Thursday, October 13, 2011

Rubber optimism intact

While the tea industry seems to be losing its lustre, the rubber industry is enjoying a healthy boom and seems comfortably geared for the next three months as well.

Achieving prices quoted at Rs. 600 per kg during the first nine months of the year, the last quarter will follow the same healthy pattern, Colombo Rubber Traders’ Association Chairman M.S. Rahim said yesterday.

Rahim stated that prices had remained high and that even if prices were brought down in any way during the next three months, the industry would still boom. “We have had a very dry season, therefore production is heavy and they have been tapping well. Even if there is a price drop, this would be compensated by the high production, which will keep the industry afloat.”

In 2010 total production was 153,000 kilos he said. “This year will be definitely more,” Rahim acknowledged, conceding that he could not give a proper figure at this point.

Rubber exports have increased from 35-45%, from which the majority is exported as solid rubber tyres.

Rahim noted that even with the State increasing the cess from Rs. 4 to Rs. 12, prices had been holding up fine until September. Production of classic white crepe rubber was sold at over Rs. 600 per kg.

“Sri Lanka is the only country that produces this kind in such good quality. Therefore, despite the troubles in Europe, the demand for it never died,” he explained.

Even the 1X crepe rubber used mostly for Sri Lanka’s consumption traded at Rs. 450 on average.

On Minister of Industry and Commerce Rishad Bathiudeen’s statement in Parliament on rubber manufacturers asking for a hike in cess, Rahim claimed that the statement was “irrational” and was one that was unlikely to be imposed.

“If there is an increase in the cess, it will kill the market. Demand will go down rapidly as the situation anyway is a decrease in demand as most countries including China slowing down,” he said.

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Tea industry looking at bleak Q4

By Cheranka Mendis

Sri Lanka’s tea industry has been battered and beaten by the weather gods this year and is now looking at lower production volumes and low auction prices despite early expectations of the year continuing the trend of 2010, which ended off as a record year for the industry.

Colombo Tea Brokers’ Association Chairman Sudath Munasinghe told the Daily FT that thanks to the weather patterns, production would amount to 225 to 227 million kilos this year. Total tea production at the end of 2010 was recorded as 333 million kilos. “It is purely a weather-related issue,” Munasinghe said.

“The south west monsoon was a bit of a flop this year and the north east monsoon is to start in November – a delayed start from the usual – which would not help the industry.”

Comparing fourth quarter expectations to last year figures, Munasinghe stated that total crops in October, November and December last year were 26.6 million, 26.7 million and 25.7 million respectively. He anticipates 23-24.5 million, 25.5 million and 25 million for the same months this year. The latest statistics which list August 2011 figures show the production level to have been 23.9 million in the said month.

“During the first eight months of the year (January to August) in 2010, production was recorded as 222.7 million. This year production during the same period was 220.9 million.”

Commenting on production in different elevations, Munasinghe stated that the high growns had increased in production by 1.7% while mediums had fallen by 7.8% compared to the previous year. The lower grade teas have also declined by 0.8%. Tea prices at auctions too have maintained lower numbers than the previous year and the negative trend is expected to continue in the fourth quarter as well. “Up to now we are below last year’s Colombo auction prices.”

He stated that the end September sales were at Rs. 361.49, while in 2010 the auction price was Rs. 369.39 at the end of the period.

“The prices will not be the same as last year. However, the reasons for this purely lie in the unrest in the Middle East and the devaluation of currency in certain countries such as Russia, which devalued its currency twice within the last month itself.”

He noted that even though Russia was buying tea in large volumes, the drop in purchasing power had affected pricing.

“At the beginning of 2011, we expected the year to continue the extremely positive trend of 2010. In that year the industry marked records in production and average auction prices as well as US$ earnings.”

The tea exports sector however is the only silver lining for the industry. In August export volumes were better than in 2010, he said. Exports within the first eight months of the year have been valued at 209.8 million kilos, while in 2010 the volume was 200.8 million kilos during the period.

“Earnings have increased 4% more than last year,” he asserted. Total earnings as at now stand at Rs. 107 billion, a 26% increase from Rs. 98.8 billion in 2010. “In US$, we have earned US$ 968 million, an 11% increase from 2010, at Rs. 869 million.”

On FOB values, Munasinghe acknowledged that this year the value was 4.6 per kilo while in 2010 the value was 4.3 per kilo.

Touching on concerns for the industry, the Chairman stated that the regional plantation companies were struggling for survival due to the bad production. “With low production and the 27% wage increase, the regional plantation companies have had a tough year so far, which is likely to continue unchanged within the next three months.”

Causing additional hindrance to the local trade is the unrest in Syria and Libya as well as the US sanctions on Iran.

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New Europe-based fund buying into JKH

Buying by a new fund operating out of Europe into premier blue chip John Keells Holdings (JKH) has been the only silver lining in an otherwise gloomy Colombo stock market.

Analysts said that the fund based in London has been picking up available JKH quantities during the past two market days, including yesterday. The major seller on most days had been the Captains out of their trading portfolio.

Foreign holding in JKH had increased by three million shares to 317.6 million shares (or nearly a 38% stake) from 314.6 million shares on Friday.

Yesterday JKH saw 2.17 million of its shares traded for Rs. 434.7 million, of which 1.56 million shares were done via six crossings at Rs. 200. The bulk of the buying had been by the foreign fund.

On Monday, 1.63 million shares of JKH traded for Rs. 325.6 million inclusive of 0.87 million shares via three crossings at Rs. 200 each.

On Friday slightly over one million of JKH shares traded before closing at Rs. 202.50. Of the quantity traded, 0.45 million shares were done via two crossings at Rs. 201 per share.

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DNH welcomes framework for ETFs, says timing crucial

DNH Financial Ltd. yesterday welcomed the availability of regulatory framework for Exchange Traded Funds (ETFs).

The Daily FT yesterday exclusively reported this development in tandem with new Code for Unit Trusts being gazetted.

“Whilst ETFs could indeed provide a desirable investment opportunity for investors to tap the local market, its attractiveness will to a large extent depend on the performance of the market as ETFs are generally passive investment schemes. Consequently, market timing will be critical in the launch of any ETF,” DNH added in a commentary in its daily report on the market.

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ASI back to negative return as Rs. 22 b in value wiped off

The Colombo stock market yesterday is back to negative return territory for the second time in three months as Rs. 22 billion in value was wiped off due to lack of confidence and other concerns.

The All Share Index (ASI) dipped by nearly 1% bringing its year-to-date return to a negative 0.48%. On Monday it was a face-saving positive 0.5%. In mid-July the ASI sank to a negative return of 0.6% but recovered subsequently.

The overall negative run and gloomy outlook persists at Colombo bourse with analysts blaming it on a multitude of reasons. Though macroeconomic fundamentals are healthy as confirmed by Central Bank’s post-October monetary policy review, analysts cited the lack of overall confidence in the market due to certain manoeuvres of questionable nature.

Some also blamed overregulation; whilst others said prices dropping from their highly unrealistic levels was a good thing.

Yesterday’s turnover was only Rs. 1.6 billion and 64 million shares traded, with nearly 166 counters suffering dips.

“We believe that the selling has been partly due to the deadline (15 September 2011) nearing for the submission of the debtors’ list. We also believe the heavy speculative drive the bourse witnessed over the past months has reached some point of saturation with the market lost for direction. However, foreigners seem to have regained participation in fundamental counters, which had registered minimal price change over the past months,” Arrenga Capital said.

Apart from deals on JKH, a block of 15.7 million shares of Softlogic Holdings traded via a crossing at Rs. 20 each. In total 16.1 million Softlogic shares traded for Rs. 323 million with price down by 1% to Rs. 20.10.

Serendib Hotels increased the speculative count lot as the voting closed low at Rs. 30.4 after hitting an intra-day Rs. 37.9 whilst the non-voting also closed with a 6.7% dip at its close of Rs. 22.4 after touching a high of Rs. 24.7.

Regnis Lanka’s speculative play remained unfettered to the weak market play as it gained 1.7% at its close of Rs. 503.4 It was seen advancing especially after mid-trading hours. Colombo Land & Development continued to decline with heavier selling side, with Asian Alliance Insurance seen leading the price losers’ list after shedding a solid 26.5%. Some investor participation was evident in Citrus Leisure as the counter appreciated 6.2% whilst closing at Rs. 64.9.

Thanks to JKH, the market saw net foreign inflow of Rs. 427 million. DNH Financial said that although net foreign selling had generally been on a rising trend on a year-to-date basis, it shouldn’t be a cause for concern and did not in any way indicate a declining appetite for Lankan equities.

“Foreign investors battered by global markets are understandably shaving off profitable positions in the Sri Lankan bourse,” DNH said, adding that a significant majority of foreign portfolio investments were likely to have been made during pre-bull run years at considerably lower price levels.

Meanwhile, world and European stocks were at a three-week high with car manufacturers as top gainers. Chinese shares were on a rebound. The MSCI Asia Pacific Index gained 0.8%, erasing its early losses with S&P 500 Index also advancing by 1%. Euro stocks fell earlier on speculation of the political dispute in Slovakia expecting to delay the approval of Euro’s bailout fund.

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PLC aims phoenix rising from markets ashes!

Way to wow the world?

■Issuer of Rs. 7 b biggest post-war IPO People’s Leasing confident of success midst challenges

■Says pricing attractive with good upside, robust leasing industry growing at double digit

■Preferential allocation for foreigners; strong appetite following road shows in Singapore, Hong Kong; next stop is three cities in India; managers believe IPO will lift the Colombo bourse

Given the bearish conditions in local and global stock markets, the timing may be highly challenging, but issuer of Sri Lanka’s biggest post-war IPO, People’s Leasing Plc (PLC) yesterday expressed confidence that the Rs. 7 billion offering would be a success.
“We are coming to the market without any overhang of pre or private placements. We have remained successful as the leader for the past nine consecutive years in the leasing industry, which is booming given the post-war momentum, and the country’s economy is on the rebound overall,” PLC’s longstanding Chief Executive Officer D.P. Kumarage told the Daily FT yesterday on the sidelines of the company’s media launch of the mega IPO.

