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Dimantha Mathew, Head of Research, at First Capital on the bond and equity market performance – 17.03.2019

Dimantha Mathew, Head of Research, at First Capital on the bond and equity market performance – 17.03.2019

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis

Hiruni Perera, Senior Research Analyst, at First Capital on the bond and equity market performance – 14.03.2019

Hiruni PereraSenior Research Analyst, at First Capital on the bond and equity market performance – 14.03.2019

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research deliver heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

Dimantha Mathew, Head of Research, at First Capital on the bond and equity market performance – 13.03.2019

Investment in Sri Lanka

Dimantha MathewHead of Research, at First Capital on the bond and equity market performance – 13.03.2019

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital is an investment bank offering independent advice and transaction execution relating to capital raising and other strategic needs including mergers and acquisitions for investment in Sri Lanka. The Company’s industry leading transactions are reflective of the ingenuity in enabling the most opportune financing processes for our clients. First Capital’s services for investment in Sri Lanka include a total service for public offers of corporate debt, acting in the capacity of managers/ financial advisors and placement agents, in addition to due diligence, pre-offer preparation, offer management, distribution strategy and after-market advisory services, initial public offerings, secondary offerings such as rights issues, corporate actions including mandatory and voluntary offers, private placements and at-market placements of listed securities.

Nisansala Kuruppumudali, Research Analyst, at First Capital on the bond and equity market performance – 11.03.2019

Share Market Investment in Sri Lanka

Nisansala Kuruppumudali, Research Analyst, at First Capital on the bond and equity market performance – 11.03.2019

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research deliver heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

Want to get an in-depth analysis of the “Budget 2019”?

Daily FT | 07.03.2019

The Budget for 2019 focused on continuing its reform agenda though with a much slower liberalisation policy framework while taking measures to revive and strengthen the local entrepreneur. Heavy focus has been laid on promoting tourism together with investing in transportational infrastructure, education and housing whereas improving revenue collection and mobilisation remained priority.

The Government plans on a sustained path of fiscal consolidation as it aims to enhance the revenue surplus it achieved in 2018 and reduce the budget deficit to 4.4% of GDP for 2019 while the Debt to GDP ratio is expected to improve to 77%.

  • The Government continues with its plans to remove para-tariffs in its process of liberalisation but has laid down a strategy for its implement at a slower pace of three to five years. Reviving local industries especially construction has been targeted with measures to promote local construction and lower construction costs. The Government also expands its existing ‘Enterprise Sri Lanka’ program with enhanced loan schemes at concessionary rates supporting start-up entrepreneurs.  
  • The Budget has a special focus on investing on infrastructure with funds being allocated to initiate the Light Rail project and complete the expressways while continuing and expanding urban housing projects. Human capital development has also been recognised with educational loans for tertiary education and foreign education programs for local university candidates among others.  
  • Capital market development measures are at a minimum within the Budget, only limited to promoting female participation in the boardroom.

1.0 Fiscal Strategy 

The Government’s fiscal strategy is on fiscal management with priority provided for sustained reduction of fiscal deficit and outstanding public debt via enhanced revenue mobilisation. Since 2015 revenue has regained upward momentum while deficit reduction is currently planned at a slower pace.

In previous years budget deficit of 3.5% was targeted as at 2020, but expectations have been reduced to 4.2% deficit in 2020 and finally reaching 3.5% in 2021. Nevertheless fiscal consolidation has continued with utmost focus despite 2019 being an election year.

2019 Budget tax increases are more widespread for the retail market while higher taxation has been targeted from cigarettes, alcohol and tobacco industries while vehicle taxation has also been increased. Though para tariff removal continues to be a focus point, it proposed to be implemented in staggered mode within a three to five year period.

The Government is expected to register a revenue surplus of 1.5% of GDP in 2019. Further, the budget deficit is anticipated to be reduced to 4.4% with Debt to GDP ratio expected to fall to 77.0%.

