Sri Lanka Equity Forum
Dear Reader,

Registration with the Sri Lanka Equity Forum would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.

Thank You
Sri Lanka Equity Forum

SLEF Market Sentiment Indicator


View results

Latest topics
» Stuck money in CFT.
by Gainer Today at 2:06 am

by kuma524 Today at 1:59 am

» Tomorrow is a GREEN day because of JKH
by Gainer Today at 1:54 am

» මහින්ද කරපු ලොකුම මෝඩකම දශක 3ක් තිබ්බ යුද්ධය අවසන් කල එකද ??
by Chinwi Today at 1:32 am

» CEB makes profits of Rs. 13.7 billion in first quarter of 2015
by Teller Today at 1:22 am

» Muslim Congress to contest upcoming election with UNP
by Teller Today at 1:19 am

» Ceypetco has suspended oil contracts worth millions of dollars
by Teller Today at 1:13 am

» Suspension of projects Loss is for Sri lankans
by Teller Today at 1:11 am

» falling below a key psychological barrier of 7,000 points,
by Teller Today at 1:08 am

by Teller Today at 12:57 am

» ESL and CFVF June Quarter Earning per share will increase
by Gainer Today at 12:47 am

by kassachandi Yesterday at 11:47 pm

» ජනපතිවරයා මහින්දව ප්‍රතික්ෂේප කරලා !
by skyfall Yesterday at 11:47 pm

» German utilities outperform sluggish European stock markets
by VALUEPICK Yesterday at 11:38 pm

» Why no trading in JKH
by charith82 Yesterday at 11:33 pm

» Maithripala Sirisena's statement in 2012 on 'Ranil Defeating Gamini Dissanayake in 1994 Presidential Election'?
by DealKing Yesterday at 11:17 pm

» Analysis - දෛවයෝගය...
by GameUP1030 Yesterday at 10:18 pm

» its very difficlt to retain in the market.....but.....
by GameUP1030 Yesterday at 9:48 pm

» ශ්‍රී ලංකා රජයේ භාණ්ඩාගාරයේ - මහා භාණ්ඩාගාර බැඳුම්කර හොරා - දුෂිත රනිල්ට නාම යොජනා දෙන්න එපා - දයාසිරි ජයසේකර
by DealKing Yesterday at 9:12 pm

» Dont Panic Guys Low Volumes Market will recover Soon
by Daniel260476 Yesterday at 9:11 pm

» OH UNP - Former President SLFP Chandrika to come from United National Party along with Ranil in General Elections?
by DealKing Yesterday at 9:09 pm

» Newcomer akashameer
by akashameer Yesterday at 8:47 pm

» F***K its below 7000.
by kumarweerarathne Yesterday at 8:38 pm

by peacockman Yesterday at 7:38 pm

» දිලිත් ජයවීරගේ ගනුදෙනු ගැන හොයන්න අධිකරණයෙන් අවසර
by keeper Yesterday at 7:32 pm

» JKH N wonder of the wonder! over 185! QUESS YOUR TARGET!
by wisdom79 Yesterday at 6:55 pm

» Dear Admin Plz put BLUE color For my name
by Jiggysaurus Yesterday at 6:11 pm

» (BG/SBLC) for lease which can be used in all forms of projects
by bgmandate100 Yesterday at 5:15 pm

» Political instability affecting the market sentiments
by stockback Yesterday at 4:41 pm

» Listed food and hot beverage stocks
by VALUEPICK Yesterday at 4:39 pm

» Stocks in the accumulation stage
by VALUEPICK Yesterday at 4:34 pm

» Is it time to go behind tea stocks?
by VALUEPICK Yesterday at 4:30 pm

» HVA - A rights issue or split?
by anjelo Yesterday at 4:22 pm

» How To Tell If A Pullback Is A Buy Opportunity
by VALUEPICK Yesterday at 4:13 pm

» Every time this happens
by Daniel260476 Yesterday at 4:00 pm

» Value opportunities in frontier Sri-Lankan Market
by VALUEPICK Yesterday at 3:49 pm

