Wednesday, February 29, 2012

Sri Lanka stocks close up 0.4-pct

Feb 29, 2012 (LBO) - Sri Lanka's stock closed up 0.49 percent Wednesday, with turnover boosted by the change of control of motor dealers, though market participants are still getting used to a new trading system, brokers said.

The Colombo All Share Index rose 0.49 percent to 5,458.09 points up 26.42 points while the Milanka Index of more liquid stocks rose 0.54 percent to 4,744.84 points.

Turnover rose to 1.6 billion rupees with a Sri Lanka's Access Engineering buying a 60 percent stake in Sathosa Motors from Japan's Itochu Corp for 846 million rupees paying 235 rupees a share.

Brokers said they were still getting used to a new automated trading system upgrade at the Colombo Stock Exchange which was keeping transaction volumes down.

With the so-called 'odd lots' board no longer in place and all stocks going through the main board single shares were being traded at high prices.

Ceylon Tea Services rose 58.10 rupees to 599.0 rupees and EB Creasy and Company rose 249.40 rupees to 1,000 rupees.

However a stock exchange spokesman said trades below 100 shares were not included in the index. Under the earlier system odd lots used to trade to a discount to the main board.

Commercial Bank rose 10 cents to 100.10 rupees, Hatton National Bank was flat at 150 rupees, and Sampath rose 0.91 cents to close at 185.91 rupees.

Many banks have reported higher profits largely on lower tax charges but their core banking profits were squeezed on rising interest rates.

Bukit Darah, an index heavy stock rose 28.80 rupees to close at 980.00 rupees Sri Lanka Telecom rose 70 cents to 45.80 rupees.

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Sri Lanka Access Engineering buys control of Sathosa Motors

Feb 29, 2012 (LBO) - Sri Lanka's Access Engineering bought 60 percent of vehicle importer Sathosa Motors from Japan's Itochu Corp. for 846 million rupees paying 235 rupees a share, its chairman Sumal Perera said.

 He said the acquisition would be a good fit to the group's existing business which is expanding.
 "In addition to organic growth, we were looking at any good strategic investment opportunity," he told LBO.

"We believe there will be steady growth in the commercial vehicle and construction machinery business in the coming years."

 Access Engineering plans an initial public offer opening on March 6 of 20 million shares at 25 rupees each to raise 500 million rupees.

Perera said in June 2011, the firm raised 4.5 billion rupees in a private placement of shares at the same price.

The acquisition of Sathosa Motors would also provide Access Engineering access to the Sathosa Motor's vehicle workshop, Perera said.

"There will also b synergies with the workshop. We have increased our company's plant and machinery and we need a very good workshop to maintain them. Also, there is the Isuzu brand name."

Perera said Itochu Corp wanted to exit from Sathosa Motors and selected Access after evaluating a few candidates.

"Itochu is a very large Japanese trading company. They felt they needed a good local partner to go forward and focus on the business and after evaluating a few candidates they selected us," Perera said.

"But they will continue to be our trading partner in Japan in shipping, Isuzu vehicles and spares."

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Foreign holding update - 24.02.2012

source - CAL Research

Harry’s Melstacorp buys 11% more in Spence for Rs. 5 b

 SLIC books hefty Rs. 4 b capital gain as an eager Harry secures large block

 Ups control to 40.8%

 Melstacorp to revise Spence mandatory offer price to Rs. 115 per share from Rs. 113

Business tycoon Harry Jayawardena-linked Melstacorp Ltd. yesterday acquired a strategic block of an 11% stake in Aitken Spence Plc for Rs. 5 billion, paying a price above that of the ongoing mandatory offer.

Melstacorp, a fully-owned subsidiary of Distilleries Company, bought a 10.8% stake or 44.03 million shares at Rs. 115 each (Rs. 2.17 above the mandatory offer price of Rs. 112.83) in a deal worth Rs. 5.06 billion from Sri Lanka Insurance Corporation (SLIC).

 Analysts said the above mandatory offer price suggests that Harry was eager to clinch SLIC’s stake, which incidentally was acquired when the Distilleries-involved consortium owned and managed the insurance giant.

 Some estimated that the actual cost for SLIC was around Rs. 18 to 20 per share, which means it booked around Rs. 4 billion profit from the sale. SLIC held the stake via General fund (6.4%) and Life fund (4.43%).

 With yesterday’s acquisition, Harry now controls around 40.8% stake in Spence. The next remaining block is a 7% stake held by EPF. The control is via Distilleries (28%) and Milford Exports along with Stassen Exports (2%) in addition to Melstacorp’s 11% acquired yesterday.

 Net asset per share of Spence at Company level is Rs. 23.66 and at Group level it is Rs. 57. Spence’s forward PE is 13 times and price to book value is two times.

 The buy by Melstacorp however was in line with current market price. Spence closed last week at Rs. 116, up by Rs. 2 from the previous week. Yesterday it began trading at Rs. 119.90 (intra-day highest) whilst prior to the mega crossing of 44 million shares, a few blocks went at Rs.115 level before closing at Rs. 115.50.

 As exclusively reported by the Daily FT on Monday, foreign funds have of late stepped up buying into Aitken Spence. They picked up a 1% stake for Rs. 516 million last week.

 Distilleries at company level had revenue reserves of Rs. 25 billion as at 31 December 2011, up from 21.7 billion as at March 2011 and Rs. 16.8 billion as at December 2010. Its recent major investment (via Melstacorp) was a 3.2% stake in JKH, currently worth Rs. 4.76 billion.

 Last week Melstacorp acquired a 9% stake in Lanka Milk Foods for Rs. 350 million, thereby increasing Harry’s control to 52% and a mandatory offer is pending.

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Pasan Madanayake buys 20% stake in ASCOT for Rs. 368 m

Engineer turned entrepreneur Pasan Madanayake yesterday bought a strategic 20% stake in ASCOT Holdings for Rs. 368 million.

 The purchase was via his newly-floated firm St. Louis Capital Ltd. Yesterday 1.85 million shares of ASCOT amounting to a 23% stake traded for Rs. 411 million.

Pasan had picked up the biggest block of 1.6 million shares (20.1% stake) that traded at Rs. 225 each in addition to a few more in a deal worth Rs. 368 million.

 ASCOT figured in the top 10 gainers percentagewise as its share price closed up 16% or Rs. 28.60 to close at Rs. 206.40 whilst it hit an intra-day high of Rs. 225. The 1.85 million share volume saw 413 trades.

 Pasan owns Amtrad, the leader in cement pavings and blocks, as well as Lanka Quarries, also a leader in its field.

 Analysts viewed the investment as strategic as there were speculation that Pasan could be looking for synergies between ASCOT and his two companies.

 The seller of the block was Rohan Iriyagolle, who previously controlled a 42% stake via Axis Financial Services. Following the sale, his stake has come down to 21%. The other major shareholder of ASCOT Holdings is Nimal Perera with a stake of 20%.

 Nimal crossed the 20% threshold in January when he bought a 3.3% stake or 0.26 million shares at Rs. 150 level.

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COMBank breaks Rs. 10 b barrier in pre-tax profit

Commercial Bank of Ceylon PLC has achieved outstanding growth in key performance indicators to post record profit and operational growth in 2011 and end the year once again as the benchmark private bank in the country.

 According to income statements released to the Colombo Stock Exchange for the 12 months ending 31 December 2011, Commercial Bank exceeded Rs. 10 billion in profit before corporate tax, reaching a new milestone by growing PBT by 17.9% to Rs 10.987 billion in the review period.

Profit after tax grew by a robust 45.7% to reach Rs. 8 billion (Rs. 8.047 billion) from Rs. 5.523 billion for the previous year.

 The bank’s total income for the year was up 9.54% to Rs. 45.483 billion, with interest income growing by Rs. 2.9 billion to Rs. 37.639 billion and non-interest income (foreign exchange and other income) growing by 16% to Rs. 6.590 billion. Net interest income increased by 9.66% to Rs. 17.996 billion. Net income improved by 11.3% to Rs. 24.586 billion.

 The total interest income growth was principally attributable to a healthy 21.59% growth in interest income from loans and advances, which amounted to Rs. 28.697 billion for the 12 months. Interest income from other interest earning assets such as Treasury Bills and Bonds totalled Rs. 8.942 billion reflecting a decline of Rs. 2.195 billion or 19.7%.

 This was due to the reduction in bills and bonds volume and the lower interest regime that prevailed in the review period.

 Gross loans and advances grew by Rs. 59.590 billion over the 12 months to Rs. 287.96 billion at 31 December 2011, an increase that averaged Rs. 5 billion per month. The total performing loans and advances portfolio of the bank expanded by a noteworthy 27.50% to Rs. 272.135 billion.

Total deposits of the bank as at 31 December 2011 stood at Rs. 318.461 billion, an increase of Rs. 58.682 billion or 22.59% over 12 months. The average growth in deposits was also close to Rs. 5 billion per month.

 On the strength of these results, the Board of Directors of Commercial Bank has proposed a final dividend of Rs. 3.50 per share, made up of Rs. 1.50 in cash and Rs. 2 in the form of a scrip dividend, taking total dividend per share for the year to Rs. 6. The bank paid an interim dividend of Rs. 2.50 earlier in the year. These dividends are on the higher capital after a Rights Issue in August and a 1 for 1 Share Split in September 2011.

 Commercial Bank Managing Director Amitha Gooneratne described the bank’s performance as the result of solid all-round contributions from all core areas of banking. “Our focus has always been on optimising the operational returns whilst maintaining a healthy balance in the deposit mix and prudent lending,” Gooneratne said.

