Friday, September 30, 2016

Sri Lanka can meet 5.4-pct budget deficit target for 2016: Ravi

Sep 30, 2016 (LBO) – Finance Minister Ravi Karunanayake said Sri Lanka is well on its way to achieving the fiscal target for 2016 as the Value Added Tax increase would be presented in Parliament next week.

“Revenue collection is largely on target despite delays in passing the VAT amendments, and we are confident of meeting the 2016 Budget deficit target of 5.4 percent,” Ravi Karunanayake, finance minister said.

“Of the total 410 Budget proposals presented last year, over 100 had been put into operation. Only 10 to 15 of the Budget proposals were of ‘great importance’ and only VAT had taken extra time to be carried out.”

He said issues such as VAT for non-VAT registered traders would be ironed out in the new Budget to be presented in Parliament on 10 November and the Budget 2017 will adopt a zero-based budgeting strategy.

“It is a method of budgeting in which all expenses must be justified for each new period.”

“You take ownership for the claim. All funds will be looked at from an internal rate of return, cost benefit analysis, value for money, national planning and treasury before getting the Cabinet approval.”

The minister also accused some politicians of spreading false stories.

“These are the biggest challenges in presenting Budget 2017, but I do not foresee any in the immediate future.”

“Other than political hurdles we do not see any future challenges and the Government will work very hard to develop the economy.”

 

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Asia stocks slip as Deutsche sours mood, Brent USD49.24 on OPEC pact

SINGAPORE, Sept 30 (Reuters) – Asian stocks followed Wall Street lower in early trade on Friday, while oil prices held close to the highest level in almost a month on optimism over an OPEC plan to curb output.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, on track for a 0.4 percent drop for the week. It is poised for a 2.2 percent gain in September, and a 9.5 percent jump in the third quarter.

Japan’s Nikkei retreated 1.5 percent after sluggish consumption data. It is down 1.7 percent for the month, but set to end the quarter 5.7 percent higher.

Some Bank of Japan board members doubted whether the central bank’s overhaul of its massive stimulus programme, announced last week would enhance flexibility of monetary policy, a summary of opinions at the central bank’s September rate review showed on Friday.

Japanese consumer prices in August fell 0.5 percent from a year earlier, missing expectations. Consumer prices in the Tokyo area in September dropped 0.5 percent, the fastest year-on-year drop since 2013.

Japanese industrial output rose 1.5 percent, beating expectations for a 0.5 percent rise.

South Korea’s KOSPI slipped 0.8 percent after manufacturing activity contracted for a second month in September to hit a 14-month low, and August industrial output posted the biggest decline in 19 months.

On Thursday, Wall Street lost about 1 percent as Deutsche Bank shares slumped to a record low after a report that trading clients had withdrawn excess cash and positions held in the largest German lender.

The bank’s U.S. shares closed down 6.7 percent at $11.48 after earlier falling to as low as $11.185.

The immediate cause of Deutsche’s crisis is a fine, disputed by Deutsche, of up to $14 billion by the U.S. Department of Justice over its sale of mortgage-backed securities.

Deutsche’s woes, alongside a grilling of Wells Fargo’s chief executive by U.S. lawmakers amid a call for the bank to be broken down due to a scandal over its opening of client accounts without agreement, helped push the S&P bank index down 1.6 percent.

Oil prices extended gains, rising more than 1 percent on Thursday, on optimism over an agreement by OPEC to cut output, but the rally was limited by doubts the reduction would make a substantial dent in the global crude glut.

U.S. crude futures added 1.7 percent to $47.83, after climbing to as high as $48.32, the highest level in almost five weeks. They were little changed on Friday.

Brent crude rose 1.1 percent to $49.24 on Thursday, after earlier touching a three-week high of $49.24.

The U.S. dollar was little changed at 101.09 yen, heading for a flat end to the week, but down 2.2 percent for September, and 2 percent for the quarter.

While the yen is headed for its third straight quarter of gains, speculation that Japanese investors may buy more foreign assets in their new business half-year starting from Oct. 1 could stem the Japanese currency’s gains in the near term.

The euro was also steady at $1.12165, on track for a 0.1 percent decline for the month, but up 1 percent for the quarter.

The Indian rupee posted its biggest drop since June on Thursday, after Indian officials said elite troops crossed into Pakistan-ruled Kashmir and killed suspected militants preparing to infiltrate and carry out attacks on major cities, in a surprise raid that raised tensions between the nuclear-armed rivals.

 

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Infrastructure: Sri Lanka's ministries should be aligned to be more effective

Sep 30, 2016 (LBO) – Sri Lanka’s budget allocations for national road development are high, but it needs to be attuned to needs, and ministries should be properly allocated, a senior official said.

“The problem is that we have fragmented systems, especially transport and highways are two different ministries so it is very difficult for us to agree on one plan,” said Namalie Siyambalapitiya, director planning, Road Development Authority (RDA).

“This is something for the government to think about – when allocating ministries. They should look at the functionalities of those ministries. Now it is a very difficult task for us to handle transport issues as the highways ministry is separate from us.”

She was speaking at the LBR LBO Infrastructure Summit 2016 themed “Realizing The Transformative Power of The Western Region Development: Opportunities and Challenges.”

The summit brought together more than 45 top-level speakers in front of a packed audience at the Cinnamon Grand.

She said the island is currently at the formulating stage of the National Road Master Plan from 2017 to 2027.

The plan intends to facilitate public transport systems, enhance the safety of road users, with environment and social safeguards, and introduce stringent monitoring mechanism to ensure return on investment.

“Sri Lanka has made high budgetary allocation from 2005 – 2015 to the RDA to develop the national road network including the expressway network,” Siyambalapitiya said.

“But – I agree that we have built roads and dumped money into this without systems to evaluate the outcome. So the new plan will have key performance indicators.”

However, there are many challenges ahead.

“There are no classifications of roads based on a functional hierarchy, and the development of roads has been mostly reactive to emerging land use patterns and the increasing trend in motorization, while allocation of adequate financial resources to carryout maintenance has been lagging behind increasing needs.”

“And substantial capacity expansion to cope with the growth in traffic did not occur due to many other limitations like land acquisition cost and road geometry.”

Increasing backlog of deferred maintenance caused costly rehabilitation and reconstruction, she added. An emphasis in the past on rehabilitation and maintenance has led to a piecemeal approach to the improvement of the network, preventing the development of a cohesive network.

“There is a need for a strategic shift from the traditional project centric approach to an approach that is focused on programs and strategies in line with the development happened in other sectors.”

“There is an absence of committed economic/development plan for the country; lack of coordination and integration among the relevant sectors and lack of policy instruments to govern infrastructure development and its share in National Economy.”

 

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Sri Lanka adds more taxes for smokers

Sep 30, 2016 (LBO) – Sri Lanka’s Cabinet has approved a 15 percent Value Added Tax (VAT) and 5.00 rupees production tax on cigarettes as well as an increase of cess on the import of “beedi” leaves, a statement said.

“Cabinet has decided to impose 15 percent VAT on cigarettes again, increase the current production tax to Rs. 5/- for any size cigarette, and to increase the cess on import of beedi leaves from 2,000 rupees to 3,000 rupees and to take other actions to minimise the tobacco use in the country,” the Cabinet announcement said.

“15 percent of Sri Lanka’s population between the ages of 18-69 smoke and the State spends 72 billion rupees each year to treat tobacco related illnesses.”

Currently taxation on cigarettes in Sri Lanka is the third highest in Asia. In the first half of 2016 the Government earned 46 billion rupees, up 12 percent from the previous year.

 

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Sri Lankan rupee edges up as tight liquidity prompts dollar sales

Sept 30, 2016 (Reuters) – The Sri Lankan rupee traded slightly firmer on Friday, after four straight sessions of losses, as tight rupee liquidity triggered dollar sales by some banks, dealers said.

The spot rupee was at 146.75/90 per dollar at 0556 GMT, compared with Thursday’s close of 146.90/147.00.

The rupee has fallen 0.58 percent so far this week.

“A few banks are selling dollars due tight rupee liquidity following yesterday’s bond auction,” a currency dealer said asking not to be named.

Sri Lanka’s central bank will conduct a reverse repo auction for 55 billion rupees ($374.58 million) on Friday, through which it absorbs liquidity from the banking system.

The central bank’s decision on Wednesday to hold key monetary policy rates steady suggested that policy makers were keen to support a slowing economy even as they kept a tight leash on rampant credit growth, analysts said.

After the rate decision, treasury bill yields dipped between 16 and 33 basis points.

The central bank is under pressure from the International Monetary Fund (IMF) to continue rebuilding international reserves and maintain exchange rate flexibility to develop the foreign exchange market further.

Sri Lankan shares gained, with the benchmark Colombo stock index up 0.25 percent at 6,544.93 as of 0600 GMT. Turnover was at 360.7 million rupees ($2.46 million).

 

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AGALAWATTE PLANTATIONS (AGAL) - CORPORATE DISCLOSURE

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DISTILLERIES COMPANY OF SRI LANKA (DIST) - CORPORATE DISCLOSURE

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Thursday, September 29, 2016

Asia stocks gains as crude oil surges after OPEC deal

TOKYO, Sept 29 (Reuters) – Asian stocks gained on Thursday in tandem with an oil price rally after OPEC members agreed to curb output – boosting investor risk appetite.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.6 percent.

Commodity-heavy Australian shares advanced 0.6 percent and South Korea’s Kospi gained 0.7 percent. Japan’s Nikkei rose 0.9 percent after losing 1.3 percent the previous day.

