Markets

Money Market update First Capital Ltd.

Maturity 01-06-03
Coupon 11.00%
Amount offered
Rs.Mn 1500
Amount
Accepted
Rs.Mn 1500
Weighted
average 14.28%
Change 0.34%

                91 Days 182 Days 364 Days
Last Week 12.43% 12.52% 13.21%
This Week 12.50% 12.60% 13.36%
Change       0.07% 0.08% 0.15%

The Inter-Bank Call money market and the Overnight Repo market

As a considerable portion of the liquidity shortfall was once again exposed to the market, the inter-bank call money rate surged closer to the Central Bank Reverse Repo rate. The week started with 13.02% and closed at 14.72%.

We observed that some of the market players who were financing through the reverse repo window of the Central Bank, have returned to the inter-bank money market as the inter-bank call money rates were comparatively low in the previous week.

However, given the narrow depth of the inter-Bank money market, the increased volumes pushed the rates up. During the week the call money rate fluctuated between 15.50% and 12.75%. The weekly call money average rose by 93 basis points to close at 13.87%.

CB Open Market Operations

The Central Bank overnight repo rate and the reverse repo rate remained unchanged at 11% and 15% respectively. On Monday the Central Bank Open Market Operations released Rs. 6.2Bn to the market compared with Rs. 10Bn reverse repo on the previous Monday.

The reverse repo window remained active through out the week as the market borrowed on a daily basis. The market repo rate followed suit the liquidity in the inter-bank money market and gradually rose to reach the Central Bank reverse repo rate.

The Treasury Bill auction.

In the treasury bill auction held during the week the government of Sri Lanka renewed Rs. 4.35Bn worth of bills. Given the rising call money rates and the liquidity shortfall the bill yield came under pressure. In spite of the Central Bank intervening for Rs. 1.9Bn, the yields for all maturities recorded noteworthy gains.

With this the 364 days yield stretched to the highest since May 1997.

Treasury Bond auction

Rs. 1.5Bn worth of 3-year bonds were offered in the bond auction held during the week. The 3-year bond yield too came under pressure as the investors expected much higher yields to compensate the short to medium term uncertainties in the economy. The secondary market activities remain on a lacklustre note and few trades were witnessed in the maturities of 2-3 years, while the long bonds remained inactive.

Foreign Exchange - Dollar Spot Movement

The Central Bank dollar/rupee trading band remained unchanged, buying at Rs. 75.60 and selling at Rs. 79.47. During early week's trading the spot moved up on the renewed buying interest. However, on general the spot remained stable in the region of Rs.78.40~78.50. Three months forward was quoted at Rs. 79.95 to Rs. 80.05, while six months was at Rs. 81.40 to Rs. 81.50

Jittery investors keep away

Pre- election jitters kept investors away from the Colombo bourse as the weekend approached. A failed attempt to pass constitutional reforms in parliament left investors cold. Expectations of the reforms being passed or having a positive effect on the peace process were not high to begin with.

Trades of Asian Hotels Corporation carried out by Asia Securities dominated the market and left market watchers guessing about the motives behind the deals.

The All Share Price Index slid .6 points to close at 505.8 while the Milanka Price Index gained 2 points to register 829.1. Average turnover during the week was Rs.21.6.mn. Foreign participation during the week was negligible with net foreign inflows of Rs29.7 mn.

"The elections promise to be a win win situation. If the People's Alliance comes in people will follow, the recently appointed Industries Minister Ronnie De Mel closely and infrastructure projects will become a reality," Senior Fund Manager, Eagle NDB Fund Management Company Ltd, Channa de Siva said.

"A UNP win is also positive since investors are waiting for them to come in and energise the market. Market optimism will pick up slightly. People will wait and invest just before the election- stretching their finances to the maximum. Investment will be in fixed income securities in the meantime, he said. Alliances formed by the Sihala Urumaya will be a deciding factor in this election, de Silva said.

"Higher than expected government spending on defence and the postponement of the Sri Lanka Telecom Initial Public Offering would most likely lead to a sharp fund shortfall in the government budget and cause market interest rates to rise in the next couple of months," Head of Research, Asia Securities, Dushyanth Wijaysingha said. "This will dampen the performance of equities despite the revival in corporate earnings growth," he said.

Tea Update

Export revenue up by 16.8%

Low grown prices took a backseat at last weeks auctions after a fortnight of improved prices.

Tea brokers said that the drop was not a cause for concern given the abnormal increases in the previous two auctions. They said that the drop in low grown prices was only a correction and that we could expect future drops in the following weeks.

