Tag Archives: Capital Markets Research Unit

SRI LANKA FINANCE SECTOR

“In tough conditions Bigger the Better”

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 Content –

FC Research expects finance sector to face moderately tough conditions to operate with thinning margins and new LTV regulations leading to slower and previous but moderate credit growth. Despite slow economic conditions rise in NPLs are likely to be slow amidst price appreciation in vehicle prices as bulk of the lending is attached to vehicles. We believe the larger finance companies have an advantage with lower cost of funding and large conversion levels from leases to loans which improves re-pricing abilities at times of rising interest rates. Sector Recommendation: HOLD

 

Margins to dip but Credit Growth to remain moderate: With rising interest rates and bulk of the lending attached to leases finance sector is likely to experience a dip in margins while credit growth is expected to remain moderate around 16-18% despite deceleration from 2016. New LTV regulations also likely support the slower credit in 2017E.

Upbeat second-hand market vehicle prices to support Lower NPL provisions: Despite rise interest rates and slower economic conditions FC Research expects NPL provisions of finance companies to continue to stay on the back significant price appreciations in the second hand vehicle market. Higher vehicle prices are likely to deter related borrowers from default while even if defaulted higher vehicles prices ensures finance companies of eliminating losses and recovering bad debts.

Selected larger finance companies to perform: Finance companies with better rating and larger asset base tend to have a lower cost of funding while some finance companies have already converted significant portions from loans to leases enabling them to re-price part of the assets in line with interest rates. These two conditions being satisfied enables selected finance companies specifically identified as PLC, CFIN, LFIN, COCR and LOFC to perform better in tough environment. We expect the selected companies to provide an average total return on equal weightage of c.51% during a 12 month period.

 

*Disclosure:

First Capital Group and its affiliates does not hold any shares in PLC, CFIN, LFIN, COCR, and LOFC.  Neither First Capital Group nor its affiliates have traded in the shares of PLC, CFIN, LFIN, COCR, and LOFC in the three trading days prior to this document, and will not trade in the shares of PLC, CFIN, LFIN, COCR, and LOFC for three trading days following the issue of this document

 

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This Review is prepared and issued by First Capital Equities (Pvt) Ltd. and is based on information available in the public domain, internally developed and other sources believed to be correct. Although all reasonable care has been taken to ensure that the contents of this document are accurate, First Capital Equities (Pvt) Ltd and its Directors and employees, are not responsible for its accuracy, usefulness and reliability and disclaim liability for any loss suffered by the use of information contained herein.

First Capital Equities (Pvt) Ltd may act as a Broker in the investments which are the subject of this document or any related investments and may have acted on or have used the information contained in this document, or the research or analysis on which it is based, before its publication.

Sri Lankan shares rise for 3rd session on foreign buying, window dressing

FIRST CAPITAL’S HEAD OF RESEARCH, DIMANTHA MATHEW, SPEAKS TO REUTERS

Thu Mar 30, 2017

Sri Lankan shares rose for a third straight session on Thursday, closing at their highest in more than one week, helped by foreign investor buying and quarter-end window dressing, stockbrokers said.

The Colombo stock index closed 0.31 percent firmer at 6,040.18, its highest close since March 21.

On Monday, it had closed at its lowest since March 15, 2016 after the central bank tightened its monetary policy on Friday by 25 basis points to contain high inflationary expectations.

Stockbrokers said rising interest rates have kept most investors on the sidelines. Yields on treasury bills rose 6-16 basis points at a weekly auction on Wednesday.

“Local buying demand is increasing and the market is moving up on blue chips. Buying interest from the retail side is slowly improving,” said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

“Local buying interest has now started to improve but the foreign side is still dominating.”

Foreign investors net bought shares worth 200 million rupees ($1.32 million) on Thursday, raising the year-to-date net foreign inflow to 4.58 billion rupees in equities.

Turnover stood at 1.18 billion rupees, well above this year’s daily average of 718.3 million rupees.

Shares of Nestle Lanka Plc jumped 4.46 percent, Ceylon Theatres Plc rose 10.30 percent, Ceylon Cold Stores Plc gained 0.82 percent, and Commercial Bank of Ceylon Plc, the country’s biggest listed lender, ended up 0.93 percent.

($1 = 151.8500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management,  retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

Sri Lankan shares hit near 3-wk closing high; post 1st weekly gain in 6

FIRST CAPITAL’S HEAD OF RESEARCH, DIMANTHA MATHEW, SPEAKS TO REUTERS

Fri Mar 31, 2017

Sri Lankan shares closed at their highest in nearly three weeks on Friday, rising for a fourth straight session on purchases by foreign investors and on quarter-end window dressing, stockbrokers said.

The Colombo stock index ended 0.36 percent firmer at 6,061.94, its highest close since March 13. The index rose 1.1 percent on week, posting its first weekly gain in six.

“We are seeing some significant improvement in investor confidence. Local institutions have started to come in to the market. They may be feeling that this is the right time as the market has bottomed out,” said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

“Retail investors are still on wait and see, but the bigger players are getting in with heavy foreign participation.”

