CSE THIS WEEK

China Securities Depository and Clearing Corporation and CDS Sri Lanka
Dec 18, 2018


Sri Lanka’s Central Depository Systems (Pvt) Ltd (CDS) and China Securities Depository and Clearing Corporation Limited (CSDC) recently committed towards pursuing a cooperative relationship in the areas of securities clearing and depository.

This commitment was formalized with the signing of a MoU between the two depositories during a visit by CSDC officials to Sri Lankan recently.

CSDC is a non-profit-oriented corporation with Shanghai Stock Exchange and Shenzhen Stock Exchange as its shareholders, each holding 50% equities.

As CDS and CSDC work together in future, the MoU will pave the way for the depositories to exchange information and expertise on business operating models and other securities market developments.

CSDC Deputy Chairman of the Board Dr. DAI Wenhua said “It is my great pleasure to sign this MoU in the beautiful city of Colombo, which bears vivid witness to the friendly relations that the Chinese and Sri Lankan people have long enjoyed. We appreciate the indispensable role that CDS plays in the Sri Lankan capital market as well as its constructive contribution to the industry in the Asia-Pacific region and look forward to closer ties between our two organizations. “

Commenting on the development, CSE and CDS Chairman Mr. Ray Abeywardena said “With this MoU, we are pleased to establish a formal channel of collaboration with CSDC, which is a depository that plays a crucial role in the Chinese capital market and the rest of the Asian region. We anticipate that the MoU will open new possibilities of collaboration between the two depositories. We are particularly keen to work with CSDC on further developing our clearing and settlement function, particularly in the areas of strengthening registration and settlement infrastructure, capacity building and improving the services offered to stakeholders of the Sri Lankan capital markets. Cooperation with peer depositories and international markets is essential to raising the bar in the Sri Lankan capital market and we pleased to collaborate with CSDC in this regard.”

CSDC is the Central Securities Depository (CSD), Securities Settlement System (SSS) and Central Counterparty (CCP) of the Chinese exchange market. It provides registration, depository, clearing and settlement services to equities, bonds, exchange-traded funds (ETF) and other derivatives listed and traded on Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE) and National Equities Exchange and Quotations (NEEQ), and plays a key role in cross-border linkage programmes including Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect and the Mutual Recognition of Funds between the Chinese mainland and Hong Kong markets.

http://www.lankabusinessonline.com/china-securities-depository-and-clearing-corporation-and-cds-sri-lanka/

Sri Lanka Perspectives

Even the constitutional crisis and its questionable status did not deter the government from signing two contracts totaling more than $50 million with two Chinese firms. The contract worth $32 million with China Harbour Engineering Company (CHEC) was to enhance the deep berth capacity of the state-run Jaya Container Terminal in Colombo. The other contract worth $25.7 million was for the supply of three cranes from Shanghai Zhenhua Heavy Industries for the same project. India had expressed its concern at the deal earlier as  80 per cent of its marine trade passes through the port.

http://col.hariharan.info/

Mangala to retain Sri Lanka finance ministry

Dec 19, 2018 

Sri Lanka’s new cabinet is expected to be sworn in Thursday with Mangala Samaraweera retaining the finance and media portfolio in a 30-member cabinet.
Official sources said there was serious wrangling with President Maithripala before Prime Minister Ranil Wickremesinghe could get his list of 30 approved.

There was intense speculation about the law and order ministry with Sirisena insisting that he wanted to retain the subject of the police department under the defence ministry which he controls.
Several ministers of the National Unity Government were being dropped to meet the constitutional requirement of limiting cabinet posts to 30.

Earlier in the week Malik Samarawickrema, Rishad Bathiudeen and Mano Ganeshan had offered to stay out to allow Wickremesinghe to name a scaled down cabinet. 

​​​​​​​https://economynext.com/Mangala_to_retain_Sri_Lanka_finance_ministry-3-12951-10.html

New cabinet

Sri Lanka is not Greece, it is a Latin America style soft-peg: Bellwether

By Bellwether

Dec 26, 2018

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FLOATING INTEREST:  The IMF team (or at least one person who knew pegs), that went into Argentina eventually blew the lid off the 7-day Leliq (term reverse repo rate) after the central bank continued to intervene and print money (sterilize) even with rates at 60-percent.

There are pronouncements that Sri Lanka is like Greece from both sides of the political divide, but that is not correct. Sri Lanka has a Latin America style soft-peg which can put the country on a dangerous slippery slope unlike a strong floating rate like the Euro.

