Tag Archives: Private Wealth Management in Sri Lanka

ASK THE RIGHT QUESTIONS BEFORE INVESTING

Kavin Karunamoorthy, Senior Manager of Asset Management at First Capital, reveals points to consider both for those already in the know and those hoping to cautiously test the investment waters.

Don’t put all your eggs in one basket!
As the age old saying goes, it is important that you understand that you should not put all your investments in one tool. Investment banks or wealth managers can help you manage and diversify your investments, while lowering risk and maximizing returns. Hence, it is important to seek out information from the correct sources.

Time and goals setting
Investors should consider four main points: First, they need to identify their short-term and long-term financial goals i.e. how and when does he need the money. Second, they need to plan the funding capacity i.e. understanding your ability to allocate funds for investment purposes either as a lump sum or on a monthly basis. Third, identify the investment time horizon that you have earmarked for your investments i.e. anticipate when you will require your funds. For example, you may require a monthly income after retirement as well as a lump sum to finance your children’s university education or buy a second house. Finally, evaluate your risk appetite and acceptable risk level. One needs to understand that higher the risk, higher the return, and similarly lower the risk, lower the return. A risk-averse investor may choose to invest in low risk fixed income instruments such as treasury bills and bonds, bank deposits, unit trusts and listed corporate debt. An investor with a higher risk tolerance could look at instruments such as the stock market, property and real estate, unlisted corporate debt, or derivatives.

As Sri Lankans what sort of investors are we?
We find that Sri Lankans are generally risk averse; this can be attributed to two factors, first, the lack of financial literacy, and second, the bad experiences of the previous years. However, you do find individuals that take risks and reap the rewards; after all, most of our top investors have taken calculated risks to be where they are today.

Still, in recent times, we have seen slight growth in interest from younger entrepreneurs and executives towards planning their retirement etc. We want to encourage this trend and create more awareness about the investment tools available at different income levels, so that even if they don’t have large funds in hand, they can plan and set goals to achieve their financial aspirations.

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What the experts bring to the table
A professional wealth manager is able to give the investor an overall picture of the financial market, including its past, present and future cycles. It is the role of a wealth manager to provide investment strategies across all asset classes for individuals and corporates, while keeping track of market opportunities, recognizing trends and matching them to your interest, with a focus on performance, liquidity, risk management and other relevant factors.

Companies charge either a flat advisory fee or fees linked to performance.

Enlisting a wealth manager
If you have chosen to enlist the services of a professional wealth manager, in addition to acknowledging risk level, expected return and the period of investment, be sure to meticulously evaluate the instruments as well as the wealth manager’s credentials and the track record of the companies with whom you intend to place your hard-earned money, and don’t be afraid to ask questions.

In Sri Lanka, a wealth manager must be licensed and authorized by the Securities and Exchange Commission of Sri Lanka (SEC), in addition to owning the necessary proficiency and competencies in relation to investments and wealth planning. Finally, the approach that your wealth manager takes must be philosophically consistent with how you view the world.

The First Capital difference
We understand that not everyone’s requirements are the same, that is why we take the time to sit with our clients and map out their lifestyle, considering inflation and other economic, geopolitical and environmental factors that affect income and expenditure. Although it’s a time-consuming affair, it gets people excited because it shows them just how much they need to put aside for a comfortable future. Backed by over 35 years’ insights into investment trends and markets access, First Capital is in a unique footing with a 360-degree view of the financial market through the collaboration of in-depth knowledge from its primary dealer unit, stock brokering unit, corporate financial advisory, wealth management arm, research unit, structuring and placement arm, and regional branch network to provide holistic solutions for our clients. Additionally, our team comprises experts from the banking and finance industry, capital markets and the real estate industry, enabling us to service clients’ needs across asset classes.

Our focus is to provide our clients with a positive return, while safeguarding their capital. To this extent, we have strong internal risk management processes in place to monitor and ensure that every investment we make on behalf of our clients are within the parameters of the SEC, Central Bank regulation and our own code of conduct.

First Capital is the only listed and rated investment bank in Sri Lanka, reflecting governance standards and transparency. The company is rated Aby ICRA Lanka.

 

At First Capital we provide a multiple Wealth Management solutions for individual and corporate investors to achieve your financial aspirations.
Backed by over 35 years of expertise, insights to investment trends and markets access, First Capital’s professional fund managers, ensure that risks are diversified over a multitude of asset classes, to identify prudent investments to suit your investment goals.

Atchuthan Srirangan, Assistant Manager – Research at First Capital Holdings PLC commenting on the bond and the equity market performance on Ada Derana – 29.01.2019

Share Market Investment in Sri Lanka

First Capital’s Atchuthan Srirangan at First Capital Holdings PLC 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 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.

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.

Sri Lanka GDP, CPI Outlook Lowered Through 2019

2019-01-11 06:00:00.6 GMT
By Cynthia Li

(Bloomberg) — Economists slashed Sri Lanka growth forecasts for this year after the economy grew at the slowest pace in five quarters, according to the latest quarterly survey conducted by Bloomberg News.

The biggest revisions were for the first and second quarters, both cut by 1.3 percentage points to 3.3 percent and 4 percent respectively. Growth in 2019 overall is expected to average 4 percent, down 0.3 percentage point from last quarter’s survey.