 He said the bank had, as a result, maintained or improved key performance ratios.

 Gooneratne also disclosed that the bank had been able to transfer Rs. 1.194 billion to an investment fund account from the tax savings, resulting from a reduction in the tax rate from 35% to 28% and the reduction in the financial VAT rate from 20% to 12%.
 Total assets of the bank grew by Rs. 71 billion or 19.2% to Rs. 441 billion as at 31 December 2011.

The bank opened 26 new delivery channels and installed 100 new ATMs in Sri Lanka during the review period, to end the year with 213 service points and a network of 500 ATMs, which is the largest ATM network operated by a bank in the country. The bank’s Bangladesh operations comprise of 17 service points and 14 ATMs.

 Specific provisions increased by 92.3% to Rs. 1.979 billion. The impact of this increase was, however, partly offset by a net reversal of statutory general provisions on performing and overdue loans due to the Central Bank’s decision to reduce general provisions to 0.5% from 0.9% at the beginning of the year.  As a result, net provisions for bad and doubtful debts increased by Rs 151 million to Rs. 235.2 million.

 The gross NPL ratio (net of interest in suspense) reduced from 4.22% at end 2010 to 3.43% at 31 December 2011, while net NPL ratio came down to 2.08% from 2.78% a year previously. With the additional specific provisions made on a prudential basis during the year, gross provision cover improved to 34.07% by the end of the year, Commercial Bank Chief Financial Officer Nandika Buddhipala commented. Net provision cover (provisions made as a percentage of net non-performing loans) improved to 39.53%.

 Commercial Bank’s open credit exposure ratio (ratio of net non-performing loans to capital) also recorded a significant improvement, from 18.61% in 2010 to 14.26% in the year reviewed. Net exposure came down as a result of the additional provisions and the increase in the capital base following the bank’s rights issue, Buddhipala explained.

 Interest expenses rose by 7.17% to Rs. 19.643 billion, mainly due to increase in deposit volume during the year. Non-interest expenses grew by 18.66% to Rs. 11.841 billion, primarily on account of increased expenses linked to the expansion of the bank’s delivery channels in Sri Lanka and Bangladesh. One of the significant contributors to operating expenses was the full-year impact of the deposit insurance scheme mandated by the Central Bank of Sri Lanka, he said.

 In other key performance ratios, the bank’s basic earnings per share improved by 39.06% to Rs. 10.04; return on equity improved to 20.76% from 17.87% last year and return on assets reached 2.71% from 2.69% last year. Market capitalisation as at 30 December 2011 was Rs. 76.508 billion, the highest among listed banks and the sixth highest among all listed entities in Sri Lanka.

 The bank also improved its total capital adequacy ratio to 13.01% from 12.27% a year previously.

 Taken as a Group, the Commercial Bank, its subsidiaries and associates posted pre-tax profit of Rs. 11.068 billion at the end of 2011, recording a growth of 19%. Profit after tax for the period was up 47% to Rs. 8.095 billion.

 Commercial Bank is the largest private bank in Sri Lanka, and the only Sri Lankan bank listed in the world’s Top 1,000 Banks. It operates a network of 213 service points in Sri Lanka and a network of 500 ATMs, the single largest ATM network operated by a bank in the island.

 The bank has been adjudged ‘Best Bank in Sri Lanka’ for 13 consecutive years by ‘Global Finance’ Magazine and has won multiple awards as the country’s best bank from ‘The Banker,’ ‘FinanceAsia,’ ‘Euromoney’ and ‘Trade Finance’ magazines.

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Broker battle for big deal

Given its sheer size, the deal involving SLIC and Melstacorp on Spence had its share of broker battle as well, the Daily FT learns.

There had been several brokers who either showed the quantity in full or parts or were firming up already. Some had been asked for a higher price by the seller as well.

 However, akin to a directive from the sky, the deal was eventually done on a shared basis between Sommerville and John Keells Stock Brokers, much to the chagrin of those who sweated previously or almost had the deal.

 Spence trades were done via two blocks – 26 million shares and 18 million shares each with JKSB as the buying broker and Sommerville doing the selling.

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HNB ups Group net profit by 27.6% to Rs. 6.2 b in 2011

Hatton National Bank (HNB) revealed yesterday that it has made a Rs. 6.2 billion consolidated profit after tax for the year 2011.

 In a statement, HNB said the financial year 2011 presented a set of new challenges for the banking sector, different from those it witnessed during the previous two years. In 2011 the banking sector experienced an unprecedented growth in demand for credit, recording a 32% growth in loans and advances compared to 24% in 2010.

The bigger challenge for the banking sector, however, was to manage its liquidity as the deposits witnessed only a 19% growth during the year. In addition, the healthy margins enjoyed by the industry in the past came under persistent pressure with interest rates remaining close to single digit for the major part of 2011.

 Despite the challenges faced, the bank recorded strong results in 2011 and Chairperson Dr. Ranee Jayamaha commented: “In 2011, we stood strong and tall for our clients, depositors and shareholders in an uncertain world. Our passion to perform and fresh thinking helped deliver business solutions that met our client-specific commercial needs across the entirety of the branch network last year, with no compromise on quality, building lasting and fulfilling relationships with customers from all walks of life.”

During the financial year 2011, the bank’s interest income recorded a growth of 9.6% due to rapid growth in loans and advances, compared to the negative growth witnessed in 2010. However growth in interest income did not keep pace with the increase in loans and advances, demonstrating a drop in yields compared to 2010.

 However, interest cost in 2011 increased by 13.9% during the same period, despite deposits growing at a slower pace than advances. Hence the bank’s net interest margin narrowed in 2011. This was an industry-wide phenomenon witnessed during the financial year. Accordingly, the net interest income of the bank grew by 5.5% in 2011 compared to 2010.

The bank was successful in growing its commission income base by more than 32% during the year with trade income and card commissions leading the way. However exchange income witnessed a setback during 2011 due to relatively stable exchange rates for the most part of the year.

 A significant drop of 49.9% was noted in other income due to the absence of capital gains realised in 2010 from the disposal of investments in Commercial Bank of Ceylon PLC, Distilleries Company of Sri Lanka PLC, Acuity Securities (Pvt) Ltd. and Lanka Ventures PLC and the marked to market gains recorded from equity investments in the previous year. However, the dividend income increased by Rs. 200 m as a result of higher dividend declared by DFCC.

 Accordingly, the net income of the bank for 2011 stood at Rs. 21.2 billion, which is a 5.2% growth from the previous year.

 During the year the bank focused on capacity building by opening 35 new customer centres, which is by far the most aggressive network expansion during the past decade.

 Commenting on the expansion drive, HNB Managing Director and CEO Rajendra Theagarajah stated: “In 2011, our focus was essentially to further penetrate the rural sector, and as such we followed a concerted strategy of network penetration with a view to not only enhance our footprint across the Island but also to bring the concept of banking to the very doorsteps of every rural community. Our initiatives towards absorbing individuals even at the lowest tier of the socioeconomic group have opened vistas of opportunities to communities who have for generations lived beyond the poverty line.”

Despite the said expansion, focus on rationalisation of cost continued to be a priority during 2011 and the bank managed to maintain the increase in staff emoluments at a modest 5% while other expenses increased by 10% during the year.

 However, the increased contribution towards the deposit insurance scheme introduced in late 2010 and marked to market losses of the equity portfolio included under other expenses further contributed towards increasing the cost base compared to the previous year. This, coupled with the lower growth in net income, has caused the cost to income ratio to deteriorate to 57.7% compared to 54.9% last year.

 The bank continued its recovery efforts to bring the gross NPA ratio below 4% in 2011 and accordingly, the gross NPA ratio stood at 3.9% compared to 4.5% last year. However, the net NPA witnessed a marginal increase to 2.3% from 1.95% in 2010 mainly due to the 0.5% reversal of the general provision as per Central Bank guidelines as a precursor to the introduction of fair value accounting in 2012.

 The industry witnessed the benefit of a lower tax regime in 2011, as the Government Budget proposals in 2010 announced significant reductions in corporate tax rates applicable for banks. Accordingly, the corporate tax charge for HNB dropped by 3.1% reflecting an effective tax rate of 28.3% compared to 33.7% in 2010.

 In 2011, HNB managed to grow its pre-tax profits by 15.4% to Rs. 7.8 billion compared to the previous year, while the Group posted a pre-tax profit of Rs. 8.5 billion, recording a growth of 17%.

The net profit after tax for the bank stood at Rs. 5.6 billion, recording a growth of 24.8 % in 2011 despite pressure on margins and significant reduction in investment income as explained above. The Group net profit for 2011 amounted to Rs. 6.2 billion, which represents a year-on-year growth of 27.6%.

 The bank’s return on average assets stood at 1.6% compared to 1.5% in the previous year and return on average equity was maintained at 17.3% in 2011 despite the equity infusion.

 In 2011, the bank’s asset base grew by a significant 20.4% funded by an infusion of capital as well as a steady growth of its deposit base. Contrary to the previous two years, the loan book of the bank grew by a staggering 25.8% to Rs. 264.3 b. The growth was supported by all segments including corporate, SME, leasing, pawning and retail aided by the bank’s customer centre network spread across the country. The network expansion during the year, especially in the previous war torn regions too contributed towards this end.

 Though the bank witnessed a robust growth in deposits of 21.4%, it did not keep pace with loans and advances. The current account base for the bank showed a drop from the previous year, mainly due to the withdrawal of a large deposit which came in for a short period of time during the last week of 2010.