  • The Government plans to grow total revenue and grants to 15.8% of GDP to Rs. 2,464 b for 2019 with 84% of the revenue expected through taxes, while Taxes on Goods & Services continuing to take the top slot contributing 62.3% of tax revenue and 52.5% of total revenue and grants. Nontax revenue is forecasted to be 10.8% of the total expected Government revenue.  
  • The total planned expenditure for 2019 is Rs. 3,149 b, resulting in 20.2% of GDP, growing from 19.4% of GDP in 2018. Recurrent expenditure is forecasted to be controlled at 76.7% of total expenditure constituting 15.5% of GDP higher 2018 figure of 15.2% of GDP. Salaries and interest payments are expected to be the largest components of recurrent expenditure amounting to 32.2% and 37.8% of recurrent expenditure respectively.  

Government plans on spending public investments at 4.8% of GDP amounting to Rs. 756 b growing from a low of 4.4% of GDP in 2018.   

2.0 Analysis on Appropriation Bill  

2.1 Government expenditure

  • With the aim of narrowing the budget deficit the Appropriation Bill for 2019 projected a total Government expenditure for 2019 to be Rs. 3.1 t (20.2% of GDP) as opposed to Rs. 2.8 t for 2018. The highest allocation of expenditure in the 2019 Budget is for the Ministry of Defence which is Rs. 393.1 b, of which 91% is recurring expenditure (Rs. 356.4 b).
  • The bulk of the Budget’s total expenditure is allocated for recurrent expenditure, amounting to Rs. 1.4 t (15.5% of the GDP). 38.0% of the recurring expenditure reflects interest payments (Rs. 913 b) while 32.0% is allocated for salaries and wages (Rs. 778 b).

Total capital expenditure stands at Rs. 877 b, which is surprisingly less than the interest payments. The highest capital expenditure allocation is for Ministry of Highways and Road Development and Petroleum Resources Development which is allocated Rs. 175 b of capex, which represents 99.7% of its total allocated expenditure. The Finance Ministry has been allocated a sum of Rs. 183.8 b while the Ministry of Provincial Councils and Local Government was allocated Rs. 292.4 b, of which bulk of the expenditure still reflects recurring expenditure. 

2.2 Government revenue changes for 2019  

  • Introduction of Nation Building Tax on manufacture of cigarettes effective from 1 June 2019. Accordingly, Excise Duty on cigarettes which are more than 60 mm will be increased by 12%, resulting in an increase of Rs. 5 per stick on average.
  • Revision of Excise Duty and implementation of Luxury Tax on motor vehicles effective from 6 March. In addition, the 200% cash margin requirements on motor vehicle imports will be removed in the near future. 
  • Revision of Cess Duty on importation of tendu leaves (beedi leaves) from Rs. 2,500 to Rs. 3,500 per Kg, effective from 6 March.
  • Introduction of 3.5% of Nation Building Tax in place of existing Stamp Duty, on all foreign payments made by using any credit cards and debit cards. 
  • Increase of Excise Duty on hard liquor manufactured locally by 8% and malt liquor by 12%.
  • Piece based VAT rate on disposal of garments by BOI approved enterprises will be revised from LKR 75 to LKR 100 on the basis on inflation indexation. 
  • 15% increase of all fees and charges which have not been revised since 2016.
  • Increase of toll on expressways by Rs. 100 during peak hours effective from 1 April.
  • Increase of license fee of casinos from Rs. 200 m to Rs. 400 m per annum and rudjino games to Rs. 1 m per annum. The Casino Turnover Levy will be charged at 15%.
  • A casino entrance fee of $ 50 per person, will be charged.
  • Excise Duty on refrigerators will be revised to 25%.
  • Duty rate will be revised to 40 cts per gram of sugar in excess of the exempt quantity. 
  • Rate of the levy on gross collection will be revised to 15%.
  • Embarkation Levy will be increased by $ 10 to $ 60 per passenger.
  • Unit rate of the Custom Import Duty will be increased by 10% on importation of selected goods.
  • Custom Duty on undenatured ethyl alcohol will be increased by Rs. 200 to Rs. 1,000 per litre

