Thanks to the Bull Run fuelled by the post-war optimism, Sri Lanka in 2010 created the most amount of new share market investors with the record figure almost equaling preceding four years combined total thereby propelling the overall number to pass the half a million mark.
The Colombo Stock Exchange (CSE) last year saw a record 57,093 new Central Depository System (CDS) accounts opened up by 27% from 2009. Last year’s figure beat the previous highest of 56,465 achieved in 2005. Interestingly the 2010 figure nearly equaled the total number of new accounts opened between 2006 and 2009.
Between 2001 and last year the number of CDS accounts had increased by 70% from 361,643 to 554,000.
Analysts attributed the massive increase in the new openings to the Bull Run enjoyed by the market, making equities investments the most attractive especially in a relatively low interest rate regime. The re-rating of the market and company valuations in tandem with post-war rebound and optimism was another reason.
The Colombo stock market is the world’s consistently best performing for the past two years with 96% return in 2010 and 125% in 2009. This year so far with 9.5% return Colombo remains Asia’s best performing, a fete it has enjoyed for two consecutive years as well.
The country also saw 10 new IPOs including the popular ones such as Singer Finance Plc (which created the highest ever oversubscription of 135 times), thereby beating the previous record established by Odel in recent years.
Despite the massive flowing only 13% of the accounts (72,000) were traded once in 2010. However this percentage is more or less equal to previous years. According to the Securities and Exchange Commission (SEC) approximately 7,000 account holders trade on a daily basis.
Analysts as well as the CSE and SEC agree that the number of new investors as well as active trading will swell this year with an estimated over 50 IPOs scheduled.
The SEC in its 2011 to 2013 roadmap presented recently said that among its core objectives will be to facilitate the widening and broadening of the investor base.
“We think that it is important to increase the number of active investors in the CSE as well as to increase awareness among the investors.
The importance of this goal is to broaden the investor base to increase the liquidity of the market to minimise market manipulations and other market abuses,” SEC Chairperson Indrani Sugathadasa said at the unveiling of the roadmap.
She also said that the stock market should venture into rural areas further in order to achieve our objective of widening and broad basing of investor base. “More investors in the stock market will create more liquidity.
The liquidity of the stock market provides investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments,” the SEC Chairperson pointed.
Noting that the CSE has already ventured into 4 provinces, she said the development projects that are underway in the Northern and the Eastern provinces has shown a full swift where the society is very interested in knowing the latest development at the stock market and to invest in it. All 5 existing branch offices of the CSE have performed exceptionally well during the year 2010 and the SEC would like the CSE and stock brokers to venture into other areas such as the East in the near future by establishing branch offices.
SEC Chief also identified the Unit Trust industry, a vital segment of the capital market of as the best conduit to mobilise savings of the less sophisticated small investors. “Therefore, the SEC encourages small scale investors to start their investment through Unit trust as it is less risky than investing in the market directly. To achieve this goal, the SEC already has suggested a marketing plan to promote Unit Trust within Sri Lankan community,” Indrani Sugathadasa added.
She also urged brokers to enhance access to clients. “This could be achieved by providing clients with internet trading facilities which we encourage. We think it is important to increase the number of active investors in the CSE as well as to increase awareness among the investors on the stock market,” she added.
The SEC has expressed confidence that the market capitalisation in 2011 will increase to Rs. 3 trillion from Rs. 2.2 trillion in 2010. Year to date it has already grown by 9.3% to Rs. 2.4 trillion.
Commercial Credit says to list in June
Commercial Credit Ltd., a registered finance company, said yesterday that it will list on the Colombo Stock Exchange (CSE) in June.
The plan for listing was announced by Commercial Credit Chief Executive Roshan Egodage in a statement marking the opening of the Ratnapura branch last week.
From a loss making year in 2009, Commercial Credit said it was set to deliver a predicted minimum profit of a Rs. 400 million at the end of the current 2010/11 financial year. This it said was “an unprecedented growth not achieved by any finance company.”
Operating an asset base of Rs. 1.5 billion at the time of takeover, the company’s current asset base stands at Rs. 4.4 billion, and Egodage expressed confidence this figure will reach Rs. 6 billion by the end of the financial year in March 2011, officially propelling the company into the ranks of the largest finance companies in the country.
The Interest Income and Interest Expenditure Gap – the core income of a finance company, grew a staggering 700% from Rs. 10 million to Rs. 70 million per month from 2009 to 2010, while the Cost to Income Ratio fell from 85% to 45%, well below the industry average of 83%.
Meanwhile monthly collections recorded a 500% increase from Rs. 60 million in 2009 to 300 million at the end of 2010, while the Gross NPL ratio fell from 12% to 2%.
Dhammika turns Mr. Aluminium!
Triggers Takeovers and Mergers Code by increasing stake in number two in industry Lanka Aluminium from 29% to 37%; Move after Hayleys in which Dhammika is the single largest shareholder took over number one firm Alumex for Rs. 2 b late last year
Young business leader Dhammika Perera yesterday returned to the takeovers scene which he once dominated in early 2000s, by buying 8% stake in Lanka Aluminium Plc thereby increasing his stake in the number two player in the industry to around 37%.
The block amounting to 1.14 million shares was done at Rs. 41.50 via a crossing in a deal worth Rs. 47 million. As at 30 September, 2010, Dhammika held 26% stake whilst sources said that he had increased it to close to 30% until yesterday’s purchase.
Yesterday in total 1.18 million shares of Lanka Aluminium traded between a high of Rs. 41 and a low of Rs. 38 before closing at Rs. 41, up by Rs. 4.90. The seller was Rhino Roofing part of the St. Anthony’s Group.
In mid last year Dhammika paid Rs. 34 per share for the block of 3.5 million shares representing the 25% stake. The seller was Alchemy Heavy Metals,
Lanka Aluminium is controlled by a foreign fund or trust by the name Clovis Company Ltd., which owns 51% stake. The net asset per share at company level is Rs. 27 whilst at Group basis it is Rs. 33.
The acquisition by Dhammika comes following Hayleys Plc late last year acquiring control of number one player in the aluminum industry Alumex, a family held venture for Rs. 2 billion. Dhammika owns 29% stake in Hayleys.
The Company which is engaged in the manufacture and sale of aluminium extrusions, as at 31 March, 2010 had Rs. 556 million in assets (net asset per share of Rs. 28) whilst at Group level it was Rs. 1.15 billion (net asset per share of Rs. 34).
Net profit attributable to equity shareholders of Lanka Aluminium increased from Rs. 32 million in 2008/9 to Rs. 50 million in 2009/10 whilst the company’s net profit rose from Rs. 20.5 million to Rs. 41 million. Whilst the company turnover dipped from Rs. 660 million to Rs. 525 million, at Group level, top line grew from Rs. 2.3 billion to Rs. 2.5 billion.
Group includes Castalloys Ltd., which manufactures aluminium castings, Classic Teas Ltd., which exports tea and Comark Lanka Ltd., , which does trading in Aluminium extrusions and accessories.
source - www.ft.lk
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