Praveen Balendran [email protected] www.arpicoataraxia.com ArpicoAtaraxia Asset Management (Pvt) Ltd. Fixed Income Newsletter: 06 February 2015 This Week  Inflation January 2015 and Treasuries Remains Flat  Sri Lanka’s total public debt ratio increased to 88.9 pct - Finance Minister  Janashakthi buys Bartleet Finance for Rs. 984 m  Sri Lanka to generate revenue though taxes, not by printing money: Deputy Minister of Economy  Rupee forwards end weaker; seen falling Arpico Ataraxia S&P SL20 Index Fund 06 February 2015 Date Bid Price Offer Price 08.3601 08.5719 Inflation (CCPI) January 2015 YOY 3.2% 05 Feb 2015 T-Bill Auction As at 02 February 2015 This Week Last Week 91 Days 5.82 5.80 182 Days 5.90 5.90 365 Days 6.05 6.05 AWPLR (%) *AWPLR – Average Weighted Prime Lending Rate AWDR (%) *AWDR – Average weighted Deposit Rate Jan 2015 6.43 3 6.38 . 6.36 5.94 Dec 2014 6.35 6.20 30 Jan 2015 Weekly 23 Jan 2015 Monthly - ArpicoAtaraxia Cash Management Trust Fund Date 05 Feb 2015 Year to date 13.3060 13.00% SLIBOR (%) as at 06.02.2015 07 Days 06.22 30 Days 06.39 91 Days 06.65 LIBOR International T-Bill Rates 2 Year Yield 5 Year Yield USA 0.52% 1.30% UK 0.39% Australia 1.92% ARPICOATARAXIA NAV Price 10 Year Yield 30 Days 0.17 1.81% 91 Days 0.25 1.04% 1.53% 182 Days 0.36 1.99% 2.44% 365 Days 0.62 Treasury bill Yields 6.5 91 Days 6.4 182 Days 365 Days 6.3 6.2 6.1 6 5.9 5.8 5.7 5.6 6-Aug-14 6-Sep-14 6-Oct-14 6-Nov-14 Sri Lanka Inflation Movements Annual Avg… 8.1 8.8 8 7.6 7 5 SDFR 9.0% 8.0% 6.9 6-Jan-15 Sri Lanka Policy Rates 11 6 5.7 5.3 4.7 4.5 3.5 3 7.0% 8.0% 6.5% SLFR 8.0% 8.0% 6.5% 6.5% 6.0% 3.3 1-Nov-14 1-Sep-14 1-Jul-14 1-May-14 1-Mar-14 1-Jan-14 1-Nov-13 1-Sep-13 1-Jul-13 1-May-13 1-Mar-13 1-Jan-13 5.0% 1-Jan-15 9 6-Dec-14 Sri Lanka Inter Bank Offer Rates (SLIBOR) 8.5 Over Night 7 days 1 month 8 7.5 7 6.5 6 7-Aug-14 7-Sep-14 ARPICOATARAXIA 7-Oct-14 7-Nov-14 7-Dec-14 7-Jan-15 6.5% 8.0% 6.5% Inflation January 2015and Treasuries Remains Flat Inflation computed by the department of census and statics increased to 3.2 %in January 2015 from 2.1% in December 2014 this mainly due to the increase in food prices. However the annual average inflation declined to 3.2% in January 2015 from 3.3% in December 2014. The Colombo Consumer Price Index recorded a monthly increase of 1.7% in January 2015 this mainly attributed to the increase in food prices. Food items such as onions, potatoes, eggs, coconuts and vegetables prices increased. Non food category such as clothing, foot wear and recreational and Miscellaneous Goods recorded an increase in the average price. While the Furnishings, Household Equipment and Routine Household Maintenance; Health and Communication remained unchanged, but the prices of fuels and transport declined due to the downward revision of fuel prices. Overall the prices in the non food category declined. Core inflation declined to 2.1% in January 2015 from 3.2% in December 2014. Treasuries Flat Auction held on 2nd February saw the yields remained the flat with, 6 month and 1 year bills at 5.90 and 6.05 respectively but 3 month bill moved up by 2 basis points to 5.82. The auction received bids totaling Rs 31,749 Mn but CBSL accepted only Rs 9,869 Mn thus the auction oversubscribed by Rs 21,880 Mn. Sri Lanka’s total public debt ratio increased to 88.9 pct - Finance Minister Sri Lanka’s Total Debt to Gross Domestic Product (GDP) ratio would increase to 88.9 percent from reported 74.4 percent of the government debt in the end 2014, the Finance Minister has said. According to the provisional data, the outstanding debt of the government as at end 2014 was LKR 7,373 billion, which reflects a per capita debt of LKR 357,233? The new government says the total debt will increase to LKR 8,817 billion and the per capita debt will also increase to about LKR 427,220 for the last year. Janashakthi buys Bartleet Finance for Rs. 984 m Janashakthi Ltd. has acquired a 99.78% stake in Bartleet Finance Plc for Rs. 984 million, thereby further consolidating the former’s position in the financial services industry. The acquisition has been in two stages whilst it was approved in principle by the Monetary Board in August last year. Janashakthi Ltd. said on 22 January acquired 86.79% stake in Bartleet Finance Plc for Rs. 874.8 million or around Rs. 131 per share. The stake amounting to 6,639,998 shares was bought from Bartleet Transcapital Ltd. (BTCL). At the time of the acquisition, Janashakthi Ltd., already held 0.9 million shares accounting for a 13% stake. This was bought between 2 and 10 January at a total price of Rs. 109.3 million. With these acquisitions, Janashakthi now holds 7.633 million shares or 99.78% stake as of 22 January and Bartleet Finance will be a subsidiary. Sri Lanka to generate revenue though taxes, not by printing money: Deputy Minister of Economy Sri Lanka’s Deputy Policy Planning and Economic Affairs Minister Dr.Harsha de Silva, said that the new government would not print money to raise revenue to deliver election promises but would tax selected industries as a revenue generation measure. “These must be look at not as individual effects or rather targeting certain individual companies, but as a collective way of raising revenue on a one time basis in order to ensure that we have the ability to ensure the delivery of what we have promised to the people,” De Silva said. Rupee forwards end weaker; seen falling Rupee forwards closed weaker on Thursday as policy uncertainty weighed on the currency, discouraging exporter selling of dollars amid importer demand, dealers said. One-month forwards ended at 133.80/95 per dollar compared with Monday’s close of 133.67/70. Markets were closed for local holidays on Tuesday and Wednesday. Currency dealers said the rupee may depreciate because of an expected increase in consumption after a raft of tax reductions on key commodities in last week’s supplementary budget. ARPICOATARAXIA