Tag Archives: Seylan Bank Plc

US bond rate increase good for CSE; not so much for local bonds

FIRST CAPITAL’S  SENIOR RESEARCH ANALYST ATCHUTHAN SRIRANGAN, SPEAKS TO THE SUNDAY TIMES

Foreigners rally in cash at CSE

Despite being one of the poorest performing markets in the region, Sri Lanka’s stock market which has been in the doldrums has attracted a lot of foreign buying interest since of late.

This heavy investor participation stems mainly from the rate increase in the US bond market. While the rates going up is seeing foreign funds shifting back to the US from frontier markets such as Sri Lanka, a small component of their corresponding funds which invest in stock markets  are being ploughed into the Colombo Stock Exchange (CSE), analysts say.

There has been continuous foreign selling in local bonds and as at January 1, 2017 it was US$ 2 million.  The new regime under Donald Trump is trying to strengthen the US Dollar and luring back  funds  to the US.

Atchuthan Srirangan, Senior Research Analyst First Capital Equities noted that on the back of all this, this month’s foreign inflow at CSE was Rs. 600 million as at February 8. Mr. Srirangan said that in the year to date the total foreign participation so far is more than 50 per cent of CSE’s turnover, while for the same period last year it’s 38 per cent.

But why put cash in the CSE? 

That’s due to most shares at the CSE trading at 4x their price to Earnings Ratio (PER) which has made these bargain counters for foreign investors. Foreign fund managers say that CSE is a good investment this year owing to superior earnings projections, low valuations and the potential for better earnings.

From January 1 to 8 February, foreigners bought Rs. 7.67 billion and sold Rs. 8.63 billion. While the net outflow is Rs. 1.026 billion, analysts note that some foreign selling was done to foreigners themselves.

Analysts say that a considerable foreign play was done by Norway’s $830 billion sovereign wealth fund, locally managed by Lynear Wealth Management. The fund has been increasing its focus on emerging countries but only has about 4 per cent of its assets managed externally.   Negotiated deals were recorded in many counters early this month – mostly blue chips and mid-caps bought by foreign funds — Hatton National Bank (0.7 million shares at Rs. 227) and Commercial Bank (0.2 million shares at RS. 145). The aggregate value of crossings accounted for 45 per cent of the turnover. Subsequent to its scrip dividend announcement, Sampath Bank attracted high investor preference where stock price increased to Rs. 267 up by 0.8 per cent.

On February 2, foreign investors stood on the ‘buy’ side with a net foreign inflow of Rs. 90 million. Net foreign inflows were seen in Commercial Bank at Rs. 29 million, Sampath at Rs. 29 million, Melstacorp at Rs. 17 million while net foreign outflows was mainly seen in Seylan Bank (Rs. 5 million). Foreign participation was 66 per cent.

Hemas Holdings saw 2.8 million shares crossed at Rs. 104 on February 2. Its main buyer in 3Q17 was Morgan Stanley and Co: International PLC. But Franklin Templeton Investment Funds had reduced its position in Hemas during the same period.

Overseas Realty Rights Issue saw a 24 per cent acquisition by Jilansu Tao Shing Pee Education Foundation on February 3. Foreign investors were net buyers with a new foreign inflow of Rs. 27 million on this day and net foreign inflows were mainly seen in Sampath Bank Rs. 35 million, Melstacorp Rs. 13 million and Tokyo Cement non-voting Rs. 12 million. That following Monday foreign investor activity accounted for 47 per cent of the turnover.

The day after foreign investors stood on the ‘buy’ side with a net foreign inflow of Rs. 111 million. Net foreign inflows were seen in John Keells Holdings (JKH) Rs. 51 million, Hemas Holdings Rs. 30 million, and Nestle Rs. 28 million while net foreign outflow was mainly seen in National Development Bank Rs. 4 million. Foreign participation was 52 per cent that day. On February 8 foreign investors were net buyers with a net foreign inflow of Rs. 152 million. Net foreign inflows were seen in JKH (Rs. 103 million), Sampath Bank (Rs. 49 million) and Melstacorp (Rs. 10 million). Net foreign outflow was mainly seen in Hatton National Bank (Rs. 17 million). Foreign participation was 33 per cent.

On February 13, foreign investors were net buyers with a net foreign inflow of Rs. 333.33 million foreign participation was 61 per cent. Let’s hope this trend co continues.

 

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 over 8-month low; Seylan deal weighs

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

Sri Lankan shares fell for a sixth straight session on Tuesday to hit its lowest in more than eight month led by financials as a Seylan Bank share deal cancellation weighed on sentiment.

Stockbrokers said the Colombo Stock Exchange cancelled the 1.3 billion rupees ($8.7 million) Seylan Bank foreign deal on the request of the broker with the consent of both buyer and seller.

