• STOCK MARKET REVIEW
  Weekly Stock Market Review
• Sri Lanka participates at EIBTM '98
• HNB extends branch automation to N & C

Sri Lanka participates at EIBTM '98

For the seventh consecutive year, Sri Lanka participated at the European Incentives, Business Travel & Meetings (EIBTM) Exhibition, which was held at the Palexpo Exhibition Centre, Geneva, Switzerland from 12th to 14th May '98.

A delegation comprising of leading members of the travel and tourism industry of Sri Lanka was led by the Sri Lanka Convention Bureau (SLCB), which functions under the Ministry of Tourism & Civil Aviation, with the primary objective of marketing and promoting Sri Lanka as a destination for MICE Tourism. (MICE-Meetings, Incentive travel, Conventions & Exhibitions).

EIBTM, which is the world's largest and most prestigious MICE related Exhibition, has been identified by the Sri Lanka Convention Bureau, to participate on an annual basis, in order to create an awareness of Sri Lanka as a MICE destination, to the leading European MICE industry members, who in turn will promote Sri Lanka in this region. This year's event has attracted over 4000 such MICE buyers from 41 countries, with 2400 exhibitors from 108 countries.

The Sri Lanka delegation was led by Mr. A. B. Ranjit De Silva, Director/Ceylon Tourist Board - London Office, who co-ordinates the SLCB's promotions in the UK and Benelux countries, and comprised Mr. Dharni Soza, Director/Ace Conventions (Pvt) Ltd., Mr. Nihal Illeperuma, Director/CDC Conventions (Pvt) Ltd., Mr. Michael Elias, Director/Conventions (Colombo) Ltd., Mrs. Desiree Premachandra, Marketing Manager - Pax Sales Development/Air Lanka Head Office, Mr. I. A. R. Perera, Manager/Air Lanka - Switzerland, Mr. Dieter Krattiger, Sales Manager/Air Lanka - Switzerland, and Mr. Rick Mobah, Sales Manager/Air Lanka - Benelux countries.

HNB extends branch automation to N & C

Among the private commercial banks, HNB has the most number of branches in the Northern and Eastern Provinces, HNB already has three branches in the Northern Province, namely, Jaffna, Vavuniya and Mannar and six branches in the Eastern Province, namely, Ampara, Batticaloa, Kalmunai, Akkaraipattu, Kantalai and Trincomalee.

HNB's vision of computerizing its branches initially spread is wings in the Eastern Province and gradually moved into the Northern Province. The Trincomalee branch in the Eastern Province has been automated during the initial phase, and the recent additions are the branches in Ampara, Kalmunai and the newly opened branch at Kantalai. The other branches in the Eastern Province, Akkaraipattu and Batticaloa too would come into the web of computerization shortly in the next phase.

In the Northern Province Vavuniya branch has been computerized and plans are underway to computerize the other branches too in the future.

The bold step of venturing from one end to the other end of Sri Lanka amidst diverse impediments, has distinctively displayed the Bank's policy of providing caring the efficient customer service. The introduction of technology has further strengthened this aspect to meet the NEW growing demand of the Branch Expansion programme launched to reach the customers and to meet the challenges of the millennium.

HNB will install ATMs in Trincomalee branch in the Eastern Province and Vavuniya branch in the Northern Province shortly.

The feasibility of providing Automated Teller Machines (ATMs) and the Telephone Banking facilities in the Eastern Province is being closely analysed with a view to provide 24 hour banking facilities to further enhance the customer service.

- Press Release

STOCK MARKET REVIEW
Weekly Stock Market Review

Market continues to trade in a narrow range. The market continued to trade in a narrow range, albeit at a slower pace, with the ASPI gaining 8.4 points (2.4% WoW). Average daily turnover dropped to Rs. 45.1m this week. Foreign activity remained negative and was 53% of total turnover, compared to 27% last week.

Interest rates heading north
Interest rates have been on a steady upward climb since June, and have reached TTD highs. Yields for 3.6 and 12 months Treasury bill rates last week stood at 11.93%, 12.35% and 12.52% which were around 2.3% higher than YE97 levels. Likewise, the weighted average Prime Lending Rate (PLR), reached 16.4% two weeks ago, the highest YTD, although it dipped to 15.5% last week. The jump in rates is attributed to a tightening in the overnight money market. Consequently, Call Market Rates (CMR) rose to a YTD peak of 16.2% two weeks ago, but subsided to 13.4% last week. We have factored in a rise in rates towards 2H98 and hence, the recent rise in line with expectations. We expect the 12 months TBR to reach a maximum of 13% in the 2H, although the PLR has gone slightly over expectations for a peak of 15.5% in the 2H. Our forecast for average 12 month TBR's and the PLR for 1998 remain unchanged at 12.11% and 14.85% respectively. These rates are flat from average levels seen in 1997.

Rupee depreciates 6.3% YTD to Rs 65.45/US
The pace of the rupee's depreciation accelerated in 2Q98 to 3.2% QoQ, from a slower 2.2% QoQ in 1Q98. As at 27th July 1998, the rupee was down 6.3% YTD to Rs65.45 - US$. Over the past 12 months, the rupee has depreciated by 9.3% YoY. On current trends, the rupee is likely to depreciate by 6%, 7.5% over the remainder of the year, bringing it to YE98 rate of between Rs69/US$ and Rs 70/US$. Our current forecasts stand at a YE98 rate of Rs68.25/US$, but we are revising this upto Rs 70/US$. However, we continue to point out that, in comparison with regional currencies particularly, subcontinent currencies, the Sri Lanka rupee is lagging behind. Given its impact on export competitiveness, and on the balance of payments in light of slowing external inflows, we feel the rupee should slide at a still more faster pace.

Results released during the week
* Lanka Milk Food (LMF) released its results for 1QEY3/99. Turnover has increased 8.1% Rs478m. Loss after tax was Rs 6.2m compared to a loss of Rs 18.2m last year. These results are in line with our expectations.

* Sampath Bank Ltd (SAMP) results for 1Ho of FY12/98 are ahead of our expectations. PAT has expanded by 34.3% to Rs201.8. Net interest income and yields have shown improvement in 2Q98. Loan growth has come in at 35.8% YoY to Rs. 11.8bn, a YTD increase of 8.2%. We have revised up our earnings to Rs411m for FY3/98 and to Rs491m for FY3/99.

No significant upside in the short term
We do not expect the current market lethargy to improve next week foreign investors continued to be on the selling side. The SAARC, summit which concluded today failed to give the boost expected to the market as the status quo on key issues, especially between India and Pakistan seems to remain unchanged. However, the signing of the primary project agreement to develop the Colombo Port is a reason to be more optimistic given that JKH is the largest market cap stock. Our favourite BUYs are: JKH, Balangoda, Dockyard, Lanka Lubricants, Sampath Bank.

JF-HNB Research
This information is as at July 31 1998.