By Hiran H.Senewiratne
CSE activities were bullish throughout yesterday following an International Monetary Fund decision, announced by its Board of Governors, that it has approved a 457 billion creation of Special Drawing Rights (about US 650 billion) that will be allocated to members effective August 23, stock market analysts said.
Under this arrangement Sri Lanka is expecting around US $ 780-800 million or an equivalent SDR allocation, which is expected to ease foreign exchange reserve pressures/ imports, since Sri Lanka does not have ample dollars in the country, analysts said.
“The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy, IMF Managing Director Kristalina Georgieva said.
“It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis, she said. SDRs are paper assets which can be exchanged for currencies, such as the US dollar, by selling to other central banks which are willing to part with their reserves.
Another reason for the market to be bullish was that Expolanka, which recorded very good profit, traded heavily in the market, being the fourth most valuable listed company in the CSE. It witnessed a price appreciation of Rs. 6.30 or 8.6 percent. Its shares started trading at Rs. 73.40 and at the end of the day they shot up to Rs. 79.70, contributing 27 points to the All Share Price Index.
In this bull run situation banking sector counters witnessed a marginal drop. Further, Senkadagala Finance yesterday announced plans for a right issue to raise up to Rs.474.5 million to help the company maintain its capital adequacy requirements ordered by the Central Bank.
Accordingly, the finance company controlled by the Balasuriya family will issue 8.6 million ordinary voting shares in the proportion of one new share for every nine existing shares, at a price of Rs.55 per share. The current stated capital of the company is Rs.1.95 billion. The Senkadagala Finance share was last traded at Rs.90.53.
Amid those developments both indices moved upwards. The All Share Price Index went up by 85.95 points and S and P SL20 rose by 43.08 points. Turnover stood at Rs. 6.65 billion with six crossings. Those crossings were reported in JKH, which crossed 1.65 million shares to the tune of Rs. 228 million, its shares traded at Rs. 138, TJLanka 2.5 million shares crossed for Rs. 107 million, its shares fetched Rs. 42.50, Hayleys 755,000 shares crossed for Rs. 51.5 million, its shares traded at Rs. 82, Grain Elevators 200,000 shares crossed for Rs. 28.4 million, its shares fetching Rs. 142, LOLC 50000 shares crossed for Rs. 24 million, at Rs. 485 per share and Royal Ceramic 536,000 shares crossed for Rs. 22 million, its shares trading at Rs. 41.
In the retail market, five companies that mainly contributed to the turnover were, Expolanka Rs. 1.89 billion (24.3 million shares traded), Browns Investments Rs. 688 million (101 million shares traded), Royal Ceramic Rs. 493 million (11.9 million shares traded), Vallibel One Rs. 351 million (5.7 million shares traded) and LOLC Rs. 288 million (597,000 shares traded). During the day 282.3 million share volumes changed hands in 37697 transactions.
Sri Lanka Insurance enters into a strategic tie up with Sri Lanka Medical Association
Sri Lanka Insurance signed a Memorandum of Understanding (MoU) with the Sri Lanka Medical Association (SLMA) to improve healthcare knowledge, enhance safety and ensure providing best insurance solution for healthcare professionals in Sri Lanka.
The agreement between the two organizations intends to facilitate the upcoming International Medical Congress which will be conducted virtually on the 21st of September 2021, with the participation of medical practitioners, medical students, and researchers in the field of medicine. Further the agreement will facilitate awareness building initiatives on road safety and introduce a special insurance scheme for the registered members of the Sri Lanka Medical Association.
The MoU outlines the shared and individual commitment of Sri Lanka Insurance to provide a unique insurance scheme for every registered member of the Sri Lanka Medical Association. The insurance scheme will make provisions for a vast variety of benefits suitable for the risk management requirements of modern-day professionals, including comprehensive motor insurance solution.
As part of the MoU signed by the two bodies, the Sri Lanka Medical Association (SLMA) and Sri Lanka Insurance will collaborate to facilitate educational programs to raise awareness on road accident, conduct media seminars and social media programs in collaboration with Sri Lanka Insurance Motor Plus to create a safe and healthy environment for all Sri Lankans.
The Sri Lanka Medical Association (SLMA) is the national professional medical association in Sri Lanka, which brings together medical practitioners of all grades and all branches of medicine. The SLMA is the oldest professional medical association in Asia and Australasia with a proud history that dates back to 1887. Comprised with around 4000 members, SLMA serves as the leading body of the medical community to achieve the highest standards of medical professionalism and ethical conduct in Sri Lanka and the Association aims to provide a forum for its members to further their professional and academic development.
Sampath Bank to expand its lending activities as economy rebounds
Samath Bank’s adequate capital buffer may enable it to sail through the tough times and help in boosting the credit growth in the near term when the economic activity recovers to a greater extent, First Capital Research said yesterday.
Elaborating on Sampath Bank’s capital buffer in a report titled, ‘Robust show despite nagging macro pressures’, First Capital said, ” Sampath Bank’s earnings increased by 83% YoY in the 2Q2021 to LKR 2.4bn while the surge was attributed to the rise in total operating income by 38.4% to LKR 14.7 bn despite the increase in impairment by 50.1%YoY to LKR 4.3 bn.”
