Economic Capsule - June 2015

1. Economic Capsule
June 2015
Research & Development Unit
222nd Issue

2. C O N T E N T S
BANKING SECTOR NEWS 
 Branch Openings
 Commercial Bank begins Myanmar Operations with Opening of
Yangon Office
ECONOMIC & BUSINESS NEWS 
 Sri Lanka GDP Grows 6.4 % in 1Q, 2015
 Fitch Ratings on Sri Lanka
 Latest Government Borrowings
 External Trade Performance Jan – Apr 2015
 Vehicle Market – May 2015
 Sri Lanka Signs Articles of Agreement for Asian Infrastructure Investment Bank
 About AIIB Bank
 Sri Lanka Eying Funding from China-led AIIB
 News Snippets
INTERNATIONAL NEWS 
 Greek Debt Crisis
 China's Banks Dominate Rankings for Profits, Strength

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

4. Branch Openings
4< Research & Development Unit >
Katugastota
Wattegama
242
243

5. Commercial Bank begins Myanmar
Operations with Opening of Yangon Office
5< Research & Development Unit >
• The Commercial Bank of Ceylon opened
its representative office in Yangon on,
8th June, formally launching its
operations in Myanmar, initially to offer
Advisory Services to Sri Lankan and
Bangladeshi businesses wishing to enter
that country, and to arrange Banking and
Advisory facilities, funds transfer and
encashment services.
• Commercial Bank is the first Sri Lankan
bank to be granted a licence by the
Central Bank of Myanmar to operate a
Representative Office in the country.

6. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Economic & Business
News

7. Sri Lanka GDP Grows 6.4 %
in 1Q, 2015
7< Research & Development Unit >
• Sri Lanka's economy
grew 6.4 % in the
first quarter of this
year, led by the
services sector
which accounts for
over half of Gross
Domestic Product.
• In the first quarter of 2015 agriculture had recorded a growth of 0.7 %
while industries and services had recorded growth rates of 6.5 % and
7.5 % respectively.
% Share
Source: DCS

8. Fitch Ratings on Sri Lanka
8< Research & Development Unit >
Growth Offsets Political Debility: Sri Lanka’s ‘BB−’/Stable rating
reflects high and less volatile real GDP growth compared with peers,
and a favourable level of basic human development against persistent
political uncertainty, weak public finances and a frail external liquidity
position.
Key Developments
• Persistent Political Uncertainty
• Public finances remain weak: General government revenues continue to
decline, and in Fitch’s view, this trend is likely to continue. The interim budget
announced in January 2015 did little to address the underlying weaknesses in
the fiscal profile as most of the revenue measures announced were one-off in
nature. Cont…

9. • External liquidity position weak: Sri Lanka’s foreign-reserve coverage
of its current external payments remains narrow, and is vulnerable to
shifts in investor sentiment.
− That is especially true because foreign holdings of Sri Lankan
government securities are high and as domestic political uncertainty
currently prevails.
− Lower oil prices, a steady inflow of remittances and tourism receipts
are expected to support the current account.
− But wage increases announced in the interim budget and the policy
rate cut in April could translate into higher imports and is a risk to
the current account that bears monitoring.
Fitch Ratings on Sri Lanka (cont…)
< Research & Development Unit > 9
Cont…

10. 10< Research & Development Unit >
Fitch Ratings on Sri Lanka (cont…)

11. Latest Government Borrowings
11< Research & Development Unit >
Sri Lanka Development Bonds (SLDBs) (auction held on 25 June 2015)
Amount Accepted (USD mn)
(Floating)
1 Y & 10 M 3Y & 7M 5Y
255.00 35.00 37.00
Weighted Average Margin (bps)
over 6 month LIBO
340.12 376.43 410.95
Foreign Currency Term Financing Facility (FTFF) (announced on 16 June 2015)
Size Up to a limit of USD 500 Mn
Maturity Not less than 3 years
Interest Rates Fixed rate or a floating rate linked to the 6M LIBOR (USD)
Purpose
Meeting corresponding import elements of external funded projects specified in the
Budget for the fiscal year 2015.
Source: CBSL
Source: Ministry of Finance