 The savings deposit base witnessed a healthy growth during the year despite increasing interest rates towards the latter part of the year adding pressure on low cost deposits. The rupee fixed deposits during the year witnessed a sizable growth of 45% to Rs. 113.3 b in 2011. Accordingly, the Current Account and Savings Account (CASA) ratio dropped from 56% in 2010 to 49% in 2011.

 The bank paid an interim dividend of Rs. 1.50 per share for 2011 in December and proposes a final dividend of Rs. 6 per share. The final dividend consists of cash dividend of Rs. 3 per share and a scrip dividend of Rs. 3 per share. The gross dividend for the year increased by 76.7% to Rs. 2,914 million on account of the total dividend payment of Rs. 7.50 per share against the total gross dividend payment for 2010.

 During the year the bank raised Rs. 6.1 billion by way of a rights issue while the tier II capital base was strengthened through a subordinated debt issue of Rs. 2 billion during the year. As a result, the capital adequacy ratios remained healthy with core capital ratio at 12.76% and total capital adequacy ratio at 14.51% as at the end of December 2011.

 The Group companies recorded commendable contributions during 2011, with HNB Assurance PLC, the insurance subsidiary, posting a 24% growth in gross written premium and 14% growth in post-tax profits to reach Rs. 275 million.

 Sithma Development Limited, the property development subsidiary, recorded outstanding performance in 2011, posting a growth of 60% in post-tax profit, while Acuity Partners (Pvt) Ltd., the joint venture investment bank, posted commendable results despite sluggish market conditions that prevailed during most part of the year.

 The Acuity Group further consolidated its position as the full service investment bank in the country through the asset management arm that was set up during the year, in collaboration with Ceylon Guardian Investments PLC.

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Singer Sri Lanka ends 2011 with Rs. 22 b revenue; profits up 95%

Singer Sri Lanka has capped a strong 2011 financial year by recording the most successful quarter yet in the Group’s history.

 The consumer giant’s CEO Asoka Pieris noted that the Group’s revenues for 2011 reached Rs. 22 billion, while its net profit grew by 95% – remarkable figures that underscored the Group’s popularity with Sri Lankan consumers.

 Singer Sri Lanka’s performance is even more noteworthy when the Group’s Rs. 150.5 million net gain on dilution in the previous year, attributed to Singer Finance’s IPO, is excluded. If this gain is set aside, the Group’s net profit growth over the prior year is a staggering 152%.

 The Group’s fourth quarter growth was consistently strong with Singer (Sri Lanka) PLC notching a 38% increase in revenue while Singer Finance revenue rose by 27%.

 Overall Group revenue grew by 37% in the fourth quarter, buoyed by strong consumer demand for its innovative products and services. 

 The Group’s outstanding results for the year were driven by the increasingly strong bond it shares with consumers, which were reflected in a surge in unit sales. Unit sales of televisions increased by 56% over the same period of the preceding year, while sales of refrigerators, washing machines, and audio equipment improved by 35%, 36%, and 36% respectively.

 Other product lines that showed outstanding growth included computers (49%), air-conditioners (109%), small kitchen appliances (62%) and fans (87%).

 Singer Sri Lanka offers customers an unrivalled degree of choice in these product categories and others, reflecting its commitment to a multi-brand marketing strategy. The Group leverages the country’s most extensive retail network to give customers the freedom of shopping at a conveniently close location.

 Paired with the industry’s most widespread service network, Singer Sri Lanka is able to offer its customers an unbeatable value proposition. As the Group sets its sights on new heights, it is confident that it will be able to continually enhance its product and service offerings, enabling it to secure sustained success in the future.

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Bourse down despite Rs. 5 bn. Aitken Spence deal

Insurance Corp. sells out to Melstacorp

The Colombo bourse declined yesterday for the second consecutive day despite a Rs.5 billion deal where Sri Lanka Insurance Corporation (SLIC) sold its long held stake in Aitken Spence at Rs.115 per share to Melstacorp Limited, a 100% subsidiary of the Distilleries Company of Sri Lanka.

The market closed with the All Share Price Index dropping 44.92 points (0.82%) and the Milanka down 33.96 points (0.71%) on a turnover of Rs.5.86 billion, up from the previous day’s Rs.616 million, with 124 losers comfortably outpacing 72 gainers.

Brokers and analysts said that the market was unable to sustain the previous week’s rally that ended a protracted slump.

"Most of the day the turnover was around the Rs.170 million range until the big deal went through in early afternoon trading," a broker said. "Other than for the Spence transaction and some big trades in Ascot Holdings and PC House, the market was virtually dead."

The General and Life Funds of the SLIC sold their Spence stakes by crossings – the General Fund selling slightly over 26 million shares (6.14%) and the Life Fund 18 million shares (4.43%).

SLIC was the fourth biggest shareholder of Aitken Spence and broking circles said that these shares had been available for some time. The deal went through above the Rs.112.83 mandatory offer by Melstacorp for Spence that is pending right now.

A total of 1.6 million Ascot was transacted at Rs.225, up Rs.47.20 from its previous close. The share however closed at Rs.206.40, gaining Rs.28.60.

A total of 5.2 million PC House was traded yesterday closing flat at Rs.10.90. Brokers said that Acme Printing and Packaging was also heavily traded gaining 50 cents to close at Rs.27.10.

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Tuesday, February 28, 2012

Foreign net inflow tops Rs. 3 billion

Locals may be having fears of the Geneva outcome but the very investors from the West are continuing to be bullish with net inflow topping the Rs. 3 billion mark by yesterday.

Foreigners were net buyers to the tune of Rs. 224 million increasing the net inflow under just two months of the year to Rs. 3.16 billion. Though small it is a record high and significant since for three years beginning 2009, the Colombo Bourse has seen a consecutive outflow.

 Among stocks favoured by foreign funds yesterday were Ceylon Tobacco (Rs. 63 million), Sampath Bank (Rs. 61 million), Aitken Spence Hotels (Rs. 52 million) and Royal Ceramics (Rs. 16 million) whilst there was also buying in to JKH and Chevron Lubricants.

 As part of trading Captains were largely on the selling side of Sampath as well as Commercial Bank whilst state funds EPF and ETF were active yesterday as well collecting banking and other blue chips.

 Sampath, CTC, Aitken Spence Hotel Holdings and Royal Ceramics figured among the top five turnover contributors.

Analysts said average local investors were either selling out or on the sidelines awaiting the developments of the Human Rights Council sessions on Sri Lanka at the United Nations in Geneva whilst others blamed the inaction to problems associated with the Automated Trading System (ATS) version seven, as well as profit taking.

 Ending 11 successive positive sessions, the stock market dipped by 1.6% yesterday whilst turnover was Rs. 616 million.

  “The fall is due to profit-taking, but a number of investors have complained they can’t access the system via the internet after the stock exchange upgraded its trading system,” Acuity Stockbrokers Prashan Fernando was quoted as saying by Reuters.

 Arrenga Capital said the bourse lost steam after seven consecutive days of gains with the approach of the month end margin calls and profit taking by investors.

 The benchmark index had jumped over 550 points during the past seven days. The selling pressure during the day led to a decline in activity levels while the turnover was boosted by 3 off-market deals in blue-chip counters.

“In line with our expectations the sharp gains in the past week built up selling pressure with some investors looking to take profit. We believe the bourse is likely to continue to decline in next couple of days bringing back selected counters to attractive prices. Thus, we advise our investors accumulate on a decline market as we believe that at 5,200 level market valuations seem in line with peer markets,” Arrenga said.

 Bukit Darah, Selinsing and Ceylon Beverage Holdings were the largest contributors to the decline of the index, which some linked to anomalies of ATS Version 7.

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Bourse down on profit taking, unreliable prices

* Traders opt out for a while due to new system

Profit taking pulled down the Colombo Stock Exchange yesterday (Feb. 27) after about a week’s run on making positive gains as a new trading system has made it difficult to judge the true value of stocks, brokers said.

The All Share Price Index closed 89.71 points lower, down 1.61 percent to 5,476.59 points while the Milanka Price Index of more liquid stocks fell 1.03 percent, down 49.39 points to 4,753.39.

Turnover amounted to Rs. 616 million on 21.2 million shares changing hands during the day which saw 49 counters close in positive territory against 167 that closed in the red.

"We are of the opinion that the new trading system that is being implemented at the brokerages is causing traders to stay out of markets temporarily. This has led to some profit taking as we are unable to judge the true value of stocks. Spreads have widened and until the system runs at peak performance, we are unlikely to see much activity this week," Bartleet Religare Securities Technical Analyst Stefan Juriansz said.

"Technically the index seems to be finding some resistance at around 5,650. If we see the possibility of what the technicians refer to as a double bottom, that would only present us with a better opportunity to pick up strong investments. As discussed last week we are keeping an eye on certain value counters such at JKH, SAMP and VONE for index direction and the opportunity to enter into such securities," he said.

"All nine of the world’s worst-performing equity indexes this year are in frontier countries. This was due to the fact that the larger, more liquid markets offered relatively more compelling investment opportunities. However now Bank Julius Baer & Co. says the losses create buying opportunities for long-term investors and advise clients to look for quality as opposed to underperformance," Juriansz said.

As at January 16, 2012, the Colombo Stock Exchange was the second worst performing market in the world.

Foreign purchases continued to be positive with a net inflow of Rs. 224.4 million during the day.

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Asia Capital begins construction of two luxury hotels

The Asia Capital Group said the construction of a 30 room hotel property, ‘Taprobana,’ has begun in Balapitiya and is expected to be completed in time for summer 2013. It said work had also begun on another 30 room property in Wadduwa, situated in a prime beachfront location which will be opened simultaneously.