Most other varieties continued to obtain good prices.

Meanwhile, Sri Lanka's tea export revenue for the first six months of 2000 both in US dollar terms and in rupee terms showed phenomenal growth. John Keells Stockbrokers reported that tea export revenue in US$ terms for the first six months of 2000 was up 7.8% over 1999 while in rupee terms revenue shot up by 16.8% yoy. The brokers said that a 2.3% increase in export volumes, together with firmer tea prices were instrumental for this performance.

The brokers reported that increased demand from main tea importers such as the CIS & Russia, Iran, Iraq, Saudi Arabia and the United Arab Emirates kept tea prices at attractive levels. John Keells also said that the gradual increase in world oil prices since August 1999 have been an impetus for Middle East and Russian buying.

They reported that the National Sales Average (NSA) upto June had increased by 22% yoy to Rs.129.37/Kg. "The NSA was well supported by the low grown tea, which averaged a price of Rs.137/Kg for the 1H of 2000, an increase of 15% yoy," John Keells reported.

In addition, the brokers said that amongst the top 10 destinations for Sri Lanka's tea exports upto May 2000 was again Russia and the Commonwealth of Independent States (CIS). Russia and the CIS imported 25.97m Kgs of Sri Lankan tea during this period compared with 21.52m Kgs in the same period last year, a 20.7% increase yoy.

John Keells said that Japan was another country where export volumes increased by 46.5% yoy in for this period with approximately 3.84m Kgs being exported.

Tea production also showed dramatic increases in the 1H of CY2000 where Sri Lanka recorded a 12.7% increase over the same period last year. John Keells added that despite world tea production being ahead by approximately 36m Kgs upto May 2000, tea prices continued to hold attractive levels. The brokers said that given that world oil prices could continue to remain strong between US$25-29/barrel, devaluation of the rupee, a stable demand from Russia & CIS countries and the current power crisis faced by Kenya should hold well for the tea market in the coming months. "We expect the NSA average for CY2000 to come in at Rs.130/Kg a 12.7% increase yoy," John Keells Brokers said.

New look for Hayleys Electronics

Heyleys Electronics Groups has launched a new logo and corporate identity programme for the new millennium projecting a youthful contemporary and dynamic image in line with its current business model.

The look and feel of the logo dipicts the electronics business the group is involved in i.e. consumer electronics and lighting. It also gives due place to the many business partners who help sustain the groups stability growth such as service partners, trade partners, distribution partners, financing partners a news release says.

The group's consumer electronics products reach consumer via 16 showrooms and over 250 dealer outlets with after sales service being provided through 30 centres throughout the country. Its lighting products are retailed at over 20,000 retail outlets serviced by 20 distributors.

Shipping and Aviation

JAL Cargo introduces new logistics standards

Technological advances occur at an alarming rate. In this fast-paced arena, information is required on a real-time basis; speed alone is not enough to be an industry player. A more comprehensive transportation service is necessary to occupy the top spot in 21st century logistics.

By offering logistic strategies which consist of 'J Speed, 'J Freight' and 'J Special', the new JAL Super Logistics will move ahead.

JAL's information technologies have been integrated with priority handling to further develop 'J Speed'. A faster, more accurate transport service is now available for urgent cargo.

J Freight is the result of a amalgamation of JAL's information technologies. The most advanced cargo status control system makes the impossible possible, both for small and large cargo transport strategies.

The J Special service provides special handling and transportation for special cargo such as superprecision machines and works of art. JAL's unique skills and experience make the highest quality possible.

Delmege Air Services (Pvt) Ltd., GSA for Japan Airlines in Sri Lanka now offers the above services primarily to Los Angeles and San Francisco in the US.

Top cargo agents felicitated

Saudi Arabian Airlines presented awards to the top agents for the year 1999, recently. Those who received awards were: Expeditors Lanka, Expolanka Freight, Mag Consultants, Dart Express Lanka and Roton Vander Freighting. Pictured are Rohan Ratnayake — Cargo manager SAA, Kanishka Wijesinghe — GM SAA, Andree Fernando — Expeditors Lanka, Gazzali Arifeen — Expolanka Freight, Shafik Kassim — MD SAA, Mohammed Al Hindi — Manager SAA, Sri Lanka/Maldives, Carlyle Perera — Mag Consultants, S Mohandas — Dart Express Lanka, Mana Jayawardana — Roton Vander Freighting and Prins Jayawardena — Operations Manager SAA.

