Tag Archives: Asset Management in Sri Lanka

Bond Yields Decline With Lower Borrowing Costs

Bond Yields Decline With Lower Borrowing Costs: Inside Sri Lanka

2019-01-24 02:58:30.589 GMT

By Anusha Ondaatjie

(Bloomberg) — Sri Lanka’s bond yields fell as the government’s cost of borrowing was mostly lower at an auction Wednesday.

* Central bank sold 21b rupees ($115m) of 364-day bills at 10.70%, down from 10.75% at previous auction, and 2.55b of 182- day notes at 9.87%, unchanged from the last sale

* “There is buying interest coming in at the short end, especially with bills down,” says Dimantha Mathew, head of research at First Capital in Colombo

** “Some foreign inflows into two-year bonds also boosted sentiment and helped shift money from the mid to longer tenors.”

* Yield on 11.5% govt bonds due December 2021 fell 4bps to 10.78% on Wednesday

* Global funds bought a net $0.1m of Sri Lankan shares on Wednesday, helping pare the month’s outflows to $13m: exchange data

* USD/LKR marginally changed t 182.20

Dimantha Mathew, Head of Research at First Capital Holdings, Commenting on the Bond and the Equity Market Performance on Ada Derana – 23.01.2019

Stock Brokers in Sri Lanka

First Capital’s Dimantha Mathew Commenting on the Bond and the Equity Market Performance on Ada Derana

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.

First Capital’s Dimantha Mathew with the Market Review on Ada Derana

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.

SL keeps December policy rates unchanged – Ceylon Today 29-12-2018

Ceylon Today | 30.12.2018

Sri Lanka to loosen key policy rates in 2019

Sri Lanka might loosen its key policy rates in 2019, with two rate cuts of 25bps each, starting from beyond first quarter 2019, several economists and equity research firms predicted on Friday.
In its December post-monetary policy statement, Colombo-based equity research arm First Capital Research stated that “with below-par GDP growth of 2.9% for 3rd Quarter 2018 and 2018 growth rate likely to fall below the Central Bank of Sri Lanka (CBSL) GDP growth rate expectation of 4.0% coupled with relatively lower debt maturities beyond first quarter 2019 provide room for rate cuts thus warranting economic expansionary policy measures in 2019.

 

“We assume the impact of the policy rate hike which took place in Nov 2018 to materialise during the 1Q2019 thus improving the overly sluggish credit growth and GDP growth levels thereby providing room for the two rate cuts in 2019,” it stated.
Meanwhile, USA Fed reserve officials raised interest rates for the fourth time in 2018 by increasing the rate by 25bps, boosting the benchmark federal rate to 2.50% in December 2018. Policy makers signalled they may soon pause their monetary tightening campaign by trimming the number of rate hikes they foresee in 2019, to two from three.

 

Sri Lanka must accelerate broad-based structural economic reforms without further delay to accelerate its current sluggish economic growth momentum, the Central Bank of Sri Lanka (CBSL) said on Friday. In its December monetary policy meeting statement, CBSL noted that the reduction of the Statutory Reserve Ratio (SRR) at the last monetary policy review in November 2018 released around Rs 90 billion of rupee liquidity to the banking system.
The Monetary Board of the Central Bank of Sri Lanka, at……its meeting held on 27 December 2018, decided to maintain policy interest rates at their current levels. Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 8.00 per cent and 9.00 per cent, respectively.
The full monetary policy meeting statement is reproduced below:
“Monetary Policy Review: No. 8 – 2018
The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 27 December 2018, decided to maintain policy interest rates at their current levels.

Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 8.00 per cent and 9.00 per cent, respectively. The Board considered current and expected developments in the domestic economy and the domestic financial markets as well as the global economic environment, with the broad aim of stabilising inflation at mid single digit levels in the medium term to enable the economy to achieve its potential growth.
Subpar economic growth continued in the third quarter of 2018
As per the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy recorded a modest real GDP growth of 2.9 per cent, year-on-year, during the third quarter of 2018, compared to the revised growth of 3.6 per cent in the second quarter of 2018.

 

As per the available economic indicators and other economic developments, real GDP growth is likely to be low in the fourth quarter of 2018 as well, before picking up gradually in 2019. The continued low economic growth reemphasizes the need for implementing broad based structural reforms without further delay.
Notwithstanding the elevated market interest rates and rupee liquidity deficit, private sector credit growth accelerated
The reduction of the Statutory Reserve Ratio (SRR) at the last monetary policy review in November 2018 released around Rs 90 billion of rupee liquidity to the banking system. However, the liquidity deficit has widened thereafter, and the Central Bank continued its Open Market Operations (OMOs) cautiously to manage liquidity on overnight, short-term and long-term basis as appropriate.