 "Asia Leisure owns and operates three properties, The Park Street Hotel – Colombo, The River House – Balapitiya and The Tamarind Hill Hotel – Galle.The River House was the 1st ever Sri Lankan property to be featured in Conde Nast Traveller’s exclusive annual Hot List (2005) as one of the ‘Hottest’ new hotels in the world and Robb Report Recommended 100 Ultimate Luxury Escapes for the second consecutive year," Asia Capital said in a statement.

"Taprobana which will be registered under the Tourist Board of Sri Lanka will be located on a picturesque beachfront property. It is expected to compete with the other quality beach properties in the area. Using distinctive Asian influences, the hotel will be built on a ‘home away from home’ concept and will provide stylish, comfortable accommodation for discerning guests wanting to experience Sri Lanka’s beautiful beaches and hospitality.

"The hotel will boast all modern features including a spa, a healing and meditation centre near the beach, business centre, library, music room, swimming pool and meeting facilities conforming to international standards. The main restaurant will serve the best of gourmet specialties in fish and seafood for which the south coast is renowned for.

"The 30 room property in Balapitiya will include two luxury suites and due to

its unique structure and design the rooms will be in equal style while the suites will have extensive space. All rooms will overlook the beach with a wider view of the sea. Rooms will be equipped with state-of-the-art facilities including Wi-Fi, iPod connectors, LED HD TVs, mini bar and a spacious living area with balconies facing the ocean."

Speaking about the company’s investment in these properties Peter Jansen, Director of Asia Leisure said, "The leisure industry is expected to be the fourth largest foreign exchange earner for the country,evidenced by 2011 recording the highest ever tourist arrivals of 855,975. Given this rise in demand we feel that this is the ideal time to expand our string of properties, offering visitors a unique hotel experience."

The Wadduwa property situated on a prime beachfront land will all be suites which will boast of high ceilings and will have balconies with a sea view, among all other international standard amenities.

The hotel will boast a large swimming pool overlooking the Indian Ocean, an authentic fine dining restaurant and a gourmet garden restaurant. The spa operations will be conducted from an exclusive wing.

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NDB Group profits up 35% to Rs. 2.9bn

The NDB Group’s Profit After Tax for the year ended December 31, 2011 was Rs 2.94 bn, up 35% over the previous year. The Profit Attributable to Shareholders for the year was 2.70 bn and compares with Rs 2.1 bn for 2010, a growth of 29%. This significant increase in group profits was attributable to the growth in the core banking income of NDB by 13% over the previous year and the improved performance of the fee based group companies, the bank announced.

 NDB positions itself as the only Financial Services Group in the country, with subsidiaries and associates in Investment Banking, Stock Broking, and Wealth Management, which make up the Capital Markets cluster, and Insurance. The performance of the capital markets cluster improved significantly due to the increased level of activity, in particular managing complex IPOs, apart from a host of other Investment banking services it offers. Additionally, the investment banking arm in Bangladesh, NDB Capital, has performed well despite the difficult market conditions.

The Bank’s Net Interest Income grew by 18% over 2010, supported by a significant growth in loans and advances by 43% and customer deposits by 35%. The growth is commendable, and in relative terms NDB’s performance during the year was higher than its peers.

The Bank’s Profit After Tax, grew by 32% despite the relatively lower equity income during the year compared with 2010.

NDB has been able to contain its Non Performing Loans (NPL) ratio to an all time low of 1.35% which is one of the lowest in the industry. The Bank has been able to achieve this low level of delinquencies by the use of strong credit analysis techniques and proactive risk management practices. The provision cover on NPLs was at 74% as at 31 December 2011 with an Open Loan Position of 2.73%, which signify minimum amount of stress on the Bank’s equity, on account of un-provided delinquencies.

NDB is actively engaged in SME banking and has funded agriculture, handicrafts, manufacturing, trading & distribution, fisheries, and dairy sectors to develop the entrepreneurs in the country.

NDB Divi Aruna SME Loan Scheme was extended to most parts of the country in 2011 including the deep South and the East. Facilities were provided to fisheries, agriculture, dairy and other small scale industries. This scheme provides much needed capital with flexible repayment terms at an attractive pricing, with convenient accessibility. NDB also conducted capacity building workshops in identified areas of the country in an effort to enrich the knowledge base of SMEs

NDB is also actively engaged in Corporate Banking with primary concentration on import, export and infrastructure related businesses. Majority of the Corporate Banking customers of NDB use the electronic-banking platform to transact their business. Product features and facilities are regularly being added and enhanced to continuously improve accessibility, convenience and security.

In keeping abreast with the growth momentum created as a result of restoration of peace, the Project Finance Division diversified its portfolio into growth sectors such as Tourism, Healthcare, Rubber Products, Non-conventional Renewable Energy, Construction related sectors and Animal Husbandry.

The economic revival of the North and the East created unprecedented opportunities for project financing and NDB funded several projects. This also included hotel projects in Passekudah in the East, including a five-star hotel in the year 2011.

NDB has also made strong inroads into rural and urban parts of the country. The expansion plan with 13 branches in 2011 increased its foot print covering key geographies in the country. NDB continued to push its national savings drive, taking the core concept of ‘savings’ beyond monetary measures.

This savings drive was extended to all part of the country earlier in the year.

NDB launched some of the most innovative products in the year 2011. NDB introduced the breakthrough ‘Rattharan Savings’ product. The pioneering product offers a unique feature in which customers can reserve gold at today’s price and obtain gold for the future by paying in instalments.

The Bank revolutionised the leasing industry by introducing new benefits to its leasing product, where long traditional requirements of customers, to have guarantors or make a down payment, in order to obtain a lease facility are no longer required.

For the first time in the Sri Lankan banking history NDB introduced a loan approval within 3 hours for its Dream Maker Personal Loans. NDB also became the first bank in Sri Lanka to introduce secure, online shopping for debit cardholders with the introduction of the ‘Verified by Visa’ facility.

NDB Group has signed an MOU with Singapore’s DBS Bank, to form a strategic alliance in Investment Banking. Through this MOU, NDB Group and DBS Bank would work on Equity and Fixed Income Issuances, Syndications, Project Financing and Mergers & Acquisitions.

 DBS Bank is the largest bank in Singapore and a leading financial services group in Asia.

NDB was presented a number of awards in the year including the award for excellence in branding and marketing at the CMO Asia Awards, the Bronze Award for its ‘Ithuru Karana Maga’ at the 2011 Effie Awards. In addition the bank emerged the proud recipient of an award presented at the prestigious National Business Excellence Awards and won two awards at the Best Corporate Citizens Awards 2011.The Bank emerged 2nd Runner Up - under the second main category at the Best Corporate Citizen Award 2011 for CSR and Sustainable Business, and was also recognized for the Special CSR Project carried out in the North and East, under the category of ‘Best CSR Projects’

NDB was once again positioned in the prestigious Business Today Top Twenty Awards ranking which recognizes the cream of Sri Lankan corporates for their exceptional performance throughout the past year.

In keeping with the bank’s commitment to provide high quality banking services, NDB implemented a new core banking IT platform in the last quarter of 2011. The IT platform is expected to significantly improve customer services and offer innovative services.

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NTB posts record profits

Nations Trust Bank closed the year with a post-tax profit of Rs 1.5Bn, a growth of 41% over 2010. Current year achievement was driven by a noticeable growth in business volume, modest growth in top line revenue despite falling NII margins, controlled growth in operating expenses, provision reversals and lower taxation, the bank said in a statement.

 Across the industry NII margins contracted with intensifying competition. Whilst lending rates were driven down by lower market interest rates and revival of loan growth, funding costs trended upwards as competition increased and liquidity diminished alongside credit growth. Bank also witnessed narrowing NIMs but shifting the asset mix to more high yielding assets softened the impact of falling NII margins. The interest rate cap on credit cards which came into full force during the year, shaving off 12% of the NII margin on the product also contributed significantly to the falling NIMs which was somewhat mitigated with the growth in the card receivables portfolio. Reconfiguration of the cards business model also supported the improvement of yields on cards portfolio towards the second half of the year.

Non-fund based (NFB) income on cards and trade recorded good growth against the previous period.

Improvements in macro economic factors relating to import/export volumes, tourism and consumer spend bolstered these growth levels. Trade finance volumes, both on imports and exports picked up significantly compared to the previous year with the resultant income increasing by 34%. Credit card related non-fund based income grew by 29%. With the re-configuration of the cards business model coming into force, greater attention was paid to increase business drivers on spend and card acquisitions. Foreign exchange income for the year recorded a moderate growth of 9% with increased customer values contributing significantly to the overall number. However, despite commendable performance of the core NFB income lines, overall non-fund base income growth for the current year was lower that 2010 due to large trading gains booked in 2010 on the Fixed Income Securities portfolio.

The Bank continued to manage costs, curtailing the increase in cost to 6% despite rolling out an expansion strategy with investments made in people, premises, systems and the NTB brand. Group cost income ratio was at 63% compared to 59% for the previous period, mainly due to lower NII margins and mark to market losses in the current year. The Bank has laid down strategies towards managing the cost to income ratio below 50% in the medium term.

The sound risk management framework coupled with the conducive economic environment resulted in the Bank recording a healthy NPL ratio at 2.8% compared to 4.82% reported in December 2010.

Whilst absolutes NPLs contracted by 23% over previous year levels, growth in the loan book also assisted in lowering of the NPL ratio. Focused credit management was reflected in provision reversals during the year.