Greece had a debt rollover problem like Sri Lanka and went into sovereign default. There was no problem with the currency or private debt default or disappearing incomes.

The central bank has put Sri Lanka in a Latin America style strait-jacket. Sri Lanka escaped the worst LatAm effects up to now, because there was no large commercial debt. But from 2005, after Sri Lanka started tapping international bond markets everything changed.

What is Greece?

Greece had a monetary union with a strong floating exchange rate, which was the Euro. When it came to light that the Greece had been fudging debt numbers, amid an economic downturn, lenders refused to roll-over debt and there was sovereign default.

Cont... https://economynext.com/Sri_Lanka_is_not_Greece,_it_is_a_Latin_America_style_soft_peg__Bellwether-3-12995-2.html

Marella Cruises vessel calls at Sri Lanka's Colombo port

Dec 28, 2018 

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Marella Cruises vessel M V Marella Discovery had called at Sri Lanka's Colombo Port with complement of 1,732 passengers and 764 crew, agents Aitken Spence Shipping Ltd said.
Marella Discovery had sailed from Europe calling at Italy, Crete, Egypt, Jordan, Oman, U.A.E. and India before coming to Sri Lanka and will move on to Malaysia, Thailand and Indonesia.
More than 1,000 passengers had taken tours in Colombo, Galle and a river safari organized by Aitken Spence Travels.
The Malta flagged is 264 in length and 32 meters wide and could accommodate up to 2,074 passengers. 

https://economynext.com/Marella_Cruises_vessel_calls_at_Sri_Lanka_s_Colombo_port-3-13002-6.html

Sri Lanka voted by travel influencers as top destination in Asia for 2019
Dec 28, 2018

A panel consisting of five of the world’s top travel influencers and bloggers has voted Sri Lanka as the top emerging Asian travel destination for 2019. 

The awards were published last week on the site TravelLemming.com, which focuses on emerging and off-the-beaten path travel spots around the globe. 

Winners for the Asian awards were selected by an expert panel consisting of five of the best renowned travel bloggers and influencers in the world, with a combined following on social media of over 750,000.In describing why Sri Lanka won, the article reads: “Sri Lanka has been poised on the edge of tourism popularity for a few years now, and 2019 might finally be the year it pops. 

In fact, it was just named the #1 country in the world to travel to in 2019 by Lonely Planet. And, honestly, it’s hard to disagree with that assessment. From dreamy surf coasts to quiet jungle retreats, to incredible wildlife and history, Sri Lanka has all the makings of one of the greatest travel destinations on the planet.”

One of the judges, Meg Jerrard of the popular travel blog Mapping Megan, is quoted as saying: “Sri Lanka is a mesmerising and magical place with something for everyone, and enough diversity to keep a trip interesting. It has stunning beaches, is a haven for budget travellers, has flavourful food, and there are oodles of heritage, wildlife, and incredible landscapes just waiting to be hiked.”

Other judges on the panel included popular gay travel bloggers Nomadic Boys, hipster travel star Travels of Adam, the San Diego-based Instagram star Hackerette, and the acclaimed travel blogger Otts World. 

Travel Lemming CEO Nate Hake said: “One of the biggest trends in travel these days is the desire of tourists to get off the beaten path. Our six winning destinations in Asia are all great options for wonderful places to explore without the crowds!”

The site TravelLemming.com is dedicated to the promotion of travel to emerging travel destinations. The name lemming derives from the Scandinavian rodent, which is rumoured (falsely) to engage in such mindless group behaviour that it will literally follow fellow lemmings of a cliff to death. Travel Lemming encourages travellers to think beyond the popular destinations and to forge their own path. 

Travel Lemming was started by its founder Nate Hake, an American traveler from Denver, Colorado who is most famous for visiting 43 countries in a single year.

http://www.ft.lk/front-page/Sri-Lanka-voted-by-travel-influencers-as-top-destination-in-Asia-for-2019/44-669694

Sri Lanka CBSL keeps policy rates unchanged

December, 28, 2018

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The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 27 December 2018, decided to maintain policy interest rates at their current levels. Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 8.00 per cent and 9.00 per cent, respectively.

