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Wednesday June 19th, 2024

Sri Lanka stocks hit all time high

ECONOMYNEXT – Sri Lanka stocks closed up 2.4 percent on January 16, reaching an all time high, of 7922.66 points topping a previous high of 7811.8 points reached on February 14, 2011, the Colombo Stock Exchange said.

The S&P SL20 index of most liquid stocks also topped 3000 points, to close at 3,003.3 points exceeding the previous high on December 04, 2019.

The Colombo Stock Market is one of the best performing in the world coming behind Venezuela which is up 30.77 percent so far in 2021 according to markets tracked by Bloomberg, and Hanoi Stock Exchange which rose 5.04 percent to close up 13.48 percent for the year.

In US dollar terms Hanoi is up 13.62 percent and Sri Lanka 12.62 percent.

Top contributors were LOLC Holdings, Commercial Leasing and Finance and LOLC Finance.

Stocks gained in early trade and faltered before ending at a new high, brokers said.

“The sentiment is somewhat that the market is in need of a correction but with the current interest rate environment and a strong rebound in earnings expected in 2021, the current market valuation is largely justified, “Naveed Majeed, Vice President, Asia Securities Private Limited told EconomyNext.

“In terms of a correction, we might see this coming at different levels, even today the market took a dip at a point and then picked up, so we will see slight adjustments, but I don’t think we will see a drastic market drop mainly because of the earnings season around the corner.

“There is also the case of “where to invest?” if money is pulled out of the market at this point, so we see continued asset allocation towards equity markets in the low-interest-rate environment”

“The current Trailing 12-month market P/E multiple seem elevated, but this is only due to abnormal COVID impacted earnings of 2020. With strong earnings recovery expected in 2021, the current forward multiples are justified at this point.”

A 2011 surge ended as a correction came from the balance of payments with low interest rates and excess liquidity ending in a rate hike and a float of the rupee in early 2012.

Sri Lanka’s private credit is still weak and the firms have higher business volumes now especially in rupee terms.

The market turnover was 12.2 billion rupees with 137 stocks gaining and 73 falling.

LOLC Holdings contributed most to the ASPI gain, closing 38.50 rupees up at 265.25 rupees a share.

Commercial Leasing and Finance gained 2.10 rupees to close at 10.80 rupees a share and LOLC Finance gained 1.30 rupees to close at 9.40 rupees a share also contributing to the ASPI gain.

In the banking sector Hatton National Bank closed 6.00 rupees up at 112.00, Sampath Bank 5.50 rupees up at 146.75 rupees a share, Commercial Bank of Ceylon gained 4.40 rupees to close at 88.70 rupees and DFCC Bank closed 2.20 rupees up at 67.90 rupees.

Expolanka Holdings gained 40 cents to close at 53.80 rupees and Access Engineering gained 4.90 rupees to close at 29.90 rupees while Browns Investments, an affiliate of LOLC Holdings closed 20 cents down at 7.30 rupees a share.

In the hotel sector Eden Hotel Lanka closed 40 cents up at 13.80 rupees a share, Sigiriya Village hotel closed 50 cents up at 35.00 rupees, Aitken Spence Hotel Holdings gained 1.90 rupees to close at 34.90 rupees and John Keells Hotels closed 60 cents up at 11.00 rupees a share.

Sri Lanka Telecom closed 1.40 rupees down at 41.20 rupees while Melstacorp Plc closed 50 cents up at 63.20 rupees.

John Keells Holdings closed 1.25 rupees up at 161.25 rupees a share and Richard Pieris Company closed 40 cents up at 15.90 rupees.

Ceylon Tobacco Company gained 10.00 rupees to close at 1,124.25 rupees while Ceylon Cold stores closed 15.00 rupees up at 710.50 rupees a share while Distilleries Company fell 50 cents to close at 23.80 rupees.

Hayles Plc closed 7.00 rupees up at 498.25 rupees while Hemas Holdings closed 1.00 rupee down at 95.60 rupees.

Tokyo Cement Company gained 3.00 rupees to close at 86.30 rupees while Cargills Ceylon closed 6.75 rupees down at 218.75 rupees a share.

Nestle Lanka closed 5.50 rupees down at 1,303.75 rupees and Dialog Axiata closed 30 cents down at 12.60 rupees.

Aitken Spence Plc closed 5.40 rupees up at 70.10 rupees while Carson Cumberbatch closed 4.50 rupees down at 300.75 rupees.

Dipped products gained 27.50 rupees to close at 428.75 rupees a share and Haycarb gained 50 cents to close at 758.25 rupees.

Lanka Ceramic closed 10.00 rupees down at 154.00 rupees a share while Royal Ceramic Lanka gained 14.50 rupees to close at 217.25 rupees a share.

Sri Lanka recorded a net foreign sales of 178 million rupees today.

The Capital Goods industry was the most active, gaining 5.4 per cent and the Materials Industry which was also active gained 3.5 per cent today. (Colombo/January 18/2021 – Update II)

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Central banks expect to increase gold reserves after buying 1,037 tonnes in 2023: Survey

ECONOMYNEXT – About 29 percent of central banks in the world intended to increase their gold reserves in 2023, up from 24 percent in 2023 and just 8 percent in 2019, a survey by the World Gold Council showed.

“The planned purchases are chiefly motivated by a desire to rebalance to a more preferred strategic level of gold holdings, domestic gold production, and financial market concerns including higher crisis risks and rising inflation,” the WGC said.

About 81 percent of 70 central banks that responded to the survey expected global central bank holdings of gold to go up, from 71 percent in 2023.

