An Echelon Media Company
Wednesday June 7th, 2023

Sri Lanka’s EPF stock portfolio soars in Dec, outperforms market

ECONOMYNEXT- The listed equities portfolio of the Employees’ Provident Fund (EPF), a superannuation fund of private sector worker savings, has grown 10.03 percent to 66.3 billion rupees in the December quarter despite a passive management.

The only movements in the portfolio during the quarter were 362.8 million rupees in Seylan Bank voting and non-voting shares through a rights issue. The Laugfs Power shares moved from the unlisted equities to the listed portfolio.

Even discounting for these two movements, the EPF portfolio had grown 9.4 percent during the quarter, outperforming the market.

The All Share Price Index of the Colombo Stock Exchange had grown 7.28 percent during the same period.

The stock market continued its positive momentum experienced since May during the final quarter of 2019, buoyed by the Presidential elections and wide tax cuts which followed, especially for the construction industry.

The LOLC Holdings Plc investments by the EPF added 810.73 million rupees to the portfolio, the highest in absolute terms, with a growth of 43 percent.

The stock price of LOLC, a non-bank financial group, boomed in December following the firm divesting its Cambodian microfinance subsidiary PRASAC to a Korean bank for 603 million US dollars.

The highest gain in the portfolio came from ACL Cables Plc, a construction material manufacturer, appreciating 50.92 percent or 114.6 million rupees.

The fund’s largest investment is in Commercial Bank (8.79 billion rupees), and the counter fell 3.16 percent during the quarter, impairing 286.9 million rupees.

Meanwhile the second largest investment, in Sampath Bank, gained 6.14 percent, adding 357.6 million rupees and the third largest Hatton National Bank Plc grew 11.89 percent, adding another 715.8 million rupees to the portfolio.

Although the portfolio gained in December, it is still lower than the 83.7 billion rupees in investments made when initially buying shares.

Most of the shares were bought pre-2011, when the EPF stopped stock market investments following allegations of third party dealers pumping stocks and dumping to the superannuation fund.

The EPF re-entered the market in May with purchases in telco Dialog Axiata Plc and the knit fabric manufacturer Teejay Lanka Plc , giving a boost to a stock market which was reeling from the Easter Sunday terror attacks.

The then governor Indrajit Coomaraswamy had said that the EPF did not divest loss-making stocks as the market multiples were low.

Impairment losses totaling billions of rupees have been made, with the largest losses made on Carson Cumberbatch Plc, Bukit Darah Plc and Colombo Dockyard Plc.

The EPF had not sold such stock in the December quarter as there were no market participants who were willing to buy large parcels, Central Bank Deputy Governor H. A. Karunaratne said on Thursday.

The fund has set a target of doubling its investments in stocks to 6 percent of its total assets, as government requirements for debt funding falls in the future.

Around 93 percent of EPF investments are in Treasury bonds.(Colombo/Feb03/2020)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka’s shares slip on profit taking and selling pressure

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

Continue Reading

Sri Lanka Treasuries yields plunge, 12-month down 318bp

ECONOMYNEXT – Sri Lanka’s Treasuries yields plunged across maturities at Wednesday’s auction with the 12-month yield falling 318 basis points, in one of the biggest one day falls, data from the state debt office showed.

The 3-month yield fell 244 basis points to 23.21 percent.

The 6-mont yield fell 339 basis points to 21.90 percent, along with the 12 months to 19.10 percent.

The short-term yield curve is inverted.

The central bank last week cut its policy rate 250 basis points in a signaling move but is not printing money to enforce the rate cut.

The debt office sold all 140 billion rupees of offered securities. (Colombo/June07/2023)

Continue Reading

Sri Lanka forex reserves rise US$722mn in May 2023

ECONOMYNEXT – Sri Lanka’s foreign reserves grew 722 million US dollars to 3,483 million US dollars in May 2023 from 2,761 million US dollars in April, official data showed amid weak credit and better inflows.

Sri Lanka lost almost all its reserve in over two years as the central bank sold reserves and printed money to keep rates down (sterilized reserves sales) including borrowed dollars from India.

Gross official reserves fell to a low of 1,705 million US dollars in September 2022.

Sri Lanka’s central bank hiked rates in April 2022 to slow credit and also stopped printing money after it ran out of borrowed Asian Clearing Union dollars from India.

Sri Lanka’s gross official reserves are made up of both monetary reserves of the central bank and any balances of the Treasury account from loans or grants it gets.

The central bank’s net foreign reserves are still negative after busting up borrowed reserves to suppress rates. By April (before the collection of reserves in May) the central bank’s net reserves were negative by 3.7 billion US dollars.

In May alone 662 million US dollars were bought from the market, Central Bank Governor Nandalal Weerasinghe said.


No pre-determined level to stop Sri Lanka rupee appreciation: CB Governor

Borrowing dollars through swaps and busting them up, was invented by the US Federal Reserve as it was printing money and breaking the Bretton Woods system in the early 1970s.

Sri Lanka received a 350 million US dollar tranche from the Asian Development Bank and 331 million US dollars from the IMF to the Treasury for budget support.

The loans can be sold to the central bank by the government to generate rupees and spend. However, since credit is weak, not all the inflows go out of the country particularly as the central bank is conducting deflationary open market operations on a net basis.

By allowing the rupee to appreciate unlike in previous episodes of recovery in an IMF program, after a bout of money printing, the central bank is bringing down inflation – in some cases absolute prices – and restoring confidence and easing the ‘pain’ of ‘monetary policy’ or stimulus.


Why is Sri Lanka’s rupee appreciating?

Though exports are falling, tourism revenues are also picking up.

The budget support loans, tourism receipts less the reserve collected will widen the trade deficit. Building foreign reserves involves lending money to the US or other western nations and is similar to repaying foreign debt. (Colombo/June07/2023)

Continue Reading