Involving 390 million shares at Rs. 18 each, PLC’s IPO which is now open for subscription is the biggest since Dialog’s Rs. 8 billion offering in 2005. As a truly home-grown Sri Lankan entity PLC’s IPO is the biggest ever.

Whilst everything from company’s outstanding track record in mere 15 years, solid backing parent – People’s Bank, pricing, future earnings upside to growth prospects for the industry seems perfect, Kumarage admits the timing is tough.

“Yes, the market has had some bad experiences and had lost faith in IPOs. On top of it, the Colombo market has remained bearish whilst global markets are underperforming. These are the biggest challenges, but we remain confident,” added Kumarage, who has been PLC’s CEO and General Manager since 1997.
Having begun with a capital of Rs. 10 million, one-and-a-half decades ago, today PLC is Rs. 65 billion worth asset-strong. In FY2011, its after-tax profit was a whopping Rs. 2.58 billion, up from Rs. 1.2 billion in the previous year and reflecting a compound annual growth rate of 36%.

Top line enjoying a 12% CAGR was Rs. 9.8 billion in FY2011. The phenomenal growth in assets had been whilst ensuring top quality with non performing loan ratio of a mere 1.2% as at March 2011. Leasing industry is estimated to grow by 25% per annum over the next few years.

“We have been the market leader in leasing for nine consecutive years. The company possesses the potential to scale to greater heights in the next decade. I am confident that this IPO will receive an overwhelming response from investors, both individual and institutional enhancing the value for our shareholders, whilst strengthening our capacity to fund our ambitious growth plans in the future,” Kumarage added.

Noting that the IPO has the best potential to lift the Colombo bourse, joint managers to the issue NDB Investment Bank and Capital Alliance Holdings said the pricing of Rs. 18 was very attractive with an upside both in the short and medium term. From recurrent earnings basis the pricing reflects a PE of eight times, much attractive than some of the financial services peers in the Colombo bourse.

Based on the response at recently concluded road shows in Singapore and Hong Kong, the IPO has already elicited foreign appetite. Similar exercises are planned in three Indian cities Mumbai, Bangalore and Chennai.

Given the sheer size, liquidity as well as strong fundamentals, the PLC is expected to be a sought-after stock in Colombo bourse for foreigners.  To make it a success, a 30% allocation has been set aside for Identified Investor Category which includes foreigners. Retailers will get 22.5% share and non-retail will get 27.5% along with 10% for Unit Trust and 10% for employees out of the IPO quantity.

The primary objective of the Issue is to obtain a listing for the Ordinary Voting Shares of PLCL on the CSE to comply with the regulatory requirement of the Monetary Board.

As a company carrying on business in the finance sector, primarily in the leasing and HP financing business, it is intended that the entirety of the monies raised through the Issue, subsequent to meeting all expenses in relation to the same would be utilised to part finance the loan disbursements made by the company to its customers during the remaining period of the FY 2011/12 through financial products such as leasing, HP and loans.

It is estimated that the funding requirement for such disbursements would amount to approximately Rs. 12-14 billion which is in excess of the total monies to be raised from the Issue. The balance funding requirements for disbursements would be financed through means such as bank borrowings, issuance of promissory notes and asset backed securitised instruments.

The increase in stated capital of the company subsequent to this Issue would improve its debt to equity position and would enable the company to leverage its balance sheet and raise the requisite debt financing in a comfortable manner.

The company expects to utilise the monies raised from the Issue before the end of FY 2011/12.
In addition, the IPO would facilitate PLCL to broad base the public ownership of the company and strengthen its identity through increased visibility and brand image amongst the public. PLCL believes that fulfilment of these objectives will further enhance the growth of the business operations of the company.

The company provides its financial services through a wide network comprising 37 regional branches and 121 window offices located within PB branches. Disbursements have grown at a Compounded Annual Growth Rate (CAGR) of 32% from Rs. 13.8 billion in FY 2006/07 to Rs. 41.8 billion for FY 2010/11 – resulting in an impressive 35% CAGR in the total assets of PLCL.

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Commercial Banks deliver record interim performances

Prasad Polwatte and Asanka Liyanage

The Sri Lankan economy is bouncing back with a projected nine percent growth in 2011, in the backdrop of a further fillip through increased foreign direct investments or FDIs with the surge in tourist inflows.

The Foreign Direct Inflows in the first quarter of 2011 totalled US$ 236m.

It was reported that the local financial markets were more stable with improved liquidity and declines in interest rates since the beginning of 2010.

The exchange rates were fairly stable during the period and the same trend is likely to continue in 2011. On the other hand financial markets encourage long-term borrowings through Initial Public Offering (IPOs) of shares and debentures which contributed to downward trend in interest rates.

The banking sector sustained its earnings via investment income from government securities and equities. In this article an effort has been made to compare and contrast the performances of Licensed Commercial Banks (LCBs) in the first half 2010 and 2011. Both state and private LCBs overall performances were comparatively higher and almost all key performance indicators showed an improvement.

Except Seylan all LCBs have increased their profits. Significant increases are noticeable in the performance of the two state banks and Commercial Bank and Pan Asia Bank of the Private Sector.

The main reason for this increases were the reduction in provisioning for bad and doubtful debts and loans written off compared to previous year. However, the increments in interest income and interest expenses were fairly moderate.

In the case of DFCC bank the results of 2010 included profit relating to the sale and change of classification of part of the Bank's shareholding in Commercial Bank Ceylon PLC (the contribution to profit after tax from this CBC share disposal was Rs 5,282 m). Generally, LCBs performances have improved in all measures and paved the way to set aside money for loan defaults and improved liquidity for on lending.

Even though an increasing trend was visible in the growth in Advance portfolio of the banks (Approximately 20% to 30%) the interest income showed only a marginal increase because of the decrease in Average Weighted Prime Lending Rates (AWPLR). Further, LCBs were more concentrated on Government securities and that especially in Treasury Bills, of which interest rates have decreased considerably during the period.

LCBs have shown an average deposit growth around 20% to 30% in the first half of 2011, and also, the same growth is reported for loan and advances.

These were remarkable achievements, when deposits during the period have experienced unattractive low interest rates. In sharp contrast the growth in loans and advances were not adequate with low interest rates offered by banks.

Apart from the Commercial and Nations Trust Bank shares, prices of all other LCB shares have declined during the period. This reduction in prices might be mainly due to overall declining trends in prices in the Colombo Stock Exchange. However, even with the drop in market prices, market prices of LCBs alone were positioned well above their respective book values. Due to the improved profits in the first six months of 2011, all LCBs have made a remarkable improvement in their ROA and ROE except Seylan.

Banks exercise a delegated function of CBSL as a monitor to ensure that firms use the resources allocated to them effectively.

They also play an important role in sharing risk in the economy by diversifying and thereby minimize market fluctuations during the period. Key performance indicators showed an overall improvement in the first half 2011.

However it was mainly due to the efficient recovery actions rather than profits generated from core banking activities.

Therefore, a greater challenge persists for LCBs to sustain and improve upon the first half performance to the next lap due to external shocks, immerging competitors, new regulations and tax structure.

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Sri Lanka unveils 'Pure Ceylon Cinnamon' brand

At Anuga Trade Fair, Cologne, Germany:

Sri Lanka has unveiled the "Pure Ceylon Cinnamon" brand to the world. Pure Ceylon Cinnamon is Sri Lanka's second national brand, the first being 'Pure Ceylon Tea'.

Industry and Commerce Minister Rishad Bathiudeen announcing the Pure Ceylon Cinnamon brand at the Congress Centrum Nord (hall) at the Anuga Trade Fair in Cologne, Germany.

"I request you to take the message of "Pure Ceylon Cinnamon" to promote our Cinnamon. I also warmly invite you all to taste the unique flavour and inhale the smell of pure Ceylon cinnamon with Ceylon tea," said Industry and Commerce Minister Rishad Bathiudeen announcing the "Pure Ceylon Cinnamon" brand to the world at the Anuga Trade Fair in Cologne, Germany on Tuesday.

Minister Bathiudeen was addressing the "Pure Ceylon Cinnamon" international launch event at the Congress Centrum Nord Hall in the Anuga Trade Fair in Cologne.

"The Export Development Board, which comes under my Ministry has developed a trade mark for cinnamon, to market it as a branded product. The Lion logo is the second National Brand launched by the Sri Lankan government for an agriculture product after Ceylon tea. This trade mark will be registered in the USA which is the major market for cinnamon and also in the European Union. The Export Development Board will take necessary initiatives to closely monitor the export process, to assure the maintenance of required quality standards by the exporters, to qualify to export cinnamon under the "Pure Ceylon Cinnamon" trade mark.

"I also wish to mention that cinnamon export companies in Sri Lanka have obtained HACCP certificate for their processing centres to conform their produce to international food safety regulations," Minister Bathiudeen said.

Sri Lanka is the largest producer of true cinnamon in the world accounting for about 70% of the global supply. The cinnamon growth trend looks set to continue in future driven by the realization of the dual value in Cinnamon, that, it is not only a spice but also has become a weight loss aid, which shows the increasing touch-points of Pure Ceylon Cinnamon brand as it gains more recognition thereby showing the urgent need for brand engagement at international level.

Minister Bathiudeen will also be promoting "Sri Lanka Expo 2012" outside the Anuga venue in Cologne (two events) and Frankfurt (one event). Sri Lanka Expo 2012 is the premier international trade fair organized by the EDB and will be held from March 28 to 30, 2012 at the BMICH in Colombo.

Anuga Trade Fair is the world's largest food, beverage and catering exhibition with over 6,596 exhibitors (from 100 countries) and around 150,000 trade visitors from 180 countries joining in 2011.

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Minimum capital rule for insurance supervision

The Insurance Board of Sri Lanka (IBSL) as the insurance regulator considering the growth in the insurance sector, international developments and the requests made by the insurance industry, has taken a decision to transform the rules-based supervisory system to a risk-based capital model (RBC).

This project was funded by First Initiative and the technical assistance was provided by the World Bank.
The World Bank and First Initiative had appointed Deloitte Touche Tohmatsu India to propose a suitable risk sensitive capital regime for the Sri Lankan insurance market.