Overnight, European shares gained on a recovery in battered Deutsche Bank shares while the Dow rose 0.6 percent and the energy index had its best day since January in light of the OPEC agreement.

Oil prices settled up nearly 6 percent on Wednesday after OPEC struck a deal to limit crude output, seen as a surprise by the market, at its policy meeting in November. It was OPEC’s first agreement to cut production since 2008.

“With profits being squeezed the battle for market share can’t go on and this deal ushers in a new period of cooperation between OPEC nations and specifically between Saudi Arabia and Iran,” wrote Kathy Lien, managing director of FX strategy for BK Asset Management.

“While we wouldn’t be surprised by some back-pedalling between now and November, this is a historic moment and one that should have a lasting impact on the Canadian dollar.”

The Canadian dollar, which was already on the front foot against its U.S. peer earlier this week thanks to a perceived U.S. presidential debate win by Democrat Hillary Clinton over Republican Donald Trump, soared even further.

A potential win by Trump, who has criticised trade agreements, has been a source of concern for U.S. neighbours Canada and Mexico.

The Canadian dollar traded at C$1.3051 to the dollar after gaining nearly a percent overnight. The loonie had seen a six-month low of C$1.3281 early on Tuesday amid jitters towards the U.S. presidential debate.

Other commodity-linked currencies also fared well as oil rallied, with the Norwegian crown touching a five-month high against the dollar on Wednesday. The Australian dollar hit a three-week high of $0.7696 early on Thursday.

The euro inched up 0.1 percent to $1.1223, while the dollar climbed 0.3 percent to 100.950 against the safe-haven yen as broader risk sentiment improved.

Brent crude was up 0.4 percent at $48.87 a barrel, adding to overnight gains of 5.9 percent. U.S. crude added 0.5 percent to $47.28 a barrel after rising 5.3 percent on Wednesday, when it hit its highest since Sept. 9.

 

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Sri Lankan rupee edge down ahead of bond auction

Sept 29, 2016 (Reuters) – The Sri Lankan rupee edged down on Thursday ahead of a bond auction as investors bought the local currency to buy bonds, and as importer demand for dollars exceeded greenback sales by exporters, dealers said.

The spot rupee was trading at 146.75/85 per dollar, compared with Wednesday’s close of 146.62/70.

“Investors want to be in cash to buy bonds at today’s auction,” a currency dealer said asking not to be named.

“There is a strong speculation that today will be the last bond auction for this year. So the only option investors will have is T-bills.”

Central bank officials were not available for comments on bond auctions.

Another dealer said ample rupee liquidity in the absence of less fixed-income instrument could help reduce the market interest rates.

“Very little exporter conversions or remittances were witnessed in the market today. Foreign investors who are into bond buying were also not seen.”

Sri Lanka’s central bank held its key policy interest rates steady on Wednesday, a widely expected decision that analysts say suggested policy makers were keen to support a slowing economy even as they kept a tight leash on rampant credit growth.

After the rate decision, T-bill yields dipped between 16 and 33 basis points.

Private sector credit growth was at 28.5 percent year-on-year in July, its highest since August 2012, but central bank chief Indrajith Coomaraswamy on Wednesday said the central bank expected the credit expansion rate to slow to 20 percent by this year-end.

The central bank is under pressure from the International Monetary Fund (IMF) to continue rebuilding international reserves and maintain exchange rate flexibility to develop the foreign exchange market further.

Sri Lankan shares gained, with the benchmark Colombo stock index rising as much as 0.3 percent at 6,531.31 as of 0738 GMT. Turnover was at 302.7 million rupees ($2.07 million).

 

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CENTRAL INVESTMENTS & FINANCE (CIFL) - CORPORATE DISCLOSURE

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Wednesday, September 28, 2016

Sri Lanka Central Bank holds key interest rates unchanged

Sept 28, 2016 (LBO) – Sri Lanka’s Monetary Board held key interest rates unchanged with slow second quarter growth in the economy, despite credit growth to the private sector continuing to remain high.

The economy grew provisional 2.6 per cent, year-on-year, during the second quarter of 2016 compared to the growth of 7.0 per cent recorded in the same period of 2015.

“The growth of credit granted to the private sector by commercial banks was at 28.5 per cent, year-on-year, in July 2016, compared to 28.2 per cent in the previous month,” a policy statement said.

“Market interest rates, which increased in response to monetary tightening measures of the Central Bank, are expected to slow down credit expansion in the months ahead.”

The Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank were held unchanged at 7.00 per cent and 8.50 per cent respectively.

The monetary policy statement is below:

According to the Department of Census and Statistics (DCS), the Sri Lankan economy is provisionally estimated to have grown by 2.6 per cent, year-on-year, during the second quarter of 2016 compared to the growth of 7.0 per cent recorded in the same period of 2015. Meanwhile, growth in the first quarter 2016 was revised to 5.2 per cent.

In the second quarter of 2016, Services related activities grew by 4.9 per cent while Industry related activities recorded a moderate expansion of 2.2 per cent. Agriculture related activities, which were affected by adverse weather conditions, recorded a contraction of 5.6 per cent in the second quarter of the year.

A combination of improvements in the Purchasing Managers’ Index (PMI) and business confidence as well as favourable base effects in the fourth quarter of 2016 are expected to contribute to a rebounding of growth in the second half of the year.

On the external front, the deficit in the trade account expanded marginally by 0.7 per cent, year-on-year, during the first seven months of 2016 as the decline in export earnings was greater than the contraction in the expenditure on imports.

Strengthening the external position, earnings from tourism increased by an estimated 16.0 per cent during the first eight months of the year, while workers’ remittances increased by 4.5 per cent during January-July 2016.

In addition to the confidence gained from the Extended Fund Facility of the International Monetary Fund (IMF-EFF), increased investment inflows on account of government securities as well as other financial flows to the government helped to stabilise the domestic foreign exchange market.

Reflecting these developments, gross official reserves were estimated to have improved to US dollars 6.6 billion by end August 2016, while the Sri Lankan rupee has recorded a marginal depreciation thus far during 2016.

Reflecting the normalisation of domestic supply conditions as well as the suspension of the implementation of certain changes to government tax policy, inflation declined further in August 2016, on a year-on-year basis. Core inflation also moderated on a year-on-year basis, reflecting the impact of the latter effect.

In the monetary sector, broad money expansion continued to remain high at 17.8 per cent in July 2016, on a year-on-year basis, compared to 17.0 per cent recorded in the previous month. The expansion in monetary aggregates was mainly driven by credit flows to the private sector and the government from the banking system, while credit to public corporations continued to contract
during the month.

The growth of credit granted to the private sector by commercial banks was at 28.5 per cent, year-on-year, in July 2016, compared to 28.2 per cent in the previous month. Market interest rates, which increased in response to monetary tightening measures of the Central Bank, are expected to slow down credit expansion in the months ahead.

Considering the above developments, the Monetary Board, at its meeting held on 27 September 2016, was of the view that adequate measures are currently in place to contain monetary expansion at levels supportive of maintaining the macroeconomic balance while facilitating economic activity.

Accordingly, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 7.00 per cent and 8.50 per cent, respectively.

 

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Asia stocks inch up after Wall Street's gains, oil prices slide

TOKYO, Sept 28 (Reuters) – Asian stocks edged up early on Wednesday following an overnight rise for U.S. stocks, while reduced hopes that a meeting of major producers would reduce a oversupply weighed heavily on crude oil prices.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1 percent.

Australian stocks were up 0.5 percent while South Korea’s Kospi was flat. Japan’s Nikkei was last down 1.1 percent.

Overnight, the Dow rose 0.7 percent and Nasdaq added 0.9 percent. A perceived win by Democrat Hillary Clinton over Republican Donald Trump at the first presidential debate gave broader support to equities, although sliding oil prices were a drag on the energy sector.

Oil fell about 3 percent on Tuesday after Saudi Arabia and Iran dashed market expectations that the two major OPEC producers would find a compromise this week at a meeting in Algiers to help ease a global glut of crude.

U.S. crude had crawled up 0.45 percent to $44.87 a barrel early on Wednesday, the final day of the Sept. 26-28 International Energy Forum gathering.

With oil prices having dropped to less than half of their 2014 highs, the Algiers talks are OPEC’s second attempt at an output agreement after a failed round in Qatar in April.

“The market currently does not expect any agreement at this meeting, so no agreement should have only limited negative impact on the oil price,” wrote Marshall Gittler, head of investment research at FXPRIMUS.

“Expectations are now so low though that if by some miracle they did come to even a half-hearted agreement, that would probably send prices up sharply.”

In currencies, the dollar was flat at 100.470 yen.

It had popped up to 100.990 yen on Tuesday when Clinton was seen to have emerged as the winner at the debate and removed an element of uncertainty. But the rise petered out with the market reminded that Clinton also favours a weaker dollar, and with the greenback also hurt by falling U.S. yields.

The euro was steady at $1.1217 after losing about 0.4 percent overnight on concerns over Europe’s banking sector.

Near-term market focus was on European Central Bank President Mario Draghi, who will face tough questions from German lawmakers later on Wednesday about the central bank’s monetary policy.

Federal Reserve Chair Janet Yellen will deliver semi-annual testimony before the U.S. House Financial Services Committee.

The Mexican peso, which jumped against the dollar following Clinton’s perceived debate win, held to its gains.

The currency stood little changed at 19.38 pesos to the dollar, having rallied on Tuesday from a record low of 19.92 hit earlier on worries that a Trump win would threaten Mexico’s exports to the United States.

The 10-year U.S. Treasury note yield hovered near a three-week low of 1.546 percent touched overnight amid speculation that Europe’s banking woes could delay the Fed’s next interest rate hike.