 

Given high credit growth and foreign exchange market developments, overnight interest rates in the money market have been maintained close to the upper bound of the policy rate corridor. Other market interest rates remained at elevated levels, both in nominal and real terms.
In spite of the increased cost of funds and tight liquidity conditions, the year-on-year growth of credit to the private sector accelerated since September 2018, partly reflecting the private sector advancing its activities in anticipation of measures by the government and the Central Bank to curb excessive import growth. Nevertheless, with the contraction in net foreign assets of the banking system, the year-on-year growth of broad money (M2b) remained within the expected levels.
Favourable outlook for inflation in the near term
Headline inflation, based on both the National Consumer Price Index (NCPI) and the Colombo Consumer Price Index (CCPI), remained in low single digit levels.

 

 

Core inflation also remained subdued thus far in 2018. Recent downward adjustments to fuel prices and selected administratively determined prices, as well as the reduction of Special Commodity and telecommunication levies, along with the ongoing recovery in the agriculture sector are expected to impact favourably on inflation in the near term.

 

 

Volatile global commodity prices, possible weather-related disruptions to domestic supply chains due to unpredictable weather patterns, and the possible pass-through of the effect of the rupee depreciation in recent months to domestic prices pose risks to the inflation outlook. The current projections show that inflation, on average, will remain below 5 per cent in 2019 and stabilise in the range of 4-6 per cent thereafter with appropriate policy adjustments.
External sector continues to face international and domestic headwinds
The trade deficit widened further in the first ten months of 2018 with the expansion in import expenditure outpacing the growth of export earnings.

 

However, a moderation in import expenditure is expected, in response to the measures adopted to curb imports of motor vehicles and non-essential goods as well as the impact of the depreciation of the rupee.
While earnings from tourism continued to grow, a slowdown in workers’ remittances was observed. In the financial account, both the government securities market and the Colombo Stock Exchange experienced net outflows of foreign investment, although marginal inflows have been observed in December.
The widening trade deficit, tight conditions in the global markets and excessive speculation in the domestic market exerted pressure on the exchange rate, and the Sri Lankan rupee depreciated by 15.9 per cent against the US dollar thus far during 2018 up to 27 December. Meanwhile, gross official reserves amounted to US$ 7.0 billion at end November 2018, providing an import cover of 3.7 months.
Policy interest rates maintained at current levels
Although inflation remains subdued and economic growth remains below potential, the Monetary Board of the Central Bank was of the view that it is appropriate to continue the current monetary policy stance to stabilise overall economic conditions and domestic financial markets in a context where there has been an uptick in private sector credit as well as continued pressure on external reserves. Accordingly, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels.” (IG)

Weekly Government Securities Market – 16-12-2018

Stock Brokers Sri Lanka

Weekly Yield movement & Volume

In the secondary market, the yield curve shifted slightly downwards compared to the previous week, mainly on shorter-and longer-tenure maturities. Limited activities were witnessed during the week, resulting in low volumes as market participants remained on the sidelines amidst the political uncertainty and long-pending Supreme Court decision.  At the primary auction held on 12 December, yields of six-month and one-year bills were accepted at 10.03% and 11.24%, slightly higher than previous closing levels. Furthermore, Rs 50.0 billion in Treasury Bonds are to be issued through an auction on 13 December 2018.

 

Liquidity & CBSL Holdings

CBSL market liquidity remained negative throughout the week, while widening the liquidity gap and recording the lowest liquidity for the week on 7 December, amounting to Rs 87.6 billion. CBSL holdings slightly declined and remained stagnant at Rs 66.8 billion during the week.

 

Foreign Interest

Foreign holding was recorded at Rs 180.9 billion, recording a drop of Rs 17.0 billion. Overall, Government Securities marginally increased by Rs 434.0 million, while foreign holding percentage for the week declined to 3.6%.
Maturities for next Week
The Government Securities Market has a Treasury bill maturity amounting to Rs 17.5 billion to be settled on the week ending 21 December.

 

Daily Summary

Thursday (06.11.18): The overall secondary market yield curve shifted slightly downwards as the buying interest continued across the yield curve in-spite of the prolonged political upheaval. Short to long tenure maturities were seen reaching intraday lows, on the back of buying that stemmed from local counterparties. The one-year bill traded at 11.10%, while short-tenure maturities, [01.07.19] and [15.09.19] traded at day’s lows of 10.08% and 10.50%, [01.05.20] at 11.30%, [01.08.21] at 11.56%, and [15.12.21] at 11.70%, while mid-tenure maturities, [15.05.23] at 11.70%, [15.03.25] at 11.75%, [01.08.26] at 11.95%, [15.06.27] at 12.00% and long-tenure maturity [01.09.28] at intraday low of 12.30%. Foreign selling was witnessed on [15.05.23] at 11.75%, while market witnessed moderate volumes.

