The Central Bank's Spot Rates for transactions with Commercial Banks announced on the morning of May 19, 1998 were as follows:

The approximate middle exchange rates of following currencies calculated on the basis of cross rates quoted by Gulf International Bank, Bahrain as it appeared in Reuters Financial Information System on May 19,1998 were as follows:

Average rates at which the following currencies were quoted by Commercial Banks in Colombo for Telegraphic Transfers at mid-day on May 18, 1998 were as follows:

Average Weighted Prime Lending Rate (AWRP) and Lowest Prime Rate (LPR)
The Average Weighted Prime Lending Rate (AWPR) during the week ended May 15th 1998 was 14.2 per cent for all banks. The Lowest Prime Rate among banks during this week was 12.0 per cent.

Average Weighted Deposit Rate of Commercial Banks (AWDR)
The Average Weighted Deposit Rate (AWDR) of Commercial Banks for the month ended April 30th 1998 was 9.6 percent.

Stock Market Review
Market closes down 35.2 points on shortened week.

The ASPI dropped by 4.5% to close at 742.1 points in three days of trading on the back of profit taking and weakened sentiment following fears of a nuclear arms race in the subcontinent. Average daily turnover showed a substantial decrease of 38.9% WoW to Rs 134.68m. Foreign activity as percentage of total market activity picked up by 2.1% WoW to 17.1% Foreigners were net sellers with a total outflow of Rs. 32.46m.

February exports grow 6.5% YoY
Export growth in February, while below expectations, were stronger than the disappointing set of figures seen in January. Growth in non-garment, manufactured exports continued to decline, although the rate of decline slowed to 11% YoY, as against a 24% drop in January. Once again, tea (+53%YoY) and garments (+7.9%YoY) shored overall exports into positive territory. Gem exports are also facing problems as the main export markets in South East Asia grapple with economic crises. Overall Import growth was more subdued, although strong growth was seen in investment imports. Consequently, the trade deficit expanded by 5%YoY in February, as against the substantial 28% expansion in January. We shall continue to closely monitor trade data in the following months as it is crucial for our view on the currency. For the moment, our view remains for a 10.3% depreciation for the Sri Lanka rupee, taking it to Rs. 68.25% US$ by YE 98.

Corporate results for the week:
Commercial Bank: Results for 1QFY12/98 show a marginal decrease in income by 0.5% to Rs. 840.3m. PAT was up 37.2% to Rs. 134.4m. The results are in line with our expectations. We expect 2H98 see a pick up in banking activity. Turnover are low as loan demand has not increased substantially. Loans and advances increased 20.1% YoY to Rs. 17.1bn. The QoQ increase is 9.1%.

Seylan Bank: Results for 1QFY12/98 show a decrease in income by 2.6% to Rs. 115.1m. PAT was up 67.8% to Rs. 61.4m. Coming from a low base in 1997. Seylan Bank Ltd (SEYB) has shown high growth YoY. The negative growth in total income is largely due to a reduction in the lending rates. However, trading profits have increase as operating expenses have reduced and deposit rates have been reduced improving net interest income. Loans and advances increased 11% YoY to Rs. 20.9bn and deposits have increased 7.6% YoY to Rs. 27.8bn.

Dankotuwa Porcelain: Dankotuwa Porcelain Ltd (DPL) released its results for the 1st quarter ended 31st March 1998. Turnover has increased by 30% to Rs. 177.1m. PAT has increased by 21% Rs. 29.2m. These results are in line with our expectations. DPL is currently running near its full capacity of approximately 800,000 pieces per month. We expect earnings growth in 1998 to stem from cost saving measures planned by the company through efficiency.

Time for long term funds to increase allocations
The drop in ASPI gives an opportunity to Investors who were not able to get in to fundamentally strong stocks that rapidly appreciated in price in over the last few weeks. That said investors should expect greater short term volatility in the index as long as local investors play the lead role in the market. Currently local investors account for around 60% of market turnover. Current crisis in the subcontinent has not changed the fundamental attractiveness of the Colombo market. Hence despite the short term hiccups long term investors are advise to increase their allocations to the market.

JF-HNB Research.
This Information is as at 15th May 1998.