The Central Bank's Spot Rates for transactions with Commercial Banks announced on the morning of June 30, 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 June 30, 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 June 30, 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 June 26th 1998 was 14.2 per cent for all banks. The Lowest Prime Rate among banks during this week was 12.5 per cent.

Average Weighted Deposit Rate of Commercial Banks (AWDR)
The Average Weighted Deposit Rate (AWDR) of Commercial Banks for the month ended April 31st 1998 was 9.6 percent.

Sinhaputhra Finance Limited — non bank banking with a human face
By Carl Muller

One of the nicest departments to call in on at Sinhaputhra Finance is Deposits. You feel that you are, first, among friends, second, that these friends really know what they are doing. Five staffers go about their work in the most pleasant surroundings. There are two senior managers, too,

Susan Gunawardena and Saliya Jayantha de Alwis, seated at either end of the large, airy office. A nice arrangement, to be sure, for Deposits means dealing with members of both sexes, and Susan supplies that understanding female touch, putting many customers perfectly at ease. All you hear is a muted murmur. There is no bustle, no raised voices. It tells me one thing: here are people who know what they are doing and doing it well. True professionals.

To the man in the street, one supposes the importance of any finance deposit is what sort of interest he can hope to get. Everywhere, finance companies make this the main message. They advertise their rates and offers. While this was quite impressive in the early days, many would-be depositors later began to feel that they were being bombarded with a rigmarole of rates and promises which made no reference to the fine print. We have seen many finance companies went under, having remained most glib in their offers that received the widest and most strident publicity. For a long time in the recent past, the man in the street actually came to regard such companies as traps. However, this period has passed and the "cowboys" are no more. After all, what is a finance company if it is not a bank with all the real-term applications of a banking institution? True, the Central Bank recognises the Finance House as a Non-Bank Institution, but for all intents and purposes, the finance company is a bank — and as a bank it is there to look after your money, protect it, lay it out with a financier's expertise and harvest it in order that you reap more than you sow.

Saliya de Alwis is not anxious to paint me any sort of picture. A most unassuming man, he has only one thing he wishes to stress, "Our success is teamwork. Our success is also due to a very fast, efficient and personalised service. Every customer is special — very special. Our customers are our friends, and you do not let down a friend, do you?"

At the top, Chairman Kithsiri Wanigasekera remains as buoyant and ebullient a personality as ever. Together with Join Managing Director, Ravana Wijeratne, he has motivated the staff, guided them objectively and raised morale. This is very important. How could a disgruntled staff relate to the public? This has contributed enormously to the resounding success the company enjoys in the field of deposit mobilisation.

The progressive growth of Sinhaputhra Finance's deposit base can be attributed to the recognition of the company's stability, rising from its efficient management techniques and the valuable inputs from its marketing and PR personnel. Public relations has done much to uphold the Company's image. In Deposits, I met many customers, some very important people too, who all agreed that what they find, and like, is not just efficiency and prompt service but also true courtesy.

It is obvious that public deposits form an integral part of a company's co-business in the secondary finance market and is a principal source of capital which finance institutions rely on to provide funds for their investment portfolio. Yet, the marketing of deposits is a most competitive venture. For one thing, the finance company has to contend with the banking sector and other larger and quite mediocre institutions. This may be why there is this emphasis on the provision of more attractive rates of interest. It still is the main criteria in the maintaining of competitiveness. However, unlike others who rose rapidly and fell just as rapidly, Sinhaputhra Finance has applied reason and commonsense, making their interest rates dependable and solid. There is really no need to beat a big drum and declare that they can do better than any other. This way led to collapse for others in the past. What is necessary is that customers understand and appreciate the Company's strength and are secure in their investments.

Sinhaputhra Finance, as an institution, is among the upper-level players. It has grown, reached its standard with the firm rooting of its deposit base, occasioned by good public relations and that all-important personal contact. "In 1993," Saliya says, "the deposit base was Rs. 76 million. It is around Rs. 400 million today." Over the years, the Company also widened its deposit-linked ancillary services: Fixed Deposit loans, hire purchase, lease financing, as well as an exclusive consumer credit scheme, income tax consultancy and the guaranteeing of credit and consignment facilities. Interest rates rise and fall with the market trends, depending on the positive and negative aspects of the country, political and economic situation. There is no rigidity whatsoever. This ability to move with the tide, the ebb and the flow, has been a hallmark of the company's service. In fact, depositors are also educated in the vagaries of the financial market, the financial climate. They are quick to appreciate that if the company's interest rates are dropping a notch or two, it is simply because the economic climate is under the weather. In this way, Sinhaputhra Finance has become a barometer of the country's economic well-being.

