Saturday, March 31, 2012

IMF to consider $ 800m loan for Sri Lanka

Reuters: The International Monetary Fund (IMF) will consider making a $ 400 million loan disbursement to Sri Lanka at a 2 April meeting and the final $ 400 million tranche of a $ 2.6 billion loan a few months later, the global lender said on Friday.

The IMF has withheld the loan tranche since September in response to the Central Bank’s failure to implement its repeated request to allowing flexibility in the rupee currency.

 After spending more than $ 2.7 billion of the nation’s reserves propping up the rupee, the Central Bank on 9 February shifted its foreign exchange policy to allow the market to determine the currency’s rate, and stopped defending a certain price level by selling dollars in the market.

“The (IMF) board is meeting on Monday 2 April to discuss the seventh review and there could be an eighth review a few months later. So the plan is two reviews of about $ 400 million each,” Koshy Mathai, the IMF Resident Representative for Sri Lanka, told Reuters via a text message.

 The Central Bank on Thursday said it may stop supplying dollars to pay oil import bills from May, its latest move to allow more rupee flexibility.

The global lender has already disbursed $ 1.8 billion through six reviews since the loan was approved in July 2009, and the Central Bank had earlier said it will not draw the remaining $ 800 million from the global lender due to the high interest rate.

 Two Central Bank officials confirmed that now the country has opted to borrow the remaining tranches and complete the program. The Central Bank has started to rebuild its depleted reserves, they added.

 Central Bank Governor Ajith Nivard Cabraal has said the country is not desperate for the IMF money, but it will be a bonus if it comes through, backing away from his previous stance of not borrowing the remaining tranche.

 Prudential fiscal and monetary policies under the global lender’s program, along with optimism after a 25-year civil war ended in May 2009, has helped attract foreign investors to the $ 59 billion economy.

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Harry’s daughter, Rusi Captain among new faces on HNB Board

The Board of Hatton National Bank PLC has appointed four new Directors with effect from 2 April.
 HNB in a press statement said the four new Directors are L.U. Damien Fernando, D.T. Sujeewa H. Mudalige, D.S.C. Jayawardena and Rusi S. Captain.

 Jayawardena and Fernando are representing interests of Jayawardena-controlled companies’ stake in HNB whilst Captains also hold a substantial stake in the bank.

Fernando has over 29 years of experience in finance, life and non-life insurance, asset management and unit trusts, management of healthcare, food and beverages, manufacturing and in retail, in the mercantile sector.

 In his career he has held many offices including Board and other positions. Fernando is a Fellow Member of the Chartered Institute of Management Accountants of the United Kingdom and holds a Master of Business Administration from the University of Sri Jayewardenepura.

 Mudalige has over 25 years of experience in public accounting practice and in industry in Sri Lanka and overseas and currently is a partner of PricewaterhouseCoopers – Sri Lanka. He has served on regulatory bodies such as the Securities & Exchange Commission of Sri Lanka (SEC) and the Sri Lanka Accounting and Auditing Standards Monitoring Board of Sri Lanka (SLA & ASMB).

He has also been a member of the governing boards of the University of Colombo/School of Computing (UCSC), Postgraduate Institute of Management (PIM) and the National Institute of Business Management (NIBM). He is a member of the Financial System Stability Consultative Committee of the Central Bank of Sri Lanka.

 He recently completed his tenure as the President of the Institute of Chartered Accountants of Sri Lanka and also serves as the Vice President of the Confederation of Asia and Pacific Accountants.

  The Confederation includes the professional accountancy bodies of Asian and Pacific nations. He has also served as a Governing Board Member of the Chartered Institute of Management Accountants (CIMA), Sri Lanka Division.

 Mudalige is a Fellow of the Institute of Chartered Accountants of Sri Lanka, Fellow of the Chartered Institute of Management Accountants (UK), Fellow of the Association of Chartered Certified Accountants (UK) and a Fellow of the Chartered Institute of Securities and Investments (UK).

