 million. That following Monday foreign investor activity accounted for 47 per cent of the turnover.

The day after foreign investors stood on the ‘buy’ side with a net foreign inflow of Rs. 111 million. Net foreign inflows were seen in John Keells Holdings (JKH) Rs. 51 million, Hemas Holdings Rs. 30 million, and Nestle Rs. 28 million while net foreign outflow was mainly seen in National Development Bank Rs. 4 million. Foreign participation was 52 per cent that day. On February 8 foreign investors were net buyers with a net foreign inflow of Rs. 152 million. Net foreign inflows were seen in JKH (Rs. 103 million), Sampath Bank (Rs. 49 million) and Melstacorp (Rs. 10 million). Net foreign outflow was mainly seen in Hatton National Bank (Rs. 17 million). Foreign participation was 33 per cent.

On February 13, foreign investors were net buyers with a net foreign inflow of Rs. 333.33 million foreign participation was 61 per cent. Let’s hope this trend co continues.

Price controls hit Sri Lanka IOC unit as crude, taxes rise

ECONOMYNEXT - Sri Lanka's Indian Oil Corporation said December quarter profits fell to 80 percent to 257.5 million rupees in the December 2017 quarter from a year earlier, as taxes rose amid price control, interim accounts show.

Profits plunged 82 percent from 1,461 in the September quarter.

The firm reported earnings of 0.48 cents per share for the quarter.

Crude prices which fell to unusual lows of around 38 dollars a barrel in the first quarter of 2016 had risen to around 50 dollars by the fourth quarter with a steep increase taking place in the last quarter, data shows.

Revenues rose to 20.5 billion rupees in the December quarter from 18.1 billion rupees a year earlier, while cost of sales rose to 19.2 billion rupees, from 16.44 billion rupees.

Gross profit fell to 1.2 billion rupees from 1.7 billion rupees.

By end September the firm had 12 billion rupees of inventory, which had reduced to 8.0 billion rupees by December.

The firm said in August customs duty was increased by 6.0 rupees a litre in June 201 and excise import duty by 10 rupees in August.

Sri Lanka was supposed to have a price formula in place by December 2016 to prevent the economy and the rupee and the economy from being hit by credit taken to cover losses, but it did not happen.

Piramal Glass Sri Lanka unit December net up 22-pct

ECONOMYNEXT – Piramal Glass Ceylon said net profit rose 21.7 percent to Rs202 million from a year ago in the December 2016 quarter, the first quarter in operation after a two-month shutdown to upgrade its furnace.

The Sri Lankan container glassmaker's December quarter sales grew 11 percen to almost Rs2 billion over the period, with growth mainly from the domestic market.

Earnings per share for the quarter were 21 cents, according to interim accounts filed with the stock exchange. The share was last traded at Rs5.50.

EPS for the nine months ending 31 December 2016 were 29 cents, with net profit down 39 percent to Rs276 million from the previous year.

A statement said sales grew 6 percent to Rs5.1 billion over the period, with 7 percent growth in domestic sales and a 3 percent increase in export sales.

“During the year, the company’s export portfolio has showed a marked increase in its sales to USA,” it said.

Piramal Glass Ceylon said nine month profits were lower because of higher borrowing costs, the plant closure, and reliance on lower-margin trading and rising gas prices.

“The long-term loan interest cost has yet again started rising from this quarter onwards due to the long-term loan of Rs3 billion obtained for the relining,” it said.

“The plant was inoperative for two months due to relining and hence a major portion of domestic sales were done through trading. Although margins are low, we were compelled to resort to trading to ensure continuity of supply to our customers,” the company said. “The continuous upward trend of LPG prices has a major impact on the cost of production.”