 

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Sri Lanka to see USD2 bln investments from India, ETCA discussed: minister

Sep 28, 2016 (LBO) – Sri Lanka will see investment of more than two billion US dollars in the next two to four years from India, a visiting Indian minister here to discuss the Economic Technology Cooperation Agreement, said.

“We are looking at investment in the tune of 2-3 billion US dollars in the next two to four years,” Nirmala Sitharaman, Minister of (Independent Charge) for Commerce and Industry of India, said Tuesday.

“Areas like real estate, industry, energy, infrastructure and housing are what we are looking at.”

Sri Lanka is currently at the formulating stage of an “Economic Technology Cooperation Agreement” with India, but several local professional associations have raised concerns about the flow of professionals between the two countries.

“This agreement can go ahead only with mutual trust. The negotiation has to be done in detail and without any kind of pressure on the timeline,” the Indian minister said.

“I wish to state here, whilst the opportunities exist, synergies between the two countries are very repeatedly underlined by business and it is important to recognise that this negotiation has to be done in detail.”

“We value the agreement, but of course it has to be done taking everybody on board and talking on every issue of concern for both sides. It has to be done with a great sense of ease and comfort,” she added.

Malik Samarawickrama, Minister of International Trade and Development Strategies, speaking at the press conference said that the Government will push to finalize ETCA as soon as possible.

“We will try to get this done as soon as possible as this will open up a market of 1.2 billion for us. The timeline could extend to March 2017 from the previous December deadline.”

Anwsering repeated question from reporters he said the government will not consider Mode 4 of the WTO General Agreement on Trade in Services (GATS) which allows professionals to provide a service in another country.

“Instead, the ETCA agreement will seek to boost cooperation in technical areas, scientific expertise and research amongst institutions, boost standards of goods and services able to compete on the global market and improve opportunities for manpower training and human resource development.”

“Without an improvement in training we may experience shortages in the future.”

Around 65 percent of Sri Lanka’s exports to India falls under the Free Trade Agreement, but just 25-30 percent of goods from India fall under the FTA. Sri Lanka also experiences non-tariff barriers when exporting to India.

The government plans to improve access for Sri Lankan goods to India under this agreement, he said. Seventy percent of transshipment and 40 percent of revenue from flights are linked to India, and the government aims to boost these services areas too.

Sitharaman said that the issues faced by Sri Lanka under the current Indo-Lanka Free Trade Agreement (FTA) needed to be addressed before any new agreement.

“It is being talked about, it is important and we are willing to deal with an open mind.”

“The passing of the Goods and Services Tax (GST) in India has made it one market with easier access for investment,” she added.

 

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ADB lowers Sri Lanka growth in 2016 to 5-pct from 5.3-pct

Sep 28, 2016 (LBO) – The Asian Development Bank (ADB) has lowered the economic growth forecast for Sri Lanka to 5.0 percent for 2016 from 5.3 percent saying growth prospects for Sri Lanka edge lower on weak industrial performance and fiscal consolidation.

“ADB lowered the GDP growth rate to 5.0 percent for Sri Lanka in 2016 from the 5.3 percent it projected in March this year,” the bank said in its flagship annual economic publication, Asian Development Outlook 2016 (ADO 2016).

“The growth in 2017 was lowered to 5.5% from the 5.8% projected six months ago while the inflation will remain 4.5% this year and 5.0% in 2017.”

The growth forecast for Sri Lanka in 2016 is revised down on unexpected weakness in the second quarter, which held growth in the first half to 3.9 percent. GDP grew by 5.2 percent in the first quarter and then slumped to 2.6 percent in the second to hold growth in the first half of 2016 to 3.9 percent year on year.

Agriculture was hit by dry weather that cut tea production in the first quarter and by heavy rain and flooding in the second quarter that markedly reduced agricultural output by 2.5 percent in the first half.

However, the ADO 2016 said that the weak economic performance in the first half came mostly from an unexpected slowing of industry in the second quarter, mainly in manufacturing and construction. As other industry indicators show stronger performance, recovery is expected in the second half.

The forecast for growth in 2017 is similarly lowered because of tight monetary and fiscal policies to achieve economic reform objectives amid the continued lackluster global demand.

On expectations that food production will revive under normal weather and that monetary tightening will curb demand pressures, inflation is expected to moderate in the second half of the year. On balance, ADO 2016 forecasts for inflation are retained.

As tourist earnings continued their strong performance in the first half of 2016, and remittance inflows strengthened, their combined earnings offset the trade deficit by a larger margin than in 2015. Accordingly, the ADO 2016 forecast for the current account deficit is retained for 2016 but it is widened for 2017 on oil prices rising more than expected earlier and possible adverse effects on exports from Brexit.

The update says prudent debt management is required in Sri Lanka, where general government debt ratios have long been high by regional standards.

“For Sri Lanka, where a significant share of debt is external, additional pressure is likely to come from the interest rate cycle of the US Federal Reserve,” the ADO 2016 update predicted.

The growth projections for next year are retained for all economies in South Asia except Pakistan, which is higher, and Sri Lanka, which is lower.

 

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CB Governor says 2Q growth should be higher than 2.6-pct

Sept 28, 2016 (LBO) – Sri Lanka’s second quarter economic growth for this year should be higher than the published 2.6 percent, Central Bank Governor said.

Governor Indrajit Coomaraswamy told reporters in Colombo that he would expect it to be higher than the current figure, once it gets revised.

“If you look at proxies for growth like availability of cement for the construction sector, electricity consumption and credit growth, economic growth may not have slowed down as much as 2.6 percent,” Governor said.

“Credit is growing at about 25 percent in the second quarter and inflation was low at that time. So you can’t have high credit growth, low inflation and low growth. The money has to go somewhere,” he said.

“So, there are chances that figure is revised upwards.”

Coomaraswamy further expected the third and fourth quarters to record more growth than last year’s numbers as he sees an upward movement in business confidence.

“We are seeing a pick up in the Purchasing Managers’ Index (PMI) and business confidence,” he pointed out.

“But most of all, the tailwind for growth for the second half will be the very positive base effect stemming from the very low growth rate recorded in the fourth quarter of last year.”

Governor said since fourth quarter growth was only 2.5 percent last year, that will give a positive base effect for this year.

“It should mean that we will get a decent growth number for the fourth quarter of this year.”

“So our expectation is that this year’s growth would be about 5 percent or little bit more than that and next year it will be a bit higher than that.”

 

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Tuesday, September 27, 2016

Asia stocks slip, yen gains on U.S. debate jitters

SYDNEY, Sept 27 (Reuters) – Uncertainty gripped Asian markets on Tuesday as investors braced for a potentially pivotal U.S. presidential debate, shunning stocks while favouring safe-haven bonds and the yen.

Early jitters saw Japan’s Nikkei sink 1.4 percent to its lowest in seven weeks, while the dollar dropped to a one-month trough around 100.08 yen before steadying. A higher yen is seen as a threat to exporter sales and profits.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.4 percent, with the technology and financial sectors both down more than 1 percent.

The debate between Democrat Hillary Clinton and Republican Donald Trump starts at 0100 GMT and could have a big impact with the race seemingly so close.

Markets have tended to see Clinton as the candidate of the status quo, while few are sure what a Trump presidency might mean for U.S. foreign policy, trade and the domestic economy.

On Wall Street, the Dow fell 0.91 percent, while the S&P 500 lost 0.86 percent and the Nasdaq 0.91 percent. The pan-European STOXX 600 index also fell 1.6 percent to a one-week low.

Big banks led the declines after Deutsche Bank slid to a record low on concerns it might need to raise more capital to meet $14 billion in U.S. fines.

“There’s a thing called Trump thermometer,” said David Bloom, London-based global head of forex strategy at HSBC.

“If you want to know who won the presidential debate, don’t go to Twitter or Facebook. Just look at the dollar/Mexico peso .”

The peso has hit record lows in recent days on concerns a Trump victory would threaten Mexico’s exports to the United States, its single biggest market.

“If Clinton wins, you will get a big rally in the peso, and reasonable rallies in emerging markets,” he said, while if Trump gets the nod it should benefit safe-havens such as the yen, the euro and the Swiss franc.

The dollar was shaky on Tuesday at 100.36 yen and threatening a psychological bulwark at 100.00, with the euro firm at $1.1243.

Other safe-havens include U.S. Treasuries which caught a bid ahead of the debate and pushed longer-term yields to three-week lows.

In commodity markets, oil ran into profit-taking having bounced 3 percent on Monday as the world’s largest producers gathered in Algeria to discuss ways to tackle a crude glut that has battered prices for two years now.

Brent crude eased back 45 cents to $46.90 a barrel, while U.S. crude dipped 38 cents to $45.55 per barrel.

 

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Sri Lankan rupee weaker on importer dollar demand

Sept 27, 2016 (Reuters) – The Sri Lankan rupee traded weaker on Tuesday as seasonal demand for dollar from importers exceeded sales by exporters and banks, dealers said.

The spot rupee traded at 146.45/55 per dollar, compared with Monday’s close of 146.35/45.

The spot-next forwards were at 146.56/60 per dollar, edging down from Monday’s close of 146.38/48. One-week forwards were at 146.65/80, weaker from last close of 146.50/68.

“There is importer demand today and not much of exporter conversions or remittances to meet that demand,” a currency dealer said, asking not to be named.

Dealers said the market expects the rupee to be under downward pressure until December due to the seasonal importer dollar demand.

The spot rupee is usually managed by the central bank and market participants use the forward market levels for guidance on the currency.