» My New-look Portfolio
by BvsB Yesterday at 3:34 pm

» There’s No Need to Fear Stock Market Corrections
by VALUEPICK Yesterday at 3:31 pm

» Long term invesment in new government or now!!!!
by VALUEPICK Yesterday at 3:09 pm

» PMB udin buy yatin close
by oops Yesterday at 3:02 pm

» LFIN whats going on?
by kassachandi Yesterday at 2:25 pm

» Mull N ( Muller & Phipps )
by Steve Jansen Yesterday at 1:54 pm

» 6950 tomorrow?
by nimantha80 Yesterday at 1:34 pm

» Why market down...
by EquityChamp Yesterday at 1:24 pm

» I think it's good deposit rates from SFL N..........
by GameUP1030 Yesterday at 1:05 pm

» NO MORE MR......
by nigma Yesterday at 12:25 pm

» Be Carefull About CSF !!!! Mr.Asanga Seneviratne using Mr.Victor Ramanan as his "Golaya". Read the Full msg.
by Daniel260476 Yesterday at 12:08 pm

» TEXTURED JERSEY LANKA : TJL Acquires Ocean India (Pvt) Ltd
by Melissa Pereira Yesterday at 12:04 pm

» Investment Advisors
by EquityChamp Yesterday at 11:51 am

» China stocks shrug off easier trading rules; rest of Asia up
by VALUEPICK Yesterday at 11:49 am

» Moderator Slstock
by skyfall Yesterday at 11:47 am

» this is a fuck market
by karuna Yesterday at 11:46 am

» Your tea addiction may actually be strengthening your bones
by VALUEPICK Yesterday at 11:43 am

» Emerging and frontier markets are attractive. It is time to become bullish!
by VALUEPICK Yesterday at 11:40 am

» how to find good girl
by GameUP1030 Yesterday at 11:24 am

» MARA R.......enter price?
by Daniel260476 Yesterday at 11:17 am

» AEL getting HOT and HOT
by karuna Yesterday at 11:06 am

by Daniel260476 Yesterday at 10:54 am

» TOKYO Cement
by Mr. Belfort Yesterday at 10:30 am

by Dhehan Yesterday at 10:00 am

by sureshot Yesterday at 9:58 am

» JKH not traded for record 2nd day
by Daniel260476 Yesterday at 9:49 am

» CFT Bull Start
by peacockman Yesterday at 9:37 am

by sharemarket Yesterday at 9:29 am

» Access Engineering enters property sector with Horizon
by Melissa Pereira Yesterday at 9:27 am

» අවනීතිය රජයන යුගයකට පා නගමින් සිටිමු.
by Mr. Belfort Yesterday at 9:26 am

» Airtel becomes third largest mobile operator in the world
by Melissa Pereira Yesterday at 9:11 am

» ශ්‍රී ලංකාව සමඟ ආර්ථික සහයෝගීතාවය වැඩි කිරීමට ප්‍රංශය සූදානම්
by GameUP1030 Yesterday at 9:07 am

» Audit Committee Forum holds discussions with CSE and SEC
by Melissa Pereira Yesterday at 9:07 am

» My analysis of AEL
by NZ BOY Yesterday at 8:59 am

» Textured Jersey in major overseas acquisition
by Melissa Pereira Yesterday at 8:59 am

» Unit Trust
by hettdas Yesterday at 8:43 am

by samaritan Yesterday at 8:30 am

by samaritan Yesterday at 8:27 am

by kassachandi Yesterday at 8:17 am

» TJL'S overseas acquisition
by Teller Yesterday at 3:14 am

» Rs 1000 per day wage demand by tea trade unions
by Teller Yesterday at 3:04 am

by kassachandi Yesterday at 12:05 am

» COLUMN-"New normal" of weak commodity prices, strong volumes in Australia forecasts: Russell
by VALUEPICK Wed Jul 01, 2015 11:35 pm