While in prior years, gold’s “historical position” was the top reason for central banks to hold gold, this factor dropped significantly to number five this year.

This year, the top reason for central banks to hold gold is “long-term store of value / inflation hedge” (88%), followed by “performance during times of crisis” (82%), “effective portfolio diversifier” (75%) and “no default risk” (72%).

Concerns about sanctions were listed as by 23 percent of emerging market central banks (0 advanced).

De-dollarization as a reason to hold gold gained ground, but was not among the main reasons.

About 13 percent of emerging market central banks listed de-dollarization as one of the reasons to buy gold up from 11 percent last year and 6 advanced nations said the same from zero last year.

Around 49 percent of central banks expected gold reserves to be moderately lower five year from now in the 2024 survey, against 49 percent in 2023 and 38 percent in 2022.

About 13 percent of central banks surveyed said US dollar reserves would be significantly lower in the 2024 survey, up from 5 percent in 2023 and 4 percent in 2022. (Colombo/June18/2024)

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Sri Lanka rupee closes weaker at 304.75/305.40 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed weaker at 304.75/305.40 to the US dollar Tuesday, down from 304.15 to the US dollar Friday, dealer said, while some bond yields edged up.

Sri Lanka’s rupee has weakened amid unsterilized excess liquidity from earlier dollar purchases.

Excess liquidity fell from as high as 200 billion rupees, helped by some sales of maturing bills and also allowing some term contracts to run out.

However the central bank has started to inject liquidity again below its policy rate to suppress interest rates.

On Tuesday 30 billion rupees was printed overnight at an average yield of only 8.73 percent.

Separately another 25 billion rupees was printed till June 25 at 8.09 percent to 9.05 percent, which was still below overnight the policy rate of 9.5 percent.

Nobody has so far taken the central bank to court for printing money beyond overnight at rates lower than the overnight rate.

Sri Lanka operates an ad hoc exchange rate regime called ‘flexible exchange rate’ which triggers panic among market participants, as the central bank stays away when spikes in credit either creates import demand or unsterilized credit is used up.

“If large volumes of unsterilized liquidity is left, the exchange rate has to be closely defended to prevent speculation involving early covering of import bills and late selling of exports proceeds,” EN’s economic columnist Bellwether says.

“Just as an appreciating or stable exchange rate leads to late covering of import bills, a falling rates leads to immediate covering of import bills.

“Keeping exchange rates stable is a relatively simple exercise but it is difficult to do so if short term rates are also closely targeted with printed money, as liquidity runs out, as if the country had a free float and no reserve target.”

“When there is a large volume of excess liquidity remaining (except those voluntary deposited for long periods by risk averse banks) the the interest rates structure is under-stated compared to the reported reserves.

“Interest rates would be a little higher than seen in the market if the liquidity was mopped up and domestic credit and imports were blocked to prevent the reserves from being used up.”

In East Asia there is greater knowledge of central bank operational frameworks, though International Monetary Fund driven flawed doctrine are also threatening the monetary stability of those countries, critics say.

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Vietnam selling SBV bills to stabilize the Dong, as Sri Lanka rupee also weakens

Sri Lanka’s rupee started to collapse steeply after the IMF’s Second Amendment in 1978 along with many other countries as flawed operational frameworks gained ground without a credible anchor.

A bond maturing on 15.12.2026 closed at 10.10/30 percent up from 10.05/30 percent Friday.

A bond maturing on 15.10.2027 closed at 10.60/57 flat from 10.60/80 percent.

A bond maturing on 01.07.2028 closed at 11.15/35 percent, up from 11.05/20 percent.

A bond maturing on 15.09.2029 closed at 11.80/90 percent unchanged.

A bond maturing on 15.10.2030 closed at 11.90/12.00 percent.

A maturing on 10.12.2031 closed at 11.95/12.10 percent.

A bond maturing on 01.10.2032 closed at down at 11.95/12.10 percent, down from 12.00/10 percent. (Colombo/Jun14/2024)

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Sri Lanka’s Ceylon Chamber links up with Gujarat Chamber

ECONOMYNEXT – The Ceylon Chamber of Commerce has signed an agreement with the Southern Gujarat Chamber of Commerce and Industry (SGCCI) to increase trade cooperation between India and Sri Lanka.

The MOU was signed by CCC CEO Buwanekabahu Perera, SGCCI President Ramesh Vaghasia, in the presence of Dr Valsan Vethody, Consul General for Sri Lanka in Mumbai, India.

“With the signing of the MoU, … the Ceylon Chamber of Commerce and SGCCI aim to facilitate trade between the two countries via initiatives such as trade fairs and delegations, business networking events, training programmes,” the Ceylon Chamber said in a statement.

“This partnership will open doors for Sri Lankan businesses to explore opportunities in Surat’s dynamic market and enable the sharing of expertise and resources between the two regions.”

Established in 1940, SGCCI engages with over 12,000 members and indirect ties with more than 2,00,000 members via 150 associations. It promotes trade, commerce, and industry in South Gujarat.

The region’s commercial and economic centre Surat has risen to prominence as the global epicenter for diamond cutting and as India’s textile hub, and is ranked the world’s 4th fastest growing city with a GDP growth rate of 11.5%

Surat’s economic landscape is vibrant and diverse. As India’s 8th largest and Gujarat’s 2nd largest city, it boasts the highest average annual household income in the country.

The nearby Hazira Industrial Area hosts major corporations like Reliance, ESSAR, SHELL, and L&T. (Colombo/Jun18/2024)

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