Financial Times

First Capital Sovereign Bond Index continues to rise

Cuts by the Central Bank in January and this month in its Open Market rates by 150 basis points has pushed the entire yield curve down, increasing the value of bonds in the hands of investors, First Capital said in a statement. During this period the yield curve moved down sharply with the value of the same bond increasing approximately by Rs. 5.00.

The First Capital Sovereign Bond Index (FBI) showed a total return of 23% (annualized) for the period ended May 9, 2003. With the Central Bank issuing more longer-term bonds (4, 5 & 6-Year maturities) in the recent past, the duration of the index has been improving. The present duration of the index portfolio stands at 2.4 years. The market capitalization of the index also had grown and now it stands at approximately Rs. 203 billion, which is more than 50% of the total bonds outstanding as at today.

"Based on the performance of the index, it is reasonable to assume that the large players of the bond market would have reaped very high dividends during the first half of the year, " the statement said.

Apart from the Central Bank rate adjustments, the sustained excess liquidity in the market, improved demand by the market for bonds and reduced borrowing pressure by the government also contributed towards the lowering of interest rates.

For the period ended May 10, the inter-bank liquidity level remained excess with large volumes. New inflows to the banking system, improved gross official reserves and retirement of government debt kept the inter-bank liquidity at a higher level. Therefore, the market rate structure was very much dependant on the Central Bank repo rate and the reduction in the repo rate was very effective to shift the overall yield curve, the statement noted.

Given the moderate growth in private sector credit most of the banking funds also diverted to government bonds. Further, new entrances to the industry also helped boost the demand for bonds. With improvements in government cash flows due to availability of foreign loans and privatization proceeds, pressure eased in the domestic borrowings.

The fiscal outlook for the second half remains positive for the bond investors. Given the prevailing high liquidity position and the reduced domestic borrowing programme, it is very unlikely to reverse the current trend in the interest rates.

However, any phenomenal growth in the private sector credit demand or political uncertainty might exert some pressure on the interest rates. Nevertheless, the impact will be somewhat marginal, First Capital said.

Customs computerisation reduces clearance time

The Sri Lanka Customs computerization of Customs data called "Electronic Data Interchange" (EDI) would eliminate the bulk of the manual operation of documentation to expedite clearance of shipped goods, said M.R. Rajmohan, Superintendent of Customs (Bonds) speaking on "Customs Clearance and Bonding facilities" at the workshop on the "Role of the Board of Investment (BOI) in Attracting FDI" held in Colombo recently.

He said under the new system clearance would be made extra fast and customers need not be sent from pillar to post anymore as the entire customs clearance process would be carried out by the EDI.

Rajmohan said that to clear goods through the EDI there would be three parts - entry lodging, entry processing and cargo clearance.

The BOI would be the first to enjoy bond facilities.

The slow manual entry lodging process would be replaced and documents need not be brought into the Customs office. Earlier when documents were handed over nobody knew what would happen to those documents.

He said that in the case of electronic entry the importer or the exporter need not come to the Customs office but could attend to the entry procedure in their own offices.

The other documents needed would be obtained by the Customs from the shipping agents and Letters of Credit from banks and all paper documentation work would be eliminated.

He said that as required by law, the original documents would be retained by Customs.

The earlier system was hazardous with manual entries and the customer needing to travel frequently. With EDI no customer needs to travel, information is sent from sources, original documents at delivery only, paperless processing, and zero-time processing.

He said that earlier the valuation of the goods was by the Customs. However, Customs now accepts the valuation made by the customer so that there would not be under-valuation or over-valuation.

Dr. Nihal Samarappuli, Executive Director (Research), BOI speaking on 'Free Trade Agreements and its Benefits", said that free trade agreements are intended to attract Foreign Direct Investment (FDI) to Sri Lanka and there were Preferential Trading Agreements (PTA), Free Trade Agreements (FTA), Customs Unions, Common Markets and Economic Unions under this category.

The salient features of the Indo-Lanka FTA is to establish a Free Trade Area through complete or phased elimination of tariffs.

The FTA did not remove all tariffs on all goods at once but was phased out in India by three years and in Sri Lanka by eight years.

Samarappuli said that achievements under the Indo-Lanka FTA so far have been 37 projects, Rs. 14,500 million estimated in investments and 4,450 estimated to have secured employment.

The product range would be metal products, wire/cables, plastics, edible oil, MDF Bonds, marble and granite, and automotive tyres and ceramics. Several other officials also spoke. (QP)

SriLankan sets new cargo handling record

SriLankan Airlines' Cargo Centre at the Bandaranaike International Airport handled a record 12,078 metric tonnes or 12 million kilogrammes of freight in March, the highest ever in the history of the centre.

The previous high was in November 2000 when the Cargo Centre handled 12,024 metric tonnes. SriLankan Airlines' Cargo Centre handles all import, export and transshipment cargo through BIA, including freight for all other airlines and freighters that use Katunayake.

"We are moving steadily towards our objective of being the cargo transshipment hub in the region," said Nalin Rodrigo, Senior Manager Cargo at SriLankan Airlines. Of the record total in March, transshipments by SriLankan Airlines totalled 1.67 million kilogrammes, which is also the highest ever in transshipment by SriLankan Airlines.
SriLankan Airlines' use of an all-Airbus fleet has increased the efficiency of cargo handling, resulting in swifter movement of cargo from one flight to another due to aircraft cargo holds accommodating containers of the same dimensions. SriLankan Cargo also operates its own specialized freighter service with an Antonov AN12 aircraft to Karachi, Madras, Trivandrum, Bangalore, Male, and Gan Island, according to an airline statement.

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