The Board considered current and expected developments in the domestic economy and the domestic financial markets as well as the global economic environment, with the broad aim of stabilising inflation at mid single digit levels in the medium term to enable the economy to achieve its potential growth.

http://bizenglish.adaderana.lk/sri-lanka-cbsl-keeps-policy-rates-unchanged/

Export earnings from food and beverages up
Friday, December 28

Earnings from merchandise exports increased by 0.4 per cent (year-on-year) to US dollars 979 million in October 2018. The marginal growth of exports in October reflects mainly the decline in agricultural exports by 11.5 per cent which offset the 4.5 per cent growth of industrial exports.

Under industrial exports, export earnings from textiles and garments increased marginally in October 2018 due to higher earnings from textile exports despite the slight decline registered in garment exports.

The reduced earnings from garment exports was mainly driven by the lower demand from the USA, despite an increase in exports to the EU market and non-traditional markets such as India, Canada, Japan and Hong Kong. Further, reflecting the combined impact of both volume and export prices, earnings from petroleum products increased significantly in October 2018.

Export earnings from food, beverages and tobacco and base metals and articles increased substantially during October 2018 due to improved performance in most of their sub categories.
Meanwhile, earnings from agricultural exports were lower during the month owing to the poor performance in almost all sub categories except seafood, vegetables and rubber.



Reflecting lower average export prices and exported volumes, export earnings from tea declined in October 2018. Export earnings from spices also reduced during the month due to the poor performance in most categories of spices.

Further, despite an increase in earnings from coconut non-kernel products, earnings from coconut exports decreased due to the drop in earnings from coconut kernel products such as desiccated coconut and coconut oil.

However, owing to higher exports to the EU market, earnings from seafood exports rose during the month.
Leading markets for merchandise exports of Sri Lanka in October 2018 were the USA.

​​​​​​​http://dailynews.lk/2018/12/28/business/172533/export-earnings-food-and-beverages

First Capital increases equity exposure as global funds reversing towards Asia
Dec 28, 2018

First Capital Research has upgraded its equity exposure to 60 percent with the belief that the events that have unfolded globally may benefit Sri Lanka and the equity market over the next few months positively impacting earnings and possibly leading to net foreign inflows.

Over the last 3 months, they have maintained exposure at 50 percent considering earnings hit via depreciation and political unrest affecting the sentiment of the market. During the period, however, the market gained by about 100-120 index points.

“As we step into 2019, we are witnessing the global fund flow reversing towards Asia and commodity prices crashing with the dip in oil prices benefiting the BoP position of Sri Lanka and positively affecting the cost of living,” the firm said.

First Capital Research has also upgraded ASPI volatility expectations to 6,000-6,500 (from previous 5,800 – 6,200), assuming Market PER to be 8.5x – 9.5x.

The firm, however, expects the divergent views between the President and UNF government to continue to affect key policy decisions within the cabinet throughout 2019, up until the Presidential elections due in Jan 2020.

Global growth is expected to slow down during 2019 primarily led by the possible impacts arising out of the trade war between the US and China coupled with the downgrade in growth expected in the US economy.

“The slowdown in the US economy is likely to result in decelerating the Federal Reserve’s interest rate normalization process which may provide some breathing space for weaker Asian economies.“

First Capital Research further said that global fund flow has already started to reverse towards Asia and emerging markets providing a reasonable level of stability to Asian and other emerging markets.

​

http://www.lankabusinessonline.com/first-capital-increases-equity-exposure-as-global-funds-reversing-towards-asia/

Small car taxes likely to fall
December 30, 2018

Sri Lanka is mulling to reverse the tax increase on small cars while even mid-sized sedans will become cheaper under a new taxation system following intense pressure and lobbying of motor traders at the end of a political crisis, official sources said.

Amidst concerns expressed by Indian automobile manufacturers, the Finance Ministry is likely to bring down small car duties back to what they were before August 1 or even reduce further especially for cars below 1,500cc engine capacity.
With the aim of curtailing an additional outflow of foreign exchange from vehicle imports, the government is to introduce vehicle engine power output based taxation (engine horse power) criterion in the 2019 interim budget an official source revealed.

The current engine capacity based taxation formula introduced in 2018 budget is to be replaced by engine power output based taxation to prevent tax revenue leakage, a senior Treasury official who wished to remain anonymous told the Business Times.
He said that the current system provided avenues for siphoning out money from the country as the CIF value is now not considered for duty calculations.
This system was helping money launderers and persons who wish to send money out of the country to do so by hooking up an invoice and siphoning out money, putting pressure on the already stressed foreign reserves.

