Daily Market Commentary

ABC
28 January 2015
Sri Lanka
Sri Lanka Markets Update
Daily Market Note
Domestic Markets
HSBC research is available online:
 USD/LKR spot closed at 133.15/40 against an opening level of
133.10/35.
 Spot opened trading today at 133.15/40 and is currently trading at
133.20/45.
 Overnight liquidity was a surplus of LKR 11.8 Bio and O/N Money
averaged at 5.82%
Source : Reuters (24/11/14)
Internet
http://www.hsbcnet.com
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Reuters
HSBS
Disclaimer
This report must be read with the disclaimer,
disclosures and analyst certifications on p4
that form part of it.
Issued by The Hongkong and Shanghai
Banking Corporation Limited.
Source : Reuters (24/11/14)
 Regional Currency Performance against USD
LKR
-0.27%
THB
-0.24%
Contacts
-0.05% BDT
INR
0.39%
IDR
0%
0%
0%
0%
0%
0%
Local currency depreciation/appreciation
0.21%
0%
0%
0%
Source : Reuters (01/01/14 to 24/11/14)
 CBSL left policy rates unchanged with standing deposit rate at
6.50% and standing lending rate at 8.00%. Access to standing
deposit facility remains rationalized at 3 times per calendar month,
deposits exceeding 3 times will be accepted at 5.00%
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ABC
Sri Lanka Markets Update
USD/LKR Spot-closing (27 Jan 2015)=133.15/40
Inter-Bank call money ( 27 Jan 2015) 5.82%
USD/LKR forward Premiums
Treasury Bill Rates – Auction rates - net of
tax
SLIBOR
3 mth 145/175 cents
6 mth 280/320 cents
12 mth 520/580 cents
3 mth
6 mth
12 mth
USD Sovereign Bond
2015
2020
O/Night
1 Month
3 Month
6 Month
12 Month
5.80% (5.79%)
5.90% (5.91%)
6.05% (6.04%)
3.04%
4.62%
5.91%
6.35%
6.57%
6.81%
7.11%
Economic Indicators
All share Price index
S&P SL 20 Index
Daily Turnover
7,367.65 up by 51.57 points (+0.70%)
4,130.43 up by 33.69 points (+0.82%)
Rs. 1,128.56 million
CBSL SDFR
CBSL SLFR
Statutory Reserve Ratio(SRR)
6.50% (January 2014)
8.00% (January 2014)
6.00% (June 2013)
Consumers Price Index
Inflation y-o-y %
Inflation 12m moving ave
180.20 (Dec 2014)
1.6% (October 2014)
3.8% (October 2014)
GDP Growth
Gross Official Reserves
Government Revenue
Government Expenduture
Unemployment
7.70% (2014 3Q)
$ 7.37 Bn (Dec 2014)
$ 8.75 Bn (2013 CBSL Annual Report)
$ 12.84 Bn (2013 CBSL Annual Report)
4.5% (2014 2Q)
Outstanding External debt
$ 39.7 Bn (2013 CBSL Annual Report)
Exports
$ 898.50 mn (Oct 2014)
Imports
$ 1750.20 mn (Oct 2014)
Trade Deficit
$ -851.70 mn (Oct 2014)
Derivatives – IRS (Bid)
USD
0.7370
1.4660
1.9250
2 Year
5 Year
10 Year
Central Bank rates
NZD
3.50%
GBP
0.50%
CAD
0.75%
CHF
-0.75%
GBP
0.8670
1.2621
1.5827
AUD
USD
EUR
JPY
AUD
2.4175
2.6100
2.9020
EUR
0.1088
0.2988
0.7238
2.50%
0.25%
0.05%
0.00%
Stock Markets
International Currency Markets
DJI (USA)
Nikkei 225
FTSE 100
17,813.98 (1.48%)
17,511.75 (1.05%)
6,796.63 (1.02%)
USD/JPY
GBP/USD
EUR/USD
AUD/USD
USD/CAD
Commodity Markets
LIBOR - USD
Gold
IPE brent
WTI
3 mth
6 mth
12mth
$ 1,289.83
$ 49.06
$ 46.79
118.12
1.5162
1.1337
0.7990
1.2429
JPY/LKR
GBP/LKR
EUR/LKR
AUD/LKR
CAD/LKR
1.1268
201.80
150.89
106.35
107.08
0.2526%
0.3554%
0.6224%
US Treasuries
Asian Currencies
5 yr
10yr
1.4660%
1.9250%
USD/IDR
USD/INR
12,505
61.44
30yr
2.3050%
USD/THB
32.63
Source: Reuters/Daily FT
*All rates above are for indicative purposes only.
2
PUBLIC
Sri Lanka Markets Update
ABC
FX Edge
Asian FX: SGD: MAS lowers SGD NEER policy slope
The MAS announced an unscheduled change of policy today, stating that the slope of the policy band
within which the SGD NEER is managed “will be reduced, with no change to its width or the level at which
it is centred”. This is the first unscheduled MPS since October 2001.
The MAS was far more aggressive in its policy easing than we had expected and the market was clearly
surprised by today’s announcement, with the SGD NEER falling initially by around 1.1% according to our
model. Our estimate of the NEER is now trading around 0.7% above the bottom of the band
(compared to 1.5% above bottom-bound pre-MPS).
We believe the SGD NEER will fall to the lower bound of the band before the April MPS, as the
market will speculate that this is not a one-off easing decision, but the start of an easing cycle. There is a
risk that the MAS could ease further in April, by flattening the slope again (to a 0% slope), via a re-centring
of the band lower, or by widening the band. We estimate that the new slope could be 0.5%, from 2.0%
previously.
This decision today means the MAS wants to open up room for outright depreciation in the SGD NEER in
2015. A 0.5% slope implemented today, assuming no other changes in band parameters in the rest
of year means the SGD NEER can depreciate 1.3% from where it was trading at end-2014. Had MAS
left policy unchanged in 2015, the SGD NEER can only at best manage zero percent appreciation.
We recently revised our USD-SGD forecast to 1.40 by end-2015 (see Asian FX Focus: SGD: NEER a
tipping point, 26 January 2015: https://www.research.hsbc.com/R/20/j3RNGH8). We are currently short
SGD-IDR 3m NDF.
We believe the urgency and the magnitude of the decision today reflects more than just concern about the
domestic inflation outlook owing to lower oil prices. We believe the MAS appears concerned than it let on
about the global economy, disinflationary forces and SGD over-valuation.
The last policy easing took place in October 2011, amid the European debt crisis. This time, the MAS
could be reacting to aggressive QE programs and negative interest rate policies taken by central banks in
the G10 recently. One key difference between these periods lies in Singapore's weaker economic
fundamentals today - the core inflation outlook is weaker, growth has been softer and productivity growth
dismal leading to an over-valued SGD. As such, we believe the new slope setting is likely to be lower than
the slope MAS shifted to in October 2011.
We estimate that the new slope could be 0.5%, reduced by more than 1ppt because the MAS omitted the
word “slightly” when talking about the slope reduction. We can verify this new assumption in April when
MAS next provides an indication of where the SGD NEER has been trading within the policy band. There
is a possibility the slope is only reduced to 1%.
3
PUBLIC
Sri Lanka Markets Update
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