Foreign investors net bought shares worth 1.06 billion rupees ($6.99 million) on Friday, the highest net foreign purchases since Dec. 8, raising the year-to-date net foreign inflow to 5.64 billion rupees in equities.

Turnover stood at 1.74 billion rupees, well above this year’s daily average of 734.8 million rupees.

Shares of biggest listed lender Commercial Bank of Ceylon Plc climbed 1.57 percent, while Ceylinco Insurance Plc jumped 6.46 percent and conglomerate John Keells Holdings Plc rose 0.66 percent.

($1 = 151.7500 Sri Lankan rupees) (Reporting by Ranga Sirilal; Editing by Biju Dwarakanath)

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management,  retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

Sri Lankan shares slump to one-year low as banks fall

FIRST CAPITAL’S HEAD OF RESEARCH, DIMANTHA MATHEW, SPEAKS TO REUTERS

Mon Mar 27, 2017

Sri Lankan shares fell to a more than one-year closing low on Monday in dull trade as investors sold shares of lenders after the central bank tightened monetary policy in the previous session, dealers said.

On Friday, the central bank raised its benchmark interest rates by 25 basis points for the first time in eight months to contain high inflationary expectations and a possible acceleration of demand side inflationary pressures.

The Colombo stock index closed 0.36 percent weaker at 5,974.94, its lowest close since March 15, 2016. The index broke below a key psychological barrier of 6,000 on Wednesday.

“Margins (calls) are still affecting the market. Buying interest still hasn’t come back into the market,” said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

“Investors took the rate hike as a positive as it will give some kind of stability in the economy and the hike was less than what they expected. But investors are still waiting for the market to bottom out to get in.”

Turnover stood at 429 million rupees ($12.7 million), less than this year’s daily average of 688.4 million rupees.

The index had lost 2.18 percent since March 7 after the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse fell to “oversold” territory from “neutral”, with the 14-day relative strength index dropping to 27.488 points versus Friday’s 30.480, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 76.3 million rupees on Monday, raising the year-to-date net foreign inflow to 3.89 billion rupees in equities.

Shares in Melstacorp Plc fell 3.06 percent while the biggest listed lender Commercial Bank of Ceylon Plc fell 1.59 percent.

($1 = 151.4000 Sri Lankan rupees)

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Sri Lankan shares fall to 1-yr closing low, rate review in focus

FIRST CAPITAL’S HEAD OF RESEARCH, DIMANTHA MATHEW, SPEAKS TO REUTERS

Thu Mar 23, 2017

Sri Lankan shares fell for a second straight session on Thursday to a more than one-year closing low as expectations of an interest rate hike continued to drag down the market ahead of the central bank’s monetary policy review.

The Colombo stock index closed down 0.3 percent at 5,979.85, its lowest close since March 15, 2016. The index breached a key psychological barrier of 6,000 in the previous session.

“There are no buyers as most of the local investors are on the sidelines awaiting the outcome of the policy review,” said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Sri Lanka’s central bank could raise its key policy rates in the coming months if it skips a chance to tighten at its second monetary policy review of the year on Friday, a Reuters poll showed, two weeks after the International Monetary Fund called for further tightening.

Analysts said investors expected a rate hike.

Turnover stood at 616.4 million rupees ($4.1 million), less than this year’s daily average of 671 million rupees.

The index has lost 2.1 percent since March 7, when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse dipped further into oversold territory on Thursday, with the 14-day relative strength index at 24.614 points versus Wednesday’s 26.758, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 194 million rupees, raising the year-to-date net foreign inflow to 3.26 billion rupees in equities.

The treasury bill rates have risen between 33 to 77 basis points since July 28, when the central bank last raised the key interest rates.

Shares in Asian Hotel Properties Plc fell 2.9 percent, while Lanka ORIX Leasing Company Plc fell 0.8 percent and Sri Lanka Telecom Plc 0.9 percent.

($1 = 151.5000 Sri Lankan rupees)

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

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management,  retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

Sri Lankan shares fall to 1-yr closing low, breaching key barrier

FIRST CAPITAL’S HEAD OF RESEARCH, DIMANTHA MATHEW, SPEAKS TO REUTERS

Wed Mar 22, 2017

Sri Lankan shares fell on Wednesday to a more than one-year closing low, breaching a key psychological barrier of 6,000, as expectations of an interest rate hike continued to drag down the market ahead of the central bank’s policy review.

The Colombo stock index closed down 0.7 percent at 5,996.65, its lowest close since March 15, 2016.

“The market came down mainly on margin calls,” said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

“Investors are expecting a rate hike, so local investors are on the sidelines and only foreign investors are active.”

Sri Lanka’s central bank could raise its key policy rates in the coming months if it skips a chance to tighten at its second monetary policy review of the year on Friday, a Reuters poll showed, two weeks after the International Monetary Fund called for further tightening.

Turnover was boosted by foreign-buying in conglomerate John Keells Holdings PLC and stood at 1.05 billion rupees ($6.9 million), well above this year’s daily average of 672 million rupees.