The balance sheet recorded a growth of 23% and crossed the Rs 100 billion mark for the first time, a landmark by any standards for a Bank in its 12th year of operations. The single most challenge during the year has been funding the asset book with the optimal sources of funds as demand for funds exceeded the mobilization of deposits for greater part of the year, which was the case across the industry. However in anticipation of the interest rate hike towards the 4th Qtr, Bank pushed for deposit growth for the medium term which resulted in recording a growth of 39%, outpacing industry growth. The Bank also managed to grow its loan book by 39% to Rs 62Bn, again out performing industry growth. The growth in credit was driven primarily by retail and SME, leasing and consumer finance.

The capital position also strengthened to Rs.8.6Bn with the conversion of the 2nd tranche of warrants leading to a comfortable Group Capital Adequacy Ratios both at Tier 1 and 2 levels. The Bank also concluded an issue of unsecured, subordinated debenture amounting Rs 2bn which augurs well for further expansion of the loan book.

Commenting on the performance CEO/Director Saliya Rajakaruna stated, "Our bank had its best year ever in 2011, not only were we able to report a significant uplift in earnings but also a stable balance sheet recording a balanced growth in deposits and advances. The Bank’s growth over the recent past and performance in 2011 is a continuation of this progressive growth somewhat mirroring the growth of Sri Lanka. As a relatively young player in financial services, NTB is proud of the innovations we have brought to the market and the trust we have garnered. We now look to participate in the evolution of a stable, secure and vibrant financial services industry in Sri Lanka"

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Monday, February 27, 2012

Aitken Spence draws biggest foreign buying as net inflow tops Rs. 1 b

The Colombo Bourse last week saw a net foreign inflow of Rs. 1.2 billion, with Aitken Spence Plc drawing the most buying, whilst brokers expect the non-national interest to grow further.

 Spence saw net foreign shareholding increase by 4.8 million shares or 1% last week, whilst overall nearly five million of its shares traded for Rs. 571.5 million.

The bulk of the trading took place on Thursday with foreign buying amounting to Rs. 516 million.

 Interestingly EPF was the major seller amounting to nearly Rs. 340 million whilst National Equity Fund too was on the selling side. Despite the sale, EPF remains a major shareholder in Spence with a 7.35% stake or 29.8 million shares as at end 2011.

 Among buyers of Spence were Aberdeen funds, which as at end 2011 were holding a 9.7% stake.

 Spence subsidiary Aitken Spence Hotel Holdings also figured among foreigners’ favourites on Friday, drawing over Rs. 110 million of buying.

 Friday’s overall net inflow of Rs. 122.7 million brought the week’s total to Rs. 1.2 billion and the year-to-date figure to Rs. 2.94 billion.

 Given the fact that the Colombo Bourse had seen net outflows during the past three years, the current net inflow trend has boosted investor and broker sentiments.

 Among other stocks picked by foreigners last week were JKH, Tokyo Cement (two million shares) and Chevron, whilst interestingly Royal Ceramics too drew foreign buying.

 Arrenga Capital said foreign buying had brought back some of the lost confidence in the market.

 Asia Wealth Management said foreign investors were booking bulk stakes in selected counters. It said foreign investor interest had been “inspirational for local institutional investors to be active again, whom were previously lagging behind in the absence of foreign impulse”.

“According to our belief, now the market is promising for investors, which earlier went through a turbulent correction. Therefore, we see investors are more in the mode of accumulating shares at substantial discounts. It is important to note that foreign investors are not intending to earn a quick profit and exit the market; rather they would seek for long standing investments in counters with immense potential. Goldman Sachs buying into Rs. 1 b Commercial Bank shares is one fine example to this,” Asia said.

 It is also noted that the currently depreciating local currency would give way for foreign investors to enter the market, even with expectations for the currency to further depreciate.

“A depreciating exchange rate would not affect foreigners with big foreign portfolios, a reason being well diversified portfolios would be robust to diversify currency risk as well, hence a un- hedged position in the Sri Lankan secondary market would not pose huge risks for a big foreign portfolios,” Asia Wealth added.

 DNH Financial said pick up in net foreign purchases was significant despite the rhetoric of some commentators that foreign investors have been ‘exiting’ the market.

“Encouraged by a weaker rupee and healthy corporate results in blue chip stocks, foreign portfolio investors appear to be cherry picking fundamentally strong value and growth stocks that are likely to outperform on a consistent basis with relatively lower earnings and price volatility,” it said.

“Taking into consideration the medium to longer term investment horizon of FIIs, we believe that foreign buying in domestic equities will accelerate this year but on a highly selective basis,” DNH added.

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Mandatory miss!

Companies controlled by business tycoon Harry Jayawardena last week admitted that by an oversight they had failed to make a mandatory offer on Lanka Milk Foods Plc way back in September 2011.

The bizarre development, which also exposed the failure by the regulators, Melstacorp Ltd., said that as at 12 September it (0.79%) together with its parent Distilleries (33.57%) and Milford Exports (1.9%) acting in concert was holding 14.5 million shares or a 36.27% stake in LMF.

On 13 September a further 5% stake or two million shares of LMF had been bought at Rs. 105 each by the connected parties. This purchase increased the connected parties’ stake to 41.27%.

“However due to an oversight, the Offeror failed to make a Mandatory Offer in September 2011 to purchase the remaining 23.49 million shares, constituting 58.73% of the issued shares of Lanka Milk Foods at the time it triggered the Code,” Melstacorp Secretaries P.W. Corporate Secretaries said in a filing to CSE last week. 

 The disclosure came after Mesltacorp on 15 February purchased 3.54 million shares or a 8.85% stake in LMF. As exclusively reported by the Daily FT on 16 February, the bulk of the purchase was at Rs. 99 per share.

 The PW Corporate Secretaries in their filing said that when Melstacorp sought to determine the highest paid price paid during the 12 months preceding 15 February 2012, it had transpired that Mesltacorp had incurred a similar obligation on 13 September 2011, i.e. five months earlier.

 The Secretaries had notified this oversight to the SEC on Thursday for a determination as to the shareholders to whom the offer should be made and the offer price at which the offer should be made.

 The Secretaries also stated that L.U.D. Fernando, a Director to the connected parties, had on 13 September purchased 20 shares of LMF from the Odd Lots at a price of Rs. 119 per share. However, Fernando is currently not a connected party as he ceased to be a director from 8 December 2011.

 Prices at which shares transacted as Odd-Lots are not considered in computing the highest and lowest price in determining the mandatory offer, hence Melstacorp has sought a due determination from the SEC on the offer price as well.

 As per accounts ended on December 2011, Harry J-linked Milford Exports was the biggest shareholder with a 33.57% stake whilst Melstacorp prior to recent purchase had a 5.79% stake whilst its parent Distilleries had a 1.9% stake. These combined holdings give Harry J an estimated slightly above 50% control in LMF. The other major shareholder is Mills Enterprises Ltd., which owns 15.3%.

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Analyst: ‘Take bold steps to provide accurate forecasts rather than trying to hide the obvious’

*Rs. 1bn net foreign inflows stimulates positive moods in desperate CSE

*Market digests ‘new’ economic climate

An equities market analyst says the Rs. 1 billion net inflow of foreign investment into the Colombo Stock Exchange (CSE) has lifted moods in a market desperate for change.

The All Share Price Index closed 1.07 percent higher on Friday to 5,566.30 points, continuing on a positive run after weeks of sharp declines.

"The market has moved from being extremely pessimistic to moderately bullish towards the end of the week. We have seen close to Rs. 1 billion in foreign purchases for the year and the main beneficiaries were JKH and COMB. This positive influx of funds has helped stimulate a positive mood in the market that was desperate for change," said Stefan Juriansz, Technical Analyst, Bartleet Religare Securities.

"However one concerning factor was that COMB has hardly moved from Rs. 100 while shares swapped hands. Once the selling stops we hope that the stock would resume its uptrend and keep Rs. 100 as support rather than becoming resistance for the stock. JKH on the other hand seems to have now found solid support at Rs. 160 and the stock now has the potential to move towards Rs. 210. If JKH were to head towards the technical target, the index which follows has the potential to move towards 6,100. This move up for the index would be a short term bullish correction in a bear market.

"Technically the ASPI is stuck in a downward trading channel with a channel resistance of about 5,650, while the MPI will face heavy resistance at 5,000. The market would be looking to break above these levels next week and head higher, however such a move without some consolidation will be difficult and ideally we would look for the market to drift towards 5,350," Juriansz said.

The Economy

Even though the index seems to have found temporary support, we believe that the economy may see signs of hitting a plateau, he said. "The Central Bank will have a difficult job striking a balance between inflation and growth and will try not to raise rates in the face of steep inflation which is supposed to be ‘6 percent’."

As reported in The Island Financial Review last week, Standard Chartered Bank in its latest country report suggests that the Central Bank would have to raise rates by 0.75 basis points and the rupee to devalue further this year as market forces cannot be stopped.

"We feel more rate hikes may be in the cards as we feel that the hefty loan growth may not be sustainable over the long run. Bank sector asset quality has hugely improved from the lows of December 2009 where NPLs peaked at 8.5 percent to 3.8 percent in December 2011," Juriansz said.

"If the loan growth continues at these high levels, we may see asset quality being compromised in the longer run coupled with the higher forecast interest rates. We however find the current quality of banking assets satisfactory with the more stringent CBSL reporting regulations. At present the market has digested the new economic climate that revealed itself last week. It is now imperative that the key stakeholders take bold steps to provide the market and the economy with accurate forecast rather than trying to hide the obvious. The market is fragile and unexpected announcements or unstoppable market moves can kill the momentum and will bring about the next leg of the bear market."