This transformation will help to ascertain varying risk profiles of different insurers and to be consistent with the international best practices and emerging standards of the International Association of Insurance Supervisors (IAIS). This project comprises five phases, namely, Market Analysis, Qualitative Report, Quantitative Report, Final Draft Rules and Training.

The consultants have already completed the first two phases of the project and the feedback of the insurance industry was obtained for the Qualitative Report. During the seminar organized by the IBSL on October 3, 2011, the Quantitative Report which is the third phase of the RBC project was presented to the insurance industry with the objective of introducing its basic concepts.

This seminar was held with the participation of the Chairperson and the Board Members of the IBSL and representatives of World Bank, Deloitte Touche Tohmatsu India all insurance companies and their audit firms.

IBSL has granted a one month time period to the insurance industry participants to comment on the Quantitative Report.

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People’s Leasing IPO to raise Rs 7 b


People’s Leasing announced yesterday of it’s Rs 7 billion IPO issuing 390 million ordinary shares at Rs 18 per share, the largest IPO since 2005, at a press conference in Colombo.

The IPO will be open on November 3 and will be considered a unique opportunity for investors to partner the growth of this aggressively expanding leasing company. The new shares will amount to 25 percent of the issued and paid up ordinary shares of the company subsequent to the issue.

The trend in vehicle growth in a country is driven by per capita income. As Sri Lanka expects to double its per capita income the motor industry is envisage better prospects. In this backdrop, the IPO of People’s Leasing Company Limited will be attractive for strategic investors, PLCL CEO D.P. Kumarage said.

“We do not expect substantial changes in the duty structure for motor sector and this will augur well for the industry growth and sustainability, he said.

The increase in the stated capital of the company subsequent to this issue would improve its debt to equity position and would enable the company to leverage its balance sheet and raise requisite debt financing in a comfortable manner. The IPO will also facilitate to broad-base the public ownership of the company and strengthen its identity through increased visibility in brand image amongst the public, he said.

There is scope for credit growth in Sri Lanka as Sri Lanka’s private sector credit was among the lowest in Asia highlighting the underleveraged status. It was 28 percent of GDP in Q1 2011.

The PLCL is keen on attracting long-term investors and especially the foreign investors. The company had conducted several road shows in identified countries. This was a huge success and 30 percent of the preferred allocation of shares will be for foreigners where 1.5 million shares will be offered to the retail investors and the balance will be in accordance to the tender process.

“People’s Leasing is one of the fastest growing leasing companies in the country with a clear 25 percent market share. The company processes the potential to scale to greater heights in the next decade. We are confident that the IPO will receive overwhelming response from investors, both individuals and institutional, enhancing the value for our shareholders, while strengthening our capacity to fund our ambitious growth plans in the future,” he said.

The funds raised through the issue will be utilized to part finance the loan disbursements made by the company to its customers during the remaining period of 2011/12 through financial products such as leasing, hire purchase and loans.

PLCL started its commercial operations in 1996 as a fully owned subsidiary of People’s Bank to provide leasing and related services to the bank’s customers. It has an asset base of Rs 65 billion and a workforce of over 1,000 employees at present. Its monthly disbursement value stands at Rs 5 billion and has recorded improved performance in disbursement and profitability on year on year basis where it recorded Rs 2.5 billion PAT for the last financial year.

The company provides its financial services through a wide network comprising 37 regional branches and 121 window offices located within People’s Bank branches.

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SEC Investor Day at SLECC

The Securities and Exchange Commission of Sri Lanka (SEC) is celebrating its 24th anniversary in October 2011. In view of this the SEC has made arrangements to conduct an educational exhibition and a road show titled "Investment Day 2011" at the Sri Lanka Exhibition and Convention Centre (SLECC) on October 22, 2011 from 9.30 a.m. to 5.00 p.m.

The Investment Day 2011 will comprise over 50 stalls from the Colombo Stock Exchange, Stock broking companies, Unit Trust Management companies and top listed companies. The road shows held so far in Galle, Kandy, Kurunegala, Negombo and Ampara have been a tremendous success with the participation of around 1000 existing and potential investors at each Road Show.

The highlight of Investment Day 2011 is to showcase Listed Companies on the Colombo Stock Exchange and give potential investors the opportunity to get investment advice, discuss investment opportunities with Stock Broking companies, open CDS accounts to transact in shares, meet Unit Trust Companies and explore investment opportunities in Unit Trusts.

Participants will get the chance to witness the re-enactment of the open outcry system. The Investment Day will also feature prominent professionals from the securities industry, who will address the gathering on a wide spectrum of topics throughout the day, ranging from investing in the stock market, unit trusts and the debt market in all three languages.

Entrance to the Investment Day 2011 will be free.

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JKH holds price in dull trading on CSE

Nearly 2.2 million JKH changed hands on the Colombo bourse yesterday where sentiment was dull and both indices came down fairly sharply – the All Share by 64.81 points (0.97%) and the Milanka by 29.98 points (0.51%) on a turnover of Rs.1.59 billion, down from the previous trading day’s Rs.3.02 billion, with 30 gainers way behind 167 losers.

"The market lost quite a bit of ground and sentiment was dull," Prashan Fernndo of Acuity Stockbrokers said. "Other than JKH, large volumes of Softlogic Holdings, Serendib Hotels and Colombo Land were transacted."

JKH closed flat at Rs.200 with nearly 2.2 million shares done between Rs.199 and Rs.200 including six crossings totaling to nearly 1.6 million shares done at the Rs.200 price.

Softlogic Holdings saw a crossing of 15.7 million shares at Rs.20 with the counter closing 20 cents down at Rs.20.50 with a total of over 16.1 million shares, including the crossing, done between Rs.19.80 and Rs.20.70.

Serendib Hotels lost Rs.2.60 to close at Rs.30 on nearly 2.7 million shares done between Rs.30 and Rs.37.90 with brokers saying that the company’s plan to re-brand its properties had attracted investor interest.

Regnis once again went over the Rs.500 mark gaining Rs.8.20 to close at Rs.504.30 on nearly 0.2 million shares done between Rs.477.10 and Rs.504.30.

Colombo Land lost a rupee to close at Rs.60 on over a million shares done between Rs.59.50 and Rs.61.40. A parcel of 500,000 shares of this counter was crossed at Rs.60.

Brokers said that the day’s trading on Softlogic Holdings accounted for 1.9% of the company and the retail selling was focused on Regnis, Serendib Hotels and Colombo Land. Retail selling was seen on Asian Alliance Insurance which dropped sharply by Rs.88.20 to close at Rs.241 on 0.1 million shares done between Rs.240 and Rs.311.

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Commercial Credit PLC ‘Best Finance Company in Asia’

* Top honours at UDC Business Awards 2011
Commercial Credit was adjudged the ‘Best Finance Company in Asia’ at the recently concluded international UDC Business Awards in Malaysia.

Presented by the former Prime Minister of Malaysia, Dr. Mahathir Mohamed, the Award was accepted on Commercial Credit’s behalf by the DGM - Corporate Planning Andrew Samuel in the presence of DGMs (Operations) K.L.A Senevirathna and Sudath Jayasekera.

"Winning the prestigious international UDC Business Awards validates Commercial Credit’s reputation as an eminent financial institution in the Asian region, and puts the company on the global map of leading finance institutions", Commercial Credit PLC, CEO Roshan Egodage said.

Presented for the first time by the Universo De’Comercio (UDC) UK in collaboration with El Universo De’Comercio Sdn Bhd, Malaysia, the UDC Business Awards attracted much attention from private and government sectors, as well as leading business personalities and entrepreneurs.  Prestigious and much sought after, the Awards showcase high achieving companies and personalities around the world as well as highlight the importance of business integrity.

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Wednesday, October 12, 2011

Sri Lanka urban agency to offer land in former war-zones

Oct 12, 2011 (LBO) - Sri Lanka's Urban Development Authority which was focussing on the capital Colombo will offer state lands in former war-zones for commercial development, director general Rohan Fernando said.

"Now we are making arrangements to provide lands from Mankulam, Kilinochchi and Jaffna," he told a forum on property development at the Central Bank.

"So these lands will also come in to the market very soon for investment."

The areas are in Sri Lanka's Northern Province, where a civil war raged for nearly three decades until May 2009.
The lands being considered for development were under various state agencies, officials said.

Fernando said the bulk of the work by the UDA has so far focussed on developing Colombo but the agency is now increasing focus on the provinces.

"Little by little we are doing that," he said.

It has provided land for investment in Nuwara Eliya in Central Sri Lanka and in Trincomalee in the East, also a former war zone.

In Hambantota in the South, the UDA had built a loan-funded secretariat building to house 40 state agencies using a loan.

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Sri Lanka stocks end down almost one percent

Oct 12, 2011 (LBO) - Sri Lankan stocks fell almost one percent Wednesday and turnover was also lower than usual with sharp falls in some shares that had risen sharply in recent weeks, brokers said.

The main All Share Price Index fell 0.97 percent (64.81 points) to 6,604.23, while the more liquid Milanka index fell 0.51 percent (29.98 points) to close at 5,905.92, according to stock exchange figures.
Turnover was 1.6 billion rupees.

Asian Alliance Insurance, the day's biggest loser and third most actively traded stock, fell 88.20 rupees or 26 percent, to close at 244.10, after hitting a low of 240 rupees during the day.

Serendib Hotels was the most actively traded stock, closing at 30.40 rupees, down 2.60 with 2.67 million shares done.

There were several crossings or off-market private deals of John Keells Holdings at 200 rupees a share. It closed flat at 200, accounting for the day's top turnover.

Softlogic Holdings closed at 20.10 rupees, down 20 cents with 16 million shares traded, including a crossing of 15.7 million shares at 20 rupees each.

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Sri Lanka stock market show as SEC marks 24 years

Oct 12, 2011 (LBO) - Sri Lanka's Securities and Exchange Commission (SEC) said it is holding an exhibition with over 50 stalls the regulator marks 24 years on October 22.

Over 50 stalls from the Colombo Stock Exchange, broking firms, unit trust managers and listed companies will participate at an 'investment day' at the Sri Lanka Exhibition and Convention Centre (SLECC) from 9.30 am.

