CSE News Updates

Sri Lanka’s first quarter GDP growth slowed to 6% but still remains amongst the highest in the world, according to stock broking firm DNH Financial.
It said Sri Lanka reported 1Q2013 GDP growth rate of 6.0% in line with its expectations. Growth was spearheaded by the industrial, services and agriculture sectors which rose by 10.7%, 4.3% and 2.0% compared to 10.8%, 5.8% and 12.0% reported during 1Q2012.

“We view this performance as satisfactory and indicative of the country’s resilience in an environment of globally heightened risk, while also setting the foundation for our expectation of 6.5% to 7.0% GDP growth rate for FY2013.
With the exception of China, which has reported a GDP growth rate of 7.7% in 1Q2013, it is encouraging to note that Sri Lanka has outperformed all BRICS countries in terms of 1Q2013 GDP performance during the period,” DNH Financial said.

REUTERS: Foreign investors have been shifting to Sri Lanka’s treasury bills while selling longer tenure T-bonds, the latest central bank data showed on Friday, as a rise in U.S. Treasury yields has prompted many offshore investors to rush to the exits.
Foreign investors bought a net Rs. 6.67 billion ($ 51.97 million) in T-bills in the three weeks ended on 19 June, while they sold a net Rs. 5.66 billion worth of T-bonds in the same period, the data showed.
Foreign holdings in T-bills rose 9.9% to $ 576.94 million and fell 1.3% in T-bonds to $ 3.31 billion in the same period, the data showed.
“Foreign investors are preparing to exit and that is the reason why they are now gradually shifting to short-term government securities,” a currency dealer said on condition of anonymity.
“For foreigners, Sri Lankan securities are still risky assets despite a return of well above 10%. With the U.S. Treasury yields rising, they want to exit from these markets.”
The Sri Lankan rupee sank to a more than six-month low on Friday for a second time in six sessions, with some foreign investors booking forwards to hedge their exposure, dealers said.
Central Bank Governor Ajith Nivard Cabraal, however, has said the fall in the currency is no cause for concern as foreign investors have been changing their positions rather than pulling out of the island nation’s bond market.

Plush five star The Kingsbury’s owner Hotel Services (Ceylon) PLC is going for a 3 for 8 rights issue to raise Rs. 660 million.
Offered at Rs. 10 per share the rights will entail issuance of 66 million new shares.
Funds raised will be used to retire debt thereby strengthen the balance sheet. Long-term borrowings as at 31 March 2013 was Rs. 1.2 billion, up from Rs. 400 million a year earlier and short term borrowings were Rs. 634 million, up from Rs. 28.4 million in FY12 whilst there was also a short-term loan of Rs. 775 million from related companies.

The rights issue is subject to regulatory and shareholder approval.
Hayleys PLC holds a 38% stake and subsidiary Carbotels Ltd., a further 13%. Other major shareholders include EPF (10.5%) and Bank of Ceylon (4.4%).
In the FY13, with an investment of Rs. 2.4 billion, the company completed the upgrading of the former Ceylon Continental Hotel  and rebranded the property as the landmark of luxury in Colombo; The Kingsbury.
The property which was closed for upgrading in February 2012 was planned to be operational by
October 2012 but due to the change of scope of the upgrading program for the betterment of the hotel, the opening was re-scheduled to mid December 2012. The opening went through a gradual phase from
January to March 2013.
Due to the closure, the company in FY13 suffered a net loss of Rs. 449 million up from Rs.186 million.
The reduction in revenues experienced year on year was Rs.363 million due to the closure of the hotel. The increase in administrative expenses by 41% to Rs.365 million in FY13 from Rs. 259 million in FY12 was mainly attributed to the investments the company made on its human resources.
The company said with the appointment of a qualified and experienced senior team with extensive international exposure to manage the hotel, the Kingsbury under their leadership is poised to reach unparalleled levels of performance during the next financial year.