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Asia Capital profits up 476%

Asia Capital PLC announced a Rs. 1.29 billion profit for the first nine months of the 2011/12 financial year on Wednesday, a 476% increase from the corresponding period of 2010/11. This was led chiefly by a 266% increase in revenue from Rs. 238.3 million as at December 31, 2010 to Rs. 872.6 million as at December 31, 2011.

 In other key performance indicators the gross profit of the company as at December 31, 2011 was Rs. 852.1 million from Rs. 150 million in December 2010. Other operating income too recorded a significant increase to Rs. 733.4 million from Rs. 189.9 million at end December 2010.

The basic earnings per share of the Group was Rs. 11.76 as at December 31, 2011 up from Rs. 2.04 in December 2010. This year a dividend per share of Rs. 6.95 was also declared.

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Sunday, February 26, 2012

What’s wrong in EPF investing in stock market?

The investments in the stock market by the Employees Provident Fund have come in for severe criticism. There are allegations that interested parties have palmed off to the EPF, their shares bought at peak prices during the bull market which ended a few months ago. There is particular criticism directed at the EPF’s purchase of Baihira Farms shares which went above Rs.300 but is now down to Rs.150 or so. The share was unnecessarily pushed up by brokers on the back of the EPF purchases. 

Since our market is small and lacks liquidity, any big orders cannot be executed without a steep increase in price. This point has to be noted by those who engage in trading. Since, the EPF orders are farmed out to several broker firms, the trading is effectively done by the brokers. There are also negotiated sales for large quantities where an offeror wants to dispose of his shares in one lot for otherwise the price would drop steeply with every large lot size sale. Any large buyer has to be particularly careful since normally there could be a premium payable for a large quantity in a rising market or a large discount in a falling market. The EPF Investment Manager has to be conscious of the state of the market and not pay too much. There has been criticism also about the purchase of Galadari Hotel and Laugfs Gas shares by the EPF. There are allegations that a higher price was paid than necessary to acquire the shares in these two companies with the intention of rewarding their controlling shareholder sellers.

There is criticism of a different sort about the purchase of shares in the listed banks like Commercial Bank or Hatton National Bank. The criticism is that the EPF investments, which are carried out by the Central Bank,  also supervises  the commercial banks and therefore has  access to unpublished price sensitive information and if they trade on the basis of such information they would be guilty of insider trading, a criminal offence in law. It is correct that the Department of Bank Supervision of the Central Bank carries out checks and inspections which provide them with unpublished information about the particular banks.

But, the shares of the banks are the most attractive shares in the market, providing both safety and good returns. To shut their shares altogether from the EPF portfolio would be to deprive the subscribers to the EPF of valuable shares which could provide extra returns. Should the workers, who contribute to the EPF, be deprived of such opportunity for high returns?  The answer to the problem of access to unpublished price sensitive information could be resolved by building a Chinese wall to separate the Investment Management arm of the EPF from the Department of Bank Supervision.

Another criticism is that the EPF by acquiring a large stake in a bank can interfere in the appointments and management of the banks. This unfortunately is a possibility which is not at all desirable. Large global investment funds are passive investors and they do not seek to change persons on the board of Directors or interfere in the management of the company. They leave that to those who are more competent to do so. The EPF should follow this same policy of being a passive investor. The State Corporations already suffer from the curse of outside interference in the management by politicians and the appointment of political favourites and bureaucrats who lack knowledge and experience in the particular field of business of the State Corporations. These men have driven these corporations to bankruptcy and destroyed the taxpayers capital invested in them. 

There are some critics who oppose what they say is the attempt of the EPF to prop up the stock market. They would prefer to see the stock market collapse altogether. But, a stock market collapse generally has adverse consequences on other sectors of the economy. It could lead to financial losses for many people who had bought shares in an earlier period at higher prices. There could also be what economists call systemic failure if a broker firm were to fold up unable to settle the trades carried out by it. It would undermine the other broker firms to whom they owe money. We remember the financial crisis in USA in 2008/2009 when the housing mortgage market collapsed. Many Investment banks were in trouble and Lehman Brothers collapsed. The US government allowed it to fail but when it realised that other banks were similarly exposed, the authorities stepped in to bail them out.

Recently, we saw the Greek government becoming insolvent and seeking a bail out from the European Union. Then it was realised that several European banks and even some US banks were exposed to Greek debt too. The European Bank intervened to provide low interest loans to these banks, which these banks promptly invested in Euro bonds at higher rates of interest. Governments do not risk systemic failure when financial markets face a crisis.

Our stock market is facing a crisis due to the bursting of a bubble which emerged after the end of the war. The high share prices could not be sustained and a bursting of the bubble was inevitable. But when this took place many investors deserted the stock market. The EPF has come to the rescue of the stock market and its limited intervention has already restored the confidence of the retail investors and encouraged other Funds and other large investors to come in without waiting for the market to bottom out on its own. Most people would not fault the EPF for doing so.

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Foreign holding update - 17.02.2012 Published By CAL Research

source - CAL Research

Acuity says market upturn will continue this week

The Colombo Stock Market gained momentum last week with the All Share Price Index gaining over 250 points with turnover hitting a high of Rs.3.7 billion on Thursday, Acuity Stockbrokers said in a market report.

 This turnover figure of Rs. 3.7 billion was a high for 2012, the brokerage said.

Foreign investors remained net buyers for the second consecutive week, pushing the market’s year-to-date net inflow to Rs.2.81 billion against a net outflow of Rs.7.09 billion during the comparative period a year earlier.

"Positive sentiment and robust market fundamentals boosted overall markets although investors adapting to the new trading system dampened Friday’s volumes," Acuity said.

The brokerage expected the positive momentum to continue this week.

The ASPI gained 281.13 points (5.32%) last week while the Milanka was up 253.35 points (5.57%), although it is still below the 5,000 point benchmark closing the week at 4,802.78 points.

Average daily turnover last week at Rs.1.71 billion was down a marginal one percent from the previous week’s daily average of Rs.1.73 billion.

Turnover was dominated by LB Finance, Hayleys and Aitken Spence which together contributed 40.79% of last week’s turnover.

Brokers said that Mr. Dhammika Perera acquiring Royal Ceramics-owned 7% of Hayleys and selling his LB Finance holding to Royal Ceramics where he is controlling shareholder accounted for much of the week’s turnover.

The Acuity report noted that active foreign participation had continued with foreigners posting a net buying position of Rs.1.18 billion against the previous week’s net buying of Rs.1.17 billion.

However net foreign purchases during the week were down 39.7% to Rs.334.8 million against the previous week’s Rs.555.4 million.

John Keells Stockbrokers (JKSB) reported that the indices continued a positive trend appreciating over 5% week-on-week "with strong activity dominated by large trades on LB Finance and Hayleys along with trades centered on large caps."

JKSB said that the foreign inflow of Rs.1.18 billion was driven by trades on Commercial Bank.

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Positive market amidst new system screw-up

Stockmarket Review

By Elton P. Ebert

After weeks of stagnation, the market moved into a new phase of renewed vigour, but was unfortunately dampened by the introduction of the new ATS version on Friday which slowed down activity and curtailed the turnover to Rs.508 million.

The brokers say that they need time to get used to the new system, which according to some brokers is not so user-friendly. The indices were in positive territory for all the four days of the week yielding a high turnover of which a massive Rs. 3.7 billion turnover was produced on Thursday when seven million shares in LB Finance and four million shares in Aitken Spence were transacted. Foreign and local institutional activity in Commercial Bank, JKH, Lion Brewery and Asiri Surgical was another important factor seen during the week which created confidence in the bourse. For the purpose of statistics it should be noted that the bourse was under severe depression around mid-February, the ASI down to 5009 on February 14. Some analysts say that this transformation came because most companies have been releasing excellent earnings data, which drew some of the high net-worth investors into the market.

The leading three banking corporates, Commercial Bank and Sampath Bank announced cash dividends and scrip dividends recently while this week Hatton National Bank followed with a cash dividend of Rs 3 per share and a scrip dividend of 1 for 54,815 voting shares and 1 for 34,963 for the non-voting shares. Now many investors are posing the question whether NDB Bank and DFCC Bank will take the cue. Colombo Dockyard announced a dividend of Rs.6 per share and the capatilization of reserves in the ratio of 1 share for every 20 held. In a week where most shares were on the rise, the Malaysian Shalimar Malay rose to Rs.926, Selinsing to Rs 1,500, and Good Hope to Rs 1,414. The other interesting price movements were that of Harischandra Mills at Rs 2,475, Paragon Ceylon at Rs.1,900 and Nuwara Eliya Hotels at Rs1,180.

With the slight lift in market conditions, IPOs are staging an appearance. Mackwoods Energy Ltd will issue 25 million voting shares at Rs14 on the main board. The issue opens on the 22nd March but investors can subscribe from 8th March onwards.

Changes in directorates: Ceylon Hotels Corporation - Gunapala Tissakuttiarachchi was appointed a Director representing the ETF from February 16; Touchwood Investments PLC - D. M. De S.Wijeratne was appointed a Non-Executive/Independent Director effective 23rd February; Indo Malay PLC- Tennyson Rodrigo was appointed Non-Executive Independent Director on 21st February; Nation Lanka Finance PLC - Former Tax chief K.M.S. Kandegedara was appointed Non-Executive Director on 10th February; Muller & Phipps Ceylon PLC - A.R. Rasiah and S.N.P. Palihena were appointed independent Non-Executive Directors on 15th February; Seylan Developments PLC - S. Palihawadana was appointed Deputy Chairman on 17th February, M.K. Muthukumar a Diirector while H. L. Gunasekara as a Director. The turnover for the four days was Rs.6.8 billion as against Rs. 8.2 billion the week earlier.