After all, when it comes to trading in the secondary financial sector, a company must be guided by economic patterns and above all, stability. There are many things to contend with. Of late we have seen share trading, higher returns on Treasury Bills and other attractive concepts of investment. All this may seem quite inviting, but governing every investment manoeuvre is the underlying political stability of the country. This is where Sinhaputhra Finance keeps ahead, keeps a watching brief. Intelligent anticipation of political trends and events is what makes the company ready at all times to move to protect its depositors, assure them that they will have no occasion to regret the confidence they have placed in the Company.

The Directorate consists of Chairman and Managing Director, Kithsiri Wanigasekera, Joint Managing Director, Ravana Wijeratne and Directors Chintamani M. Ballale, Parakrama Keppitipola, K. H. K. Wijedasa. Mohan Weerakoon and Dr. Cuda Wijeratne.

Stock Market Review
Week ending 26th June 1998
Bargains galore!

Last week’s market collapse continued, with the week beginning on a disastrous note, losing 51 points as at Thursday. This was over double the total loss last week. However, rock bottom valuations, finally caught investors eyes, and buying support came in on Friday. The ASPI lost 41 points (-6.6% WoW), while the Sensitive Price Index declined a hefty 90 points. (-9.7% WoW). Average daily turnover was Rs. 85.4m, up from Rs. 74.78m last week. Foreign activity accounted for 56.9% of total turnover; up from 242.7% last week. However, foreign selling continued to outweigh purchases, with a net out-flow of Rs. 943m recorded over the week.

Sri Lanka Rupee’s stability causes concern
In the past 12 months, the SLR has depreciated less than 10% YoY — the least among the major regional currencies that have been hammered in the economic chaos. The SLR is looking more vulnerable following the post N-test weakness in the Indian Rupee. Moreover, Sri Lanka’s exports have been slowing since December 1997. In April, exports fell 4.5% YoY, the first dip in eight months. We feel a devaluation would make sense in the current deflationary environment and falling import prices, as imported inflation would be minimised. Subdued inflation will keep interest rates to stay at current levels despite a devaluation. We would argue for an immediate 10% devaluation and a further depreciation of around 3% over the remainder of the year, bringing the rupee to a YE98 rate of around Rs. 75/US$ by YE98. This would translate into a depreciation of 18% over 1998. The rupee currently (23/6/98) stands at around Rs. 64.55/US$, down 5% YTD. Since a devaluation is not predictable, for the moment we are retaining our view for a 10.3% YoY depreciation to Rs. 68.25 by YE98.

JFIN earnings revised up
We have revised up the current earnings forecast for James Finlay & Co. (Colombo) Ltd. (JFIN) after consolidating earnings forecasts of its recently acquired Plantation Investment and Management Company Ltd. (PIMC). At the current price of Rs. 60, the stock is trading at 6.1x EPS 98 and 4.6x EPS99. The company is the only listed company in Colombo with a fully integrated tea manufacturing operation with interest in plantations, manufacturing and exports of value added tea. The company is a good hedge against falling tea prices. BUY.

CTC will benefit from abolition of duty free cigarettes
Ceylon Tobacco Company (CTC) will benefit from government plans to make imports of cigarettes and liquor imports no longer duty free. CTC’s domestic sales volume dropped by 5.7% in 1997 and earnings remained relatively flat due to the growing number of smuggled cigarettes. At the current price of Rs. 31 the stock is trading at 5.9x and 5.2x prospective earnings. At the current price CTC’s dividend yield also looks attractive at 10% for FY 12/98.

With the main overhang showing signs of clearing we recommend investors start collecting at these levels. BUY.

Currency uncertainty overshadows market

Speculation of a possible rupee devaluation, which has increased equity risk premiums, continues to cast a cloud of uncertainty on the market, particularly on foreign investors. Blue chips such as JKH, DFCC, NDB which are favourites among foreign investors owing high liquidity, have lost over 25% of their value MoM. The market’s 12-month forward PE is 5.8x at an index level of 578.9, this is the lowest the market has traded in PE terms since 1992. Morevoer, stocks representing about 20% of total market cap is trading at below book value. We continue to reiterate our view that the market remains extremely attractive for value hunters. We remain Overweight. BUY JKH, Ceylon Grain Elevators, Balangoda plantations, Colombo Dockyard.

JF-HNB Research
This information is as at 26th June 1998.