Sri Lanka’s central bank is expected to keep its key interest rates steady on Wednesday, after cutting three times since December to fend off pressure on the fragile rupee and curb accelerating credit growth that has pushed up inflation.

The central bank is under pressure from the International Monetary Fund (IMF) to continue to rebuild international reserves and maintain exchange rate flexibility to further develop the foreign exchange market.

Sri Lankan shares were nearly flat, with the benchmark Colombo stock index up 0.02 percent at 6,480.02 as of 0536 GMT. Turnover was at 288.1 million rupees ($1.97 million).

 

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CITRUS LEISURE , KALPITIYA BEACH RESORT , HIKKADUWA BEACH RESORT - GROUP RESTRUCTURE

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TRADE FINANCE & INVESTMENTS - DIVIDEND ANNOUNCEMENTS

TRADE FINANCE AND INVESTMENTS PLC
Company ID: - TFIL
Date of Announcement: - 27.Sep.2016
Rate of Dividend: - Rs. 2.00 per share / Interim Dividend
Financial Year: - 2015/2016
XD: - 06.Oct.2016
Payment: 07.Oct.2016
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ASSOCIATED MOTOR FINANC - DIVIDEND ANNOUNCEMENTS

ASSOCIATED MOTOR FINANCE COMPANY PLC
Company ID: - AMF
Date of Announcement: - 27.Sep.2016
Rate of Dividend: - Rs. 15.00 per share (Subject to 10% Dividend Tax) / Final Dividend
Financial Year: - 2015/2016
XD: - 06.Oct.2016
Payment: 14.Oct.2016
Share Transfer Book Open

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Monday, September 26, 2016

Asian shares slip, U.S. presidential debate awaited

TOKYO, Sept 26 (Reuters) – Asian shares began the week under a cloud on Monday after losses on Wall Street, as investors’ attention turned from central banks to American politics ahead of the first U.S. presidential debate.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 percent in early trade, while Japan’s Nikkei stock index slumped 0.5 percent against the headwinds of a stronger currency

Wall Street logged weekly gains but ended with solid losses on Friday. The S&P 500 still managed to record its best weekly performance in more than two months after the U.S. Federal Reserve held interest rates steady on Wednesday.

Investors awaited Monday evening’s U.S. presidential debate between Donald Trump and Hillary Clinton, which will take place early on Tuesday in Asian time zones. The first of three debates ahead of the November election could set U.S. television audience records.

“Although a ‘good’ performance by Trump could see a rally in safe haven assets, JGBs/yen, gold, German Bunds, and that further yield compression conversely may actually assist long duration ‘riskier’ assets such as EMs, high-yield bonds and U.S. equities,” Angus Nicholson, market analyst at IG in Melbourne, wrote in a note.

Analysts say the event could be a crucial factor determining the election outcome. Reuters/Ipsos polling shows about 20 percent of the electorate remains undecided, far higher at this stage in the campaign than the 12 percent undecided four years ago.

Clinton will press Trump to provide more specifics on his policies in their presidential debate on Monday, two top Clinton campaign aides said.

The dollar edged down 0.1 percent to 100.89 yen, while the euro inched up 0.1 percent to $1.1238.

Underpinning the greenback, Boston Fed President Eric Rosengren said on Friday that he believed U.S. short-term interest rates should be raised now and warned a decline in the jobless rate below its long-run sustainable level could derail economic recovery.

Investors will also pay more than the usual attention to the Japanese government bond market this week. The Bank of Japan announced last week that it is shifting its monetary policy framework to yield curve control, with the aim of pushing down short- to medium-term borrowing costs while allowing for a natural rise in super-long yields.

U.S. crude futures added 1 percent to $44.91 a barrel, after tumbling 4 percent on Friday on signs Saudi Arabia and arch rival Iran were making little progress in achieving preliminary agreement ahead of this week’s Organization of the Petroleum Exporting Countries (OPEC) meeting. For the week, U.S. crude still managed to gain 3 percent.

 

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Fund flows into emerging markets at three-year high

Sept 26, 2016 (LBO) – After cash outflows over the last few years, money flowing back into emerging markets has hit a three-year high.

Investors have chanelled more than 9 billion dollars into emerging market funds and the benchmark MSCI emerging market fund is up nearly 15 percent, CNBC reported.

In a recent note to clients, Deutsche Bank’s chief global strategist Binky Chadha said that “over the medium term, we see substantial scope for further emerging market inflows, aided by a continued rotation out of European equities.”

Despite turmoil in places such as Argentina, Brazil and swaths of the Middle East and Africa, foreign investment in a number of developing economies has quickened this year — which is also helping to feed government spending.

Two visible trends are bolstering the enthusiasm of major banks that are looking beyond the shores of Europe and the U.S. for opportunities to manage weath, Jose Rasco, chief investment strategist with HSBC Private Bank Americas, said.

“First is the continued development and expansion of a middle class in many countries, which previously were mired in the low income strata a few years ago,” he said. About 545 million people are middle class in Asia, according to recent data from Ernst & Young, which estimates three billion people will move into the middle class by 2030 — most of them in emerging markets.

Additionally, “many countries have expanded their regulatory reform process, which has led to increased involvement in global asset markets.” Even as global growth remains a struggle, “projections continue to suggest that wealth creation should remain vibrant in the emerging market world,” he said.

Clients with high net worth and the resources to take on risk are continuing to search for yield and growth, both of which have been all but nonexistent in advanced economies. This, Rasco explains, should continue to be more readily available in the world of emerging markets.

“The emerging market world suffered in the past few years as the U.S. dollar’s strength sent emerging market currencies and commodity prices tumbling,” he told CNBC. “Therefore the potential of a flat to falling dollar offers hope to investors that emerging markets may once again provide solid potential returns.”

A recent survey by Credit Suisse described key regions such as Saudi Arabia, India and China as among the most “robust” of the emerging sector, which may bode well for major banks.

“In the long-term, emerging markets continue to provide superior growth prospects, good demographics and increasing use of modern technologies, which should boost productivity,” he added.

 

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POLL: CB to stand pat this wk, assessing impact of previous hikes

Sept 26, 2016 (Reuters) – Sri Lanka’s central bank is expected to keep its key interest rates steady on Wednesday, after cutting three times since December to fend off pressure on the fragile rupee currency and curb accelerating credit growth that has pushed up inflation.

All 13 economists surveyed in a Reuters poll expect the central bank to keep its standing deposit facility rate (SDFR) steady at 7.00 percent, and its standing lending facility rate (SLFR) unchanged at 8.50 percent.

Danushka Samarasinghe, research head at Softlogic Stockbrokers, said the lag effect of previous rate increases meant “the central bank will wait for another month or two before taking any further action.”

Private sector credit growth hit a near four-year high of 28.2 percent in June, and central bank chief Indrajith Coomaraswamy expects credit growth to slow to 18 percent by the end of 2016.

The sizzling credit growth has kept inflation high, though it slowed in August to 4.0 percent on-year from the previous month’s 5.5 percent.

The rupee has come under pressure due to lower interest rates, higher imports, and foreign outflows from government securities last year. But the currency steadied after the central bank raised $1.5 billion from a sovereign bond sale in July.

The International Monetary Fund (IMF) on Friday welcomed the central bank’s preemptive move to raise policy rates to maintain inflation within its target band.

The central bank has raised both the SDFR and the SLFR by 50 bps each in February and July. That followed an increase of 150 bps in commercial banks’ statutory reserve ratio (SRR) in December.

All 13 economists expect the statutory reserve ratio (SRR) to remain at 7.50 percent.

Following are poll forecasts for rates on Tuesday:

         

                    SDFR         SLFR        SRR

                  (in pct)    (in pct)     (in pct)   

Median              7.00         8.50       7.50

Average             7.00         8.50       7.50 

Minimum             7.00         8.50       7.50

Maximum             7.00         8.50       7.50  

Rates in August     7.00         8.50       7.50

No. of economists    13           13         13

 

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OVERSEAS REALTY (CEYLON) (OSEA) - RIGHTS ISSUE 2 for 5 @ Rs. 20.50

http://www.cse.lk/cmt/upload_cse_announcements/3451474860265_.pdf

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HIKKADUWA BEACH RESORT - DIVIDEND ANNOUNCEMENT

HIKKADUWA BEACH RESORT PLC
Company ID:- CITH
Date of Announcement:- 26.Sep.2016
Rate of Dividend: - Rs. 0.10 per share / First & Final Dividend
Financial Year: - 2015/2016
XD:- 05.Oct.2016
Payment:- 14.Oct.2016
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Friday, September 23, 2016

ADB to give Sri Lanka USD24.2Mn for transport feasibility studies

Sep 23, 2016 (LBO) – The Asian Development Bank (ADB) will help Sri Lanka prepare studies and designs for new road, railway, and port projects to assure the islands transport system is ready to support economic growth in the medium term.

“With 24.42 million US dollars in ADB technical assistance, the Road Development Authority will formulate an expressway development program and prepare priority projects, such as a port access road to link the Colombo port area to the highway network,” the Bank said issuing a statement.

“The funds will also help the government to work on studies and designs for priority railway and port projects.”

The studies are expected to commence this 2016 and be completed by 2022.

“In Sri Lanka, the role of the transport sector has gradually changed from moving agricultural commodities to providing more diversified services and catering to the value-added manufacturing industry,” said Chen Chen, senior transport specialist in ADB’s South Asia Department.

“The transport network needs to better serve the towns and cities where new economic activities are being established.”

Roads and an emerging expressway network are the dominant mode of transportation in Sri Lanka, accounting for 93 percent of passenger transport and 96 percent of freight transport.

