Economic Capsule - May 2016

1. Economic Capsule
May 2016
Research & Development Unit
233rd Issue

2. C O N T E N T S
BANKING AND FINANCE 
 FinanceAsia Declares Commercial Bank Best Bank in Sri Lanka
 Banking Sector Performance – 1Q, 2016
ECONOMY & BUSINESS 
 Sri Lanka Seeking to Borrow USD 3.5 bn through Foreign Debt
 Japan to Lend USD 4.2 bn to Sri Lanka
 Import Duty Changes on Vehicles
 Sri Lanka Vehicle Registrations Subdued in April 2016
 Sri Lanka Signs MOU with Siemens to Develop Megapolis Smart Cities
 London Stock Exchange Group Enters into Agreement with Sri Lanka’s BOI
 Tea Dips USD 23.1 mn in 1Q, 2016
 Shangri-La opens 145-acre Resort in Hambantota Sri Lanka
 Economic Update
 CEAT Sri Lanka to Raise Radial Tyre Capacity by 75 %
 Construction of Access Tower 2
 LafargeHolcim to Exit Cement Business in Sri Lanka
 amanté Opens its First Exclusive Boutique in Pakistan

3. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Banking & Finance

4. 4< Research & Development Unit >
FinanceAsia Declares Commercial Bank
Best Bank in Sri Lanka
The Commercial Bank of Ceylon has won two more
prestigious international accolades, being adjudged the
‘Best Bank’ in Sri Lanka in 2016, and presented a Platinum
award for 20 years of excellence by the Hong Kong based
‘FinanceAsia,’ magazine.
• This is the sixth ‘FinanceAsia Country Banking Achievement Award’ presented to
Commercial Bank in the eight years since the Bank became the first entity in
Sri Lanka to receive this coveted tribute in 2009.
• Additionally, as FinanceAsia celebrates 20 years covering Asia’s financial markets this
year, the magazine has chosen Commercial Bank as one the recipients of a one-off
Platinum Award presented to banks and corporations that have consistently excelled
over the past two decades, providing utmost quality and innovation to customers.

5. 5< Research & Development Unit >
Total Assets Deposits Total Liabilities including
Equity
Banking Sector Performance – 1Q, 2016
Cont..
Source: CBSL

6. 6< Research & Development Unit >
(a) Net of interest in suspense
(b) Total loans and advances including non-performing loans net of interest in
suspense
(a) Profit after tax as a percentage of average equity (b) Profit before tax (annualised) as a percentage of average assets
Banking Sector Performance – 1Q, 2016 (cont..)
Source: CBSL

7. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Economy & Business

8. 8
Sri Lanka Seeking to Borrow USD 3.5 bn
through Foreign Debt
• The borrowing plan comes as Sri Lanka seeks to fix its precarious balance of payments
position after a sharp depletion of its foreign exchange reserves.
• "A USD500 mn syndicated loan is almost done with Credit Suisse. Once that is done,
we will be going for another USD500 mn syndicated loan," according to Mr. Ravi
Karunanayake."Then we will go for the sovereign bond within two to three weeks.
We will also go for a sukuk."
• The minister has also stated that government has appointed eight banks and four non-
banking institutions as the lead managers for the upcoming sovereign bond. He added
the government may look to sell bonds to Chinese and Japanese investors. Source: Reuters
< Research & Development Unit >
Sri Lanka is in the process of borrowing up to USD 3.5 bn
from foreign sources via syndicated loans, sovereign bonds,
and sukuk, the according to country's finance minister.

9. 9
Japan to Lend USD 4.2 bn to Sri Lanka
• Japan will lend USD 4.2 bn to Sri Lanka through both a
loan and bond financing for budgetary support in the
next two years, including infrastructure development,
according Sri Lanka’s finance minister Ravi
Karunanayake.
• According to the minister, Japan has committed USD 2.9
bn at a low interest rate of 0.01 % over the next two
years. The repayment period for the loan would be
40 years. Additionally a USD 1.3-bn bond would also be
issued in Japan.
< Research & Development Unit >
Source: Reuters

10. 10< Research & Development Unit >
Import Duty Changes on Vehicles
The Gazette notification issued by the Ministry of Finance
• Prices of vehicles with above 1,000cc engine capacity will increase
following the increase of the minimum unit tax according to Vehicle
Importers Association.
• According to car dealers the tax range for 800 and 1,000cc cars is
expected to come down from its present tax range of Rs 1.5 to 1.6 mn to
about Rs 1.35 mn.
• However, the India-made three wheeler auto taxies have been hit by a
raised band and will have an increased rate of customs duty.
• Users of SUVs are the worst-hit, with the import tax on one particular
brand, which stood at about Rs 5.4 mn, rising up to above Rs 7.6 mn.
Source: Press Trust of India
According to a gazette notification released by the Ministry of Finance,
Sri Lanka has reduced import duties on cars with engine capacity of 800
and 1,000 cubic centimetre (cc) while increasing duty on higher engine
capacity cars.