The removal of the ad-valorem calculation method of duty on vehicles and introducing a taxation system of subsidising the duty on super luxury cars has resulted in the coffers losing around Rs. 25-40 million from each of these vehicles.
Confining the duty calculation on vehicles engine capacity and removing the ad-valorem calculation of duty introduced by the budget has resulted in making the super luxury category cheaper.

The previous system of calculating the vehicle import duty on the cost, insurance, freight (CIF) value of the vehicle has brought sizable revenue despite minor leakages owing to the under invoicing of certain importers, he pointed out.

Under the previous system the price invoiced or quoted by a seller includes insurance and all other charges up to the named port of destination, he explained.
With a view of introducing a fair and justifiable system of duty calculations, the Finance Ministry is weighing the pros and cons of the new taxation system linked to the vehicle engine output (Brake Horse Power BHP).
The proposed taxation system will compel the higher end super luxury vehicle buyers to pay a higher duty, closing a tax revenue leakage of the government as well as creating a level playing field and ensuring the survival of all players in the market, the official disclosed

Under the present taxation formula based on engine capacity, the same duty should be levied for different brands of vehicles with same engine capacity, he said adding that the value of those vehicles differ each other in quality standards.

It is not fair to charge the same duty for a 2,000cc Korean-made vehicle purchased for US$20,000 and a European manufactured one with same engine capacity purchased at $35,000, he claimed.
Citing an example, he noted that a European made model car with a CIF value of Rs.5 million (taxed at 130 per cent under the previous system) will be charged with the same duty of a Japanese made model with a CIF value of Rs.2 million (taxed at 300 per cent) thus depriving the government of a duty income of around Rs.7-10 million per vehicle, he added.
The Finance Ministry has focused attention on the additional outflow of foreign exchange on an expensive vehicle which does not bring in sufficient proportion of inflow to state revenue, he said.

​​​​​​​Cont...  
http://www.sundaytimes.lk/181230/business-times/small-car-taxes-likely-to-fall-327230.html

Cruises ferry 72,500 tourists to Sri Lanka
December 31, 2018 

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Sri Lanka tourism is experiencing an increase of cruise liners calling in Colombo and this is attributing to the increase of tourist arrivals. Throughout 2018, Sri Lanka saw the arrival of 53 cruise liners.

In November 2018, Sri Lanka saw the arrival of three super luxury passenger vessels with combined passenger occupancy of nearly 7,000. Around 72,500 onboard passengers were reported throughout the year.

The super luxury passenger vessel MV Mein Schiff 3 of TUI Cruises with 2,430 passengers and 995 crew made her maiden call at the Port of Colombo on November 26. The vessel was welcomed at the East Container Terminal of Sri Lanka Ports Authority (SLPA).



The Chairman of SLPA Dr. Dissanayake said that the Port of Colombo had become an extremely busy port and that there were plans to construct a state of the art passenger terminal at the Port of Colombo. He further said that the process has already started and will be going through procurement process soon.

Assistant Director, Sri Lanka Tourism Promotion Bureau Harindra Dissanayake said, ‘’we’re delighted to add our contribution in promoting Sri Lanka as a leading travel destination, by establishing Tourist Information Counters in each passenger vessel to create awareness among tourists on Sri Lanka as a leading travel destination. This is done with the purpose of encouraging more tourists to visit Sri Lanka.”

http://dailynews.lk/2018/12/31/business/172705/cruises-ferry-72500-tourists-sri-lanka​​​​​​​

Sri Lanka stocks fall 5-pct in 2018, outperforms major markets

Dec 31, 2018 

Sri Lanka's stocks have fallen 5 percent over 2018, outperforming major markets in the world which were battered amid Donald Trump's economic nationalism and Federal Reserve rate hikes.

The Colombo All Share Price Index (ASPI) fell 316 points to 6,052.37 at end of trading on December 31, from 6,369.26  at the last day of trading in 2017 while market capitalization fell by 60 billion rupees to 2.84 trillion rupees , based on stock exchange data.

The index peak of 6,598.73  was reached on February 21, a week after the provincial council elections which strongman Former President Mahinda Rajapaksa won.

The stock market then tumbled gradually to an annual low of 5761.09  on October 19 before recovering to 6,092.21 on November 2, when President Maithripala Sirisena staged an unsuccessful coup against his coalition partner Prime Minister Ranil Wickremesinghe by attempting to replace him with Rajapaksa. 