The country also has a basic railway network with 10 railway lines although almost 90 percent of the network is single track.

An improved railway transport system would complement the road transport system, both for passengers and freight.

Maritime transport is also critical to Sri Lanka as an island nation, the statement added.

Total container volume handled by Sri Lanka’s ports has increased 108 from 2.5 million twenty-foot equivalent units in 2005 to 5.2 million twenty-foot equivalent units in 2015.

“The government needs to make the optimal use of the maritime transport resources in Colombo, Galle, Hambantota, Kankasanthurai, Oluvil, and Trincomalee.”

 

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Asian stocks hold near 14-month peak on Fed relief

TOKYO, Sept 23 (Reuters) – Asian shares edged closer to 14-month highs on Friday while the dollar was on the defensive as investors grew more convinced that the Federal Reserve is settling into a phase of very gradual interest rate hikes.

MSCI’s broadest index of Asia-Pacific shares outside Japan was steady and within sight of its highest levels since July 2015 that it hit in early September.

Japan’s Nikkei dipped 0.2 percent, reflecting the yen’s gains during Japan’s market holiday on Thursday.

On Wall Street, S&P 500 Index gained 0.65 percent, led by 1.9-percent gain for the real estate sector.

The S&P 500 capped its best two-day performance in more than two months, while the Nasdaq closed at a record high.

The rallies began after the Fed on Wednesday maintained the low-interest rate environment that has helped underpin the bull market for stocks since the global financial crisis in 2008.

“Because the Fed is shying away from tightening, there will be liquidity sloshing around in the world’s financial markets as well for another few months,” said Tatsushi Maeno, senior strategist at Okasan Asset Management.

Fed Chair Janet Yellen did say U.S. growth was looking stronger and rate increases would be needed to keep the economy from overheating and fuelling high inflation.

But that hardly changed the market’s perception on the outlook of the Fed’s policy, with interest rate futures <0#FF:> pricing in roughly 60 percent chance of a rate increase by December, little changed from before the Fed meting.

Crucially, the Fed also projected a less aggressive rise in rates next year and in 2018, fanning expectations bond yields will stay low in the foreseeable future.

The 10-year U.S. Treasuries yield dropped to as low as 1.608 percent, down sharply from Wednesday’s high of 1.738 percent and hitting its lowest level in almost two weeks.

The German Bunds yield also fell about 10 basis points to minus 0.093 percent from plus 0.005 percent on Wednesday.

The 10-year Japanese government bond yield fell 3.5 basis points to minus 0.060 percent in early Friday trade.

The BOJ said on Wednesday it will seek to guide the 10-year JGB yield around zero percent in an unprecedented move but investors are left wondering exactly where and how the BOJ would be able to exert control on the bond yield.

In the currency market, the dollar was softer on the Fed’s policy outlook, with the dollar’s index against a basket of six major currencies slipping to its lowest level in nearly two weeks on Thursday.

The index last stood at 95.350, off Thursday’s low of 95.048 but down 0.7 percent on the week.

The euro fetched $1.1211, recovering from Wednesday’s three-week low of $1.1123.

The yen stepped back to 100.78 to the dollar from four-week high of 100.10 touched on Thursday after Japan’s top currency diplomat warned Tokyo will take action if needed.

Oil prices rallied to a two-week high, helped by U.S. government data that showed a surprising crude inventory drop.

But they gave back some gains after Reuters reported that a two-day expert-level meeting of the Organization of the Petroleum Exporting Countries on production cooperation had yielded no major breakthrough.

The meeting was held in advance of Sept. 26-28 talks in Algeria between OPEC and other major oil producers to discuss a potential output freeze.

Brent crude futures traded at $47.38 per barrel, after having climbed to $47.83 on Thursday.

Elsewhere, copper rallied to a six-week high despite worries about slow demand growth, supported by the Fed’s policy.

 

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NAMUNUKULA PLANTATIONS - DIVIDEND ANNOUNCEMENT

NAMUNUKULA PLANTATIONS PLC
Company ID: - NAMU
Date of Announcement: - 23.Sep.2016
Rate of Dividend: - Rs. 0.50 per share / Interim Dividend
Financial Year: - 2016/2017
XD: - 04.Oct.2016
Payment: 12.Oct.2016
Share Transfer Book Open

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Thursday, September 22, 2016

Asian shares surge, dollar lags on slow-motion Fed

SINGAPORE/SYDNEY, Sept 22 (Reuters) – Asian shares surged on Thursday, taking their cue from Wall Street, after the Federal Reserve left U.S. interest rates unchanged and slowed the pace of future hikes, slugging the dollar and lifting commodity prices.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.9 percent in its sixth straight session of gains, just 1.1 percent off its one-year high touched earlier this month.

Australian shares rose 0.9 percent, while South Korea’s KOSPI advanced 1 percent.

Asia’s strong gains follow a surge of 1.1 percent for the S&P 500, 0.9 percent for the Dow Jones industrial average and 1.3 percent for the Nasdaq Composite, which closed at a record high.

“The market got what it expected/wanted,” said Daniel Morris, senior investment strategist at BNP Paribas Investment Partners in London. “Another dose of central bank support for markets following the Bank of Japan meeting.”

While Tokyo was on holiday on Thursday, stocks closed up 1.9 percent on Wednesday after the BOJ’s shift to targetting a positive yield curve, a move that was considered bullish for banks, insurers and pension funds.

The U.S. Fed did signal it could hike rates by year-end as the labour market improved further, but cut the number of rate increases expected in 2017 and 2018. It also reduced its longer-run interest rate forecast to 2.9 percent from 3 percent.

That left investors feeling any tightening would be glacial at best. Market pricing for a December move rose only a fraction to 59.3 percent <0#FF:>, from 59.2 percent, according to CME Group’s FedWatch tool.

Richard Franulovich, an analyst at Westpac, noted that back in June the median dot plot showed five hikes to end-2017. Now it is down to just three.

“We do not feel that the dollar has the wherewithal to make a more concerted run higher in the next few weeks,” he added. “The FOMC is unlikely to deliver anything more than a very ‘dovish’ December hike.”

The dollar rose as high as 101.71 yen after the BOJ’s announcement on Thursday, but the yen took back its lost ground after the BOJ’s shift to yield curve control left some unimpressed. It was down 0.1 percent at 100.155 yen, having lost 1.4 percent on Wednesday to touch a 3-1/2 week low of 100.30.

“Fundamentally, it did not amount to an easing of monetary policy, but merely offers policy tweaks at the margin and a strengthening of forward guidance,” said Frederic Neumann, co-head of economic research at HSBC.

“The BOJ now essentially promises to purchase JGBs for even longer, until inflation exceeds, and not merely meets, its 2 percent inflation target.”

The dollar index, which tracks the greenback against a basket of six major peers, slipped 0.2 percent to $95.462. It touched a six-week high of 96.333 on Wednesday, before ending the day down 0.4 percent from its previous close.

The euro was little changed at $1.1191, after gaining 0.3 percent on Wednesday.

CENTRAL BANKS STILL TRYING

Another central bank struggling with too-low inflation is the Reserve Bank of New Zealand and it renewed a pledge to lower rates again on Thursday even as much of the domestic economy is growing briskly.

The RBNZ’s blunt statement that further easing would be needed knocked the local dollar down half a U.S. cent to $0.7340 , but the market has found it hard to sell a currency that still offers an overnight interest rate of 2 percent.

In commodity markets, gold traded down 0.2 percent at $1,333.20 an ounce, having climbed 1.7 percent as the U.S. dollar declined on Wednesday.

Oil prices climbed as much as 3 percent on Wednesday after a third surprise weekly drop in U.S. crude stockpiles boosted the demand outlook in the world’s largest oil consumer.

Another supportive factor was an oil workers’ strike in Norway, which threatened to cut North Sea crude output.

U.S. crude (WTI) futures advanced 0.9 percent to $45.72 after surging 4.4 percent on Wednesday. Brent crude futures rose 0.8 percent to $47.23, adding to gains of 2.1 percent on Wednesday.

 

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Sri Lanka's Financial Intel Unit signs MOU with Singapore authority

Sept 22, 2016 (LBO) – The Financial Intelligence Unit of the Central Bank of Sri Lanka (FIU) has entered into a memorandum of understanding with the Suspicious Transaction Reporting Office of Singapore (STRO) to facilitate exchange of information on money laundering and terrorist financing.

The MOU has been entered into “within the framework of each Authority’s national legislation, to facilitate the exchange of information related to investigations and prosecutions of money laundering and terrorist financing on September 01, 2016,” a statement said.

This MOU was entered into by the FIU – Sri Lanka, in terms of the provisions of the Financial Transactions Reporting Act, No. 6 of 2006.

“Money laundering and terrorist financing are internationally connected financial crimes which could threaten the stability of global economic and financial system,” the statement said.

“Therefore, a global coordination among financial intelligence authorities is essential to fight against money laundering and terrorist financing. In this regard, the FIU – Sri Lanka has so far entered into MOUs with 32 jurisdictions, including the MOU signed with the STRO for sharing information for intelligence purposes.”

A government minister told LBO that, among its other responsibilities, the FIU was looking into the Panama Papers leak on possible cases of tax evasion by Sri Lankans.

 

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Sri Lankan rupee edges up on bank dlr sales; stocks up

COLOMBO, Sept 22 (Reuters) – The Sri Lankan rupee edged up on Thursday as dollar sales by a foreign bank helped currency forwards outpace importer dollar demand, but the market expects the rupee to be under downward pressure due to a rise in demand for imports, dealers said.

Rupee forwards were actively traded and one-week forwards were at 146.30/40 at 0645 GMT, firmer from Wednesday’s close of 146.60/70.

