Tag Archives: Share market investment in Sri Lanka

BLOCK-SPACES: EXPOLANKA’S AIR FREIGHT STRATEGY

ECHELON | 14.06.2019

MARGINS ARE SHRINKING AS GLOBAL RETAILERS DEMAND SHORTER DELIVERY TIMES

Expolanka Holdings Plc is expected to grow profits 17% annually over the next three years, benefitting from China-US trade tensions as it expands in North America and Asia. However, rising global demand for air freight is challenging margins, according to a research report.

“(The group) is reporting consistent net profit growth, with more focus on the core logistics business driving revenue,” First Capital, an investment bank, said in a report. Expolanka generated Rs2.5 billion by diversifying non-core businesses and reinvested it in the freight forwarding and warehousing businesses.

“Expolanka has a global presence in all major apparel-sourcing regions to the US, which would provide a strategic benefit due to the prevailing trade tensions between the US and China,” First Capital said. Expolanka built a competitive advantage in global apparel logistics, driving group revenue from Rs19 billion in 2009 to Rs78 billion in 2018. It has 60 offices across 17 countries, and is now diversifying to pharmaceuticals, electronics retail and e-commerce to drive volume growth. The group has invested considerable resources to expand its presence in the US and across Asia with “Expolanka has a global presence in all major apparel-sourcing regions to the US, which would provide a strategic benefit due to the prevailing trade tensions between the US and China,” First Capital said. Expolanka built a competitive advantage in global apparel logistics, driving group revenue from Rs19 billion in 2009 to Rs78 billion in 2018. It has 60 offices across 17 countries, and is now diversifying to pharmaceuticals, electronics retail and e-commerce to drive volume growth. The group has invested considerable resources to expand its presence in the US and across Asia with major fashion brands entering high-value retail markets in China, Hong Kong and India. Expolanka is also expanding into Myanmar, Indonesia, the Philippines and Vietnam. According to First Capital, global demand for air freight grew at twice the pace of world trade’s 4.3% growth. Demand for air freight is outpacing availability. For Expolanka, managing yields is challenging in an environment of rising and fluctuating costs. The majority of Expolanka’s client base consists of the biggest brands in global fashion that demand on-time and direct-to-store delivery regardless of costs.

Investment Bank in Sri Lanka

“Due to fast fashion trends in Europe and the US, delivery times have become shorter over the years. In addition, with Expolanka now beginning to cater to pharmaceutical and tech companies, the need for air exports has grown much more significant,” First Capital says.

To maintain gross profit margins at 18% and net profit margins at 2%, Expolanka is establishing long-term partnerships with global cargo carriers and negotiating block-space agreements during peak periods. This allows the firm to maintain margins by avoiding ad-hoc bookings at substantial costs, according to First Capital. There are two types of blockspace bookings: soft and hard block-space. In soft block-space, freight forwarders have the option of cancelling the booking for a minimal penalty. In hard block-space bookings, the full rate has to be paid irrespective of utilization. Expolanka currently manages between the two methods, depending on the product category, and expected demand and orders.

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 consumer demand to recover in 4Q19: FC Research

ECONOMY NEXT | 14.06.2019

Sri Lanka’s consumer demand is expected to remain weak until the last quarter of 2019 after the Presidential Election is announced, the research arm of First Capital, an investment house, said.

“First Capital Research expects the recovery in demand to be at a significantly slow pace considering the severity of the impact to all sectors by the Easter Sunday attacks and the subsequent incidents,” a report said.
“We expect demand to normalise by the fourth quarter of 2019, supported by the possible improved sentiment with the announcement of the Presidential Election,” FC Research said.

Inflation in the capital Colombo has increased in 2019. However, the central bank is attributing this increase in price levels to the depreciation of the rupee in 2018.

The rupee fell by as much as 20 percent in 2018, as the central bank lost control over the soft-pegged currency.

The central bank’s Business Sentiment Index for the second quarter of 2019 fell to the lowest levels in five years, as firms braced for a dip in manufacturing due to lower expected demand, sales, and business climate.