 
Friday (07.11.18): The secondary market yield curve shifted slightly downwards on the back of buying interest, while the overall market witnessed thin volumes. Buying interest stemmed from local counterparties predominantly centered on short-tenure maturities. Short-tenure maturities, [01.07.19] traded at 10.20%, [01.03.21] at 11.45%, [15.12.21] at 11.60%, while mid-tenure maturities, [15.05.23] traded at 11.60%, [01.08.26] at 11.90% and [15.06.27] at 11.95% with limited activity levels.

 
Monday (10.12.18): The secondary market yield curve remained unchanged while the overall market was at a complete standstill, as the market participants remained on the sideline amidst the uncertainty in the political front with the long pending Supreme Court decision. CBSL announced a primary bond auction offering Rs 25.0 billion each on [15.12.21] and [01.08.26] maturities on 13 December 2018.

 
Tuesday (11.12.18): The secondary market continued to remain at an almost standstill as the market participants remained on the sideline amidst prolonged uncertainty prevailing in the political front. However, quoting was witnessed on mid tenure maturities at higher levels amidst sluggish investor sentiment ahead of primary bill and bond auctions to be held this week. Limited activity was witnessed on the six-month bill at 10.00% with considerable volumes.

 
Wednesday (12.12.18): The secondary market yield curve shifted slightly upwards, falling in line with the primary bill auction results. At the primary auction, yields of six-month and one-year bills were accepted at 10.03% and 11.24%, slightly higher than previous closing levels. Limited activity was centered on short end of the curve with [01.05.19] trading at 10.00% and [01.07.19] at 10.10%. The overall market witnessed thin volumes with the prevailing political uncertainty, as market participants remained on the sideline.

CSE to launch a dollar board for secondary listing of foreign firms shortly

Daily Mirror | 13.12.2018

In an attempt to diversify investment options for foreign investors, the Colombo Stock Exchange (CSE) is set to launch a dollar-denominated secondary board for foreign firms to trade their securities on the CSE shortly.
“It’s a new platform, a new board we are planning to introduce, where trading and settlement will happen based on multi-currency and we will start with US dollar. Initially, it will be opened for companies which are based overseas for a secondary listing on the CSE,” a top CSE official on grounds of anonymity, said.
Foreign firms seeking a secondary listing will have to be listed in their host country, where the market regulator has to be a member of The International Organisation of Securities Commissions.
Initially, the investments of the dollar board securities will be limited to foreigners (non-residential investors).

 

We will go by the listing rules of the host country, subject to certain additional disclosures, which are required in terms of the CSE rules. There will be a capital requirement in dollars,” the official said.
Securities and Exchange Commission (SEC) Chairman Ranel Wijesinghe yesterday told Mirror Business that the SEC Commissioners on Tuesday approved the listing rules for the dollar board, paving the way for the new board to be launched shortly.
For this exercise, the CSE has already received clearances from the Registrar of Companies Department and Central Bank of
Sri Lanka.
The CSE official said that as soon as the CSE receives the approval from the SEC, they would launch the dollar board as the necessary infrastructure work has been completed.

 

Several Maldivian leisure sector companies have already shown interest for potential secondary listings.
“It will come from markets where they don’t have a large investor base and cost of listing also matters. The Maldives has some level of good companies, particularly in the leisure sector, but they don’t have a large investor base. When we get one or two listings, others will also look at it,” the CSE official remarked.
The stockbrokers welcomed the moved by the CSE noting that it would provide more diverse equity investment options for foreign intuitional investors.
Speaking to Mirror Business, First Capital Holdings PLC Research Head Dimantha Mathew said, “It will increase the diversity, by entering into new geographical locations; there will be more variety in investment options for foreign investors.”
He pointed out that the CSE only has one class of equity to be invested in; hence, the foreign investors have limited investment options in the Sri Lankan equity market.
The CSE expects that Colombo’s comparatively large foreign institutional investor base and custodian banks will attract foreign firms to Sri Lanka, who are at similar level of the CSE or below.
Mathew noted that the CSE would probably attract small foreign companies for listings initially. However, he said that Sri Lanka has the potential to attract foreign firms from fast-growing economies in the region, such from Bangladesh in the future.(NF)

Atchuthan Srirangan, Assistant Manager – Research at First Capital Holdings, with the Market Review on Ada Derana – 31.10.2018

Stock Brokers in Sri Lanka

First Capital’s Atchuthan Srirangan with the Market Review on Ada Derana

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.