Prime Minister Ranil Wickremesinghe ordered a reversal and a probe into the deal as it failed to follow proper procedure.

The Colombo stock index fell 0.45 percent to hit 6,222.33, its intraday lowest since April 8, but recovered to close 0.25 percent weaker at 6,234.75, its lowest close since Nov. 29. The bourse has fallen near 1.7 percent in six straight sessions through Tuesday.

“The market trading was quiet. We expect the turnover levels to fall further. The next supporting level is at 6,000. We expect the index to fall in thin trade,” said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Dealers said the cancellation of Seylan Bank has hurt the sentiment of potential foreign buyers.

Turnover stood at 537.6 million rupees ($3.61 million), less than this year’s daily average of around 744.7 million rupees.

 

Foreign investors bought a net 80.3 million rupees worth of shares on Monday, extending the year-to-date net foreign inflow to 697.5 million rupees worth of equities.

Shares in top private lender Commercial bank of Ceylon lost 1.53 percent, while Hatton National Bank fell 1.87 percent to drag down the overall index.

($1 = 148.7500 Sri Lankan rupees)

(Reporting by Shihar Aneez)

 

Sri Lankan shares hit more than 2-wk closing low led by banks

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

Sri Lankan shares fell for a third straight session on Friday to close at their lowest in more than two weeks, as a dollar rally to a 14-year peak after an interest rate increase by the U.S. Federal Reserve earlier this week kept investors subdued.

The 25-basis-point rate increase could hike borrowing costs of foreign capital for Sri Lanka and force the coalition government to borrow locally at higher interest rates, which could also result in movement of money from equities, analysts said.

The Fed also signalled a faster pace of increases in 2017, partly as a result of changes anticipated under a Donald Trump presidency, with the U.S. central bank hinting at three rate hikes next year instead of the two foreseen as of September.

The Colombo stock index ended 0.27 percent weaker at 6,268.61, its lowest close since Nov. 30. The bourse fell 0.88 percent for the week, its second weekly fall.

A block deal in Seylan Bank Plc boosted turnover, with dealers saying state-owned Bank of Ceylon sold 13 million shares to a foreign investor.

“A sizeable crossing of Seylan Bank boosted the turnover. Other than the Seylan trade, there was nothing. The market is getting slower by the day with the holiday mood,” said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Shares of Seylan Bank Plc ended steady, while Lanka ORIX Leasing Company Plc fell 4.49 percent and conglomerate John Keells Holdings Plc lost 1.14 percent.

Sri Lanka Telecom Plc dropped 2.61 percent, while Commercial Leasing and Finance Plc fell 5.88 percent.

Turnover stood at 1.86 billion rupees ($12.51 million), well above this year’s daily average of 753.4 million rupees.

 

Foreign investors bought a net 1.35 billion rupees worth of shares on Friday, extending the year-to-date net foreign inflow to 1.87 billion rupees worth of equities.

($1 = 148.6500 Sri Lankan rupees)

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

 

Sri Lankan shares hit more than 2-wk closing low; Fed rate hike weighs

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

Sri Lankan shares fell in line with regional bourses to close at their lowest in more than two weeks on Thursday, as a 25-basis-point interest rate increase by the U.S. Federal Reserve and hints of more to come next year kept investors on tenterhooks.

The Fed signalled a faster pace of increases in 2017 as central bankers adapted to incoming President Donald Trump’s promises of tax cuts, spending and deregulation. Partly as a result of the changes anticipated under Trump, the Fed sees three rate hikes next year instead of the two foreseen as of September.

The Colombo stock index ended 0.21 percent weaker at 6,285.53, its lowest close since Nov. 30.

“Market was on a very slow downtrend,” said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

“Bond and equity markets have adjusted for the Fed rate hike. We have seen outflows in the last three months. But going forward, we may go into a period of economic and political uncertainty because of a large number of bonds maturing in the first half on 2017 and local elections, plus a referendum coming up next year.”

The rate hike could increase borrowing costs of foreign capital for Sri Lanka and force the coalition government to borrow locally at higher interest rates, which could also see some outward movement of money from equities, analysts said.

The government is considering a change in the country’s constitution next year which requires a referendum.

The two main parties in the coalition government are expected to contest separately in the upcoming local government election, which the administration of President Maithripala Sirisena has postponed since mid-2015 citing delays in a new electoral process.

Foreign investors bought a net 44.7 million rupees ($301,213) worth of shares on Thursday, with the year-to-date net foreign inflow in shares declining to 514.7 million rupees.

 

Turnover was 361.8 million rupees, less than half this year’s daily average of 749 million rupees.

Shares of John Keells Holdings Plc fell 2 percent, while top mobile phone operator Dialog Axiata lost 1.9 percent.

($1 = 148.4000 Sri Lankan rupees)

(Reporting by Shihar Aneez; Editing by Biju Dwarakanath)