The central bank is attempting to stimulate growth with a cut in policy rates in May, after pushing down retail deposit rates in April in a bid to increase lending.

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.

Sluggish economy here to stay until Presidential polls: report

DAILY MIRROR | 14.06.2019

Sluggish economy and weakened consumer confidence could persist until the Presidential election is announced towards the latter part of the year. But the collapse in the rupee could be less severe than earlier predicted due to a potentially weak dollar, lower imports and debt inflows, according to First Capital Research. 


In a recent research report on the exchange rate, First Capital said the monetary stimulus launched by the Central Bank by way of a 50 basis points rate cut would do very little to stoke animal spirits in the economy, albeit a slight improvement in the demand, but would weigh on the rupee. 


“First Capital Research expects the recovery in demand to be at a significantly slow-pace considering the severity of the impact to all sectors by the Easter Sunday attacks and the subsequent incidents,” First Capital Research analyst and author of the report Dimantha Mathew, said. 


“We expect demand to normalize by 4Q19 supported by the possible improved sentiment with the announcement of the Presidential election,” he added. 
Sri Lanka’s economy has been slowing since 2016 before it plunged to 17-year low of 3.2 percent in 2018 as a result of the toxic combination of myopic monetary and fiscal policies compounded by bad politics and a dose of adverse weather conditions. 


The moribund economy received a final blow on April 21 when the radical Islamist terrorists targeted innocent civilians and foreigners claiming 250 lives, injuring over 500 more.

The country and its people are still struggling to come into terms with the shock the attack delivered and the incident 10 years since the end of the war sent shock waves through all the sectors in the economy, with tourism being most affected as arrivals slumped more than 70 percent.  


“Sri Lanka’s consumer confidence index compiled by Neilson recorded a major plunge in the last couple of months subsequent to the Easter Sunday attacks which we expect could lead to a further dent in imports amidst lower consumer demand,” Mathew said.


The bombings clearly showed deterioration of the Sri Lankan State machinery with the top two leaders in the government involved in a bitter tug of war. 


Meanwhile, First Capital Research upgraded its forecast for the rupee to Rs.180 to buy a dollar by the end of the year from their earlier forecast of Rs.190. Their base case has a 65 percent probability. 


“Further, we are introducing a 12-month target for June 2020E of 1 US$ Rs. 185.0 as a 60 percent base case scenario. 


In spite of the rate cut, the weakness of the rupee may be limited considering the delay in consumer demand while rupee is also likely to be supported by the weak dollar and targeted debt-driven inflows,” the report noted. 

 

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.

First Capital upgrades Exchange Rate Outlook

CEYLON FT | 14.06.2019

Treasury Bills and Bonds in Sri Lanka

Slowdown in the US may lead to weaker US Dollar: US is signalling signs of concern over its GDP growth, which is expected to slowdown partly due to the trade war. However, inflation continues to remain stable in the desired level of 2.0 per cent. Analysts expect a higher probability for a rate cut, which could be as much as 50bps, in the second half of 2019. Thereby, the US Dollar is expected to weaken during the second half of 2019, possibly favouring the Sri Lankan Rupee.
Sri Lanka consumer demand to remain weak, maintaining weaker imports: Sri Lanka’s consumer confidence index compiled by Neilson recorded a major plunge in the last couple of months subsequent to the Easter Sunday attacks, which is expected to lead to a further dent in imports amidst lower consumer demand.