“Total operating income was led by the improvement in NII, Net Fee and Commission and Net Other Operating Income. Considering the strong performance in 1Q and 2Q of 2021, we maintain the earnings forecast of Sampath for 2021 at LKR 13.7bn (+62%YoY) and 2022 at LKR 16.5bn (21%YoY). With the strong capital buffer, we expect Sampath’s lending portfolio to grow with the gradual resumption of economic activities while margins to enhance amidst the potential rise in interest rates.”
The report further said: “However, taking into consideration the higher risk-free rate applicable for valuations, with the potential rise in interest rates, we have downgraded Sampath’s fair value for 2021 to LKR 62.0 (from previous LKR 68.0) and 2022 to LKR 73.0 (from previous LKR 80.0).”
“Sampath’s’s net interest income for 2Q2021 was LKR 10.9bn reflecting an increase of 34.1%YoY, led by the decrease recorded in interest expenses as a result of timely re-pricing of liability products despite a decline in interest income by 0.5%YoY owing to low interest rate regime. Net fee and commission income comprises of income from various sources such as credit cards, trade, and electronic channels while the growth in this segment was driven mainly by higher engagements in card-related activities.”
“Net other operating income grew by 173.8%YoY backed by the increase in realized exchange income stemming from the 1.1% depreciation of the LKR against the USD reported during 2Q2021. We estimate NII and Net fee and commission income to grow by 12%YoY and 10%YoY to LKR 41.3bn and to LKR 9.9bn for 2021 respectively.”
“Impairment rose by 50.1%YoY for 2Q2021 as a result of prudent provisioning for risk categories. Credit granted for 1H2021 amounted to LKR 30.0bn with 4.1%YTD growth mainly driven by term loans, pawning & gold loans and overdrafts although loan book growth was relatively lesser compared to the private sector credit (which grew by nearly 6.7% during 1H2021) as a result of Sampath’s conservative nature in lending. Sampath provided LKR 4.3Bn in 2Q2021 as the impairment, up by 50%YoY, relative to 2Q2020 on the back of additional provisions taken despite signs of an economic recovery apparent in 1Q202.”
“Following a reassessment of the impairment assumptions, SAMP decided to apply a more prudent approach in 2Q2021, in light of the evolving impact of COVID 19 third wave and the extension of the moratorium framework. Accordingly, we have estimated an impairment of LKR 11.6bn (-12%YoY) for 2021 and LKR
10.0Bn (-14%YoY) for 2022.”
Well above capital ratios will boost lending portfolio when the economic activities improve
As at 30th Jun 2021, SAMP’s Tier I and Total Capital Adequacy Ratios stand at 12.5% and 15.7% respectively which are well above the minimum regulatory requirement of 8.0% and 12.0%,” First Capital said.
Tea exports in first seven months of 2021 amounts to Rs.23 billion
By Steve A. Morrell
The Tea Exporters Association ( TEA), indicated in their market report last week that tea exports to end July 2021 amounted to Rs. 23. 02 billion. However, the report further indicates that it showed a decrease of Rs. 1.03 billion compared with the corresponding period in 2020 which was Rs. 24.33 billion.
Forbes and Walker Tea Brokers, (FW) and John Keels Tea (JKH) report as well confirmed these findings and further said Iraq emerged the no 1 importer of Ceylon Tea.
Additionally, Turkey, Russia, and the UAE were recorded in the top category of countries importing Ceylon Tea. China, Iran, Azerbaijan, and Libya were listed in this list. Saudi Arabia and Chile were also in the major buyer list, but recorded statistics were that these latter countries reduced their buying. Reasons for this were not known at the time of writing.
Meanwhile, reduced exports to the US was reported due to the Covid pandemic still affecting the country.
Tea consumption is expected to be dominant in Asian Countries particularly India and China, consuming some 55 percent of global demand. Of importance was also the weak market outlook from European countries following economic downturn. In this instance however, the TEA report said tea consumption in these countries would not be affected. Sources also informed us that after water, tea was the most consumed beverage worldwide.
Expectations were that Sri Lankan tea production was likely to recover in 2021, however production recorded in 2010 and 2015 would not be achieved, ( Production at that time exceeded 300 million kilos)
In Consequence to the fertilizer debacle, reports from planting areas were that production is gravely affected. Clearly, yellowing of foliage resulted in reduced bulk crop . Repercussions were that before the year was out crop shortage would reach alarming levels. Such results were also applicable to the tea smallholder sector. Tea Factory Owners Association, was not available for comment in this regard.
The FW report further said tea exports also included tea bags, instant tea, green tea, tea packets and sundry value added teas. green tea, instant tea, and bulk tea exports were in the plus variance category. Tea bags showed decline in production.
However, the FW report further said offerings show that 6.2 million kilos would be auctioned next week.
Last week’s auctioned quantity was 6.3 million kilos.
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