Meanwhile both indices were improved, the All share Price gaining 281.13 points or 3% to end at 5566.30 while the Milanka was 253.35 points or 2.5% better closing at 4802.78.

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LOLC posts superior 9-month results

Emerging as one of country’s strongest conglomerates

Lanka Orix Leasing Company PLC (LOLC), now emerging as one of the country’s leading conglomerates, has posted a group profit after-tax of Rs.7.89 billion in the nine months ended December 31, 2011, up 31% from Rs.6 billion posted a year earlier.

 Analysts said that this compared with a profit of Rs.6.25 billion posted by JKH, widely regarded as the country’s strongest conglomerate. However, there’s a negative goodwill figure of over Rs. 3.6 billion in LOLC’s nine-month income statement with no similar item in the JKH profit and loss account.

LOLC in which the owners include the Orix Corporation of Japan which owns 30% is controlled by the Nanayakkara family of vehicle importers with Mr. R.M. Nanayakkara and his wife and children owning over 50%.

Mr. Ishara Nanayakkara is Deputy Chairman of LOLC in which the EPF, Sri Lanka Insurance Corporation and the ETF are also among the top 20 shareholders.

LOLC whose core business is leasing has been diversifying into many other areas of business in recent years including leisure, banking with a substantial stake in the Seylan Bank and other businesses.

The company has a stated capital of Rs.475.2 million, reserves of slightly over Rs.2 billion and retained earnings of over Rs.15.1 billion in its books according to the latest published financials covering the period up to December 31, 2011.

Total group assets run at Rs.147.7 billion and total liabilities at Rs.104.5 billion.

The financials reported that Browns Investments PLC had acquired a 100% shareholder of Excel Global Holdings (Pvt) Limited in July last year for Rs.887 million. With this acquisition the group gained controlling interest of Millennium Development (Pvt) Limited (MDL) which is a wholly owned subsidiary of Excel Global Holdings.

MDL has leasehold rights to 897 perches of land presently known as Excel World in the Darley Road area of Colombo with a remaining lease period of 32 years and provision to extend for another 40 years. A chartered valuer had placed the leasehold value of this property at Rs.4.2 billion.

Last December, the group acquired a 99.9% interest of Dikwella Resorts (Pvt) Limited, a resort located in the south coast at a price of Rs.1.01 billion. This previously Italian-owned property is reputed to be the finest beachfront location along the south coast.

The Dikwella acquisition followed taking control of the Confifi properties on Beruwela’s `golden mile’.

Also in December, the group had increased its holdings in Taprobane Capital Limited from 40% to 100% at a consideration of Rs.134 million.

Subsequently to balance sheet date the group had through Browns Investments acquired 51% of Ajax Engineers Limited, a company in business of aluminium fabrication, for a consideration of Rs.100 million.

According to LOLC’s latest financials the company’s share had traded at a high of Rs.97.60 and a low of Rs.74.50 during the quarter ended December 31, 2011.

The company’s directors are Mrs. R.L. Nanayakkara (Chairperson), Mr. Ishara Nanayakkara (Deputy Chairman), Messrs. M.D.D. Pieris, R.A. Fernando, Mrs. K.U. Amarasinghe, R.M. Nanayakkara, Kapila Jayawardea (MD/Group CEO), K. Okimoto and H. Ichida.

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Mackwoods Energy Ltd goes public, offers 25 mln shares

Mackwoods Energy Ltd (MEL), a member of the Mackwoods Group, is going public, offering 25 million ordinary shares at Rs.14 each in an Initial Public Offer (IPO) which opens on March 22.

Mackwoods Group, having commenced its operations in the energy solutions business in 1996 and catering to the demands of a variety of sectors of the economy, in 2008, brought its activities under a common identity through MEL, which previously functioned as Mackwoods Engineering (Pvt) Ltd.

This was aimed at harnessing, at an optimum level, the growing opportunities in the area of power and energy, and for greater specialisation in the sector. MEL is a total energy solutions provider of an extensive array of products and services including the development of hydropower and renewable energy projects.

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Access Engineering bullish on property development

By Dururthu Edirimuni Chandrasekera

Access Engineering Limited (AEL), having launched its Rs. 500 million Initial Public Offering (IPO) on Thursday, will be getting into property development in and around Colombo, officials said.

Sumal Perera, Chairman AEL told a group of analysts that the company has identified land and will be eyeing property development backed by the stimulated growth in the construction sector. "Our profit is from organic growth and we will continue to do so," Mr. Perera said.

AEL, which is one of the country's leading construction enterprises, will offer investors a different investment option, according to Mr. Perera. The IPO is to partly finance the working capital requirements of a housing project to the value of Rs. 3 billion undertaken by the company on behalf of UDA. In June 2011, AEL completed a share issue of Rs. 4.5 billion by placing 180 million shares at an issue price of Rs. 25 each. This is an 18% stake of the company. The balance 2% will be issued at a share issue price of Rs. 25 per share.

He added that now the company is developing large and complex infrastructure development projects utilizing innovative and state-of-the-art technological solutions in all its construction projects.

To date the company has been involved in a diverse range of construction and infrastructure projects in varied sectors such as roads and highways, bridges and flyovers, water and waste management, harbours and marine work, dredging and reclamation, telecommunication, irrigation and land drainage, piling and environment and waste management.

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Saturday, February 25, 2012

Bourse at 3-week high on foreign buying

Reuters:  Sri Lanka’s stock market rose to a three-week high on Friday, as foreign investors bought in weakened shares for the 11th straight session, while the rupee fell on importer dollar demand.

The main share index gained 1.07 percent, or 58.70 points, to close at 5,566.30. It has risen 11 percent over the last seven sessions from an 18-month low, once shares dropped into oversold territory.

“Even though the index seems to have found temporary support, we believe that the economy may see signs of hitting a plateau,” Stefan Juriansz, a technical analyst at the Bartleet Religare Securities in Colombo, said.

 The index rose higher into neutral territory on Friday with the 14-day Relative Strength Index at 52.232 from Thursday’s 49.346, Reuters data showed.

 The Colombo bourse is one of the worst performers this year among Asian markets, with a 8.36 percent loss while the majority have had positive returns.

Foreign investors were net buyers of shares worth 122.7 million Sri Lanka rupees ($1.03 million) on Friday, extending the net foreign inflow to 2.94 billion rupees so far this year, after net outflows of 19.1 billion last year.

 The day’s turnover was 508.2 million rupees, lowest since Feb. 3. Last year’s average turnover was 2.3 billion. The day’s volume was 20.6 million shares, compared to last year’s record daily average of 102.7 million.

 The rupee closed weaker at 119.90/120.00 a dollar, compared with Thursday’s close of 119.30/45 on importer dollar demand. It hit an all-time low of 120.90 on Feb. 15, after the central bank stopped

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Friday, February 24, 2012

Bourse continues to rise on back of heavy trades in LB & Hayleys

*  Share swap between Dhammika companies

The upward momentum on the Colombo bourse continued yesterday with both indices rising sharply on a turnover of Rs.3.7 billion, up from the previous day’s Rs.1.52 billion, largely on account of heavy trades in LB Finance and Hayleys.

Brokers said that there was a share swap between Hayleys and LB Finance where Mr. Dhammika Perera has substantial stakes with Royal Ceramics, also a Perera controlled company, selling 7% of Hayleys to Perera and using the cash generated to buy into LB Finance from Perera.

A substantial volume of LB Finance was crossed at a price of Rs.150 while the big blocks of Hayleys changed hands at Rs.380 also by way of crossings.

Well informed sources said that Perera paid the Rs. 380 mandatory offer price for the Hayleys stake while Royal Ceramics paid Rs. 150 for LB Finance.

The All Share Price Index was up 86.63 points (1.60%) and Milanka by 70.44 points (1.49%) with 154 gainers leaving 63 losers trailing.

LB Finance closed 20 cents down at Rs.145 with nearly 7.4 million shares traded between Rs.144 and Rs.151 generating a turnover of Rs.1.1 billion while Hayleys closed flat at Rs.380 on over 2.8 million shares done between Rs.379.80 and Rs.380 contributing Rs.1.07 billion to the day’s turnover.

Analysts noted that the transaction value of both counters yesterday were approximately Rs.1 billion each.

Apart from LB Finance and Hayleys, Aitken Spence attracted interest with nearly 4.5 million shares done between Rs.115 and Rs.115.80 closing 50 cents down at Rs.115.

"There appeared to be foreign interest in the share," a broker said.

JKH continued its upward trend closing Rs.3.30 up at Rs.178 with over 0.4 million shares done between Rs.173 and Rs.178.

Other shares that showed both volume and price gain included ERI up 10 cents to Rs.22.20 on over 3.1 million shares, Colombo Fort Land up Rs.4.60 to Rs.40.10 on over 1.2 million shares and Vallibel One up 50 cents to Rs.21.30 on over 1.9 million shares.,

Royal Ceramics was down 50 cents to Rs.154.50 on over 0.2 million shares done between Rs.124.50 and Rs.129.

Pegasus Hotels announced the dates for its forthcoming rights issue of one new share for every nine existing shares priced at Rs.36.50 with an EGM scheduled for March 20 to obtain shareholder approval. The share will trade XR from March 21 and provisional letters will be issued on March 26.