11. 11< Research & Development Unit >
Sri Lanka Vehicle Registrations Subdued
in April 2016
• Motor car registrations recorded 3,618 units in April 16
up from 3,326 units a month ago and significantly down
from 5,116 units 12 months ago.
• Brand new segment registrations recorded 1,709 units
in Apr 16 significantly up from 1,186 units the previous
month but significantly down from 2,926 units recorded
12 months ago.
• Pre-owned car registrations recorded 1,909 units in Apr
16 marginally down from 2,140 units a month ago and
also marginally down from 2,190 units 12 month ago.
Cont..

12. 12< Research & Development Unit >
Sri Lanka Vehicle Registrations Subdued in April
2016 (cont..)
• Maruti recorded 1,142 units in Apr 16 significantly
recovering from 639 units the previous month and the
extremely low 255 units in Jan 16 but yet significantly
down from 2,239 units 12 months ago.
• Electric cars recorded 85 units in Apr 16 significantly
down from 185 units the previous months and 152
units 12 months ago. Nissan Leaf accounted for 74 of
the units down from 160 units the previous month.
• 3-wheeler registrations recorded 4,151 units in Apr 16
up from 3,978 units the previous month but
significantly down from 10,839 units 12-month ago. At
the peak in Nov 15 registrations hit 13,668 and in Feb
16 registrations at 2,939 units was a 60-month low.
Source: JB Securities

13. 13< Research & Development Unit >
Sri Lanka Signs MOU with Siemens
to Develop Megapolis Smart Cities
Source: Siemens
Siemens, a renowned global leader in the area of
Smart Cities, strengthened its partnership with
Sri Lanka by signing a Memorandum of
Understanding (MoU) with Ministry of Megapolis
and Western Development to offer expertise and
best practices from its globally-proven, state-of-
the-art, Sustainable, Smart City solutions portfolio.
• 'Smart City' application involves efficient deployment and management of transport, power, waste
disposal, healthcare and other urban infrastructure and services.
• According to Lakshman Jayasekara, Project Director of the Western Region Megapolis Planning Project,
Siemens expertise and technologies will help eliminate congestion pressures on urban infrastructure,
services and environment and reduce the per unit capital cost of infrastructure.
• Sunil Mathur, Managing Director and CEO, Siemens Limited India has stated the firm had the expertise to
help cities become more liveable, more competitive and more sustainable.

14. 14< Research & Development Unit >
London Stock Exchange Group Enters into
Agreement with Sri Lanka’s BOI
The Board of Investment of Sri Lanka signed an
agreement with “London Stock Exchange Group” (LSEG)
to set up their global business services arm in Sri Lanka.
• The new facility will directly employ 400 personnel in high technology jobs. These
employees will be providing technology services which are central to the group’s
global network.
• LSEG will invest and recruit in Sri Lanka which will further boost the country’s IT
Sector. The facility will be located in the Trace Expert City of Colombo.

15. 15< Research & Development Unit >
Tea Dips by USD 23.1 mn in 1Q, 2016
• According to Ceylon Tea Brokers in its latest Tea Industry Overview, Iraq
emerged as the unlikely top buyer of Ceylon Tea as Sri Lanka’s first quarter tea
exports dropped to USD 311.8 mn in 2016 from USD 334.9 mn in 2015 as
producers battled with bad weather and volatile markets.
• Sri Lanka tea exports for the 1Q of 2016 amounted to 74.45 m kg vis-à-vis
73.21 m kg recorded for the same period last year (+1.24 m kg), the FOB
average price per kilo for this period stood at Rs.605.37 marginally lower than
Rs.606.37 (-Rs 1.0 YOY) for the same period.
• The total Sri Lanka tea production for 1Q 2016 recorded 70.26m kg in
comparison to 79.35m kg (-9.09m kg) for the same period last year. Though
production has declined by 9.09m kg, exports have increased by 1.24 m kg
compared to the same period in 2015.
• However, the industry could recover some of its lost momentum in the second
half of this year due to shifts in global politics and in oil prices, the prized
commodity on which the majority of Sri Lanka’s tea importing countries
depend for their economic wellbeing. Oil prices have seen a steady upward
momentum in 1Q of this year.
Cont..