“The one-week forwards traded at 146.55 in early trade. But they appreciated due to dollar sales by a foreign bank, possibly from stocks- and bond-related inflows,” a currency dealer said, asking not to be named.

He said the implied spot rate was 146.25/35, though the spot did not trade after the central bank’s moral suasion on Tuesday.

Traders were unwilling to trade the spot rupee below 146.00 , the level desired by the central bank, on Tuesday, dealers said.

The spot rupee was quoted at 145.90/146.40 at 0645 GMT.

The spot rupee is usually managed by the central bank and market participants use the forward market levels for guidance on the currency.

Officials from the central bank were not available for comment.

Another dealer said the market expects the local currency to be under downward pressure in the coming weeks.

“The usual seasonal importer demand is expected to pick up from now and will continue until mid-December.”

Sri Lankan shares gained, with the benchmark Colombo stock index up 0.25 percent at 6,467.48 as of 0659 GMT. Turnover was at 1.27 billion rupees ($8.70 million). ($1 = 145.9000 Sri Lankan rupees)

 

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CENTRAL INVESTMENTS & FINANCE (CIFL) - CORPORATE DISCLOSURE

http://www.cse.lk/cmt/upload_cse_announcements/2741474544834_.pdf

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Wednesday, September 21, 2016

Asia stocks pull ahead, investors on edge before BOJ verdict

HONG KONG, Sept 21 (Reuters) – Asian shares got off to a tentative start on Wednesday, while the yen was steady as investors braced for the outcome of the Bank of Japan’s policy meeting amid heightened speculation the central bank will make crucial changes to its massive easing programme.

The BOJ is expected to make negative interest rates the centrepiece of a new policy framework – widely seen as a desperate attempt to show it still has the firepower to lift Japan out of years of stagnation.

Ahead of the decision, MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.15 percent, perched at its highest levels since Sept. 12. Markets in New Zealand and Australia were flat.

“Expectations are that the BoJ may push back the timing of its 2 percent inflation target making it a more medium term objective, make QE more flexible in an attempt to steepen the curve and possibly cut the deposit rate further into negative territory,” ANZ bank analysts said in a note to clients.

“Whilst all this is speculative, we do know that the BoJ is quite divided on the merits of extending extraordinary monetary measures further given the difficulty that negative rates and a flat yield curve create for the banking and financial sector,” the analysts said, noting the BOJ has recently disappointed markets.

Markets are also watching out for the U.S. Federal Reserve policy decision, due later in the global day. Both hawkish and dovish comments from Fed officials recently have stoked volatility in financial markets, although consensus is now centred on a U.S. rate hike by year-end.

U.S. stocks ended little changed, with healthcare gains offsetting declines in energy

The Dow Jones industrial average added 0.05 percent, the S&P 500 gained 0.03 percent, and the Nasdaq Composite rose 0.12 percent.

U.S. Treasury yields were supported in early trade as investors bought longer-dated bonds on uncertainty over the outcome of the BOJ meeting.

Benchmark 10-year Treasury notes were trading at 1.69 percent, a shade higher from Tuesday’s level. European sovereign bonds rose as German, British, Italian and Spanish 10-year yields fell.

Currency markets held tight in recent trading ranges with a broad dollar index, a basket of trade-weighted currencies, holding steady at 95.99. The euro was steady at $1.11540, while the dollar was broadly flat against the yen at 101.67 yen.

The Australian dollar consolidated chunky recent gains at $0.7554 as the demand outlook for industrial metals for China continued to improve along with favourable tailwinds from emerging markets and currencies. It is up 1.5 percent in a week.

Oil prices were up in early Asian trade with U.S. crude oil futures up 2 percent to $44.85 per barrel.

 

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US Pacific Command partners with Sri Lanka on oil spill management

Sept 21, 2016 (LBO) – Experts from the U.S. Pacific Command have provided training for disaster response counterparts from Sri Lanka and Maldives on responses to potential oil spills that could impact the local environment.

Both civilian and military participants shared experiences from recent oil spill response efforts, with hands-on field exercises that included a live demonstration at sea, a statement said.

“Protecting the well-being of the Indian Ocean region is one of the reasons why it’s so important to develop regional cooperation,” said U.S. Ambassador to Sri Lanka and Maldives Atul Keshap.

“The United States will stand together with Sri Lanka and Maldives to ensure our seas can continue to provide food and employment.”

The U.S. Pacific Command, Sri Lankan Navy, Sri Lankan Coast Guard, Sri Lanka Disaster Management Center, Marine Environmental Protection Authority, and Maldives National Defense Force partnered together for the week-long workshop.

The event coincides with the U.S. Department of State Our Ocean conference in Washington D.C., where environmental activists, scientists, business and world leaders gathered to find solutions and commit to actions to protect and conserve our ocean and its resources.

 

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New markets needed to offset Sri Lanka Tea downturn: OBG

Sept 21, 2016 (LBO) – Adverse weather conditions, combined with rising costs and greater competition, threaten to weaken Sri Lanka’s position in the global tea industry, though efforts to develop new markets could help offset downturns in exports and revenue, the Oxford Business Group said in a note on the economy.

Flooding in mid-May struck a number of tea-producing regions and led to the inundation of several tea export facilities around Colombo, causing widespread disruption and compounding losses from El Niño-related drought conditions in the first half of this year.

According to a research note issued by Colombo-based broker John Keells in mid-August, output from Sri Lanka’s plantations remains low, at a time when production by key competitors is rising.

“Most black tea-producing countries have recorded substantial gains,” the report noted. “However, crop harvest from the Sri Lankan perspective is yet to show any significant improvement and continues well below last year’s levels.”

As of the end of the first half of the year, Sri Lankan production totalled 153m kg, down 11% y-o-y. By comparison, Indian production increased by 22.3% y-o-y to 230m kg, while Kenyan growers posted even stronger results, with harvests up 42.3% to 249m kg.

Exports ease

Tea exports from January to June were down 3.4% y-o-y to 146.5m kg, according to figures from the Tea Exporters Association, with declines seen in both packets and bags.

The fall in exports accelerated following the May floods, though there was a modest gain in free-on-board value per kg, which was up 1.8% y-o-y to LKR609.88 ($4.20) in the first half of the year. Nonetheless, overall rupee-denominated export revenues declined by 51.6% over for the period.

Market pressures

Along with stronger competition, exports have been affected by downturns in some key overseas markets – in particular, by the slowing of the Russian economy, combined with conflicts in some areas of the Middle East and the ongoing US-imposed banking restrictions affecting trade with Iran.

To counter these headwinds, new avenues need to be opened, according to Malik Fernando, director of a leading value-added exporter, Dilmah Tea.

“It’s imperative to find new distribution markets, as 75% of Ceylon tea heads to Russia and the Middle East,” Fernando told OBG. “The industry needs to hedge itself to avoid an even larger drop in demand.”

While also acknowledging that sales are falling, Rohan Pethiyagoda, chairman of the Sri Lanka Tea Board, told OBG that the process of deepening penetration in new countries is gaining pace and should help offset any downturn.

“Our primary export markets are struggling,” he said, mentioning Syria, Turkey, Iran, Iraq and Russia. “China and North America are new options for exports on the horizon. Currently, 6% of all exports go to China, and this is growing by 30% per year.”

Officials have also been promoting Sri Lankan tea, with pitches being made in China as well as the developing US market, where organic strains have already carved out a niche in areas like California.

Laboured production

Higher wages, however, might curb Sri Lanka’s competitive edge in entering new markets, with Kenyan and Indian pluckers paid less than half as much per day on average as Sri Lankan plantation workers.

Worse, tea plucking in Kenya, the country’s strongest competitor, is almost entirely mechanised, whereas plucking in Sri Lanka is done predominantly by hand because of differences in terrain and the way tea is planted. This results in labour costs that are an order of magnitude higher than Kenya’s.

As wages account for up to 80% of input costs for the tea industry, labour pricing, combined with lower productivity, is putting Sri Lankan growers at a disadvantage in the global market.

Wages have been inflated in part by a developing shortage of skilled labour in the industry, as the rural workforce increasingly shifts to employment in urban areas.

The appeal of higher wages and greater prospects in other sectors of the economy is also siphoning off the traditional labour pool of the tea segment, increasing the bargaining power of workers’ representatives in wage negotiations.

If weather conditions improve in the coming year, spurring a rebound in production, along with higher demand and prices in traditional export markets, Sri Lanka could regain some of its lost market share and boost revenue. This, in turn, could help plantation owners meet some of the wage demands from their workforce and allow smallholders – who account for around 75% of the tea produced – to improve their incomes.

 

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Sri Lankan rupee down on importer dollar demand; forwards active

Sept 21, 2016 (Reuters) – The Sri Lankan rupee fell on Wednesday on importer dollar demand, while currency forwards were actively traded in the absence of the spot rupee trading, dealers said, a day after the central bank’s moral suasion capped the rupee’s fall.

Traders were unwilling to trade the spot rupee below 146.00 , the level desired by the central bank, on Tuesday, dealers said.

“The spot rupee has not been trading because of the fears of the central bank’s moral suasion, but forwards were actively traded,” a currency dealer said asking not to be named.

Officials from the central bank were not available for comment.

The actively traded rupee forwards, spot-next-next were at 146.68/78 at 0615 GMT, compared with the previous close of 146.25/35.

“This means the implied spot rate is 146.55/65,” the dealer said. “Foreign buying in government securities is keeping the currency bit stable. If not for that, the rupee will fall.”

The spot rupee is usually managed by the central bank and market participants use the forward market levels for guidance on the currency.