Textured Jersey announced a dividend of 12 cents per share for 2011/12, XD from March 5 and with payment on March 15.

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Deals on Dhammika-controlled firms bolster Bourse

Rebound in stock market continues as year to date negative return now reduced to single digit; market cap back at Rs. 2 trillion level

RELATED party transactions involving top investor Dhammika Perera-controlled Hayleys, Royal Ceramics and LB Finance executed by his friend and Director Nimal Perera bolstered the Colombo Bourse yesterday with year to date negative return now trimmed to single digit.

 In deals worth over Rs. 2 billion accounting for 60% of the day’s turnover,  Dhammika bought under his personal name 2.8 million shares in Hayleys (3.7% stake) held by Royal Ceramics for Rs. 1 billion whilst he sold his personal 10% stake in LB Finance to Royal Ceramics. Hayleys share was done at Rs. 380, the same price as the recent most mandatory offer whilst LB Finance stake amounting to slightly over 7 million shares was done at Rs. 150 each.  The transactions were part of realigning the respective investment portfolios. Dhammika has been picking up Hayleys quantities from the market apart from some of those held by RCL and its Managing Director as well as Hayleys Director Nimal Perera.

Dhammika's investment holding firm Vallibel One owns controllin (51%) stakes in both RCL and LB Finance. Despite yesterday’s sale of 10% stake in LB to RCL, Dhammika continues to hold a further 10%. RCL's stake in LB Finance, the fastest growing finance company, is around 15%.These deals apart the rest of the market remained robust with continued interest from institutional and retailer players.

The ASI gained by over 1% thereby reducing its year to date negative return to single digit level of 9%, substantially lower in comparison to over 17% a week ago. The market capitalisation too made a welcome return to Rs. 2 trillion mark after having sunk to Rs. 1.8 trillion mark on February 14.

 Aitken Spence also emerged strong as the counter also recorded 10 crossings carrying a total of 4.3 million shares (generating a turnover of Rs. 517 million) being dealt at a negotiated price of Rs. 115 per share. Meanwhile, interest also continued in John Keells Holdings as it advanced by 1.9% to close at Rs. 177.2.

 Foreign investors were net buyers of shares worth Rs. 530 million, extending the net foreign inflow to Rs. 2.81 billion so far this year.

 Apart from blue chips, investors’ retail chase continued in Environmental Resource Investments and its Warrants, Blue Diamonds [non-voting] and Colombo Land and Developments. Arrenga Capital said amidst some struggle during very early trading, market managed to remain in the green for the sixth consecutive session, denoting a massive 498 points gain over the past six trading days.

 Gains were recorded across the board as the days gainers’ outperformed losers’ by 91. Following the rally benchmark index advanced as much as 115.2 points at its high point of 5,536.2 points.

 Overall participation levels of the bourse were energised by few heavy deals that took place in selected blue chips as the day saw a total of 88.2 million shares being traded, whilst the turnover crossed Rs. 3.7 billion -highest recorded since 01.12.11.

 NDB Stockbrokers said foreign interest in fundamentally sound counters remained with net foreign buying continuing.

 Diversified sector was the highest contributor to the market turnover (due to Aitken Spence, John Keells Holdings and Hayleys) and the sector index gained by 1.37%.

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Thursday, February 23, 2012

Sri Lanka bourse at 2-week high on foreign buying

* Foreign investors buy blue chips

* Foreign investors net buyers for 10th session

* Rupee weaker on importer dlr demand

COLOMBO, Feb 23 (Reuters) - Sri Lanka's stock market surged more than 2 percent in high turnover on Thursday on foreign buying in Aitken Spence PLC and other large blue chip purchases, while the rupee fell on importer dollar demand.

The main share index rose 2.14 percent in early trade, but ended 1.6 percent or 86.63 points firmer at 5,507.60, highest since Feb. 8. It has risen 9.93 percent over the last six sessions from an 18-month low, once shares dropped into oversold territory.

"The buying pressure is there as the investors were taking advantage of the low level of the market," said Sarath Rajapaksa, head of research at Capital Trust Securities in Colombo.

The index rose higher in neutral territory on Thursday with the 14-day Relative Strength Index at 49.346 from Wednesday's 44.775, Reuters data showed.

The Colombo bourse is one of the worst performers this year among Asian market, with a 9.33 percent loss while the majority of others have had positive returns.

Foreign investors were net buyers of shares worth 530 million Sri Lanka rupees ($4.46 million) on Thursday, extending the net foreign inflow to 2.81 billion rupees so far this year, after net outflows of 19.1 billion last year.

Aitken Spence PLC, which saw foreign buying of 4.4 million shares on Thursday, fell 0.43 percent to 115 rupees.

Market Heavy weight conglomerate John Keells Holdings PLC rose 1.90 percent to 177.20 rupees a share.

The day's turnover was 3.71 billion rupees, highest since Dec. 1. Last year's average turnover was 2.3 billion. The day's volume was 88.2 million shares, compared to last year's record daily average of 102.7 million.

The rupee closed weaker at 119.30/45 a dollar, compared with Wednesday's close of 118.80/85 on heavy importer dollar demand. It hit an all-time low of 120.90 on Feb. 15, after the central bank stopped supporting a specific price level. ($1 = 118.7500 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Bryson Hull)

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Born again Bourse?

The Colombo stock market is increasingly showing signs of rebirth as its value has risen by Rs. 153 billion in a week after slumping sharply on 2011 Valentine’s Day.

Bullish sentiments saw the Bourse up over 2% yesterday with market capitalisation improving by Rs. 41 billion to Rs. 1.987 trillion bringing the total to Rs. 153 billion from Rs. 1.834 trillion on 14 February. Of the rally, last Thursday produced the biggest with market’s value gaining Rs. 96 billion.

“Strong retail buying dominated the market with continuing foreign interest and increasing market confidence resulting in a strong and steady upward movement of the indices,” NDB Stockbrokers said. After losing Rs. 112 billion last week Monday and Tuesday, the ASI’s year-to-date negative return was at a high 17.52%, but the rebound has gathered momentum with the YTD negative return reduced to 10.7% by yesterday.

During the past five sessions the market has risen by over 8% from a one-and-a-half year low early last week. Turnover yesterday was a health Rs. 1.5 billion.

 Active local investor play was boosted by continued interest by foreigners. The market saw net foreign buying worth Rs. 449 million increasing the year-to-date net inflow to Rs. 2.3 billion.

“Foreign buying seems to remain strong as the market recorded net foreign inflow for the ninth consecutive trading day,” Arrenga Capital said.

 NDBS said foreign accumulation witnessed in blue chip John Keells Holdings helped to boost the indices while renewed interest in speculative counter Blue Diamond resulted in acceleration towards the end of trading.

 Diversified sector was the highest contributor to the market turnover (due to John Keells Holdings and Aitken Spence) and the sector index rose 2.59%. The share price of John Keells Holdings gained Rs. 7.40 (4.44%) to close at Rs. 174 while share price of Aitken Spence increased Rs 0.70 (0.61%) to close at Rs. 115.70. Foreign holdings of John Keells Holdings and Aitken Spence increased by 1,056,149 and 450,900 shares respectively.

 The Bank, Finance and Insurance sector became the second highest contributor to the market turnover (due to Commercial Bank) and the sector index jumped 3.41%. Commercial Bank share price increased by Rs. 0.10 (0.10%) to close at Rs. 100.90. Foreign Holdings of Commercial bank increased by 1,375,600 shares. Arrenga said with the positive sentiment in the last couple of days the retail participation improved as some of the retail favourite speculative counters gathered momentum.

The speculative lot was led by Blue Diamonds [Non-Voting] with 20 million shares changing hands for Rs. 64 million as the counter closed at Rs. 3.3 (+13.8%) after peaking at Rs. 3.5. Interest was also visible in the Voting share which gained +25.0% (Rs. 7.1 closing) despite lesser volume of 5.7 million shares being traded.

 Retail favourite Environmental Resource Investments was another speculative counter with heavy interest with a sharp of +13.9% to close at Rs. 22.2. The Warrants [W:0003 & W:0006] of the counter also followed the voting share with gains of +20.6% and +21.7%. Among other speculative counters that generated volume were Ascot Holdings (-4.5%) and PC House (-6.2%).

 Some analysts however were concerned over sharp spikes and emphasised the importance of low yet stable gains over a longer period for greater sustainability of and confidence in the market. “With the sharp gains in the indices in the last few days some profit taking is likely to take place,” Arrenga Capital opined hence advised investors to collect stocks on a down trend while taking profit on up trends.

“Investors must keep in mind that there are dark clouds still hovering over the economy and the change in sentiment from extremely pessimistic to extremely bullish is a sign that this market is still fragile,” Stefan Juriansz, a technical analyst at the Bartleet Mallory Stockbrokers was quoted as saying by Reuters.

 Although viewing the opportunities in the local bourse from a bottom-up perspective, DNH Financial said at a macro level, economic growth will continue unabated notwithstanding expectation of a rise in inflationary pressures due to cost push factors caused by the rupee depreciation and rising oil prices.

“We believe that the Government will have the capacity to fuel economic growth not only by strong domestic consumption but also supported by access to foreign capital at attractive rates thereby creating multiple, interrelated drivers for economic expansion. In balancing what we consider the compelling opportunities provided by the Sri Lanka bourse, we see particular value in domestically focused companies which should experience less earnings volatility against an uncertain global backdrop. Among domestically-oriented stocks, we are buyers of selected counters in the consumer, industrial, diversified, banking and hotel sectors which we believe are likely to attract investors who will appreciate their potential upside,” DNH Financial said.

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