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Thursday March 23rd, 2023

Sri Lanka shares down for 2nd day as tax hike, delay in Chinese debt assurance weigh

ECONOMYNEXT – Sri Lanka’s shares edged down on Tuesday as worries over delay in financial assurances from China which is mandatory for a $2.9 billion dollar IMF loan and rise in protests against tax hike kept investors in check, analysts said.

The main All Share Price Index (ASPI) edged down by 0.28 percent or 24.62 points to 8,865.05. It fell for the second session after hitting more than three-month high.

“The market is looking for more macro cues because of faster Chinese debt assurance was expected. The market is also hit by fall in corporate earnings due to high taxes,” an analyst said.

China has given an initial response on debt re-structuring to Sri Lanka though analysts familiar with the process say it is not a ‘hard assurance’ sufficient for the IMF program to go through.

The International Monetary Fund is working with China on extending maturities of Chinese loans to defaulted countries like Sri Lanka, as there is resistance to hair-cuts, Managing Director Kristalina Georgieva told reporters on January 14.
The earnings for first quarter are expected to be negative for many corporates with higher taxes and rising costs. However, investors had not expected earnings to be low in the December quarter because of year end pick ups on heavy counters, the analyst said.
Earnings in the second quarter of 2023 are expected to be more positive with the anticipation of IMF loan and possible reduction in the market interest rates as the tax revenue has started to generate funds.

However, the central bank said the IMF deal is likely in the first quarter or in the first month of the second quarter.

The most liquid index S&P SL20 dropped by 0.64 percent or 17.74 points to 2,764.51 points.

The central bank has said it could cut interest rates in future when the country sees fall in inflation, which has already started decelerating.

The market saw a turnover of 1.7 billion rupees, slightly lower than the month’s daily average of 1.8 billion rupees and while being significantly lower than 2022’s daily average turnover of 2.9 billion rupees.

The bourse saw a net foreign inflow (NFI) of 93 million rupees extending the net offshore buying to 413 million rupees so far this year.

Top losers were LOLC, Royal Ceramics Limited and Hayleys. (Colombo/Jan31/2023)

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Sri Lanka establishes committee to investigate aircraft incidents

An aircraft lands at the Jaffna International Airport, which was opened in October 2019 and promises to push the tourism frontiers in Jaffna.

ECONOMYNEXT: Sri Lanka’s has established an expert committee under the state-run Civil Aviation Authority to investigate aircraft accidents and to implement precautionary methods in the Sri Lankan airspace, an Official said.

“Even if it is only one flight, there is a chance an accident may occur,” Civil Aviation Authority of Sri Lanka, Director General, P. A. Jayakantha said.

“This particular committee is there to investigate aircraft accidents and act as a mechanism to take over if something goes wrong”.

Sri Lanka has encountered around 2,700 minor aircraft accidents and incidents mostly on the ground in the 19 years through 2021, the CAA annual reports showed.

The new committee will analyze the past accidents and take precautionary measures while also conducting investigations and provide independent reports in the future, Jayakantha said.

The team is provided with required training and qualifications by the CAA along with an International organization, free of charge.

“Internationally also it is a requirement to have a team to investigate the aircraft accidents,” Jayakantha added.

“For a long time we have not fulfilled this requirement and that is why we established this team with the cabinet approval. Moreover, recently, Sri Lanka’s two aircrafts, one training aircraft and a commercial aircraft met an accident”

The committee will be on active duty, until the Accident Investigation Act is passed and a proper Aircraft Accident and Incident Investigation Bureau is established. (Colombo/ Mar23/2023)

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Sri Lanka bond yields steady, Rupee 319/325 at close

ECONOMYNEXT – Sri Lanka’s treasury bond yields closed steady on Thursday while rupee closed weaker, dealers said.

A 01.07.2025 bond closed at 30.60/31.00 percent on Tuesday, down from 30.25/75 percent on Wednesday.

A 15.09.2027 bond closed at 27.80/28.10 percent, steady from 27.90/28.00 percent from Wednesday.

Sri Lanka rupee closed at 319/325 against the US dollar depreciating from 318/320 from a day earlier. (Colombo/ March23/2023)

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Sri Lanka shares dive to two-week low on local debt restructuring fears

ECONOMYNEXT – The Sri Lanka market fell for a fourth session to a two-week low on Thursday, led by financials, as worries over domestic debt restructuring continued after the IMF loan was approved earlier this week resulting in investors adopting a wait-and-see approach until further clarity was provided, analysts said.

The main All Share Price Index (ASPI) closed down 1.38 percent or 131.07 points to 9,395.98, lowest since March 02.

Analysts said, majority of the banks have been on slower investment trends on fears of domestic debt restructuring after the IMF approval and waiting for more clarity on the local debt restructuring.

“The market is on muted sentiments despite the IMF loan being approved and is going through a period of consolidation,” Ranjan Ranatunga of First Capital Holdings said.

The market saw a net foreign outflow of 298 million rupees and the total offshore inflows recorded so far in 2023 to 3.3 billion rupees.

The most liquid index, S&P SL20, closed 1.64 percent, or 45.33 points, down at 2,722.94.

The market saw a turnover of 3.4 billion rupees on Thursday, above this year’s daily average of 1.8 billion rupees.

This is the highest turnover generated since March 08, which is when the market was driven off of positive sentiments from International Monetary Fund deal hope after Chinese assurances.

Top contributors to revenue was Agalawatte Plantations, on off board transactions of a stake change, contributing revenue of 1.6 billion rupees, Ranatunga said.

Top contributors to revenue industry wise was Food and Beverage and Telecommunications.

Sri Lanka Telecom has been seeing positive uptrends as the Secretary to the Treasury has informed the Board of Directors of Sri Lanka Telecom PLC (SLT) and Lanka Hospitals PLC that the Cabinet of Ministers has granted approval in principle for the divestment of the stakes held by the Treasury Secretary in the two companies.

Top losers were Sampath Bank, Hatton National Bank and Commercial Bank.

Sri Lanka is looking at options to re-structure domestic debt, or local law local currency debt (LLLC), without harming the banking sector and announce them the International Monetary Fund said in a report.

Banks have been witnessing profit taking and selling pressures after continuous uptrends prior to the IMF loan had been approved.

Analysts said, selling pressures is expected to ease as the IMF hopes to reduce inflationary pressures which will in turn lead to reductions in interest rates. (Colombo/Mar23/2023)

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