SEC said potential investors could get investment advice, discuss investment opportunities with broking firm open securities accounts and meet unit trust managers.

There will also be re-enactment of the open outcry system, which was a manual method used for transactions, before securities trading was automated.

The SEC had earlier held a series of road shows in Galle, Kandy, Kurunegala, Negombo and Ampara where around a thousand existing and potential investors participated, the SEC said.

Professionals from the securities industry will also make presentations on a series of topics throughout the day, SEC said.
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EPF buying Laugfs: No smoke without fire!

The adage ‘there is no smoke without fire’ appears to be a perfect fit to Monday’s mega deal of EPF buying an 8% stake in Laugfs Holdings Plc for Rs. 1.6 billion, given its timing and the price paid.

The Employees Provident Fund (EPF), which is heading towards a fund base of Rs. 1 trillion, on Monday bought 33 million shares or an 8% stake in Laugfs for Rs. 1.6 billion or Rs. 48 per share. In total 36.88 million shares of Laugfs transacted via 1,501 trades for Rs. 1.76 billion.

Laugfs Holdings said it was the seller reducing its stake to 59% (227 million shares) from 67% previously.

Whilst Laugfs is yet to release its FY2012 first (June) or second (September) quarter results, it appears EPF’s stake in Laugfs is now nearly 14%. As at end March 2011, it held a 5.6% stake (via voting shares).

 Its non-voting holding is a high 35%. The latter is substantial as in December 2010 the holding was only 5% whilst voting stake amounted to only 1.56%.

The purchase was the talk of the market on Monday given the timing and the price. For starters, EPF bought the big stake whilst Laugfs’ share was on the up in a relative sense. The other is that it bought the stake not from the market but from the controlling shareholder via a crossing, giving credence that it was a pre-arranged deal.

Perhaps as a precursor to the impending deal, Laugfs on Friday shot up out of the blues.

After being depressed for a long time, Laugfs voting share topped the list of percentagewise gainers on Friday with price increase of 18% or Rs. 7.30 to close at Rs. 50.50. Around 20.7 million shares transacted via 2,916 trades for Rs. 987 million. The amount of trades confirms retailers buying on speculation.

Some sensed the impending deal whilst a rumour that State-run Litro gas management would be handed over to Laugfs was doing the rounds. A Laugfs spokesman had denied both. In the two preceding days, Laugfs rose by one rupee and 70 cents.

Talk of a major stake being traded was nothing new. In fact the market was buzzing with the speculation in July-August and many retailers had bought in to hoping to cash in. However, the share price remained depressed.

The question being asked is why EPF didn’t buy when Laugfs share was at much low levels. If it was keen to up its stake, EPF could have collected quantities from the market certainly at lower prices than Rs. 48 paid on Monday.

Laugfs’ net asset value per share as at 31 March 2011 was Rs. 14.31 at Company level and Rs. 15.66 at Group level, though there were higher by over 40% in comparison to FY2010.

Market talk has been that the strike price was Rs. 55 or thereabouts, and whether Laugfs and EPF deferred the deal until prices were closer to Rs. 50 levels to strike it was another question.

The investment in Laugfs also comes a week after the Central Bank issued a statement about the EPF’s fund base nearing Rs. 1 trillion in 2011.

In a critical analysis, the announcement wasn’t anything new because when Central Bank released EPF’s 2010 performance (11 March), it revealed that the base would top Rs. 1 trillion. Why Central Bank felt a reemphasis of the matter again is unclear.

Given the fact that the Rs. 1 trillion reference was made in 2010, performance release analysts noted a fresh statement following the actual reaching of that milestone would have been a more professional move.

Whilst EPF is an important investor in the Colombo bourse as part of its strategy to maximise returns to its members, of late it had been criticised over the selection of stocks or the timing of its investments. In general State funds are under flack for being the dumping ground for stocks at highly-inflated prices either by high net worth or select institutional investors.

Be that as it may, in a highly-depressed Colombo bourse, some analysts were of the view that there was nothing to suddenly fuel Laugfs’ price on fundamentals.

Whilst newly-listed Laugfs has done well in the financial year ended on 31 March 2011 to top the Rs. 1 billion mark in Group pre-tax profit (up 79%) and after tax profit of Rs. 853 million (up 61%), analysts had expressed doubts over sustainability. When interim accounts are released this view can be confirmed or dismissed. In FY2011 return on equity at Laugfs was down by 24% at Group level and 43% at Company level.

Another concern is Laugfs’ rapid diversification to a multitude of sectors such as tourism from its core business of energy, though some opined that minimising the risk of being too reliant in one sector was a good move.

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Ceylon Cinnamon debuts at German F&B fair

The country’s second national brand after Ceylon Tea, Ceylon Cinnamon’s international launch will take place today in Cologne, Germany. A top level Sri Lankan team for Germany’s Anuga Trade Fair has already left Colombo on the morning of Sunday October 09.

The team is headed by Rishad Bathiudeen, Minister of Industry & Commerce along with Janaka Ratnayake, the Chairman of the Export Development Board (EDB) and officials of the EDB. "The largest food and beverage fair will help Sri Lanka to showcase its enticing F&B export items to the world," said Bathiudeen, prior to his departure on October 09. "It will also be a launch pad for our F&B exporters to Europe and the world at large as they will get to network with other visitors and exhibitors".

Anuga Trade Fair is the world’s largest food, beverage and catering exhibition with over 6,500 exhibitors and around 150,000 trade visitors from 100 countries joining in 2011. Held once in every two years, it combines 10 F&B trade trends and this year’s fair, organised by Koelnmesse GmbH, will take place from 8 to 12 October in Cologne, Germany. It is also an important event for new markets and target groups for international exporters. The 2009 Fair saw 6,522 exhibitors from 98 countries with almost 150,000 visitors.

The international launch of Ceylon Cinnamon brand is also scheduled to take place during this event.

The team itself will lead and facilitate many Sri Lankan exporters taking part in the German Fair. Among leading Sri Lankan firms taking part at the Fair are Expolanka, CIC Holdings, Renuka Agri Foods, Akbar Brothers, Asia Teas, Bio Extracts, Ceylon Biscuits, Dilmah, Eswaran Brothers, GP De Silva Sons, Euro-Scan Exports, and Food & Nature (Pvt) Ltd.

EDB’s stalls at the Anuge venue are E040 and E046a and located in Hall 1.1, the ministry announced.

Among the exports that Sri Lanka will be showcasing are tea, canned foods, fruits and vegetables. Among the events at the Anuga Fair are talks with industry leaders, Global Forum for Food and Agriculture (Berlin - Business Leaders’ Initiative Food Security Conference), Meat Essential (for meat industry), Drink Trend forums, Innovation in Vegetable Foodstuff, Sustainability in saltwater and aquaculture fish, Anuga Culinary Stage, Meet the Halal World, Brazilian Food event, Antibacterial Technology and food safety, innovation in fruit beverages industry, and Anuga Wine Special Seminars. Product segments are Fine Food, Drinks, Chilled & Fresh Food, Meat, Frozen Food, Dairy, Bread & Bakery, Hot Beverages, Organic, FoodService, RetailTec, and the WellFood Forum.

The international launch of Ceylon Cinnamon brand, which is Sri Lanka’s second national brand, is also due to take place on Tuesday October 11 at Cologne’s Koelnmessy Congress Centrum Nord conference hall inside the Anuga venue. The Sri Lanka Export Development Board (SLEDB) holds the ownership of the second National Brand "Pure Ceylon Cinnamon."

Minister Bathiudeen will also be promoting "Sri Lanka Expo 2012" outside the Anuga venue in Cologne (two events) and Frankfurt (one event). Sri Lanka Expo 2012 is the premier international trade fair organized by the EDB will be held from 28th to 30th of March, 2012 at BMICH in Colombo.

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Tourist arrivals up 34.3 percent

By Mario Andree

Tourist arrivals during the first nine months of this year increased by 34.3 percent to 598,006 from 445,228 recorded for the same period in 2010. Arrivals in September grew 27.2 percent to 60,219 from 47,339 registered in the corresponding month last year.

Tourist arrivals for the first nine months from North America increased 23.4 percent to 36,016 from 29,185, while arrivals from Latin America increased 69 percent to 703 from 416.

Arrivals from Western Europe increased 25.3 percent to 226,990 from 181,099, while leisure traffic from Eastern Europe increased 25.2 percent to 28,321 from 22,623.

Tourists from Africa saw the highest growth increase of 60.9 percent to 2,335 from 1,451, while arrivals from West Asia increased 49.4 percent to 40,517 from 27,111.

Arrivals from East Asia increased 46.5 percent to 68,518 from 46,785, while tourists from South Asia increased 44.8 percent to 164,771 from 113,781.

Leisure travellers from other countries increased 31 percent to 29,835 from 22,777.

The hospitality industry firmly believes Sri Lanka would reach 850,000 tourists this year performing an average growth of 30 percent.

The Sri Lanka Association of Inbound Tour Operators (SLAITO) last month forecast that Sri Lanka would achieve more than one million arrivals this year with several promotional activities taking place.The Sri Lanka Tourism Development Authority in association with the Emigration Authority launched an online Visa approval system to support and attract more tourists as its first initiative after the launch of the Tourism Development Strategic plan 2011/16.

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Tea: dark clouds recede but doubts remain

By Steve A. Morrell

At last week’s Tea auctions buyers, Brokers, and Producers, were all in good spirits because price gains were substantial after the recent pall of gloom overtook the industry stemming from the Middle East crisis.

Director, Eastern Brokers, Mohan Jacobs speaking to The Island Financial review confirmed sale results were ‘quite good’ last week, but shippers had to wait to receive their payments. "Trading in that context had not returned to normal. This was worrisome but the monies will come. But then shippers will have to wait, which was not conducive to normalized trading," he said.

However there was another aspect to reversal of industry results.

Ceylon Tea Brokers PLC., in their market report indicated quick analysis on sale to the Russian Federation resulted in decreasing volumes exported to that destination.

In 2001, Ceylon Tea exported to the Russian Federation was about 54 million which eventually peaked in 2006, at 72 million kilos. Since then their absorption of Ceylon Tea decreased steadily till 2010 results showed about 54 million kilos.