12. External Trade Performance Jan – Apr 2015
12< Research & Development Unit >
Category Jan-Apr 2014
(USD Mn)
Jan-Apr 2015
(USD Mn)
Growth
%
Consumer goods 1,044.3 1,567.3 50.1
Food and beverages 446.7 611.8 37.0
Non food consumer goods 597.6 955.5 59.9
Vehicles 196.8 385.0 95.7
Intermediate goods 3,872.6 3,153.0 (18.6)
Fuel 1,761.7 921.7 (47.7)
Investments goods 1,271.1 1,554.9 22.3
Unclassified 4.3 7.3 68.4
Total Imports 6,192.4 6,282.5 1.5
Industrial exports 2,675.7 2,750.06 2.8
Textiles and garments 1,601.6 1,588.10 (0.8)
Agricultural exports 860.8 801.0 (6.9)
Tea 503.8 437.4 (13.2)
Mineral and other 44.2 17.4 (60.5)
Total Exports 3,580.6 3,569.1 (0.3)
Trade Balance
(USD 2,713 mn)
Inc. in deficit
3.9%
BOP Position
(USD 1,024.7 mn)
GOR
USD 7.5 bn
(=4.6 months
of Imports)
Source: CBSL
Cont…

13. External Trade Performance – April 2015
13< Research & Development Unit >
• Earnings from exports declined by 7.4 % to USD 708 mn in April 2015, recording
the lowest monthly earnings after April 2013.
• The reductions recorded in exports earnings from tea, petroleum products, sea
foods, rubber products and textiles and garments, respectively contributed for the
drop in exports during the month.
Tea - lower demand from Russia and Middle East
Petroleum products - around 40 % price reduction and 6.6 % volume drop recorded in bunker
fuel exports
Sea Food - 68.3 % decline in sea food exports to the EU market, the main sea food market of
Sri Lanka.
Rubber products - low raw rubber prices prevailed in the international market, exports of
rubber products also declined, reflecting a noteworthy decline in the export earnings of rubber
tyres
Textiles and garments - reduction in exports to the EU market
Export Performance
Cont…

14. 14< Research & Development Unit >
Import Performance
• Despite the lower expenditure on imports of petroleum products, total import
expenditure in April 2015 increased by 3.2 % (to USD 1,490 mn) mainly due to the
base effect of lower imports recorded in April 2014.
• The growth in imports was led by personal motor vehicles, followed by machinery
and equipment and transport equipment.
• Import expenditure on fuel declined by 32.8 % to USD 213 mn in April 2015, due to
non-importation of crude oil during the month and about 38.5 % decline recorded
in the international prices of refined petroleum products.
• Higher expenditure on personal vehicle imports, particularly motor cars which
increased by more than 90 %, contributed mainly for the increase in imports.
External Trade Performance – April 2015 (cont…)

15. Vehicle Market – May 2015
15< Research & Development Unit >
• Total vehicle registration momentum in most categories continued in
May – cheaper credit, lower cost of running and higher disposable incomes are
fuelling demand.
• Brand new cars hit an all-time record – 3,206 units in May up from 2,926 units a
month ago and 577 units 12-months ago.
• Maruti accounted for 2,512 units of which Altos were 2,311 up from 2,239 units
last month.
• Pre-owned car registrations recorded 2,793 units in May up from 2,190 units a
month ago and significantly up from 1,385 units 12 months ago.
• Hybrids accounted for 2,701 units in May up from 2,300 units in April and up from
1,177 units 12 months ago. Electric car volumes exploded recording 360 units in
May up from 152 a month ago and 4 units 12 months ago. Nissan Leaf accounted
for 356 units. Cont…