Despite fears that foreign investors may continue to exit emerging markets off in response to the cut back in the US fed’s bond buying program, DNH Financial believes that foreign allocations to domestic equities could remain (notwithstanding the possibility of a temporary sell-off), with robust domestic economic and corporate EPS growth providing the necessary tailwind.
It said descending close to the 6,200 support level, it is easy to shy away from the market on the conviction that it may lose further ground due to the perceived lack of any relevant support despite expectation of robust 2Q2013 corporate results for bluechip counters.

“While we don’t rule out the possibility of further sideways movement in the short term, we are nevertheless reasonably convinced that the market should garner firm interest from foreign investors who may adopt a cherrypicking approach focusing on counters that present strong and sustainable value in high growth and defensive sectors,” DNH said.
“This should provide the necessary foundation for the market’s systematic rise over the medium to longer term. In this respect, we advise investors to focus on companies with largely monopolistic attributes and strong brand loyalty within sectors and sub-sectors that are both growth and resilient. We reiterate the need to construct a diversified portfolio of stocks that have strong top line revenue growth and low debt to equity ratios,” DNH Financial added.

June 24, 2013 (LBO) - Sri Lanka Telecom said it had added doorstep bill collection service to their existing network of 3,000 payment points, made up of bank branches and supermarkets, making it easier to settle bills.
Under a deal inked with HDFC Bank, a mortgage lender, SLT will use its 300-strong mobile collections team to customer's homes and central locations allowing bills to be paid.

"This is especially useful for customers in rural areas such as Batticaloa, Vavuniya, Mannar, Hambanthota, Nuwera Eliya..," he said in a statement.

Some customers had to travel as much as 30 kilometres to pay a bill in those regions resulting in missed payments.

"This sometimes has resulted in line disconnections and inconvenience caused to customers, even though they have sufficient funds to settle payments on time," he said.

The bills will be updated through palmtop computers carried by HDFC Bank's collection team.

"Improving our technology remains a priority to capitalize on efficiency and productivity gains that can be facilitated through the creative use of IT and other technologies," Nimal Mamaduwa, chief executive of HDFC Bank was quoted as saying in the statement.

"Our palmtop operators reach deeper into rural parts of the country and the collection of telecommunication bills will be another value addition to our services."

June 24, 2013 (LBO) - Sri Lanka's exports fell 6.8 percent in April 2013 to 696.6 million US dollars with apparels falling 14.98 percent to 275 million US dollars from a year earlier, and exports in first four months down 7.8 percent, the Central Bank said.
Industrial exports were down 7.5 percent to 518 million US dollars.

Agricultural exports fell 0.9 percent to 175.6 million US dollars, but tea was up 1.2 percent to 106.4 million US dollars.

Imports rose 5.7 percent to 272.7 million US dollars with consumer goods up 12.7 percent to 272.7 million US dollars, intermediate goods up 5.5 percent to 884.4 million US dollar.

Petroleum imports fell 5.2 percent to 343.4 million US dollars and textile and apparel fell 15.4 percent to 154.1 million US dollars.

Investment goods were up 1.2 percent to 363.4 million US dollars.

Machinery and equipment were barely up 1.1 percent to 186.5 million US dollars, transport equipment were down 27.0 percent to 60.3 million US dollars and building materials were up 26.8 percent to 116.3 million US dollars.

The trade deficit expanded 19.2 percent to 825.4 million US dollars.

In the first four months exports rose 7.8 percent to 3,059.8 million US dollars, imports fell 11.3 percent to 6,025.4 million US dollars and the trade deficit was down 14.6 percent to 2,965.6 million US dollars.

A trade deficit is caused when domestic economic agents outside merchandise exports, including remittances, tourism receipts, borrowings and foreign direct investments.

The Central Bank said worker remittances (exports of labour) were 2.1 billion dollars and earnings from tourism receipts were 407 million dollars.

The central bank said there were 612 million US dollars flowing into Treasuries markets (exports of debt) and 546 million US dollars in other loans.