Sri Lanka earnings slow down seen on interest rate recovery

COLOMBO (EconomyNext) – Earnings of Sri Lankan listed companies will remain at current levels in the December 2015 and March 2016 financial year but could slow down thereafter owing to a possible interest rate hike, a brokerage said

First Capital Equities said low interest rates, higher disposable incomes and a stable exchange rate are likely to drive market earnings for the December 2015 and March 2016 financial year.

Market returns may improve once current uncertainty stemming from looming parliamentary elections settles, they said in a research report.

“We continue to maintain market earnings forecast for December 2015E / March 2016E at 11-13 percent year-on-year,” it said.

Market returns are likely to stay low amid the current uncertainty in the political front, First Capital Equities said, adding that they expect market returns to be strong once the uncertainty settles down.

“However, we expect a slowdown in economic conditions beyond June 2016 due to possible rise in interest rates affecting companies across the board,” the brokerage said.

“As a result we expect market earnings to slowdown for the earnings period December 2016E / March 2017E resulting in an earnings forecast of 4-5 year-on-year.”

The earnings for the December 2014 / March 2015 financial year grew 13 percent, slightly above the growth target of 10-12 percent estimated by First Capital Equities.

Market earnings for the March quarter remained strong among most companies especially in the banking and finance sector.

But absolute earnings were flat in the quarter compared to the previous year’s corresponding quarter because of lower palm oil earnings by carson Cumberbatch and Bukit Darah and losses in Lanka India Oil Corporation.






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