16. Vehicle Market – May 2015 (cont…)
16< Research & Development Unit >
Source: JB Securities

17. Sri Lanka Signs Articles of Agreement for
Asian Infrastructure Investment Bank
17< Research & Development Unit >
• China has hosted the signing ceremony of the Asian Infrastructure Investment Bank (AIIB), a
new international financial institution set to rival the World Bank and Asian Development
Bank.
• Sri Lanka has signed the articles of agreement for the China led Asian Infrastructure
Investment Bank which is expected to be operational by the year end.
• Australia was the first country to sign the articles of association creating the AIIB's legal
framework, followed by 49 other members. Seven more countries are due to sign by the end
of the year.
• Most Asian countries and countries from the Middle East and Latin America have joined, with
the launch of the Beijing-led bank being hailed as a diplomatic and strategic success for China.
• “The Bank’s foundation will be built on international best practices and the lessons and
experiences of existing Multilateral Development Banks and the private sector.” the bank said
in a statement.
Cont…

18. About AIIB Bank
18< Research & Development Unit >
• The AIIB, which was created in October 2014 by 21 countries, led by China,
will fund Asian energy, transport and infrastructure projects.
• The UK, Germany, Australia and South Korea are among the founding
members.
• Japan and the US, which oppose the AIIB, are the most prominent
countries not to join.
• The US has questioned the governance standards at the new institution,
which it sees as spreading Chinese "soft power", and tried to persuade
others to stay away.
• The AIIB will begin with authorised capital of $50bn, eventually to be
raised to $100bn.
• China will hold a 30.34% stake making it the largest shareholder of the
bank. This would give China 26.06% of the voting rights within the
multilateral institution.
• India will be the second-biggest shareholder with a possible 10-15% stake,
while Russia and Germany will make up the third and fourth biggest
member stakes.
The Beginning…
The first news reports about the AIIB
appeared in October 2013. The
Chinese government has been
frustrated with what it regards as
the slow pace of reforms and
governance, and wants greater
input in global established
institutions like the IMF, World Bank
and Asian Development Bank which
it claims are dominated by
American, European and Japanese
interests.
In April 2014, Chinese Premier Li
Keqiang delivered a keynote speech
at the opening of the Boao Forum
for Asia and said that China was
ready to intensify consultations with
relevant parties in and outside Asia
on the preparations for the Asian
Infrastructure Investment Bank.
Cont…

19. Sri Lanka Eying Funding from China-led AIIB
19< Research & Development Unit >
• The newly formed Asian Infrastructure Investment Bank (AIIB), will
boost our infrastructure projects with low cost funding, Central Bank
Governor Arjuna Mahendran has stated.
• “I'm sure we would be one of the first beneficiaries of this bank. We
wish to apply for at least USD one billion project funding for our
infrastructure projects. We hope to get those loans at around 2-3%
rate”.

20. News Snippets
20< Research & Development Unit >
Bartleet Finance PLC and Orient Finance PLC amalgamation approved
• Amalgamation of Orient Finance PLC with Bartleet Finance PLC had been approved by shareholders,
according to a stock exchange listing by Orient Finance PLC.
John Keells Holdings wraps up US$395 loan
• John Keells Holdings has announced that the Group had finalised a syndicated project development
facility worth $ 395 mn with Standard Chartered Bank for the upcoming Waterfront integrated
resort.
Sri Lanka signs loan agreements with OPEC fund for international development
• Sri Lanka’s government has signed two loan agreements with OPEC fund for international
development to obtain a part financing for rehabilitation of a A5 road corridor from Badulla to
Chenkaladi.
• The total estimated cost of the project for rehabilitation of A5 road corridor from Badulla to
Chenkaladi is USD 140 mn and the financing agremment signed with OFID is to obtain a part
financing of USD 60 mn.
Cont…

21. News Snippets (cont…)
21< Research & Development Unit >
Geo Tourism Maps for Sri Lanka’s eastern region
• The International Finance Corporation (IFC), a member of the World Bank, following the growth in
tourism on the East coast, has teamed up with National Geographic to spotlight this region to sell it
to travellers particularly interested in responsible tourism.
• Holidaymakers to the island would now be able to have a quick look at the Eastern region before
arriving and have a valuable new resource in a comprehensive online Geotourism MapGuide
website www.easternsrilanka.natgeotourism.com.
Cont…
Sri Lanka’s BOI signs Rs24.58bn investments from Jan – May 2015
• According to Sri Lanka’s Board of Investment it has signed 42 investment agreements worth Rs 24.58
bn with enterprises representing a vast range of sectors which reflect the growing diversification of
Sri Lanka’s economic base and exports.
• The investments are comprised of foreign investments of Rs 6,849 mn (USD 51 mn) and local
investments of Rs 17,734 mn.

22. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
International News

23. Greek Debt Crisis
2015 February - The government negotiates a four-month extension to Greece's bailout in return for dropping key
anti-austerity measures and undertaking a eurozone-approved reform programme.
2015 June - Greece delays instalment of IMF debt repayment until end of month, becoming first developed country
to do so. As talks with IMF, World Bank and EU 'troika' remain deadlocked, fears mount that Greece could default on
its debts.
Greece closed its banks and imposed capital controls on 28 June to check the growing strains
on its crippled financial system, bringing the prospect of being forced out of the euro into plain
sight.
After bailout talks between the leftwing government and foreign lenders broke down, the
European Central Bank froze vital funding support to Greece's banks, leaving Athens with little
choice but to shut down the system to keep the banks from collapsing.
Banks will be closed and the stock market shut all week, and there will be a daily 60 euro limit
on cash withdrawals from cash machines, which will reopen on 30 June. Capital controls are
likely to last for many months at least.
The failure to reach a deal with creditors leaves Greece set to default on 1.6 bn euros ($1.76
bn) of loans from the International Monetary Fund that fall due on 30 June. Athens must also
repay billions of euros to the European Central Bank in the coming months. Cont…23< Research & Development Unit >

24. Greek Debt Crisis (cont…)
The impending default on the IMF loans leaves Greece
sliding towards an exit from the euro, with unforeseeable
consequences for Europe's common currency project. It
also carries broad implications for the global financial
system.
Greece's exasperated European partners have put the
blame for the crisis squarely on Prime Minister Tsipras 's
shoulders. The 40-year-old premier caught them by
surprise by rejecting the demands of lenders and calling a
referendum on the bailout.
Source: Reuters
The creditors wanted Greece to cut pensions and raise taxes in ways that Tsipras has argued
would deepen one of the worst economic crises of modern times in a country where a quarter
of the workforce is already unemployed.
After announcing the referendum, Tsipras asked for an extension of Greece's existing bailout
until after the July 5 vote. Euro zone officials refused, and in his televised address Tsipras
branded the refusal an "unprecedented act".
24< Research & Development Unit >

25. China's Banks Dominate Rankings for Profits, Strength
 Chinese banks filled the top four spots for profits across the industry in 2014 after making more
than $180 bn between them. Chinese lenders collectively earned almost double the amount of
their U.S. rivals.
 Industrial and Commercial Bank of China‘s (ICBC) $59.1 bn profit last year topped the rankings,
ahead of China Construction Bank, Agricultural Bank of China and Bank of China.
 U.S. bank Wells Fargo ranked fifth with a $33.8 bn profit, followed by JPMorgan and HSBC.
 ICBC also topped The Bankers' ranking of the strongest banks in the world for the third year, which
is based on the amount of capital held, in amount rather than as a ratio of assets. The magazine
says that method best reflects banks' ability to lend on a large scale and endure shocks.
 China had four names in the top six strongest banks. There were four U.S. banks in the top 10 -
JPMorgan was third and Bank of America was fifth - and one British and one Japanese bank.
 China's big state-backed banks are growing in size and importance, fueled by their dominance of a
huge domestic market. They are growing internationally, but still have relatively modest overseas
assets.
China's banks are strengthening their position as the best capitalized
and biggest profit makers in the world, according to The Banker
magazine's annual rankings of profits and capital strength.
25< Research & Development Unit >
Cont…

26. China's Banks Dominate Rankings for Profits, Strength (cont…)
26< Research & Development Unit >
Source: The Banker

27. 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 >