However more worrying was that Tea exports from Viet Nam, and Kenya rose steadily, to record increases in 2010, to 19.1 million; and Kenya exports stood at 15 million in 2008. Increases from analysis conducted by Ceylon Tea Brokers. Viet nam from 4.1 million in 2001, increased exports to CIS/Russia to 20 million in 2009.. Kenya’s exports in 2001, was a mere 810 thousand, kilos.

The demand for Ceylon Tea had decidedly decreased. It was now important to see how these analytical results will impact officialdom, namely the Tea Board, or the Ministry to rectify existing anomalies and boost exports.

Meanwhile there were trade concerns that weather patterns were topsy turvey this year with distinct worries that crop had decreased . Both, the Western quality season failed in January this year, as did the Uva season in August. There was hardly a dry spell that provoked quality manufacture.

Similarly, weather did not induce humid growing conditions. This stifled production and the Plantations are now faced with rising costs. They predict that year end results will be bad. Most Plantation Companies will be faced with substantial losses.

Price gains last week were good, but such would only reduce plantation losses. The end result would inevitably be that a darkened red line could not be avoided.

Teas from all elevations sold well. The market future for Tea looks good , but that is not the main criteria that is relevant to the industry, brokers said.

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Monday, October 10, 2011

Blue Diamonds AGM sparks over Board appointments

Resolutions seeking reappointment of two retiring directors not passed; two new Directors rejected; four nominees of 7.6% owning BAT go through

There was spark at the 21st Annual General Meeting of Blue Diamond Jewellery Worldwide last week with regard to the election and appointment of Directors to the Board.

Ananda Wehalle and Mairus Fernando, who retire as per Articles of the company, were up for re-election but weren’t voted in.

Wehalle (B.Sc, F.C.A, F.C.M.A), a senior financial services professional, was appointed to Blue Board in November last year, whilst Fernando, who is a Director at Lanka Diamond Polishing Ltd., was first appointed in June 2011. Resolutions of the Board on two other recent appointments to the Board weren’t carried either.

They were M.B.K. Sataharasinghe, the CEO and Managing Director of People’s Realty Ltd., and international management, tax and legal consultant and Secretary ICASL M. Thiyaharaja.

The reappointment of KPMG Ford Rhodes, Thornton and Company as Auditors was also carried.

Apart from these developments, AGM of Blue saw resolutions on the appointment of four nominees from major shareholder British American Technologies (BAT) carried. The four nominees of BAT which owns around 7.6% (as September 2011 down from 10% stake originally) were W.A.D.V. Pereram, K.L. Dias, W. Ravishankar and W.W.M.R.K.W. Della. Originally five were nominated, with the other person being Shereen Dushyanthi Samarasekera.

Prior to the AGM, at an EGM on 15 September the original proposal by BAT to appoint five new directors to the Board of Blue was rejected by shareholders on the grounds it did not comply with Section 203 of the Companies Act No. 7 of 2007. This section required the directors to give their consent in the prescribed form, but this had not been done, company officials said. This was subsequently complied with ahead of the AGM.

Last week Blue upgraded three Executive Directors to the post of Joint Managing Directors. They are K.V.D.D.A. Dias as a joint Managing Director Production, M.M.N. Priyantha as joint Managing Director Research and Development and W.K. Galagoda as the joint Managing Director Finance. This is in addition to Bandula Ranaweera being the Chairman/Managing Director and Executive Director Godfrey de Kretser being promoted as Deputy Chairman. On 27 September Blue announced the appointment of Krishanthi Niyomie Gunawansa to the Board with effect from 8 October. Gunawansa is Manager Investments at People’s Realty Ltd and Director of Ceylinco Selna Ltd. and Selna Residencies. SLIC, which previously owned a 13% stake in Blue Diamond, doesn’t sit on the Board.  As at September 2011, the stake had been reduced to 10.5%. Ceylinco Insurance owns 5% whilst overall public holding is 89%.

Blue has 13,377 voting shareholders, of which 10,141 are those categorised as owning less than 1,000 shares and 1,995 owning between 1,001 and 5,000 shares. As of last week the Board of Directors of Blue Diamond comprised Bandula Ranaweera (Chairman/Managing Director), Godfrey de Kretser (Deputy Chairman), K.V.D.D.A. Dias (Joint Managing Director/Production), M.M.N. Priyantha (Joint Managing Director/Research & Development), W.K. Galagoda (Joint Managing Director/Finance), A.R. Gunawardena, A.D. Jegasothy, S.R. Wijesinghe, W.A.D.V. Perera, K.L. Dias, W. Ravishankar and W.W.M.R.K.W.B. Della.

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Softlogic buys Asian Alliance

Sri Lanka's Softlogic Holdings group is buying a 73.5 percent stake in Asian Alliance Insurance, a listed insurer for Rs 3,308 million, the company said in a stock exchange filing. Softlogic Holdings group will buy 53.16 percent of Asian Alliance held by Asia Capital PLC and its subsidiaries and 20.36 percent held by another shareholder, Fast Gain International. Softlogic Capital, a unit of Softlogic Holdings will buy 51 percent of Asian Alliance for Rs 2,295 million. Softlogic Holdings will buy 22.53 percent of the insurer for Rs 1,013 million.

Asian Alliance has general and life businesses. Sri Lankan insurers are now making losses on most of their general business.

Softlogic Holding's stock issued at Rs 29 at an IPO fell as low as Rs 16.20 before picking up to around Rs 21.50 in early trade. (LBO)

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LR Global acquires 10% Delmege stake

LR Global Partners, a frontier markets focused private equity and asset management company based out of New York, with offices in Bangladesh, Vietnam, Singapore and Sri Lanka, acquired a 10 percent of Lewis Brown and Co (Pvt) Ltd, which owns Delmege Forsyth and Co Ltd, through its investment vehicle, Lanka Strategic Investments (Pvt) Ltd. LR Global Lanka Asset Management Company Group Managing Director and CEO Channa de Silva has been appointed to the Board of Lewis Brown and Co (Pvt) Ltd.

Lewis Brown & Co (Pvt) Ltd was recently acquired by Dhammika Perera and Vallibel One Ltd, Royal Ceramics Lanka, Nimal Perera, Tharana Thoradeniya and A M Weerasinghe. LR Global Lanka Asset Management Company is committed to sourcing fundamentally sound investments in support of the capital markets in Sri Lanka.

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LB Finance awarded ISO 9001:2008

LB Finance has been recognized with the coveted ISO 9001:2008 certification.

SGS UK Managing Director Paul House presenting the certificate to LB Finance Managing Director Sumith Adihetty

The internationally-recognised certification is bestowed to companies that have implemented quality management systems which meet or exceed the standards recognised by the International Standards Organisation, and is yet another feather in the LB cap.

LB Finance was awarded the highly sought-after certification by the global leader and innovator in inspection, verification, testing and certification services, SGS UK Ltd, on June 29.

A conference was held to commemorate the occasion during which SGS UK Asia Pacific Managing Director Paul House, presented the ISO Certification to the LB Finance Managing Director Sumith Adhihetty.

The ISO 9001:2008 Quality Management Systems certification applies to processes that create and control the products and services an organisation supplies, as well as prescribing the systematic control of activities which ensure that the needs and demands of customers have been accurately met.

The certification is a further confirmation of the top-notch level of the financial packages offered by LB Finance, as was noted by Paul House.

“It is admirable that LB Finance has achieved this certification,” House said, lauding the efforts of the LB team.

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Saturday, October 8, 2011

Stocks recover from 10-wk low; telcos lead

* Laugfs boosts turnover, volumers

* Foreign inflow of 21.8 mln rupees after outflows in 12 sessions

* Rupee steady amid heavy importer demand

COLOMBO (Reuters): Sri Lanka’s stock market rebounded from a 10-week low on Friday led by telecoms, while foreign inflow for the first time in 12 sessions lifted investor sentiment.

The main share index closed 0.31 percent, or 20.99 points, firmer at 6,698.83, moving up from its lowest close since 28 July. It is still the second-best performer in Asia-Pacific behind New Zealand, with a return of 0.95 percent on the year.

Stockbrokers reported foreign buying in market. Heavyweight and top conglomerate John Keells Holdings and institutional and retail investors, who were waiting on the sidelines, also bought shares. Keells ended 1.3 percent up.            
The bourse saw net foreign buying of 21.8 million rupees, its first inflow in 12 sessions.

The island nation’s top fixed-line phone operator Sri Lanka Telecom gained 3.8 percent, while top mobile-phone firm Dialog Axiata ended 1.2 percent firmer.

Traders and analysts said investors were buying Dialog on speculation that it would buy into a local fixed-line operator.

Retail LP gas seller Laugfs Gas, which accounted for 42 percent of the day’s turnover and 22.9 percent of volume, closed 17.80 percent firmer at Rs. 48.30 on speculation that state-run Litro gas management would be handed over to it.

A Laugfs spokesman said there was no such move.

Turnover was 2.3 billion Sri Lanka rupees ($20.9 million), the highest since 30 September, and less than last year’s average of 2.4 billion and this year’s 2.7 billion.

Friday’s total volume was 90.3 million, against a five-day average of 84.9 million. The 30-day and 90-day average trading volumes were 145.9 million and 138.7 million. Last year’s daily average was 67.9 million.

The rupee closed steady at 110.18/20 per dollar for a seventh straight day, as the state bank continued dollar sales at a flat rate of Rs. 110.20 despite heavy importer dollar demand, dealers said.

Currency traders said the Central Bank’s mopping up of liquidity had created demand for local currency and, as a result, exporters and banks sold dollars to buy the rupee.

The Central Bank mopped up 24.75 billion rupees from the market on Thursday through a repo auction at 7 percent, while pumping 1.3 billion rupees into the market through its reverse repo auction at 7.25 percent, dealers said.

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Bourse closes week on positive note

The Colombo bourse yesterday shrugged off the negative market movements of the previous four days and closed the week on a positive note with both indices rising on improved turnover.

Both indices were up – the All Share by 20.99 points (0.31%) and the Milanka by 39.54 points (0.67%) with 106 gainers comfortably outpacing 74 losers on a turnover of Rs.2.32 billion, up from the previous day’s Rs.1.2 billion.