However, foreign sales of Sri Lankan stocks mirrored a regional trend, where investors sold out. 
In the US the Dow Jones Index was also down 6.7 percent by December 28, with Trump raising import duties, disrupting trade while the Federal Reserve also raised rates, ending years of loose policy.
China's Shanghai Composite Index was down 24.59 percent and Japan's Nikei was down 12.08 percent, data from Bloomberg Newswires showed.

Colombo-based First Capital Research said it expected foreign investors to return to Sri Lanka in 2019.
"As we step into 2019, we are witnessing the global fund flow reversing towards Asia," the brokerage said in a research note.

First Capital Research said that the ASPI could be expected to fluctuate between 6,000-6,500 in 2019, upgrading the firm's past projection from 5,800-6,200.
However, it said that political stability created after the ending of the constitutional crisis is temporary and differences between the president and the Wickremesinghe's United National Front will show in policy making.  

Sri Lanka's central bank which operates a soft-pegged exchange rate has also generated balance of payments pressure by injecting liquidity and defending the currency, which has panicked bond investors.
The rupee depreciated to 183 against the dollar in spot currency markets on December 31, 2018, down 19.7 percent from 152.85 on December 28, 2017.

​​​​​​​https://economynext.com/Sri_Lanka_stocks_fall_5_pct_in_2018,_outperforms_major_markets-3-13020-3.html

CSE GREEN
 
ASPI 6052

37 points up 

Sorry Samariyan,Maharaja,Kithsiri,Ryan

Yahapalanaya wrote:CSE GREEN
 
ASPI 6052

37 points up 

Sorry Samariyan,Maharaja,Kithsiri,Ryan

Who are these members????????
Samariyan & Kithsiri??????????

ruwan326 wrote:

Yahapalanaya wrote:CSE GREEN
 
ASPI 6052

37 points up 

Sorry Samariyan,Maharaja,Kithsiri,Ryan

Who are these members????????
Samariyan & Kithsiri??????????

MARA ge golayo..

Sri Lanka rupee ends flat after sudden rise, stocks up on Jan 01

Jan 01, 2019 

Sri Lanka's rupee closed around 182.80/183.00 around the same as a day earlier, after a sudden rise in intra-day trading, while stocks closed up in the first day of trading in 2019, dealers and brokers said.

The rupee closed around 182.90/183.00 on Monday against the US dollar in the spot market.
In intra-day trading on Tuesday the rupee was seen trading as strong as 182.00 before falling towards the end of the day, market participants said.

The Colombo All Share Index closed up 0.6 percent, with Ceylon Tobacco Company closing up 40 rupees 2.4 percent at 1,707.60 rupees.
John Keells Holdings closed up 3.70 at 159.70 rupees.

Bond yields were mostly flat, ahead of a Treasury bill auction on Wednesday.
A bond maturing on 15.12.2021, was quoted at 11.45/50 percent Tuesday, about the same from Tuesday close of 11.50/52 percent, dealers said.

A bond maturing on 15.07.2023, was quoted at 11.60/65 percent Tuesday, flat dealers said.
A bond maturing on 01.08.2026 bond was quoted around at 11.66/11.70 percent flat. 

https://economynext.com/Sri_Lanka_rupee_ends_flat_after_sudden_rise,_stocks_up_on_Jan_01-3-13026-3.html

KEY ECONOMIC INDICATORS

Sri Lanka to halve foreign investor limit of rupee Treasuries

Jan 02, 2019 

Sri Lanka will cut the volume of rupee bonds foreigners can hold from 10 percent of total outstanding to 5 percent, Central Bank Governor Indrajit Coomaraswamy said as a soft-pegged regime has put renewed pressure on the currency.
Some bond investors are footloose, and making the external sector volatile, he said.

"In view of the increased volatility global financial markets we intend to reduce the threshold for foreign investment in rupee denominated from 10 percent to 5 percent," Governor Coomaraswamy said presenting a road map for monetary policy for 2019.
Sri Lanka runs a soft-peg with the US dollar and has found it difficult to cope with bond outflows as it tries to prevent a 'disorderly adjustment' of the exchange rate and then print money to keep rates down.