The index has lost 1.8 percent since March 7, when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse dipped into oversold territory on Wednesday, with the 14-day relative strength index at 26.758 points versus Tuesday’s 34.145, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 414.6 million rupees, raising the year-to-date net foreign inflow to 3.07 billion rupees in equities.

The treasury bill rates have risen between 33 to 77 basis points since July 28, when the central bank last raised the key interest rates.

Shares in John Keells fell 2.1 percent, while Asiri Hospitals Plc dropped 3.8 percent and biggest listed lender Commercial Bank of Ceylon Plc fell 0.9 percent.

($1 = 151.5000 Sri Lankan rupees)

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

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management,  retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

Sri Lankan shares end flat as investors await cbank rate review

FIRST CAPITAL’S JALIYA WIJERATNE SPEAKS TO REUTERS

Tue Mar 21, 2017

Sri Lankan shares were little changed on Tuesday in lacklustre trade, hovering near a one-year closing low hit last week, as investors stayed on the sidelines ahead of the central bank’s policy review.

The Colombo stock index ended flat at 6,041.59, near its lowest close since March 16, 2016 hit on Thursday.

Turnover stood at 283.3 million rupees ($1.9 million), less than half of this year’s daily average of 665 million rupees.

The index has lost 1.2 percent since March 7, when the International Monetary Fund called for monetary policy tightening if credit growth or inflation did not abate.

The central bank’s second monetary policy review of the year is due on Friday.

“The market is closely watching for the monetary policy rate announcement and sovereign bonds,” said Jaliya Wijeratne, who heads First Capital Equities.

“Local investors are just waiting for some direction, but foreign investors are buying counters.”

Foreign investors net bought shares worth 160.8 million rupees, raising the year-to-date net foreign inflow to 2.66 billion rupees in equities.

Shares in Commercial Leasing and Finance Plc rose 8 percent, while Lanka ORIX Leasing Company Plc gained 2.3 percent and Dialog Axiata Plc rose 0.9 percent.

($1 = 151.5000 Sri Lankan rupees)

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

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management,  retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

Sri Lankan shares recover from 1-yr low on foreign bargain-hunting

FIRST CAPITAL’S ATCHUTHAN SRIRANGAN SPEAKS TO REUTERS

Fri Mar 17, 2017

Sri Lankan shares edged up on Friday from a one-year closing low hit in the previous session and after eight straight sessions of losses as foreign investors bought battered stocks.

The Colombo stock index gained 0.3 percent to finish at 6,047.84, edging up from its lowest close since March 16, 2016 hit on Thursday.

But the bourse fell 0.6 percent during the week, posting its fourth straight weekly decline, due to concerns that the central bank would raise interest rates next week.

The index had lost 1.5 percent over the eight sessions through Thursday since the International Monetary Fund urged Sri Lanka’s central bank last week to be ready to tighten monetary policy if credit growth or inflation does not abate.

The central bank’s second monetary policy review of the year is due on March 24.

“Foreigners are buying some blue chips that are at very discounted prices,” said Atchuthan Srirangan, a senior research analyst with First Capital Equities.

“But retailers and institutional investors are not active.”

Foreign investors net bought shares worth 39.5 million rupees ($260,296.54) in the 13th straight session of net-buying, raising the year-to-date net foreign inflow to 2.5 billion rupees in equities.

Turnover stood at 1.17 billion rupees, well over this year’s daily average of 676.7 million rupees.

Shares of Sri Lanka Telecom Plc gained 3.3 percent, while Dialog Axiata Plc rose 1.8 percent and conglomerate John Keells Holdings Plc edged up 0.1 percent.

($1 = 151.7500 Sri Lankan rupees)

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

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management,  retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

Sri Lankan shares fall for 7th session on rate hike concerns

FIRST CAPITAL’S HEAD OF RESEARCH, DIMANTHA MATHEW, SPEAKS TO REUTERS

The index has lost 1.4 percent over the last seven sessions since the IMF urged Sri Lanka’s central bank last week to be ready to tighten monetary policy if credit growth or inflation did not abate.

The central bank’s second monetary policy review of the year is due on March 24.

“Market is down mainly because of the negative sentiment local investors have,” said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd. “We are also seeing some margin calls coming in.”

Most of the investors stayed on the sidelines, resulting in a thin turnover, which stood at 239.9 million rupees ($1.6 million), about a third of this year’s daily average of 674.9 million rupees.

The bourse on Wednesday slipped into oversold territory with the 14-day relative strength index at 28.701 points versus Tuesday’s 30.958, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Shares of Sri Lanka Telecom Plc closed down 2 percent. Biggest listed lender Commercial Bank of Ceylon Plc ended 0.7 percent weaker, while Seylan Bank Plc fell 0.2 percent.

Foreign investors net bought shares worth 60.97 million rupees in the 11th straight session of net-buying, raising the year-to-date net foreign inflow to 2.36 billion rupees in equities.

($1 = 151.6000 Sri Lankan rupees)

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

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management,  retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.