» NZ commodity prices drop 4.7% in May, as dairy prices sink
by VALUEPICK Wed Jul 01, 2015 11:33 pm

» European Stocks Surge on Hopes for Greek Deal
by VALUEPICK Wed Jul 01, 2015 11:32 pm

» Buying CITW
by nis2010 Wed Jul 01, 2015 11:27 pm

» Talawakele Tea Estate - TPL
by Thushara Ayya Wed Jul 01, 2015 9:42 pm

» Ceylon Tea : the most eco-friendly tea in the world
by Thushara Ayya Wed Jul 01, 2015 9:40 pm

» Talawakele Tea Plantation
by Thushara Ayya Wed Jul 01, 2015 9:35 pm

» We are at a political juncture
by GameUP1030 Wed Jul 01, 2015 9:26 pm

» CLPL.N very illiquid stock and 2 days enough for push up more than 150.00
by wisdom79 Wed Jul 01, 2015 7:44 pm

» We will contest at the General Election, says Mahinda
by Dinusha Pathiranage Wed Jul 01, 2015 6:41 pm

by Ok One Wed Jul 01, 2015 4:04 pm

» EMER ...why going down
by Madu@1 Wed Jul 01, 2015 2:03 pm

» Shares in Asia up as markets digest Markit China PMI, Tankan and Greece
by VALUEPICK Wed Jul 01, 2015 1:08 pm

» India's soybean output to jump over 10% on timely rain
by VALUEPICK Wed Jul 01, 2015 12:17 pm

» Poultry market likely to see double-digit growth in 2015
by VALUEPICK Wed Jul 01, 2015 12:09 pm

by SECTOR Wed Jul 01, 2015 11:02 am

» CFT & ONAL what happen ????????????
by glad Wed Jul 01, 2015 11:00 am

by Daniel260476 Wed Jul 01, 2015 10:47 am

» CFT , EMER Give you another Chance to buy
by Jana Wed Jul 01, 2015 1:22 am

» new to stock trading
by akashameer Tue Jun 30, 2015 9:03 pm

» 2015 පළමු කාර්තුවේදී සංචාරක ක්ෂේත්‍රයේ 13.6% ක වර්ධනයක්
by GameUP1030 Tue Jun 30, 2015 8:54 pm

Sri Lanka bank liquid assets shrink amid peg defence

View previous topic View next topic Go down

Sri Lanka bank liquid assets shrink amid peg defence

Post by monash on Sat Jan 28, 2012 11:28 pm

Jan 28, 2012 (LBO) - Liquid assets in Sri Lankan banks are falling and loan to deposit ratios are deteriorating, with some banks reaching 100 percent, Fitch Ratings Lanka said as authorities continued to defend a dollar peg creating a liquidity crunch.
Fitch said in an report on the outlook on Sri Lankan banks that loan to deposit ratios of some banks with "less mature deposit franchises" are approaching 100 percent.

Loan to deposit ratios have risen from about 77 percent by end-2010 to 80 percent by June 2011. By September loan to deposit ratios of banks tracked by Fitch had risen to 90 percent.

Sri Lanka's Central Bank started to defend a dollar peg actively from around July by selling foreign exchange to banks in return for rupees as credit growth picked up and put pressure on a dollar soft peg.

The foreign exchange interventions caused liquidity shortages, forcing rates up, even though there has been no formal raising of policy rates.

Fitch said deposit rates have risen and bank net interest margins were shrinking.

To prevent rates rising further, the Central Bank offset or 'sterilized' interventions in the forex market by purchasing Treasury bills including from banks and injecting liquidity (printing money) in to money markets.

The liquidity fuels new credit, triggering fresh imports, resulting in further reserve losses, creating a vicious cycle of expansionary sterilized interventions.

Balance of payments crisis are a problem associated with so-called 'soft-pegged' central banks which try to target an exchange rate and then also tries to control interest rates by printing money.