Chartered Institute of Transport holds Int'l seminar

The Chartered Institute of Transport (CIT), Sri Lanka Branch, hosted its seventh international seminar recently at the Hotel Ceylon Intercontinental. The theme of this year's conference was 'Creating a profitable competition within the transport and logistics sector'.

Commenting on the seminar, Chairman Parakrama Dissanayake said that the objective of the seminar was to identify the latest developments, trends and technologies in transport and logistics and to provide a platform for policy makers, decision makers, professionals and business to address their needs and concerns on transport and logistic issues.

The Chief Guest at the event was the Honourable M H M Fowzie, Minister of Transport and Highways while the Guest of Honour was Peter Hill, CEO, Sri-Lankan Airlines.

Captain A V Rajendra, convener of the organising committee, said that the conference consisted of four sessions covering technology/aviation, maritime transport, road transport and rail transport.

Among those who addressing the conference were Dr Haruo Takedo — Project Director, Pacific Consultant International, Tokyo, Ogan Lagestam — Consultant, Swedish Road Administration, M I M Rafeek — Vice Chairman, Sri Lanka Ports Authority, John Buckley — CEO, South Asia Gateway Terminal, G T Jayaseelan — Head of Commercials, SriLankan Airlines and Dr V Sibal — Group Manager, Urban Transport of Rail India Technical and Economic Services.

The Chartered Institute of Transport is the only international transport body to represent all modes of transport, i.e. road, rail, sea and air in SriLanka.

Indian independent

Samrat Shipping is an independent liner agent which has successfully represented Contship Container Lines in India since 1984. Being independent, it suffers all of the usual uncertainties of the profession, but the company is a survivor as its managing director, Vaishnav Puri explains

The life of an independent liner agent in India is no less precarious than in other countries. Ship owners there have ever changing needs, and always want more for less, so making it difficult for anyone to invest with confidence.

Then there is the constant fear that one day a principal may eventually decide to uproot or set up on its own, an so risk throwing the baby out with the bath water. Maersk Sealand, APL, P&O Nedlloyd and Safmarine Container Lines, for example, now have their own front desk agency companies in the country.

Vaishnav Puri, managing director of Mumbai based Samrat Shipping, representing Contship Containerlines in India, has successfully walked this tightrope for the past 30 years.

"As with most other liner agents, we have had our ups and downs during this period, but each time change has been thrust upon us, we have emerged the stronger for it. A important point to remember is that you have to keep proving yourself over and over again," said Puri.

The company has been a number of principals come and go over the years, including Barber Blue Sea, Hellenic and Wilh Wilhelmsen. "Such departures have never been welcomed by us, but because the shipper is always God in our organisation, each time we have been forced to change, we have been able to count on their continued support in whatever we decided to do next. For example, when Hellenic Line went under, we spent a lot of our own time and money ensuring that all of our customer's cargo eventually reached its final destination — which many remember today," said Puri.

"As a consequence, when we took over the representation of Contship in 1984, on their very first vessel under our agency we loaded more cargo than they had ever had before," he added.

Samrat has also seen agency work disappear through rationalization of its principal's services. Between 1986 and 1992 it successfully represented Neptune Orient Lines' (NOL) Asian Services, but then lost the business when NOL decided to set up its own agency company called NOL India, in line with its overall global marketing strategy.

Interestingly, Puri was asked to stay on as NOL India's chief executive chairman (and 49 per cent shareholder), a position he retained even after the merger between NOL and APL.

He will have to give up the position soon, though, because of Contship's decision to establish its own competing service between India and the US East Coast (USEC), in partnership with the Shipping Corporation of India (SCI) and CMA CGM the French Line.

Samrat's liner activity today is now almost entirely focused on representing Contship throughout India. Apart from handling the line's imports, it is responsible for filling a weekly export allocation of around 1,000 TEU, spread over Contship's three direct services to Europe, USEC and South East Asia.

Samrat Shipping, which now has a staff of around 350 on the liner side, is currently 50 per cent owned by the Puri family and 50 per cent owned by the Sippy family, but its liner interests, accounting for about 95 per cent of its business, very much fall under the control of Puri and his son, Vishal.

"We know the local market and its customs better than anyone else. One of the problems with overseas representation, is that managers come and go so often that little continuity is provided."

"When a customer wants to talk to someone in authority within our organisation, we always have staff available, including myself, whereas with overseas representatives, everyone always appears to be in a meeting, or out of the country — perhaps visiting another part of their territory."

Shipping, it seems, is a universal language that knows no boundaries.

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