Rupee bond holders have been fleeing Sri Lanka from around May after the central bank cut rates and injected liquidity in April.
Analysts have warned that Sri Lanka has to reform the central bank or abandon the soft-peg to allow free capital mobility and help make the island financial centre. 
Foreign companies raised capital in Sri Lanka's stock market during British rule when Sri Lanka had a currency board, when the agency intervenes in forex markets, but does not print money after the intervention.

https://economynext.com/Sri_Lanka_to_halve_foreign_investor_limit_of_rupee_Treasuries-3-13032-1.html

Today also Green

ASPI 6062

Increased by 9.8 points

Machan Soil,Samaritan,Maharajah group when will it come to 5500..

Good 2019 beginning to all real Srilankan investors..

Will the positive vibes of new year inject some energy to see.Things are good for last week or so.

I think we are understating Sri Lanka’s GDP under new methodology: CB Governor
Jan 02, 2019 

Sri Lanka’s Central Bank Governor on Wednesday pointed out that the authorities need to look at carefully whether they are recording the GDP of the country accurately.
According to Coomaraswamy’s own view, the growth in 2018 should be somewhere between 3.5 and 4 percent.

“I don’t think this is a 3 percent growth economy, the IMF said 3.5 percent, the World Bank said 4 percent and we thought it was about 3.8 percent,” he said.
“My own view is that we are understating GDP. Not that anybody doing it intentionally, it’s just the process of going into a new methodology that needs to support with the certain amount of surveys.”
Sri Lanka adopted a new methodology for recording GDP estimates a few years ago which was commended by experts as a good methodology.

“But that methodology needs a lot of surveys to support it. We at the moment don’t have the resources to undertake all the surveys that are necessary to support that methodology,” he said.
“So, they tend to use proxies, when you use proxies it tends to be a judgment call. So what is not certain is that whether they have picked the right proxies or enough proxies.”
Coomaraswamy said even though the Census and Statistics Department is the statutory authority publishing growth figures, they also have challenges.

“One particular number I’m challenged by is the transport sector; it contracted. Maybe it’s true but that’s something that I have doubts because proxies used for that may not be completed as they could be,”
“Even the port city, I think there is some challenge in how to record that activity.”

http://www.lankabusinessonline.com/i-think-we-are-understating-sri-lankas-gdp-under-new-methodology-cb-governor/

Sri Lanka to be 'brutal' on finance companies that lose capital

Jan 03, 2019 

Sri Lanka will act fast to resolve finance companies that fall short of capital, Central Bank Governor Indrajit Coomaraswamy said., which had led to large holes in balance sheets and collapses, ending a the practice of procrastination or regulatory forbearance.

Finance companies in future will have to boost capital quickly when required.
"If finance companies don't, we will have to take regulatory action. We will have to be brutal when we apply that," Governor Coomaraswamy told reporters.

In the US, the policymakers took away the discretion and the Federal Deposit Insurance Corporation, a resolution agency now acts quickly, because delays expanded the capital shortage and the gap between deposits and assets widened.

It was easy to find a buyer when the capital shortage was small, and even if there were no takers, the FDIC had to put in only a small amount of cash in a liquidation, when a lender was closed as soon as capital fell below a pre-determined threshold like 200 basis points. 

The US has thousands of independent banks, dating back from its free banking era and also when branch banking was prohibited and a number of banks fail each year. 
When the housing bubble fired by the Federal Reserve collapsed in 2008/2009, 140 banks coming under FDIC mandate failed, another 157 failed the following year.
At end-September 2018, the ratio of capital held at finance companies in Sri Lanka to cover risks (capital adequacy) fell to 11.1 percent from 13.2 percent a year earlier.
Because finance companies give loans to riskier clients than ordinary banks, they need higher capital buffers, according to some analysts.

Central Bank regulations introduced in July 2018 call for finance companies to have at least 10 percent capital adequacy. By July 2019, capital adequacy has to increase to 10.5 percent, eventually requiring 12.5 percent July 2021 onwards.

Analysts say Sri Lanka will need to legislate a threshold like 8 percent to effectively end regulatory forbearance.

Coomaraswamy said another step existing finance companies could take is to merge with peers to meet the minimum capital levels, since having over 40 finance companies in the country is 'ridiculous', although the central bank will not force firms to take either option.

There was a spurt of new finance company licenses issued during the Rajapaksa regime. Several shadow banking institutions also failed at the time.
The current problems in firms like The Finance and ETI Finance, date back to the forbearance period.
"Non-compliance will result in restrictions on deposit and business expansion and, where necessary, winding up of businesses," Coomaraswamy said.