Following the 50bps rate cut by CBSL, there is a tendency for the rupee to weaken as demand in the system is expected to improve. However, First Capital Research expects the recovery in demand to be at a significantly slow pace considering the severity of the impact to all sectors by the Easter Sunday attacks and the subsequent incidents. Demand is expected to normalise by 4Q2019, supported by the possible improved sentiment with the announcement of the Presidential Election.
CBSL targets dollar debt inflows to maintain reserves: Central Bank’s foreign reserve position is key in building confidence in the exchange rate. Currently as at May 2019, Foreign Reserves stood at US$ 6.7 billion, which is estimated to be above the targeted four months of imports. A heavy dip in imports has reduced the overall comfortable level of foreign reserves. To maintain reserves at the US$ 6.5-7.0 billion range, CBSL needs to raise a further US$ 2 billion, for which Cabinet approval has already been obtained. CBSL also targets an additional US$ 2.5 billion to be raised to meet payments falling due in 2020 before the election season, which starts in 4Q2019 and may continue up to 2Q2020 (Presidential, General and Provincial elections). If Sri Lanka is successful in raising the required funds via foreign debt over the next couple of months, the foreign reserve position could be maintained at a reasonably comfortable level, which First Capital believes is US$ 6.5 billion, considering the prevailing environment.
Rupee weakening may soften: In spite of the rate cut, the weakness of the rupee may be limited, considering the delay in consumer demand, while the rupee is also likely to be supported by the weak dollar and targeted debt driven inflows. First Capital upgraded its Exchange Rate Outlook for 2019E to 1 USD:LKR 180.0 (from 194.0) as its 65 per cent Base Case Scenario. Further, it is introducing a 12-month target for Jun 2020E of 1 USD:LKR 185.0 as a 60 per cent Base Case Scenario.

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.

First Capital upgrades exchange rate outlook

 

DAILY FT | 14.06.2019

Treasury Bills and Bonds in Sri Lanka

First Capital has upgraded its outlook on the exchange rate given external and internal developments.

As per the upgrade Exchange Rate Outlook for 2019E to $ 1: Rs. 180.0 (from 194.0) as the 65% Base Case scenario. Further, it is introducing a 12-month target for June 2020E of $ 1: Rs. 185.0 as a 60% Base Case scenario.

It said the US is signalling signs of concern over its GDP growth which is expected to slow down partly due to the trade war. However, inflation continues to remain stable in the desired level of 2%. Analysts expect a higher probability for a rate cut which could be as much as 50 bps, in the 2H2019. Thereby, the dollar is expected to weaken during the 2H2019 possibly favouring the rupee.

Noting that Sri Lanka consumer demand to remain weak maintaining weaker imports, it said Sri Lanka’s consumer confidence index compiled by Neilson recorded a major plunge in the last couple of months subsequent to the Easter Sunday attacks which we expect could lead to a further dent in imports amidst lower consumer demand. Following the 50 bps rate cut by CBSL, there is a tendency for the rupee to weaken as demand in the system is expected to improve.

However, First Capital Research expects the recovery in demand to be at a significantly slow pace considering the severity of the impact to all sectors by the Easter Sunday attacks and the subsequent incidents. “We expect demand to normalise by 4Q2019 supported by the possible improved sentiment with the announcement of the Presidential Election,” it added.

First Capital also said CBSL targets dollar debt inflows to maintain reserves.

CBSL’s foreign reserve position is key in building confidence in the exchange rate. Currently as at May, Foreign Reserves stood at $ 6.7 billion which is estimated to be above the targeted four months of imports. Heavy dip in imports has reduced overall comfortable level of foreign reserves.

In order to maintain reserves at $ 6.5-7 billion range, CBSL needs to raise a further $ 2 billion for which Cabinet approval has already been obtained. CBSL also targets an additional $ 2.5 billion to be raised to meet payments falling due in 2020 before the election season which starts in 4Q2019 and may continue up to 2Q2020 (Presidential, General and Provincial Elections).

“If Sri Lanka is successful in raising the required funds via foreign debt over next couple of months, the foreign reserve position could be maintained at a reasonably comfortable level which we believe is $ 6.5 billion considering the prevailing environment,” First Capital said.

Noting that the rupee weakening may soften, it said in spite of the rate cut, the weakness of the rupee may be limited considering the delay in consumer demand while the rupee is also likely to be supported by the weak dollar and targeted debt driven inflows.