Dealers had expected seasonal importer demand to pick up from mid-October.

The central bank had largely not intervened to defend the rupee ever since a dual-tenure sovereign bond issue raised $1.5 billion in July.

Sri Lankan shares gained, with the benchmark Colombo stock index up 0.33 percent at 6,451.33 as of 0622 GMT. Turnover was at 976 million rupees ($6.68 million).

 

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Sri Lanka *market update* ASPI gains 0.3-pct, Net foreign inflow Rs. 28.9Mn

The ASPI gained sharply due to price increases in John Keells Holdings, Sri Lanka Telecom, Ceylinco Insurance, Teejay Lanka and Dialog Axiata. The day’s total turnover crossed the LKR 1.4bn mark to which National Development Bank contributed the majority with the assistance of three crossings. Crossings were also recorded in John Keells Holdings (Voting) and Hatton National Bank (Voting). The Bourse saw net foreign buying during the day.


The All Share Price Index gained 21.7 points to close at 6,451.6 (+0.3%), while the S&P SL20 Index gained 13.8 points to close at 3,565.9 (+0.4%). Total turnover for the day stood at LKR 1,432.9mn (USD 9,824.1k) vs. 12-months average daily turnover of LKR 910.7mn (USD 6,243.7k), whilst the volume traded for the day was 34,172k against the 12-month average daily volume of 35,985k. Top contributory counters towards the day’s turnover were National Development Bank LKR 502.8mn (USD 3,446.8k, 0.0%), John Keells Holdings (Voting) LKR 376.5mn (USD 2,581.0k, +1.1%), Hatton National Bank (Voting) LKR 78.7mn (USD 539.5k, -0.4%), Commercial Bank of Ceylon (Voting) LKR 78.2mn (USD 536.2k, +0.1%), Sampath Bank LKR 40.3mn (USD 276.0k, +0.4%). Foreign purchases amounted to LKR 667.7mn (USD 4,577.4k), whilst foreign sales amounted to LKR 638.8mn (USD 4,379.3k). This resulted in a net foreign inflow of LKR 28.9mn being recorded at the end of the day’s trading

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Textured Jersey changes its name to Teejay Lanka

Sept 21, 2016 (LBO) – Sri Lanka’s Textured Jersey, a leading knitted fabric company, has officially changed its name to Teejay Lanka with effect from 15th September 2016.

The company said in a stock exchange filing that the name change had the shareholder approval through a special resolution at the Annual General Meeting.

 

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Sri Lanka nationwide inflation declines to 4.5-pct in Aug 2016

Sept 21, 2016 (LBO) – Sri Lanka’s consumer prices as measured by National Consumer Price Index declined to 4.5 percent in August from the 5.8 percent reported a month earlier on an yearly basis, data from the state statistics office showed.

In August 2016, the contribution to the inflation from food group and non-food group are 1.84 percent and 2.61 percent respectively.

NCPI has been calculated as 113.3 for August 2016 and it shows a decrease of 1.9 index points to the previous month’s index of 115.2.

This monthly change is due to the decrease of expenditure value of food items by 1.8 percent and increase of expenditure value of non-food items by 0.1 percent.

The expenditure value of food commodity group has decreased by 1.8 percent in August 2016 compared to July 2016.

The expenditure value of non food commodity group has increased by 0.1 percent in August.

 

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Tuesday, September 20, 2016

Asia stocks waver as investors nervously await Fed, BOJ

TOKYO, Sept 20 (Reuters) – Asian shares edged lower on Tuesday as investors nervously waited on the outcomes of the Federal Reserve and Bank of Japan policy meetings that begin later in the session.

Global markets have been blowing hot and cold in recent weeks over the Fed’s intentions, not helped by both hawkish and dovish comments from several Fed officials over this period.

The consensus is that the Fed will leave interest rates unchanged at the end of its two-day meeting, with investors focusing on the statement as well as Chair Janet Yellen’s speech for clues on the timing of the central bank’s next interest rate increase.

“It’s a lot of uncertainty, leading into the Fed,” said Jennifer Vail, head of fixed income research at U.S. Bank Wealth Management in Portland, Oregon.

While Vail, like most strategists and investors, expects the Fed to refrain from taking any new steps, she said its statement could include language that’s been missing from its recent assessments, such as whether economic risks were “balanced” or “close to balanced.”

MSCI’s broadest index of Asia-Pacific shares outside Japan was slightly lower in early trading, after major U.S. indexes ended a choppy session nearly flat.

Japan’s Nikkei stock index shed 0.5 percent, as trading resumed after a public holiday on Monday. Tokyo markets will be closed for another holiday on Thursday, with the highly-anticipated BOJ meeting sandwiched in between the market closures.

The BOJ could shift negative interest rates to the primary focus of its monetary policy at the conclusion of its two-day meeting on Wednesday, when it conducts what it described as a “comprehensive” assessment of its policies.

Sources have said BOJ policymakers may consider deepening negative interest rates to show its determination to maintain an ultra-easy policy bias. It unveiled the controversial policy in late January.

“The resulting strength of the yen since then can’t really give them a positive outlook on negative rates,” said Vail, adding that “the risk is for lack of any action, given the lack of consensus” among BOJ members.

Rising speculation that the BOJ will stop short of the dramatic action needed to weaken its currency helped send the dollar to a six-day low against the yen of 101.56 yen on Monday. The dollar was last down 0.1 percent at 101.82 yen.

Wary of a flattening Japanese government bond (JGB) yield curve, the BOJ could seek ways to steepen the curve, such as making its bond buying more flexible.

“We look for the BOJ to take a more flexible stance on the time horizon for reaching its price stability target and on the pace of its JGB purchases, but expect it to refrain from further easing at this meeting,” strategists at Barclays said.

The euro was steady at $1.1177, while the dollar index, which tracks the greenback against a basket of six major rivals, was nearly flat at 95.845.

U.S. crude oil futures slipped 0.2 percent to $43.22 a barrel, moving further away from overnight highs. Brent edged 0.1 percent lower to $45.91.

Oil had rallied on Monday before settling off its highs on scepticism over Venezuela’s bid to talk up a potential OPEC output freeze, and on indications U.S. crude stockpiles had risen last week.

Spot gold inched slightly higher to $1,313.80 an ounce.

 

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No liberalization of professionals under upcoming FTAs: Kelegama

Sept 20, 2016 (LBO) – Sri Lanka’s bilateral free trade agreements that are currently being considered have no liberalization of professionals, a senior official confirmed.

Sri Lanka is currently negotiating with India to deepen the existing Indo-Lanka FTA via Economic and Technology Cooperative Agreement (ETCA), and is talks with China and Singapore to sign bilateral free trade agreements to improve trade and investments.

Executive Director of the Institute of Policy Studies, Dr Saman Kelegama, who advises the government on these FTAs, reiterated that ‘Mode 4’ liberalization will not be implemented.

‘Mode 4’ or movement of natural persons refers to one of the four ways through which services can be supplied internationally. It covers natural persons who are either service suppliers (such as independent professionals) or who work for a service supplier and are present in another WTO member country.

The GATS distinguishes between four modes of supplying services namely cross-border trade, consumption abroad, commercial presence, and presence of natural persons.

First three modes are already practiced in Sri Lanka through various institutions including the BOI which provides access under a case-by-case basis.

“There will be no liberalization of professionals under all three FTAs that the government is considering,” Kelegama said.

“Even the much debated IT industry and ship building industry will not be included in the ETCA until a request comes from those sectors with one voice.”

Kelegama highlighted that the formation of a national trade policy which initiated in October last year is now in its final stage. He said the implementing issues should be addressed in parallel to the FTA negotiations.

“Trade policy will only be guidance; practical issues of FTAs should be addressed in parallel,” Kelegama said.

Kelegama hit back at certain professionals and unions who currently insist on a national trade policy before signing a bilateral agreement.

“Those who insist on trade policy are not bothered about a foreign policy or an agriculture policy; only when it comes to FTAs, do they ask for a policy.”

Kelegama said FTA negotiations are also vital as it triggers the need for regulatory reforms in Sri Lanka.

“The moment CEPA talks came to an end, all discussions with regard to regulatory reforms came to a standstill; no one is talking about putting the domestic house in order,”

“So at least the ETCA and China-Lanka FTA initiatives have triggered the regulatory reforms in this country.”

Kelegama further said even though Vietnam lacks most of the legislative framework they signed the TPP as they want to be at the frontiers of global trading.

“Why have they done that, because this is how the world is moving,”

“Do you think Vietnam got all required acts such as regulatory issues, intellectual property laws and immigration issues together to join the TPP? No.”

He pointed out that Sri Lanka is in an advantageous position than Vietnam with regard to the legislative framework inherited from the British.

“Vietnam has a long way to do that. But they are doing it in parallel on an accelerated basis; because they want to be at the frontiers of global trading, value chains and production networks.”

 

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Sri Lankan rupee edges up on state bank dollar sales

Sept 20, 2016 (Reuters) – The Sri Lankan rupee gained slightly on Tuesday as a state bank sold dollars after the local currency fell due to importer greenback demand, with traders unwilling to trade the rupee below the level desired by the central bank, dealers said.

The spot rupee was at 145.80/146.00 per dollar at 0638 GMT, slightly firmer from Monday’s close of 145.90/146.00. One-week forwards were at 145.95/146.15, compared with the previous close of 146.12/22.

The spot rupee is usually managed by the central bank and market participants use the forward market levels for guidance on the currency.

“The rupee is under pressure mainly because of lack of (dollar) supply to meet importer demand. A state bank started selling when the spot started to trade below 146.00,” said a currency dealer, asking not to be named.