"Therefore, it will be necessary for finance companies to give priority to capital augmentation plans in the near future," he said.
"The change in the regulatory posture of the central bank will result in early interventions against noncompliant, distressed and high risk finance companies."
Many finance companies have primitive IT systems which are not capable of complex risk management. 
Bad loans across finance companies were 7 percent at end-September 2018, up from 5.7 percent a year earlier.

Coomaraswamy's hard hitting stance amidst concerns raised by officials that some that some finance companies are ignoring regulations, rights of depositors and risk management practices to please wishes of shareholders. Coomaraswamy said central bank officials are closely monitoring and talking with other at-risk finance companies to stabilize them.

He said there is little risk to Sri Lanka's economy if finance companies go bust, as they hold only 7.9 percent of the total assets in the financial sector.

"This long tail of very vulnerable finance companies are in turn a very small part of the total assets," 
Coomaraswamy said.

"Some larger finance companies are robust, and are as strong as banks."
"Having said that clearly there can be a contagion effect if there is instability in some institutions," he said.
Coomaraswamy said a deposit insurance scheme is settling what the companies owe their depositors.

https://economynext.com/Sri_Lanka_to_be__brutal__on_finance_companies_that_lose_capital-3-13038-17.html

PM, biz leaders beeline for Orchids!
3 January 2019

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Prime Minister Ranil Wickremesinghe, flanked by Urban Areas and Western Development Minister Patali Champika Ranawaka, Health Minister Rajitha Senaratne, Skills Development and Vocational Training Deputy Minister Karunarathna Paranawithana, Waters Edge Chairman Chamath Silva, Laugfs Holdings Chairman W.K.H. Wegapitiya, Access Group Chairman Sumal Perera, and Vallibel One Group Chairman Dhammika Perera, at the launch of ‘50K Orchids’ restaurant at Water’s Edge, Battaramulla on Tuesday.

http://www.ft.lk/front-page/PM--biz-leaders-beeline--for-Orchids-/44-670081

Sri Lanka preparing for sovereign bond, state banks loans to go ahead

Jan 03, 2019

Sri Lanka is preparing the groundwork to sell a sovereign bond at a suitable time Central Bank Governor Indrajit Coomaraswamy said, though a maturing billion dollar bond in January will be repaid instead of being rolled over in 2018 after political crisis hit the island in October.

Sri Lanka will get cabinet approval to sell the sovereign bond appoint managers who will then go for a bond sale at a appropriate time, he said.
Sri Lanka was downgraded by Moody's, Fitch and Standard and Poors to B-, during the crisis, just as the country was about to sign a deal with the International Monetary Fund for the last stretch in a 3 year program.

"If we get downgraded again, we will lose access to capital markets," he said.
President Maithripala Sirisena after he triggered a political crisis by appointing Mahinda Rajapaksa as Prime Minister and illegally dissolving parliament delaying plans to raise loans and rollover bonds.
Three state banks were also planning to raise loans from the Middle East and give the government, which were delayed by the crisis will also go ahead, Coomaraswamy said.
But the rates had increased after the downgrade, and had to be re-negotiated.

Coomaraswamy said Sri Lanka will repay a sovereign bond in January out of its own resources, with the Treasury already having about 650 million dollars in proceeds from the sale of the Hambantota port.
Sri Lanka has about 5.9 billion US dollars of debt to repay in 2019 including dollar denominated domestic debt.

Sri Lanka's forex reserves fell below 7 billion US dollars in December, down from a target of 10 billion in the beginning of the year, with the central bank losing control of a peg after it cut rates and printed money in April followed by another unsterilized build up of liquidity in August, which undermined the credibility of its peg.

In the November the central bank lost 500 million dollars in interventions amid the political crisis. 


https://economynext.com/Sri_Lanka_preparing_for_sovereign_bond,_state_banks_loans_to_go_ahead-3-13045-1.html

EU Parliamentarians meet Finance Minister

January, 3, 2019

Sri Lanka for removal of trade barriers

January, 8, 2019

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LAHORE: Sri Lanka has sought removal of non-tariff barriers (NTBs) and other issues to improve trade with Pakistan.

Addressing the Lahore Chamber of Commerce and Industry on Monday, High Commissioner of Sri Lanka to Pakistan Noordeen Mohamed Shaheid said that though the two countries signed Free Trade Agreement (FTA), certain issues including NTBs need to be resolved to improve trade between the two countries.