16. 16< Research & Development Unit >
Tea Dips by USD 23.1 mn in 1Q, 2016 (cont..)
• According to the report, Iraq has emerged as the largest buyer of Sri Lankan tea, outplacing Russia
in the first quarter. Turkey, the second largest importer of Sri Lanka tea in 2015, has shown a
significant decline in its purchases in the first quarter, moving down to the fifth position.
• Whilst countries with dependency on oil exports and internal strife continue to rotate their
positions on the top segment of the importer list, countries with economic and political stability
remained untapped.
• India is seen forging ahead in its appetite to grab market share and even outpacing Sri Lanka as the
market leader in Russia.
• The rapid globalisation continues to diminish traditional strengths and create new opportunities;
tea trading hubs are being consolidated in Europe and in Dubai.
• Sri Lanka’s inability to penetrate into new markets remains a major drawback whilst China, Kenya
and India has seen an upturn in their export earning Y-0-Y while Sri Lanka’s earnings seems to have
reversed. Further continuous dependence on oil exporting countries has led to a reduction in
export earnings, according to the Ceylon Tea Brokers report.

17. 17< Research & Development Unit >
Shangri-La opens 145-acre Resort in
Hambantota Sri Lanka
• Shangri-La opened its 145-acre Hambantota
Resort & Spa in the Southeast Sri Lanka, one of
the major hotel chains to enter Sri Lanka after
the end of a war.
• The 300-room beachfront resort, which includes
an 18-hole golf course and an artisan village,
launched with special packages for wild-life
enthusiasts, newlyweds and families.
• The chain has separately invested in a 500-room
hotel in Colombo scheduled to open in 2017.

18. 18
Economic Update
< Research & Development Unit >
M2b, Credit to Private Sector & Inflation
• The year-on-year growth of broad money (M2b) (sum
of currency held by the public and all deposits held by
the public with commercial banks) indicated some
deceleration, recording 18.9 % in March 2016,
compared to 19.8 % in February 2016.
• The expansion in domestic credit remained the key
driver of broad money growth, within which credit
extended to the private sector by commercial banks
recorded a year-on-year growth of 27.7 % in March
2016, compared to 26.5 % in the previous month.
• Industry and Services sectors attracted the highest
levels of credit disbursements, while personal loans
and advances also recorded a substantial increase.
• The expansion in broad money (M2b) that has been
recorded over a period of time (see figure) has
resulted in applying upward pressure on inflation
with a lagged effect.
Cont..

19. 19
Economic Update
< Research & Development Unit >
• Headline inflation, measured by CCPI, accelerated to 4.8%, Y-o-Y, in May 2016 compared to 3.1% in
April. Annual average headline inflation edged up to 1.7 % in May from 1.3 % in April.
• Core inflation Y-o-Y was at 6.6% in May 2016, compared to 4.5% in the previous month.
• Meanwhile, the National Consumer Price Index (NCPI, 2013=100) based headline inflation
increased to 4.3%, year-on-year, in April 2016 compared to 2.2% in the previous month.

20. 20< Research & Development Unit >
CEAT Sri Lanka to Raise Radial Tyre Capacity by 75 %
• CEAT Sri Lanka has announced it will invest Rs 800 mn over the next
12 months to increase radial tyre production capacity by 75 %, to 70,000
tyres a month from 40,000 to meet growing local and export demand.
• CEAT has a 30% share of the radial tyre market and supplies nearly half of
Sri Lanka’s overall requirement of pneumatic tyres.
• About a third of CEAT Sri Lanka’s current tyre production is exported to 15
countries in South Asia, the Middle East, Africa and the Far East.
Construction of Access Tower 2
• Access Tower 2, the latest investment by Access Realties 2 Ltd.; a subsidiary of
Access Engineering PLC is taking shape to serve the unfilled demand for
commercial spaces in the financial city of Colombo.
• The property which is now under construction will consist of 190,000 rentable
square feet in G+29 storey building with office spaces that vary in size from
2,500 sq. ft. to 9,000 sq. ft. across 29 floors.

21. 21< Research & Development Unit >
LafargeHolcim to Exit Cement Business in Sri Lanka
• Switzerland-based LafargeHolcim, a materials group, is exiting
Sri Lanka's cement business where it operated Sri Lanka’s only
integrated factory and had annual business volumes of USD 150 mn.
• According to a spokesperson the decision to sell Holcim Lanka was
part of a larger global divestment strategy of the Swiss materials
group.
amanté Opens its First Exclusive Boutique in Pakistan
• amanté opened its first flagship store in Pakistan at the Dolman Mall,
Clifton, Karachi. This is the first international franchise, outside of India for
the brand.

22. The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the information,
it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise, suffered in consequence
of using such information for whatever purpose. < Research & Development Unit >