"The week closed on a better note with turnover too up," Prashan Fernando of Acuity Stockbroker said. "There was heavy trading in Laugfs Gas, both voting and non-voting, and some counters like Regnis went up to previous highs."

Laugfs topped the turnover league gaining Rs.7.30 to close at Rs.50 on nearly 20.7 million shares traded between Rs.41.50 and Rs.50.50 contributing Rs.986.3 million to business volumes.

Laugfs non-voting share closed Rs.3.50 up at Rs.29.80 with 4 million shares traded between Rs.26.50 and Rs.30.

Brokers said several large parcels of Laugfs were among the trades yesterday with one parcel of 2.5 million shares changing hands at Rs.49. There were several other parcels of 100,000 shares and more also transacted, they said.

JKH closed flat at Rs.200 after reaching a high of Rs.202.50 during the day with over a million shares done between Rs.199.80 and Rs.202.50 generating the second highest turnover.

Regnis closed Rs.28.70 up at Rs.505 on nearly 0.3 million shares done between Rs.475 and Rs.508 which some brokers thought was an all-time high for the counter.

There was heavy trading in Blue Diamonds, both voting and non-voting, with the voting share up 70 cents to Rs.10.20 on nearly 6.7 million shares traded while the non-voting share closed 40 cents up at Rs.5 on over 19.7 million shares transacted.

Browns closed flat at Rs.275 on 0.2 million shares done between Rs.275 and Rs.280 while Colonial Motors continued to gain closing Rs.10.70 up at Rs.499.80 on 83,100 shares traded between Rs.490 and Rs.499.90.

Brokers said that retailers were active in Panasian Power where nearly 6.9 million shares were done closing 10 cents up at Rs.5.10, e-Channelling closing 10 cents up at Rs.9.70 on nearly 3.4 million shares and Colombo Land up Rs.1.80 to close at Rs.62.60 on 0.7 million shares.

Capital Alliance Finance too closed Rs.1.30 up at Rs.40.30 on 0.6 million shares while Radiant Gems gained Rs.1.40 to close at Rs.170 on 69,000 shares.

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Friday, October 7, 2011

Sri Lanka stocks end up 0.3-pct

Oct 07, 2011 (LBO) - Sri Lankan stocks ended higher after three days of falls with some buyers returning but continued activity in stocks that had drawn speculators, brokers said.

The main All Share Price Index rose 0.31 percent (20.99 points) to 6,698.83, while the more liquid Milanka index rose 0.67 percent (39.54 points) to close at 5,978.14, according to stock exchange figures.

Turnover was 2.3 billion rupees.

Regnis (Lanka) hit a new record high, closing at 506.20 rupees, up 28.70 rupees or six percent, after touching 508 rupees, and accounting the the day;s third highest turnover.

Laugfs Gas voting and non-voting shares were the top gainers and most actively traded stocks, accounting for the highest turnover. Voting shares ended up 7.30 rupees at 48.30 with 20.7 million shares traded.

Laugfs Gas non-voting shares gained 3.50 rupees to end at 29.50.

Blue Diamonds Jewellery Worldwide shares were also actively traded, with nonvoting shares closing at five rupees, up 40 cents, and voting shares ending at 10.10 rupees, up 70 cents.

John Keells Holdings shares were also heavily traded, accounting for the second highest turnover, closing flat at 200 rupees. There were two crossings or off-market private deals at 201 rupees.

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Sri Lanka Hatton National Bank debt rated 'A+(lka)'

Oct 07, 2011 (LBO) - Fitch Ratings Lanka has assigned Hatton National Bank's (HNB) proposed subordinated debentures of up to two billion rupees a National Long-Term rating of 'A+(lka)'.

"The issue is rated one notch below HNB's National Long-Term rating reflecting its debt-like features," a statement said.

The full Fitch rating report follows:

Fitch Ratings Lanka has assigned Hatton National Bank PLC's (HNB) proposed subordinated debentures of up to LKR2.0bn a National Long-Term rating of 'A+(lka)'. A full list of HNB's ratings is provided at the end of this commentary.

The issue is rated one notch below HNB's National Long-Term rating reflecting its debt-like features. The proposed debentures will have a maturity of 10 years with principal repayment as a bullet payment on maturity. Coupon payments will be semi-annual at a fixed rate and do not contain any deferral clauses. The debentures are to be listed on the Colombo Stock Exchange alongside HNB's other listed and rated debentures.

As at June 2011, HNB's tier I and total capital adequacy ratio (CAR) was 9.13% and 10.3%, respectively, at the bank level. The subordinated debenture issue will increase HNB's regulatory Tier 2 capital from LKR2.7bn as at June 2011 to LKR4.7bn and enable the bank to better match projected growth in its housing loan book. As such, Fitch estimates that the bank's total regulatory CAR would incrementally rise by about 0.87% after the issuance in June 2011, excluding un-audited profit for the six-month period ended June 2011 and the subsequent rights issue announced by the bank. However under Fitch's criteria, these securities will receive zero equity credit as they do not allow for going-concern loss absorption. By itself, further expected strong growth at the bank will result in a weakening of its capitalisation, as per the agency's measures.

Fitch notes that HNB's loan book steadily increased by 19% yoy in 2010 and the first half of 2011 as the post-war domestic economy improved. It shrank by 5% in FY09 similar to other banks (FY08 loan growth: 13%).

Approximately 42% of HNB's loan book comprised corporate loans, with retail/consumer loans and SME loans accounting for 29% and 13%, respectively at end-December 2010. At the same time, housing loans, leasing and pawning (gold-backed loans) accounted for 9%, 7% and 13% of loans, respectively. Pawning was included under consumer loans.

HNB's current and savings account improved in 2010, accounting for 54.2% of total deposits as at end-December 2010 (46.5% as at December 2009). The comparative figure as at June 2011 was 50.3%. This secular change in HNB's deposit mix will be positive to HNB's overall net interest margins.

HNB is a licensed commercial bank. The Government of Sri Lanka, entities related to the Stassen Group (excluding CBD Exports Ltd.) and the Browns Group held 27%, 18% and 7%, respectively, of voting equity at December 2010. 
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Jewellery maker out of the blues

* Blue Diamonds Jewellery Worldwide PLC  records profit for Q2

After sustaining losses over the past few years, Blue Diamonds Jewellery Worldwide PLC recorded a net profit of Rs. 24.2 million for the September quarter, up 469 percent from a Rs. 6.5 million loss sustained a year earlier, "derived from the writing back of non payable creditors and loans," the company announced yesterday.

Turnover increased by 100 percent to Rs. 25.88 million during the second quarter, from Rs. 12.9 million a year ago. Profit from operations increased 498 percent to Rs. 20.8 million from a loss of Rs. 5.2 million.

Blue Diamonds Chairman Bandula Ranaweera in his review published in the 2010/11 Annual Report said that "barring any unforeseen circumstances the company will be moving to a positive zone and a remarkable achievement is that the company is in a zero interest zone as all debts have been settled".

A year earlier, interest bearing loans and borrowings amounted to Rs. 17.7 million.

The company’s export income from gold, gems and jewellery is exempt from income tax. It holds a suppliers stock of jewellery amounting to Rs. 1.1 million for items not collected for a period of over ten years.

During the quarter the Board of Directors decided to write back the total outstanding balance of Rs. 19.3 million payable to Ceylinco Investment Company Ltd as non existing liability as an amount received as marketing support during the previous years, the company noted in its interim statements filed with the Colombo Stock Exchange.

Some of the new markets that Blue Diamonds is now working on positively are India, Malaysia and Russia. Products will also be offered to direct marketing companies from selected regions who will be given very specially designed collections of jewellery suited for tele-marketing, Blue Diamonds said.

The company is hoping to invest Rs.14 million to build a new administration and marketing building. They hoped to have this building ready eight months after construction begins.

The biggest shareholder (voting) is Sri Lanka Insurance with a 10 percent stake in the company amounting to Rs. 10.86 million as at September 30, 2011, followed by British American Technologies (7.66 percent) and Ceylinco Insurance (4.92 percent).

Of the non-voting share capital, Seraka Investments Ltd holds a 10.8 percent stake amounting to Rs. 16.56 million.

Ordinary voting shares closed 20 cents lower at Rs. 9.40 yesterday.

According to the 2010/11 annual report, The company’s Auditors, KPMG Ford, Rhodes, Thornton & Company have issued a qualified opinion saying that Blue Diamonds had obtained a credit facility of US$ 2.75 million from the Seylan Bank in previous years by pledging an inventory of jewellery as security. During the year ended March 31, 2005, the directors had resolved to write back the balance outstanding to the bank in respect of this facility on the basis that the company had handed over jewellery in lieu of the said credit facility as a full and final settlement.

Although Rs.203.5 million had been written back to the income statement during that financial year there was insufficient and appropriate audit evidence of this transaction. The Seylan Bank has in December 2009 demanded US$ 4.3 million together with further interest of 8% being the total outstanding sum.

The company and bank have agreed to go to arbitration on this matter and this process has commenced with the case currently at the trial stage.

The auditors have pointed out that no liability had been recorded in the financial statements in respect of the balance payable to the bank. They were therefore unable to satisfy themselves of the completeness, existence and accuracy of this liability as at March 31, 2011.

The auditors have also made reference to a write back of Rs.4.5 million to the income statement out of a payment due to Ceylinco Investment Co Ltd during the year. They have not been able, due to the absence of sufficient and appropriate audit evidence, satisfy themselves "as to the completeness, accuracy, existence of amount due to Ceylinco Investment Co Ltd of Rs.19.4 million as at March 31, 2011."

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Stock market’s return dips below 1% again

The misery continues at the Colombo stock market as its year to date return yesterday dipped below the 1% threshold once again, a level last witnessed in mid July.

A 0.4% dip in All Share Index saw the year to date dip from Wednesday’s 1.06% to 0.63% yesterday. On 19 July  the Bourse was recording a similar rate of return after it went to the negative territory on 21 July.

“As witnessed over the past few days, the market was largely stagnant,” NDB Stockbrokers said.  Turnover was only Rs. 1.1 billion below Wednesday’s Rs. 1.3 billion.