3.0 Budget and the capital market  

3.1 Capital market developments – bills, bonds, corporate debt, equity  

  • Introduce script-less Sri Lanka Development Bonds (SLDBs) and enable coupon stripping of Treasury bonds.   
  • Proposal on encouraging more women representation on corporate boards. The proposed sequencing of introducing mandatory representation of women on corporate boards is as follows; 

i. SEC will introduce a voluntary target of 30% of women in director  boards of companies listed on the CSE. All listed companies shall          disclose the percentage of women on their boards in their Annual        Report.

ii. By 31 December 2020 all listed companies that are unable to meet the 30% voluntary   target will be required to disclose reasons for being unable to do so.

iii. By 31 December 2022 all listed companies shall have at least 20% of board seats occupied by women.

iv. By 31 December 2024 all listed companies shall have at least 30% of board seats occupied by women.

 

3.2 Budget 2019 and listed securities

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research deliver heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

Sri Lanka budget exposes tile firms to more competition, boosts property sector

ECONOMYNEXT |7.03.2019

Tile companies will face more competition with some tariffs lowered or removed in the government budget for 2019 but construction firms will gain from measures to boost property development and infrastructure, an analysis by First Capital Holdings said.

It said the government’s 2019 budget presented to parliament Tuesday continues with its plans to remove para-tariffs in its process of liberalisation but has laid down a strategy for its implement at a slower pace of 3-5 years.

“Reviving local industries especially construction has been targeted with measures to promote local construction and lower construction costs,” the report said.

To support the middle-income, first-time home buyers, the government will launch a concessionary loan up to 10 million rupees at a six percent interest rate with a repayment period of 25 years called “Home Sweet Home” loans.

This budget proposal will benefit listed construction, building material companies, and banks, with increase revenue for construction and related companies and lower default risk for banks, First Capital Holdings said.

The proposal to compel foreign construction companies to form a joint venture with a local firm to be allowed to tender for government projects, unless it is fully foreign financed, should benefit Access Engineering and MTD Walkers, it said.

First Capital Holdings also said the cost of construction will reduce with the proposed para-tariff revisions and the removal of Nation Building Tax on the main construction contractor and the 30 percent reduction in cess on imported construction material.

These proposals should benefit Access Engineering, ACL Cables, Kelani Cables, Sierra Cables, Alumex, Unisyst Engineering, Swisstek (Ceylon), Lanka Walltile, and Lanka Tiles.

“The cost of the infrastructure projects will be reduced by the removal of NBT on the main construction contractor,” the report said. “Reduced cost provides capacity to handle a higher number of projects.”

“Aluminium and cable companies are likely to benefit on the back of lower raw material costs,” First Capital Holdings said. “Tile companies are likely witness increased competition from importers.”

Construction and firms involved in real estate like Overseas Realty and John Keells Holdings will also gain from proposals that will increase demand for apartments by foreigners and those booting infrastructure and property.

Dimantha Mathew, Head of Research, at First Capital on the bond and equity market performance – 06.03.2019

Treasury Bills and Bonds in Sri Lanka

Dimantha Mathew, Head of Research, at First Capital commenting on the bond and equity market performance – 06.03.2019

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research deliver heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Nisansala Kuruppumudali, Research Analyst, at First Capital commenting on the bond and equity market performance – 01.03.2019

Investment in Sri Lanka

Nisansala Kuruppumudali, Research Analyst, at First Capital commenting on the bond and equity market performance – 01.03.2019

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital is an investment bank offering independent advice and transaction execution relating to capital raising and other strategic needs including mergers and acquisitions for investment in Sri Lanka. The Company’s industry leading transactions are reflective of the ingenuity in enabling the most opportune financing processes for our clients. First Capital’s services for investment in Sri Lanka include a total service for public offers of corporate debt, acting in the capacity of managers/ financial advisors and placement agents, in addition to due diligence, pre-offer preparation, offer management, distribution strategy and after-market advisory services, initial public offerings, secondary offerings such as rights issues, corporate actions including mandatory and voluntary offers, private placements and at-market placements of listed securities.

Dimantha Mathew, Head of Research, at First Capital commenting on the bond and equity market performance

Treasury Bills and Bonds in Sri Lanka

Dimantha Mathew, Head of Research, at First Capital commenting on the bond and equity market performance – 28.02.2019

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research deliver heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank, and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.