“The moral suasion is also there when the spot traded below 146.00.”

Dealers had expected seasonal importer demand to pick up from mid-October.

The central bank has largely not intervened to defend the rupee ever since a dual-tenure sovereign bond issue raised $1.5 billion in July.

Sri Lankan shares slipped, with the benchmark Colombo stock index down 0.27 percent at 6,433.23 as of 0640 GMT. Turnover was at 128.2 million rupees ($879,286.7).

 

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New Zealand pledges to develop milk production in Sri Lanka

Sep 20,2016 (LBO) – New Zealand says that it will extend its full assistance to develop the milk production sector in Sri Lanka, the finance ministry said in a statement.

“New Zealand expects to provide Sri Lanka new technology, industry expertise and certain grants to enable the island to improve its milk production,” Grahame Morton, New Zealand High Commissioner to Sri Lanka said.

The High Commissioner made these comments following a meeting with Finance Minister Ravi Karunanayake, Monday.

The Minister also pointed out that the New Zealand’s willingness to assist Sri Lanka is evidence of the current government’s flexible policies.

“Sri Lanka was distanced away from the rest of the world in the past but it is currently open to the world due to the friendly policies of the good governance administration.”

The proposed tour of New Zealand by Prime Minister Ranil Wickremesinghe that has been scheduled for October was also discussed during the meeting.

 

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Interview: Sri Lanka stock earnings +6 pct in June quarter, valuations improve

Sept 20, 2016 (LBO) – Sri Lankan listed companies posted earnings of 49.9 billion rupees in the quarter to June, up six percent from the same quarter last year, according to Acuity Stockbrokers.

Together with a depressed market, this means valuations have improved. Lanka Business Online spoke to Chethana Ellepola, head of research at Acuity Stockbrokers, to get the inside scoop.

“If you compare current sector PEs to the Bloomberg consensus estimate for the market PE in 2016 (10.64x), then sectors such as Bank, Finance, Insurance, Land & Property, Manufacturing, Power & energy really stand out in terms of low PEs,” Ellepola said.

The potential for these sectors along with F&B, Healthcare and Construction is “strong especially as the country’s medium-term economic policies and strategies come into effect,” Ellepola added.

The island’s macroeconomy has begun to stabilize after a support program from the IMF mitigated the effect of capital outflows from the bond market, and a balance of payments deficit. In the last few months money has begun to flow back into Sri Lankan bonds and stocks.

The stock market is now primed for some careful investing.

According to Acuity, financial services has an attractive trailing PE of 7.7. So too does land and property at 8.4, manufacturing at 8.3, and power and energy at 7.7, all below a market PE of 12.8.

BFI valuations improve

In banking and finance, growth in the first half of 2015/2016 was driven by growth in the core leasing business, helped by lax import duties on small cars, low rates and higher disposable incomes.

Despite an increase in interest rates, depreciation of the rupee and tightening of import duties in the second half of the year, there was volume growth in other secured loans, particularly within the SME and micro-finance sectors.

“The fact that a number of the finance companies locked in lower rates via debenture issues meanwhile, helped trim funding costs and aided NII growth,” Ellepola said.

In terms of the construction industry, although an overall slowdown particularly in 2015 was evident, earnings in the sector are likely to rebound. Construction showed a 44 percent drop in earnings in the June quarter this year, and a 61 percent drop in earnings in the 12 months of FY15/16.

Resumption of key infrastructure projects such the Port City project, integrated development in Hambantota, completion of the Matara-Hambantota stretch of the Southern Expressway, the Colombo-Ratnapura expressway and phase IV of the Central Highway to Jaffna would support this rebound, Ellepola said.

Clear on power

“In terms of the power producers, there is long term potential in that the GosL has a clear policy mandate to capture the full potential of all renewable and other indigenous resources in order to allow the nation to be self-sufficient in energy by 2030,” Ellepola said.

Most of the power and energy companies are independent providers of power in the form of non-conventional renewable energy such as mini hydros, Ellepola said. The remainder of the sector, and majority of earnings, consists of Lanka IOC and Laugfs Gas.

“The initial target of 10 percent of total electricity generation via NCRE by 2015 was achieved but given the Mini-hydro and solar potential, wind power potential (particularly in Mannar, Puttalam and Jaffna), and untapped biomass resources in the country there are many opportunities for expansion in the sector.”

She said earnings are susceptible to weather patterns due to many of the companies investing in mini hydros. But more consistency in earnings is likely once the companies leverege on alternative energy such as wind and solar.

“With Lanka IOC and Laugfs, earnings growth will continue to be tied closely to the developments in global oil prices and related industries such as bunkering, lubricants etc.”

Although the manufacturing sector spans diverse products such as cement, textiles and glass, the sector benefited from sharp declines in raw material prices, and exporters benefited from a weaker rupee.

The manufacturing sector reported a 13 percent earnings growth in the June quarter this year, and a 30 percent growth in FY 15/16.

“The collapse of oil prices heralded the end of the commodity super-cycle, and declines in commodity prices across the board, has positively impacted raw-material, a majority of which are imported, costs.”

Diversifieds a mixed bag

Because of their exposure to a wide-spectrum of industries, the 7 percent decline in full year earnings for FY15/16 in the diversified sector reflects economic and policy uncertainty that dominated much of 2015.

Carsons’ performance was negatively impacted both by the increases in excise duties on liquor introduced late last year and the plant closure following the floods in May, Ellepola said. The preliminary loss due to the brewery not being in production for almost 50 percent of the 1st quarter was around 714 million rupees, although the total loss is expected to be significantly larger.

In the case of Aitken Spence, the end of a power purchase agreement with the CEB, at the group’s only thermal power plant, coupled with pressures in its Maldivian resorts and operational/exchange losses at its Indian hotel investment weighed on performance.

Slower growth at JKH was due to lower momentum in its two main segments Transportation & Leisure. Lower global oil prices impacted bunkering revenue, while volumes at SAGT declined due to the increasing use of deep-draft vessels currently available only in the CICT terminal.

 

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AMW CAPITAL LEASING AND FINANCE - DIVIDEND ANNOUNCEMENT

AMW CAPITAL LEASING & FINANCE PLC
Company ID: - AMCL
Date of Announcement: - 20.Sep.2016
Rate of Dividend: - Rs. 0.76 per share / Final Dividend
Financial Year: - 2015
XD: - 29.Sep.2016
Payment: 30.Sep.2016
Share Transfer Book Open

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Monday, September 19, 2016

Asia stocks hold central bank vigil, oil bounces

SYDNEY, Sept 19 (Reuters) – Caution gripped Asian shares on Monday ahead of central bank meetings in the United States and Japan this week, while oil prices bounced on talk of an OPEC deal on output and reports of fighting around Libyan oil ports.

Bombings in New York City and New Jersey and a stabbing at a Minnesota shopping mall added to a general air of risk aversion.

While U.S. officials are investigating the attacks as potential “acts of terrorism,” they stopped short of characterizing the motivation behind any of them until more evidence is uncovered.

MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, while South Korea edged up 0.1 percent. Liquidity was further sapped by a holiday in Japan.

EMini futures for the S&P 500 were trading around 0.25 percent firmer. On Friday, the S&P 500 had eased 0.38 percent and the Dow 0.49 percent.

Financials led the losses on news authorities had proposed to fine Deutsche Bank $14 billion sent its shares down 9.35 percent. Goldman Sachs and JPMorgan both fell over 1 percent.

Investors are counting down to the Federal Reserve’s Open Market Committee meeting Sept. 20-21, with chair Janet Yellen holding a news conference on Wednesday.

A surprisingly large rise in consumer price inflation reported on Friday seemed to add to the case for a hike and pushed the dollar higher.

Yet most recent consumer and industrial activity data has disappointed, leaving the market still pricing in only a 12 percent <0#FF:> probability of a rate rise this week, and 45 percent for December.

Assuming no move on policy, the focus will be on the FOMC’s forecasts for the funds rate, which this time extend to 2019.

“They may use the extension to lower their expectations for rates in 2017 and 2018, so that they end up with the same terminal level of rates but just take longer to get there,” said Marshall Gittler, head of investment research at FXPRIMUS.

“In other words, a slower, more gradual pace of tightening. In that case I would expect the dollar to weaken.”

The Bank of Japan also meets on Wednesday and could well go in the opposite direction by easing policy, though conflicting reports on what it might do have created much uncertainty.

Sources have said the BoJ will consider making negative interest rates the centrepiece of future easing by shifting its prime policy target away from base money.

Any steps that markets consider to be less than aggressive would likely see the yen push higher and pressure the Nikkei .

Early on Monday the dollar was steady at 102.35 yen, having risen from around 101.75 on Friday in the wake of the firm U.S. inflation figures.

The dollar index, which measures the greenback against a basket of six currencies, was a touch lower at 96.021.

The euro was just above a 10-day low at $1.1155, while sterling was down near a one-month around $1.3013 amid jitters over plans to leave the European Union.

British Prime Minister Theresa May signalled that she could be ready to launch formal Brexit negotiations in January or February, European Council President Donald Tusk has said.

Oil prices bounced on reported clashes at Libyan oil ports. Eastern Libyan forces said they had re-established control over two oil ports where an ousted faction launched a counter-attack on Sunday, briefly seizing one of the terminals.

Venezuelan President Nicolas Maduro was also reported saying a deal between OPEC and non-OPEC members was “close” and he aimed to announce a deal to stabilise the market this month.

Brent crude rose 66 cents to $46.43 a barrel, while U.S. crude added 65 cents to $43.68.

 

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