“Silenced high net worth and institutional investors coupled with negative contribution from foreign investors; have all led the market to deviate from its usual challenge in punting on the attractively valued fundamentally backed counters,” Arrenga Capital said.

“Bourse had been recently moving on market news, rumours and innuendo; bringing the low-profile speculative counters to spotlight whilst the fundamentally steady counters with attractive valuations take a quiet backstage play,” it added.

Arrenga said activity levels were very much discouraging with Sampath Bank, Vallibel One, Aitiken Spence and Distilleries Company of Sri Lanka being the only steady counters that registered some investor involvement.

NDB said profit taking in E-Channelling occurred during the early hours of trading and the counter closed Rs 0.20 lower. Manufacturing sector was the main contributor to the market turnover (due to Regnis Lanka) and the sector index decreased 0.41%. The share price of Regnis Lanka increased by Rs. 42.80 (9.85%) to close at Rs. 483.00.

E-Channelling was the main contributor (Rs. 166.3 million) to market turnover and the share price decreased by Rs. 0.20 (2.04%) to close at Rs. 9.40. Diversified Holdings sector also contributed to the turnover (due to John Keells Holdings) and the sector index decreased by 0.30%. The share price of John Keells Holdings remained unchanged at Rs. 200.00. Renewed interest was witnessed in Panasian Power.

Crossings took place in Distilleries and Aitken Spence. 202,200 shares of Distilleries changed hands at a price of Rs. 170.00 while 159,900 shares of Aitken Spence changed hands at Rs. 135.00.

Arrenga also said MSCI Asia Pacific Index added 3.3% whilst S&P 500 index futures gained 0.6%. More than seven stocks advanced for every one that fell on MSCI’s Asia Pacific Index with 10 industry groups seen moving up. The gauge snapped a four-day, 16% dip, and biggest fall since 2008.

Japan’s Nikkei 225 Stock Average gained 2.6% Asian stocks rebound is believed to be after the better-than expected US economic data pointing a no-recession economy and optimistic play by the European leaders, to boost earnings outlook for exporters. Chinese and the Indian markets have been closed for holidays. Nasdaq-100 index rebounded rising 0.2% after witnessing a dip following the news on the death of Apple Inc. founder, Steve Jobs.

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September tourist arrivals up 27%

COLOMBO (Reuters): Sri Lanka’s tourist arrivals rose 27.2 percent in September from a year earlier, continuing to rise every month on a year-on-year basis since a 25-year civil war ended in May 2009.

The government is targeting annual revenue of $2.75 billion by 2016 from 2.5 million expected visitors attracted by Sri Lanka’s beaches, hills, religious and historic sites, while aiming for $3 billion in foreign direct investment.

Visitors in September totalled 60,219. Tourist arrivals in the first nine months of 2011 jumped 34.3 percent from the same period last year to 598,006.

Sri Lanka has forecast 20 percent growth in visitor arrivals this year to more than 780,000 people. That would beat last year’s record high number although growth would slow from 46 percent last year. The island’s tourism industry drew $1.2 billion for investment in the first half of 2011.

The government in July said it expected at least $1.5 billion in foreign investment into a proposed “tourist city” replete with hotels, shopping and a convention centre in Katana, a coastal town located 15 km north of the commercial capital, Colombo.

Tourism revenue, which jumped 64.8 percent in 2010 to a record $575.9 million, rose 49 percent in the first eight months of this year from a year earlier to $521.7 million, Central Bank data shows.   

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E-Channelling tops turnover

Showing its appetite for speculative stocks further, heavy play continued on E-Channelling shares, as the healthcare IT company topping the turnover again with Rs.166 million for the second consecutive day.

According to the Colombo Stock Exchange’s (CSE) data, 17 million shares of ECL traded. The share opened at Rs.10.10 and peaked to Rs.10.40 before closing at Rs.9.40.

Heavy trading also comes after the purchasing of over 25, 000 ECL shares by its major shareholder British American Technologies (BAT) on Wednesday. BAT also bought   2.4% stake or three million shares last Friday at Rs. 8 each on top of collecting around one million shares previously since August.

In August 2011, ECL announced to the CSE that it had earned a capital gain of Rs.62.8 million  by trading Blue Diamond Jewellery Worldwide PLC shares.

ECL’s FY 11 Earnings per share (EPS) was only 7 cents and the Book Value per share at March 31, 2011 was 64 cents. The company made a net profit of Rs.8.3 million for the FY11.

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Fitch affirms Dialog at AAA

Fitch Ratings Lanka has affirmed the country’s celco leader Dialog Axiata PLC’s (Dialog) National Long-Term rating at ‘AAA(lka)’. The Outlook is Stable. At the same time Fitch has affirmed Dialog’s cumulative redeemable preference shares at ‘AA+(lka)’.

Dialog’s ratings incorporate support from its 83% shareholder Axiata Group Berhad (Axiata), underpinned by the latter’s board representation in Dialog, a common brand, and the integration of strategic and some operational functions between the two companies. Axiata has provided tangible support to Dialog throughout its history, most recently in the form of shareholder loan and a corporate guarantee on a long-term offshore bank credit line.

Fitch assesses Dialog’s standalone profile at ‘AA(lka)’, underpinned by its leading market share in the local mobile industry (38% share at end-June 2011), growing diversity in revenues, comfortable operating profit margins, and continuous investments to maintain its technological edge. The agency expects Dialog to generate positive free cash flow (FCF, after deducting capex and dividends) over the medium term, helped by strong operating cash flow generation and selective capital expenditure. Fitch expects Dialog to maintain its financial leverage (defined as adjusted net debt/operating EBITDAR) below 2.5x over the medium term.

Dialog’s revenue and EBITDA growth slowed in H111 to 9% and 2% respectively, largely on account of tariff adjustments within the mobile segment in Q111 (66% of group revenue). However, group revenue is expected to rebound in H211, as increased demand should more than compensate for lower tariffs.

In June 2011, the regulatory tariff floor on calls to other networks (off-net calls) was lowered to LKR1.50 from LKR2.00. However at present, all five mobile operators maintain pricing on off-net calls at LKR2.00 to preserve profitability. While further tariff reductions (to the floor) cannot be fully discounted, such adjustments are likely to be mitigated by higher demand over the medium term. At end-H111, the proportion of the Dialog’s group revenue exposed to the overcrowded local mobile industry decreased to 66% (2008: 73%), diluting the impact that potential tariff competition could have on its credit profile.

Dialog’s liquidity was comfortable at end-H111, with cash reserves of LKR8.4bn and committed unutilised credit lines of around LKR6bn, compared with current maturities of LKR9.8bn. At end-H111, the share of group debt denominated in USD stood at 65%. However foreign currency risk was limited by a natural hedge in the form of approximately USD50m of annual net operating income and USD cash reserves of USD10m at end-H111.

Dialog’s ‘AAA(lka)’ rating may face downward pressure if Axiata’s perceived willingness to support diminishes, evidence of which would include a considerable dilution in its ownership stake or control, or a material reduction in other operational and strategic ties. Fitch notes that removal of Axiata’s corporate guarantee on the offshore bank line or the repayment of the shareholder loan will not by themselves result in a downgrade.

The ‘AA+(lka)’ preference share rating is driven by the instrument’s subordination to the company’s senior creditors, and the absence of other instruments that rank in between the preference shares and senior creditors. Should such instruments be issued, the preference shares will be downgraded.

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Long supply chain makes tea expensive for domestic consumers

By Steve A. Morrell

While a kilo of Tea sells for Rs. 350 on average at the Colombo Tea Auction, local consumers end paying something in the range of Rs. 900 to Rs. 1,000 for a kilo tea, and this too for tea dust not fit for export, as the product passes through a long supply chain from plantation to kitchen.

The Island Financial Review spoke to officials of the Tea Board and brokers, none of whom wanted to be quoted. They said domestic tea consumers paid more for a cup of tea because too many go-betweens charged a mark-up.

"There is nothing wrong with this because everyone tries to make a profit," an official of the Tea Board said. "This is to be expected".

A retailer selling a kilo of tea at about Rs.900 to Rs.1,000 per kilo, makes the largest profit per kilo which is about 25 perecent.

A representative of the Planters’ Association of Ceylon, also not wanting to be named said local sales amounted to around 5 percent of total production. "This has no significant impact on production, profits, or losses," this source said.

Brokers said the domestic tea market was big business. And most Tea sold locally is bought ex-auctions. Grades that attract retail buying is mainly BOPF, and Dust grades, particularly because of the strength of these grades. Local buyers prefer stronger Tea because of their spicy foods.

They also said from stage one of their purchases (ex-auctions) a series of value added stages are exacted before the final product reaches retail shelves. Transport, taxes, cleaning, packeting, also tea bagging which is an expensive exercise, and various other stages each cost excessive sums of money.

Additionally the whole-seller also runs the risk of not getting his money back, when the retailer says sales were poor, brokers said.

At least two months credit was offered at each stage of the supply chain.

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Bourse down fourth day running on low turnover

The downturn on the Colombo bourse continued yesterday for the fourth day running on a relatively low turnover of Rs.1.2 billion, down from the previous day’s Rs.1.3 billion, with both indices losing – the All Share by 28.64 points (0.43%) and the Milanka by 27.91 points (0.47%) with 58 gainers trailing 119 losers.

"The market was in negative territory most of the day having been positive during the first half hour. But it didn’t last long," Prashan Fernando of Acuity Stockbrokers said. "Retail activity dominated trading."

E-Channelling continued to be the most heavily traded counter with 17.1 million shares traded between Rs.9.30 and Rs.10.40 closing 20 cents down at Rs.9.40 contributing the day’s top turnover of Rs.166.4 million.

Regnis which moved down on Wednesday recovered lost ground closing Rs.42.80 up at Rs.483 with nearly 0.3 million shares traded between Rs.430 and Rs.485.

Panasian Power which had seen heavy trading some time ago returned to the fore with over 12.4 million shares done between Rs.4.80 and Rs.5 gaining 20 cents to close at Rs.5.

Distilleries saw a crossing of 202,200 shares at Rs.170 with the counter closing 80 cents down at Rs.170.60 on over 0.3 million shares done between Rs.170.60 and Rs.172.There was also a crossing of 159,900 Aitken Spence at Rs. 135.