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 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.

Atchuthan Srirangan, Assistant Manager – Research at First Capital Holdings, with the Market Review on Ada Derana – 22.10.2018

Stock Market Sri Lanka

First Capital’s Atchuthan Srirangan with the Market Review on Ada Derana

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.

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.

Hiruni Perera, Senior Research Analyst at First Capital Holdings, with the Market Review on Ada Derana – 25.09.2018

Share Market Investment in Sri Lanka

First Capital’s Hiruni Perera with the Market Review on Ada Derana

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 Lanka shares fall to near 5-year closing low on foreign selling

DIMANTHA MATHEW, HEAD OF RESEARCH AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

SEPTEMBER 26, 2018

COLOMBO, Sept 25 (Reuters) – Sri Lankan shares fell over 1 percent on Tuesday to their lowest close in nearly five years, as foreign investor selling, a weaker rupee and government plans to curb imports hurt investor sentiment.

Prime Minister Ranil Wickramasinghe said on Monday the government would take measures to impose taxes to curb imports by $500 million to $1 billion to face the currency crisis.

The rupee hit a record low for an eighth straight session on Friday despite the central bank’s intervention. It fell to an all-time low of 169.00 per dollar on Friday, weighed down by importer demand for the scarce U.S. currency.

The rupee has weakened 4.5 percent so far this month after a 1.2 percent drop last month, and has declined 9.97 percent so far this year.

Analysts said the acceleration in the rupee’s depreciation was creating panic among investors.

The Colombo stock index declined 1.21 percent to 5,833.58 on Tuesday, its lowest close since Dec. 18, 2013. This was also the sharpest single-day drop since late November 2017.

“It’s another disastrous day, lots of exits happened. It’s mainly because of panic selling, that’s why the market came down sharply in lower turnover,” said Dimantha Mathew, head of research at broker First Capital Holdings.

Turnover was 297.6 million rupees ($1.77 million), the lowest since Sept. 6, and less than half of this year’s daily average of 793.5 million rupees.

Foreign investors sold a net 60.9 million rupees worth of shares on Tuesday, extending the year-to-date net foreign outflow to 5.6 billion rupees worth of equities.

Analysts said the recent fuel price hike also hurt investor confidence as it could hit corporate earnings. Fuel retailers raised gasoline and diesel prices earlier this month for a third time in four months due to higher global oil prices and a weaker rupee.

Investors are awaiting cues from the national budget in November.

Shares of Ceylon Tobacco Company Plc fell 1.5 percent, Hemas Holdings Plc lost 4.3 percent, Sri Lanka Telecom Plc ended 5.7 percent down and conglomerate John Keells Holdings Plc closed 1.1 percent lower. ($1 = 168.5500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

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.

Sri Lanka shares hit over 30-month closing low on rupee woes

DIMANTHA MATHEW, HEAD OF RESEARCH AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

SEPTEMBER 25, 2018

COLOMBO, Sept 21 (Reuters) – Sri Lankan shares dropped to their lowest close in more than 30 months on Friday as foreign investors sold banking stocks, while a weaker rupee dented investor sentiment as well.

The Colombo stock index ended 0.29 percent weaker at 5,904.90, its lowest close since March 9, 2016. It lost 2.1 percent this week, its second straight weekly drop.

“Today, the market came down on foreign selling in banking shares,” said Dimantha Mathew, head of research at broker First Capital Holdings, adding that the acceleration in the rupee’s depreciation was creating panic among investors.

The rupee hit a record low for an eighth straight session despite the central bank’s intervention. It fell to an all-time low of 169.00 per dollar, weighed down by importer demand for the scarce U.S. currency.

The rupee has weakened 4.5 percent so far this month after a 1.2 percent drop last month, and has declined 9.9 percent so far this year.

Analysts said they expected a minor support for the stock market at 5,900 levels and a stronger support at 5,800 levels.

Turnover was 977.7 million rupees ($5.80 million) on Friday, more than this year’s daily average of 796.3 million rupees.

Foreign investors sold a net 359.9 million rupees worth of shares, extending the year-to-date net foreign outflow to 5.6 billion rupees worth of equities.

Analysts said the fuel price hike also hurt investor confidence as it could hit corporate earnings. Fuel retailers raised gasoline and diesel prices in September for a third time in four months due to higher global oil prices and a weaker rupee.

Investors are awaiting cues from the national budget in November.

Shares of Sampath Bank Plc ended 2.5 percent weaker, Good Hope Plc fell 23 percent, Ceylon Tea Services Plc closed down 8 percent, and Commercial Bank of Ceylon Plc declined 1 percent. ($1 = 168.6000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

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.