The envoy said Pakistan and Sri Lanka had signed the FTA in June 2005 under which the private sectors of both the countries were provided with greater opportunities to take trade and economic relations to next level. From 2005 onwards, there was significant increase in bilateral trade, he said. “But it is also a fact that the two countries could not succeed in fully exploiting the trade potential,” he added.

The Sri Lankan high commissioner said there was a vast scope for the expansion of bilateral between Pakistan and Sri Lank.

He urged that both countries should introduce new products for trade and make business-to-business contacts stronger. “Sri Lanka offers huge opportunities in various sectors of economy,” he added. He said though terrorism remained a big challenge for Sri Lanka, but today it a peaceful country. “We have defeated terrorism due to immense support of Pakistan,” he said.

Speaking on the occasion, LCCI President Almas Hyder said Sri Lanka was at the take-off stage and Pakistani business community should avail this great opportunity. “Both Pakistan and Sri Lanka are members of Saarc and enjoy friendly relations based on historical linkages.

Cooperation between two countries especially in defence sector has played major role in further strengthening the mutual ties,” he added.

Earlier, National Assembly Deputy Speaker Qasim Khan Suri also visited the LCCI and said the government was making all-out efforts to overcome the inherited economic crisis. “The business community has a key role in economy and economic challenges will be tackled with their cooperation,” he said.

http://bizenglish.adaderana.lk/sri-lanka-for-removal-of-trade-barriers/

Recent rupee depreciation aligned with capital outflows not current account
Jan 08, 2019

Sri Lanka’s Central Bank Governor says that the rupee depreciation is no longer aligned with fundamentals in terms of current account flows and it is now being driven by capital outflows from the government securities market.

Governor Indrajit Coomaraswamy recently revealed that foreigners who held about two billion US dollars worth of rupee denominate government securities have now brought it down to just nine hundred million dollars.

“That money has had to be fed through the market and that has created a lot of pressure in a thin market of somewhere between sixty to hundred million a day,” he said.

“If 10 or 20 million of government securities money flows out it clearly creates an imbalance between supply and demand in the market.”

Coomaraswamy says that they had to intervene in the foreign exchange market as they think the current depreciation of the currency is a disorderly depreciation.

“The currency has depreciated almost sixteen percent and the real effective exchange rate is well below hundred, so it is now undervalued,” he said.

“So there is no justification for the central bank to prevent what we think now is a disorderly depreciation of the currency, so we have to intervene.”

Governor Coomaraswamy said that they also had to take a remedial action last year to reduce current account outflows. Gold imports, vehicle imports, and oil imports are the main sources that affected current account outflows.

“So those three main sources of instability in the current account have been looked after but now what we need to do is change sentiment,” he said.

According to the Governor, people need change sentiment at three levels. Importers need confidence not to accelerate imports, exporters need to start converting export proceeds or at least convert in a more timely basis and thirdly the holders of gov securities needs to have greater confidence to hold their money.

“Now it’s a matter of confidence in terms of the way we are managing the economy both on the fiscal and monetary side. We are very confident that on all those fronts going forward with the support of the government we can do what is necessary.”

http://www.lankabusinessonline.com/recent-rupee-depreciation-aligned-with-capital-outflows-not-current-account/

New Sri Lanka logistics facility targets exporters

Jan 08, 2019 

Sri Lanka’s investment agency has approved a project to build a warehouse and container depot near the Biyagama export processing zone to help exporters bring raw materials and machinery and ship outbound finished products.

The project by Skylift Container Depot and Logistics (Private) Limited, with a total value of 1.83 million US dollars will be located at Walgama, Malwana and employ 49 people, the Board of Investment said.

“We have considerable experience in handling of logistics and container depots both in Sri Lanka and in Melbourne, Australia,” the BOI statement quoted Roshan Buthgama, Director and Managing Director of Skylift as saying.

“We are confident that many of the BOI enterprises at the Biyagama Export Processing Zone will be our future customers, as this will be very advantageous for all companies.

“The activities of the logistic center would include handling of both inbound containers which would include raw materials and machinery and outbound finished products.”

The firm will set up a facility that would be engaged in warehousing and logistic services with a container depot.  

https://economynext.com/New_Sri_Lanka_logistics_facility_targets_exporters-3-13081-6.html