“We upgrade our Exchange Rate Outlook for 2019E to 1 USD: LKR 180.0 (from 194.0) as our 65% Base Case Scenario. Further, we are introducing a 12-month target for Jun 2020E of 1 USD: LKR 185.0 as a 60% Base Case scenario,” First Capital added.

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.

Rupee Bond Yields Rise Ahead of Debt Auction: Inside Sri Lanka

Investment Bank in Sri Lanka

(Bloomberg) – Sri Lanka’s bonds fell ahead of an auction of 70 billion rupees ($400m) of Treasury debt Thursday.

* Rates are up ahead of the auction and amid selling after an “overreaction” to a recent drop in yields, says Dimantha Mathew, head of research at First Capital in Colombo

* Yield on 10.9% govt bonds due in March 2024 rose 6bps to 10.38% on Wednesday: data compiled by Bloomberg

* Monetary authority on Wednesday sold 17.7b rupees of Treasury bills

* USD/LKR little changed at 176.51

* Global funds sold a net $0.2m of local shares on Wednesday, taking withdrawals for the year to $31.9m: exchange data

Dimantha Mathew, Head of Research, at First Capital on the bond and equity market performance – 12.06.2019

Treasury Bills and Bonds in Sri Lanka

Dimantha Mathew, Head of Research, at First Capital on the bond and equity market performance – 12.06.2019

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.

Atchuthan Srirangan, Assistant Manager – Research, at First Capital on the Bond and equity Market performance – 11.06.2019

Treasury Bills and Bonds in Sri Lanka

Atchuthan Srirangan, Assistant Manager – Research, at First Capital on the bond and equity market performance – 11.06.2019

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research delivers a 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.

Dimantha Mathew, Head of Research, at First Capital on the bond and equity market performance – 10.06.2019

Treasury Bills and Bonds in Sri Lanka

Dimantha Mathew, Head of Research, at First Capital on the bond and equity market performance – 10.06.2019

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research delivers a 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.

Election likely to boost Colombo bourse

Capital formation gets bloated during an election year which invariably tends to spur capital markets.

This is the reason that most stockbrokers and investors are looking forward to an election, analysts say. President Maithripala Sirisena has announced that presidential elections will be held around December 7-9, this year.

“An election itself becomes an economic activity. It is very true for the presidential election because it is an island-wide one,” Dimantha Mathew, Head of Research at First Capital noted to the Business Times.

He said the money circulation before the election will stimulate the economy. “This, in turn, will drive positive sentiments to the stock market.” This would lead to a surge in the indices, he added.

According to Mr. Mathew, the macro fundamentals in the country have improved pretty much compared to the same period last year. “The currency is stable, foreign reserves are good and we have a balance of trade that is positive.” However, the stock market indices are at historical lows. This, according to Mr. Mathew is the lack of money circulation which will ultimately improve before and after an election.

He further added that consumer expectations are also more upbeat during election years, which could indirectly spur domestic demand. This will drive retailers to the Colombo Stock Exchange (CSE), according to him.

An economic analyst agreed saying that an election causes the intermittent rise in the production and consumption of certain commodities like alcohol, meat, fuel among others. Most election-year boosts come from rushed consumption with swelling in capital formation typically in the first two quarters ahead of the polls, the analyst said noting that incumbent politicians cause temporary economic expansions before the elections.

According to him, before an election consumer confidence is said to have a high correlation to general economic growth, as its route often trails economic expansion. This will route retail interest in the CSE, he added. Another analyst confirmed this noting that businessmen inject funds to illegally financed political campaigns and massive campaign ad spending. “Also some of the money stashed away abroad is brought back to fund election campaigns which will ‘temporarily’ boost economic indicators.”

Also (while we don’t have) the eye-popping statistics on the ballooning spending candidates will do, one can try to digest the aggregate numbers by watching TV ads that will be doing the rounds. “They will be trying to match each other in the buying of media space,” the second analyst added.

The election-related costs, including for campaigns, polls management, and development, and current spending, are likely to add plenty of money into the economy which in turn will infuse the CSE with some positive retailer sentiment which it desperately needs, he said.

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.