Economists lowered their first quarter inflation forecast by 1.7 percentage point, and also cut estimates for the rest of the year, bringing the annual average to 4.3 percent from 5 percent seen in the October survey. This matches with the central bank’s projection of average inflation to “remain below 5 percent in 2019 and stabilize in the range of 4-5 percent thereafter with appropriate policy adjustments.”

The Central Bank of Sri Lanka is working to implement a flexible inflation targeting framework this year to maintain price stability and drive economic growth.

Benchmark rates are expected to remain unchanged at least until the end of the first quarter of next year, the same poll shows. Some economists said that the economy will stabilize sooner than expected.

“With the slowness in economic growth, once the macro picture stabilizes, we expect two rate cuts during the year 2019 with 25 basis points each,” said Dimantha Mathew, head of research at First Capital Holdings in Colombo.

First Capital “cautiously bullish” on listed stocks

Published on Daily FT on 02 January 2018

Stock Market Investment in Sri Lanka

First Capital Research is “cautiously bullish” over the prospects of investments into listed stocks in 2019 though the Colombo Bourse experienced a 5% dip last year.

In its latest equity strategy report, First Capital said that it was positive on equities hence recommending “buy” but reduce “cash exposure.”

As per the strategy done by analysts Dimantha Mathew, though political uncertainty has settled the battle for policy certainty may continue. It also said that external sector has turned positive favouring the Asian region.

Noting that stock markets usually pass through many phases, First Capital said it rarely reaches fair value and as a result markets either overshoot or over-correct.

“The ASPI we believe has over-corrected and is currently passing through a depression phase and potentially on its way to disbelief stage,” First Capital said.

“Valuations suggest to be attractive relative to CSE’s peer countries, strongly suggesting a healthy range of undervalued stocks,” it added. Most banks, which account for 40% of the equity market, are trading below their book value.

“When the market enters such a phase, it would be a matter of time before an unforeseen event or best known as a black swan even may lead to the market cycle to get converted to phase of “Hope”, which begins a strong bull run,” First Capital Research opined.

It also said that over the past three months (25 September to 24 December 2018), First Capital maintained exposure at 50%, considering earnings hit via depreciation and political unrest affecting sentiment of the market. However during the period the market gained by about 100-120 index points.

“As we step into 2019, we are witnessing the global fund flow reversing towards Asia and commodity prices crashing, with the dip in oil prices benefitting the Balance of Payments position of Sri Lanka and positively affecting Cost of Living,” First Capital said.

“We believe the events that have unfolded may benefit Sri Lanka and the equity market over the next few months, positively impacting earnings and possibly leading to net foreign inflows,” it said. “In view of this outlook, First Capital Research has upgraded its equity exposure to 60% from 50% previously and upgraded ASPI volatility expectations to 6,000-6,500 (from the previous 5,800-6,200) assuming Market Price Earnings Ratio to be 8.5x-9.5x.

In its equity strategy report, First Capital also said that following the re-appointment of “pre-October 26 Government” and passing of the Vote of Account in Parliament, the political uncertainty that prevailed eased off providing financial capability for the Government and its institutions to function beyond 31 December 2018.

“However stability created, is likely to be temporary, as suggested by the differences that were prevalent in the process of appointing the new Cabinet. We expect the divergent views between the President and UNF Government will continue to affect key policy decisions within the Cabinet throughout 2019, up until the Presidential elections due in January 2020,” it added.

In terms of external sector turning positive for Asia, First Capital said that global growth is expected to slow down during 2019, primarily led by the possible impacts arising out of the trade war between the US and China coupled with the downgrade in growth expected in the US economy. The slowdown in the US economy is also likely to result in decelerating the Federal Reserves’ interest rate normalisation process, which may provide some breathing space for most weaker Asian economies. “Global fund flow has already started to reverse towards Asia and emerging markets providing reasonable level of stability to Asian and other emerging markets,” First Capital Research noted.

First Capital Research optimistic – Daily News 31-12-2018

Daily News | 31.12.2018

The re-appointment of ‘pre-October 26 Government’ and passing of the Vote of Account in Parliament, and with the political uncertainty that prevailed over the last 8 weeks easing off, has provided financial capability for the Government and its institutions to function beyond 2018 according to a report by First Capital Research.

“Over the last 3 months (25-Sep to 24-Dec) we’ve maintained exposure at 50% considering earnings hit via depreciation and political unrest affecting sentiment of the market. However, during the period market gained by about 100-120 index points.”

“As we step into 2019, we are witnessing the global fund flow reversing towards Asia and commodity prices crashing with the dip in oil prices benefiting the BoP position of Sri Lanka and positively affecting Cost of Living.”

We believe the events that have unfolded may benefit Sri Lanka and the equity market over the next few months positively impacting earnings and possibly leading to net foreign inflows.

Thereby, we upgrade our equity exposure to 60% and upgrade ASPI volatility expectations to 6,000-6,500 (from our previous 5,800 –6,200),” the report adds.

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)

Hiruni Perera, Senior Research Analyst, at First Capital Holdings PLC commenting on the equity market forecast on Ada Derana – 30.12.2018

Treasury Bills and Bonds Sri Lanka

Hiruni Perera, Senior Research Analyst, at First Capital Holdings PLC 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 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 PLC commenting on the bond and the equity market performance on Ada Derana – 24.12.2018

Treasury Bills and Bonds Sri Lanka

First Capital’s Atchuthan Srirangan at First Capital Holdings PLC 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 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.