JKH closed flat at Rs.200 on over 0.2 million shares traded between Rs.200 and Rs.203. There were no crossings but several parcels of between 10,000 to 20,000 shares each were among the trades.

Brokers said that retail activity was evident in e-Channelling, Regnis, Panasian Power, CFT and Hydro Power Free Lanka with CFT closing 40 cents down at Rs.10.90 and hydrop power down 80 cents to close at Rs.15.30 on nearly 2.5 million shares done between Rs.15.10 and Rs.16.80.

Brokers said that trading in blue chips was thin with few that were traded yesterday like Commercial Bank edging down closing 90 cents down at Rs.111.50.

Among the blue chip gainers were Hayleys, up Rs.1.60 to Rs.375 but on a small volume of 5,500 shares and Haycarb, up Rs.3 to Rs.159.50 on 45,800 shares.

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Sri Lanka's biggest fund increases equity investments

Oct 06, 2011 (LBO) - The Employees’ Provident Fund (EPF), Sri Lanka's biggest fund with 976 billion rupees in assets and managed by the central bank, has increased investments in the stock market.

A central bank statement said the EPF's total assets, which had grown an annual 14.6 percent, are expected to reach a value of one trillion rupees by the end of 2011.

"A major share of the Fund (92 percent) has been invested in government securities, while the Fund has invested seven percent of its resources in equities and one percent in debt instruments of corporates."

The EPF's investments in stocks had previously been limited to five percent of the fund.

But it has been investing heavily in the Colombo bourse, buying mainly into conglomerates and banks, since the end of the island's 30-year ethnic war in 2009 triggered a stock market boom.

EPF buying helped push up share prices on the Colombo bourse, which rose to record highs and became one of the world's top performing markets in the last two years.

However, the market has been falling in recent weeks amid fears of a bubble.

Buying by Sri Lanka's largest fund also enabled foreign investors, who entered the market during the war when prices were much lower, to sell-out as only a few institutional investors have the size to buy large quantities of shares.

The central bank said the EPF is managed by a team of professionals with accounting and financial analyst as well as postgraduate qualifications and also trained in investment management.

"The total income of the Fund has also recorded a steady growth, particularly over the last five years, enabling the EPF to pay a higher rate of return to its members," it said.

The rates of return given by the EPF to members in the last two years had been above alternative investment opportunities available in the country such as similar pension funds, the one-year fixed deposit rate of a major savings bank and the commercial banks' Average Weighted Deposits Rate.

In 2010, over 210,000 new employees registered with the EPF.

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Sri Lanka stocks end down 0.4-pct

Oct 06, 2011 (LBO) - Sri Lankan stocks closed weaker for the third straight day Thursday with interest in 'penny' stocks and those that had drawn speculators, brokers said.

The main All Share Price Index fell 0.43 percent (28.64 points) to 6,677.84, while the more liquid Milanka index fell 0.47 percent (27.91 points) to close at 5,938.60, according to stock exchange figures.
Turnover was 1.19 billion rupees.

eChannelling was the most actively traded stock for the second day, closing at 9.60 rupees, down 20 cents, with 17 million shares changing hands and accounting for the day's highest turnover.

Panasian Power was also actively traded, closing at five rupees, up 20 cents, with 12.4 million shars done.

Ceylon & Foreign Trades was another actively traded stock, closing at 11 rupees, down 40 cents.

Regnis (Lanka), whose price had soared in speculative trade in recent weeks, closed at 477.50 rupees, up 42.80, after hitting a day's high of 485 rupees. It accounted for the second highest turnover of the day.

Asian Alliance Insurance ended at 354.60 rupees, down 3.10.

Newly listed Capital Alliance Holdings close at 39.10 rupees, up a rupee.

There was a crossing of off-market private deal of 202,200 shares of Distilleries Company at 170 rupees a share. It closed at 170.70, down 80 cents.

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Thursday, October 6, 2011

Fundamental stocks ailing, speculators go for eChannelling

Owing to many fundamentally sound stocks ailing with no takers, speculative investors were busy yesterday buying eChannelling, the IT company reliant on the healthcare industry.

Around 26% stake of the company or 32 million shares changed hands yesterday via 3,426 trades, generating the biggest turnover of Rs. 309 million.

Heavy demand saw eChannelling’s share price rise to Rs. 10.30 before closing at Rs. 9.80, up by Rs. 1.10 or near 13% topping the percentagewise gainers list. Of late the Company has seen a turnaround.

Preoccupation with eChannelling follows rumours of a possible takeover but market talk couldn’t be officially confirmed.

Heavy trading also comes after eChannelling’s single largest shareholder British American Technologies (BAT) buying 2.4% stake or three million shares last Friday at Rs. 8 each on top of collecting around one million shares previously since August.

Analysts estimate BAT to be owning over 25% stake in eChannelling now as opposed to 22.4% as at 31 March. Sri Lanka Insurance via its General and Life fund owns around a 23% stake in eChannelling.

Apart from deals on eChannelling, the overall market lacked excitement as ASI and MPI dipped by 0.2% each whilst turnover was a lacklustre Rs. 1.3 billion.

After its peak on Tuesday Radiant Gems witnessed some profit taking driving the counter to dip 7.6% as it closed at Rs. 180 for the day. Hydro Power Free Lanka, another penny addition, witnessed some renewed speculative playas it saw 3.9 million shares being traded in total whilst registering a gain of 8.1% closing at Rs. 16.1. Regnis Lanka continued to be actively engaged by the investors but closed with a dip of 4.5% for the day on the back of retail profit taking. Selling was visible in heavy weight John Keells Holdings as the counter dipped by 1.4%. Capital Alliance Finance, which initiated trading on Tuesday continued to be actively looked in by the investors after registering a hefty 166% gain on debut. Following a gain of more than 2.5 times, the counter saw some profit taking as it sank 4.5% to close at Rs. 38.10.

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E-Channelling top gainer

Colombo stocks ended in red yesterday with both indices recording losses. ASI dropped 15.06 points (-0.22%) to close at 6,706.48 while sensitive MPI closed at 5,966.51, dip of 16.44 points (-0.27%).
Market turnover stood at Rs 1.3 billion.

Retail investor favourite E-Channelling Plc made the highest contribution of Rs 309.1 million to the market turnover and was traded heavily during the day.

E-Channelling was the top gainer of the day and it reached the high of Rs 10.30 and closed at Rs 9.90, up Rs 1.20 (+13.8%). Radiant Gems Plc (Rs 69.8 million) and Hydro Power Free Lanka Plc (Rs 62.0 million) lagged behind in terms of turnover but were next in line to E-Channelling and traded heavily. Further, Ceylon & Foreign Trades Plc was among the mostly traded stocks and closed at Rs 11.40, the maximum price the counter could reach within the 10% price band.

Lanka Milk Foods recorded an off-the-floor deal of 245,000 shares at a price of Rs 130.00.

At the end of the day the stock closed at Rs 132.00, up Rs 4.50. Low investor interest pushed the share prices of blue-chips further down.

Premier blue-chip John Keells Holdings closed at Rs 200.00, a dip of Rs 2.80, Commercial Bank closed at Rs 111.50, down by Rs 1.30 and Colombo Dockyard closed at Rs 256.00, drop of Rs 3.20. Moreover profit realization was seen in speculative counters such as Laxapana Batteries Plc, Regnis Lanka Plc and Radiant Gems Plc.

Foreign participation was low at 8.5%. At the end of trading foreign investors were net sellers with a net foreign outflow of Rs 88.0 million. Lanka Securities Research

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Shares of E-Chanelling PLC (ECL) traded heavily yesterday amidst much speculation that surrounds the company.

According to brokers, 26.2 per cent of the company traded yesterday with 32 million shares trading at average price of Rs.9.65. ECL has 122.1 million shares in issue.

The company became the number one turnover contributor generating Rs.309 million. 

ECL’s FY 11 Earnings per share (EPS) was only 7 cents and the Book Value per share at March 31, 2011 was 64 cents.

The company made a net profit of Rs.8.3 million for the FY11.


SLIC buys 5% stake for a premium in Colonial Motors

Sri Lanka Insurance Corporation (SLIC) has this week bought an estimated 5% stake in Colonial Motors for over Rs. 190 million.

The acquisition was done on Monday when 489,200 shares of Colonial traded for Rs. 236 million.             

Among the traded were two crossings involving 400,000 shares at Rs. 480 each with the buyer being SLIC. Sellers were Colonial’s controlling shareholder The Colombo Fort Land and Building Co. (CFLB).

In August CFLB bought a 12% stake at Rs. 290 per share whilst it already owned a 52% stake. The seller was Dr. T. Senthilverl. Via this week’s sale, CFLB had made a tidy capital gain as the sale price was Rs. 480, which is Rs. 261 or 90% above the price it paid in August in acquiring a 12% stake.

Last week Colonial share price dipped by Rs. 20.70 to close at Rs. 466.30 whilst its 52-week highest is Rs. 530.

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Nimal, Dilith not buying?

Absence of high networth investors Nimal Perera and Dilith Jayaweera on the buying side of the Colombo Bourse is conspicuous this week with some even linking to market’s downfall and poor turnover.

Whilst Dilith hasn’t been active most part of the week Nimal was seen on the selling side of Regnis.

The latter began selling Regnis on Tuesday and continued yesterday as well, out of his holding of 500,000.

Regnis share price has been on the slide since Tuesday. Last week Regnis was the fifth biggest gainer with 136% increase to Rs. 440.20 whilst on Monday it peaked to Rs. 493. By yesterday it had dipped to Rs. 434.70.

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Record prices at this week’s auction

At this week’s Tea Auction conducted on 4 and 5 October, several All Time Colombo Tea Auction Record Prices were established for the Low Grown OP and OPA grades.

All three record prices were established through the catalogue of Lanka Commodity Brokers Ltd., whilst the respective buyers for the OP and OPA grades were Inter Tea Private Ltd., and U K Beverages Pvt. Ltd.

Lanka Commodity Brokers said the best leafy teas enjoyed stronger demand this week from buyers for Russia and the C I S as their “winter buying” is now in full force.

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