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Tuesday August 16th, 2022

Sri Lanka’s Yupun Abeykoon bags 100m Commonwealth bronze amid soft-peg crisis

ECONOMYNEXT – Sri Lanka’s Yupun Abeykoon has bagged the Bronze at the men’s 100 metre event at Commonwealth Games 2022 as his country reels from the worst currency crisis in the history of the island’s 72-year old central bank.

Abeykoon won bronze clocking the 100 metres at 10.14 seconds, just behind South Africa’s Akani Simbine at 10.13 seconds and Kenya’s Ferdinand Omanyala who won gold with a timing of 10.02 seconds.

Earlier in the year he set a regional record at 9.96 seconds becoming the fastest man in South Asia.

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Abeykoon won the bronze as the country’s inflation topped 60 percent in June and the currency collapsed to 360 to the US dollar amid an attempted float of the unstable soft-pegged currency which was botched by a surrender rule.

Food prices have almost doubled over the past year.

Sri Lanka got into a monetary meltdown as the central bank printed money over two years to suppress rates and eventually defaulted amid severe forex shortages.

The country’s economists got the ability to create forex shortages and currency crises in August 1950 with the setting up of a soft-pegged central bank with a policy rate.

However policy has worsened dramatically from 2015 under highly discretionary ‘flexible’ inflation targeting and ‘flexible’ exchange rate where monetary policy errors were encouraged with stimulus (output gap targeting) followed by forex shortages, spikes in foreign borrowings, depreciation and default.

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Sri Lanka rupee guidance peg edges up; market sees dull trade in govt securities 

ECONOMYNEXT – Sri Lanka’s rupee guidance peg on interbank spot trading strengthened by seven cents while yields on Treasury bills and bonds remained dull on Monday (15) with only a handful of maturities quoted ahead of the central bank’s monetary policy rates later this week, dealers said.

“There was nothing in the market. It was dull today,” a market dealer said.

The central bank will announce its latest key monetary policy rates on Thursday, August 18.

A bond maturing on 01. 06. 2025 closed at at 27.50/28.50 percent on Monday, slightly down from 27.30/28.30 percent on Friday.

The three-month T-bill closed flat at 26.00/27.00 percent on Monday.

Sri Lanka’s central bank announced a guidance peg for interbank transactions strengthened by 7 cents to 360.92 rupees against the US dollar on Monday from 360.85 rupees.

Data showed that commercial banks offered dollars for telegraphic transfers between 369.70 and 370.00 for small transactions. (Colombo/ Aug 15/2022)

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Sri Lanka stocks rally continues for 12th straight session on political stability hopes 

The main index fell for the 4th consecutive session

ECONOMYNEXT – Sri Lanka stocks gained for the 12th consecutive session on Monday (15) ending at their highest in more than four months pushed by retail shares amid signs of political stability after months of protests, dealers said.

The market generated 5.8 billion rupees in turnover, nearly twice of this year’s average daily turnover of 3.11 billion rupees.

The main All Share Price Index (ASPI) rose 1.82% or 164.04 points to 9,191.52, its highest since March 30. The index has risen 19.6% in the last 12 sessions.

“We are seeing a lot of volatility in the market today due to profit taking in the key shares that gained in the last 11 sessions,” a market analyst said.

“Profit-taking also returned after the CSE (Colombo Stock Exchange) published the last set of June reports that showed some counters having done very while some not so much, therefore, there is a significant reaction for that.”

In the last few sessions, the market was mostly driven by Lanka IOC and the plantation sector.

However, ahead of the fuel price revision, LIOC moved to red.

“There was a bit of profit taking on anticipation of price cuts. However, unless fuel prices are cut sharply, LIOC will continue to move,” the analyst said.

At the start of the month, CPC cut fuel prices by 10 rupees based on the price formula.

Globally, crude oil prices have dropped hence there is strong speculation that fuel prices will be cut further.

Last week, Sri Lanka announced a 75 percent electricity tariff hike.

Investors previously feared the move would drag the market down due to possible higher costs for manufacturing firms.

However, the political stability after four months of protest is seen as the catalyst for the market gain, dealers said.

The government also tabled an interim budget last week, revising the budget presented last year as the country is going through an unprecedented economic crisis amid plans on a four-year IMF loan programme, debt restructuring, fiscal reforms, and dealing with loss-making state-owned enterprises.

Sri Lanka already declared sovereign debt default on April 12 this year and failed to pay its first sovereign debt in May amid a deepening economic crisis which later turned into a political crisis and led to a change in the president, cabinet, and government.

The more liquid S&P SL20 index moved up, closing at 0.82% or 25.28 points stronger at 3,097.30.

Sri Lanka is facing its worst fuel and economic crisis in its post-independence era and the economy is expected to contract 7 percent this year.

The main ASPI gained 18.8 percent in August so far after gaining 5.3 percent in July. It lost 9.3 percent in June, 23 percent in April, and 14.5 percent in March.

The market index has lost 24.8 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year when large volumes of money were printed.

Sri Lanka’s sovereign debt default on April 12 has already led the country to be rated with restricted/selective default rating by rating agencies, which has weighed on investor sentiment.

Net foreign outflow was 117 million rupees on Monday while the total net foreign outflow so far this year is 1.3 billion rupees.

Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.

Ceylinco Insurance which pushed the ASPI, closed 11.9 percent up at 2,143.2 rupees a share. Browns Investment closed 8.5 percent up at 8.9 rupees a share, and John Keells Holdings gained 2.5 percent to 129.7 rupees. (Colombo/Aug15/2022)

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Sri Lanka’s Laugfs Gas makes a loss of 94-pct in June 2022 quarter

ECONOMYNEXT- Sri Lanka’s Laugfs Gas Plc, a cooking gas distributor, said it lost 94 percent or 1.75 billion rupees in the June 2022 quarter due to a shortage of dollars that hampered the company’s ability to import while the rupee slipped against the dollars drastically.

The loss per share for the quarter was 4.53 rupees.

Laugfs Gas revenue for the June 2022 quarter fell 16 percent from a year earlier to 8 billion rupees in the quarter, while the cost of sales fell 22 percent to 7.4 billion rupees generating a 628 million rupee gross profit.

Foreign currency losses have shot up 3,622 percent to 796 million rupees compared to 21 million rupees in the previous year.

“Main contributory factor for the adverse financial performance observed for the quarter was due to non-availability of foreign exchange for imports, unbearable interest cost burden during the period under review and both of which were beyond the control of the management,” the company said in its stock exchange filing.

Laugfs supply controls 20 percent of Sri Lanka’s LP gas market.

Finance costs rose to 905 million rupees from 514 million rupees a year earlier.

Despite the price increases in the market for cooking gas most companies including Laugfs had issues opening letters of credit.

(Colombo/Aug15/2022)

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