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Saturday March 2nd, 2024

Sri Lanka rupee swap discounts ease further, exporter parallel rates up

ECONOMYNEXT – Sri Lanka’s inverted rupee/dollar swap rates (discounts) have eased further and some banks are paying exporters higher than 203 for US dollars, especially to meet financial outflows, market participants said as the repayment of a billion dollar sovereign bonds was awaited.

Sri Lanka’s state minister for money and capital markets Nivard Cabraal said money to repay bond holders are being sent as promised and meet the payments on July 27.

Sri Lanka has been keeping the promise to honour all maturing debt.

There is a 203 to the US dollar ceiling promoted by authorities for dollars sold to importers and an interbank trading ceiling of 200 to the US dollar effectively. The ceiling also limited the price paid to exporters to 203 rupees per dollar.

Banks then started rationing dollars to importers of consumer goods in particular declining to issue letters of credit.

However some banks are offering higher rates to exporters around 204.50 to 206.00 to the US dollar market participants said, especially to meet financial outflows such as stock market flows in a parallel market.

Some importers, who had brought goods without LCs (DA/DP terms) based on long term relationships were forced to pay demurrage, pushing up costs as containers piled up at the port as they waited for dollars to pay import bills and banks declined to accept documents without dollars to pay for them.

Some importers have also started to meet exporters directly to beg for dollars.

Sri Lanka’s rupee had come under severe pressure as liquidity was injected (reserve money was inflated in excess of the external monetary anchor) in so-called ‘modern monetary theory to keep overnight and gilt yields down, triggering a run on forex reserves (a balance of payments deficit).

On Thursday excess liquidity fell to zero amid reserve outflows and call rates edged up to around 5.12 per cent.

Monday both call and repo were around 5.10 per cent, dealers said.

When downgrades came in late 2020, forward rates inverted as banks tried to cover their dollar loans including to a state petroleum distributor, amidst dwindling credit lines.

With the repayment of some Sri Lanka Development Bonds and the hiking of petroleum prices, some pressure had come off the swap market. A state bank staying off the long end of the market had also helped reduce swap rates.

This week swap rates eased further, market participants said.

Spot/1 month swaps were quoted around – (negative) 20/00 cents

Spot/3 months – (negative) – 170/060

Spot/6 months – (negative) – 550/230

Spot/12 months (negative) – 1000/700

In mid-July swap rates were higher.

Spot/1 months was quoted at a discount of 120/150 cents.
Spot/2 months 250/310
Spot/3 months 400/470
Spot/6 months 500/805
Spot/1 year 1100/1200 cents

On July 27, a billion US dollar sovereign bond is maturing. Of that, over 300 million US dollars are estimated to be held by domestic investors.

In bond markets, gilt yields remained unchanged from their previous close on Thursday, market dealers said.

A 2-year bond maturing on 15.12.2022 quoted flat at 5.75/95 per cent on Monday from Thursday’s close.

A bond maturing on 15.01.2023 quoted flat at 5.75/85 per cent on Monday.

A bond maturing on 15.09.2024 quoted flat at 6.68/78 per cent on Monday from Thursday’s close.

A bond maturing on 01.02.2026 quoted at 7.35/45 per cent unchanged from Thursday.

A bond maturing on 15.08.2027 unchanged at 7.55/80 per cent from the last closing.

A 10-year bond maturing on 15.05.2030 quoted unchanged at 8.25/50 per cent from Thursday.


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Sri Lanka eyes SOE law by May 2024 for better governance

ECONOMYNEXT – Sri Lanka is planning to pass a Public Commercial Business (PCB) Act improve governance of state-owned enterprise by May 2024 as part of an anti-corruption efforts following an International Monetary Fund assessment.

Sri Lanka’s state enterprises have been used by politicians to give ‘jobs of the boys’, appropriate vehicles for personal use, fill board of directors and key positions with henchmen and relatives, according to critics.

Meanwhile macro-economists working for the state also used them to give off-budget subsides or made energy utilities in particular borrow through supplier’s credits and state banks after forex shortages are triggered through inflationary rate cuts.

The government has taken billons of dollars of loans given to Ceylon Petroleum Corporation from state banks.

There have also been high profile procurement scandals connected to SOEs.

An SOE Reform Policy was approved by Sri Lanka’s cabinet of ministers in May 2023.

The Public Commercial Business (PCB) Act has now been drafted.

A holding company to own the SOEs will be incorporated and an Advisory Committee and Board of Directors will be appointed after the PCB law is approved, the statement said. (Colombo/Mar01/2024)

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Sri Lanka rupee closes at 308.80/90 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 308.80/90 to the US dollar Friday, from 309.50/70 on Thursday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.02.2026 closed at 10.65/75 percent up from 10.50/70 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent from 11.90/12.10 percent.

A bond maturing on 01.07.2028 closed at 12.15/35 percent down from 12.20/25 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent up from 12.30/45 percent.

A bond maturing on 15.05.2030 closed at 12.30/45 percent down from 12.35/50 percent.

A bond maturing on 01.07.2032 closed at 12.50/13.00 percent from 12.55/13.00 percent. (Colombo/Mar1/2024)

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Sri Lanka stocks close up 0.37-pct, Expo to de-list

ECONOMYNEXT – The Colombo Stock Exchange closed up 0.37 percent on Friday, and SG Holdings, the parent company of Expolanka Holdings Plc, said it was taking the company private.

Expolanka is the largest listed company on the Colombo Stock Exchange.

“Expolanka Holdings PLC has, at the Board Meeting held on 1st March 2024, considered a request from its principal shareholder and resolved to initiate the de-listing of the Company’s shares from the Official List of the Colombo Stock Exchange subject to obtaining necessary shareholder approval and regulatory approvals,” the company said in a stock exchange filing.

As per arrangements with SG Holdings Global Pte Ltd, the Company’s majority shareholder, it will purchase its shares from shareholders who may wish to divest their shareholding in the Company at a purchase price of Rs 185.00 per share. The share closed up at 150.50.

The broader All Share Index closed up 0.37 percent, or 39.47 points, at 10,691; while the S&P SL20 Index closed down 0.64 percent, or 19.59 points, at 3,037.

Turnover stayed above the 1 billion mark for the sixth consecutive day, registering 1.4 billion.

Crossings in Melstarcorp Plc (135mn) up at 89.50, Hatton National Bank Plc (64mn) up at 158.00, Hemas Holdings Plc (53mn) up at 75.00 and Central Finance Company Plc (26mn) up at 103.50, added significantly to the day’s turnover.

“The upward trend is continuing, with more retail buying also coming in, the number of trades was more than 10,000 today,” a market participant said. “Investors are looking for undervalued stocks and buying in quantities.” (Colombo/Mar1/2024).

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