Fitch said banks have been selling down liquid assets held largely in the form of government securities which are gradually channelled into lending, though lenders have to keep at least a 20 percent liquid asset to total liabilities ratio to meet regulations.

The Central Bank held 180 billion rupees of Treasury bills in its domestic asset portfolio by January 2012 from near zero in July 2011 as balance of payments pressure gathered pace.

Banks are now paying as much as 12 percent or more for customer deposits but 3-month Treasury bills yield as little as 8.67 percent and 12-month bills only 9.30 percent creating an incentive to get rid of Treasuries.

LBO's economics column warned over five months ago that banks were not raising enough deposits to fund rising credit growth and that the country was heading towards a balance of payments pressure and rates have to be allowed to move up fast to prevent the peg breaking.

"There is a persistent imbalance between loans made and deposits raised by the banking system, indicating that a market clearing interest rate is needed to maintain the peg to the US dollar," LBO's economics columnist fussbudget warned in August.

"To head off any 'balance of payments' problem the central bank has to weaken the rupee or allow interest rates to go up. If neither happens, credit expansion is on track to crash land in the balance of payments."

When banks raise deposits consumption is curbed (reducing pressure on the forex market) and only that 'demand' is released as credit.

But when Treasury bills are sold to the Central Bank, newly printed money is expansionary generating new aggregate demand and pressure on the peg through imports.

"Deteriorating loan to deposit ratios and declining liquid assets demonstrates in practice how this phenomenon works through the balance sheets of banks," LBO's economics columnist fuss-budget says.

"It is also interesting to note that the decline in liquid assets is the first step of how a currency crisis transforms into a banking crisis.

"The emerging trends in the banking system should be carefully noted and not forgotten so that interest rates are allowed to move up in the future without delay so as to head off episodes to balance of payments pressure as soon as credit growth becomes too strong."

A fully fledged banking crisis happens when interest rates rise and remain at levels for long enough so that it no longer makes sense for businesses to borrow and they start to default and bad loans mount.[b]

Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Posts: 334
Equity Stars: 3008
Reputation: 16
Join date: 2011-01-22

Back to top Go down

Re: Sri Lanka bank liquid assets shrink amid peg defence

Post by Antonym on Sun Jan 29, 2012 12:10 am

This is a concern, folks... It looks like CBSL will need to depreciate the rupee sooner or later.
Do you think foreign funds will hold back equity purchases in anticipation of another devaluation?

Vice President - Equity Analytics
Vice President - Equity Analytics

Posts: 1034
Equity Stars: 4149
Reputation: 272
Join date: 2011-02-09

Back to top Go down

View previous topic View next topic Back to top

- Similar topics

Permissions in this forum:
You cannot reply to topics in this forum
Who is online?
In total there are 135 users online :: 4 Registered, 2 Hidden and 129 Guests

CARACALLA, kuma524, SECTOR, stockback

[ View the whole list ]

Most users ever online was 541 on Mon Sep 19, 2011 11:29 am
We have 12760 registered users
The newest registered user is bgmandate100

Our users have posted a total of 263984 messages in 40727 subjects
Forum Rules & Guidelines
Sri Lanka Equity Analytic

The information contained in this forum have been submitted by third parties directly without any verification by us. The information available in this forum is not researched or purported to be complete description of the subject matter referred to herein. We do not under any circumstances whatsoever guarantee the accuracy and completeness information contained herein. its blogs, forums, subdomains and/or its affiliates and/or its web masters, administrators or moderators shall not in any way be responsible or liable for loss or damage which any person or party may sustain or incur by relying on the contents of this report and acting directly or indirectly in any manner whatsoever.

Trading or investing in stocks & commodities is a high risk activity. Any action you choose to take in the markets is totally your own responsibility, its blogs, forums, subdomains and/or its affiliates and/or its web masters, administrators or moderators shall not be liable for any, direct or indirect, consequential or incidental damages or loss arising out of the use of this information. The information on this website is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The writers may or may not be trading in the securities mentioned.

Latest News Tweets