 Jayawardena is a Director of Lanka Milk Foods (CWE) Plc., Lanka Dairies (Pvt) Ltd., Ambewela Livestock Company Ltd., Pattipola Livestock Company Ltd., Ambewela Products (Pvt) Ltd. and Indo Lanka Exports (Pvt) Ltd., since 2009. She has worked as an Intern for the Clinton Foundation in 2008.

 Jayawardena holds a B.A. (Commercial Law, Criminology, Sociology) from the Monash University, Australia, Professional Certificate in Marketing (CIM), Diploma in Marketing (CIM) and a Professional Postgraduate Diploma in Marketing (CIM). She is also a Certified Auditor (DNV-Norway), a Member (CIM – London) and an Associate of Chartered Institute of Marketing (ACIM – London).

 Captain is the Managing Director of Austin Gloves (Ceylon) Ltd., CEI Plastics Ltd., Propertex Development Ltd., Paints & General Industries Ltd., Paints & General Industries (Exports) Ltd., Polypak Secco Ltd. and Ranweli Ltd. He is also a Director of Chemical Industries (Colombo) Ltd., Body Bar Ltd., H.Senid Software Ltd. and Polytex Garments Ltd. Captain has had his primary education at the Royal College and secondary education (O/L & A/L) at Millfield, UK and the University of Miami, Florida.

 The Board of HNB PLC will now consist of 11 members of which seven would be independent Non-Executive Directors. The board members are Dr. Ranee Jayamaha (Chairperson), Rajendra Theagarajah (Managing Director/CEO), Pamela C. Cooray, N.G. Wickremeratne, M.A.R.C. Cooray, Dr. W.W. Gamage, Dr. L.R. Karunaratne, L.U.D. Fernando, D.T.S.H. Mudalige, D.S.C. Jayawardena and R.S. Captain.

source -

Friday, March 30, 2012

Market snapshot -30.03.12

source - CAL Research

Foreign Holding Update - 30 03 2012

source - CAL Research

Sri Lanka shares end up 0.4-pct

Mar 30, 2012 (LBO) - Sri Lankan shares closed slightly firmer Friday in somewhat choppy trade, brokers said.

 The main All Share Price Index rose 0.35 percent (19.05 points) to 5,431.09, while the more liquid Milanka index fell 0.13 percent (6.52) to close at 4,897.54.

 Turnover was 789 million rupees, according to stock exchange provisional figures.

Index heavyweight John Keells Holdings closed at 206 rupees, down 2.40 while Commercial Bank closed at 100 rupees, up 30 cents.

Environmental Resources Investments was the most actively traded stock, closing at 16.80 rupees, down 10 cents, followed by Panasian Power, which endd at 2.60 rupees, up 10 cents.

source -

Turnover tops billion with Citrus & JKH leading the field

Heavy trades in Citrus Leisure, JKH, NDB and Seylan Bank among others pushed turnover on the Colombo bourse to nearly Rs.1.2 billion yesterday, up from the previous day’s Rs.627.25 million with the indices closing in opposite directions – the All Share down a marginal 4.78 points (0.09%) and the Milanka up 25.60 points (0.52%) with 86 gainers and 95 losers almost on even keel.

 Brokers said there was a fair level of activity with possible switches within portfolios with the approach of March 31.

Citrus generated the day’s top business volume of nearly Rs.80 million closing 20 cents down at Rs.30 on nearly 2.7 million shares traded between Rs.29.60 and Rs.30.20.

JKH continued to be keenly sought closing Rs.2.80 up at Rs.208.10 on slightly over 0.2 million shares traded on the floor between Rs.208 and Rs.210 generating Rs.42 million turnover.

NDB also saw over 0.3 million shares traded and closed Rs.1.50 down at Rs.122 while Seylan (non-voting) closed 40 cents up at Rs.29 on nearly 1.2 million shares done between Rs.27 and Rs.29.10.

Another banking stock that demonstrated some volume was Sampath where over 0.1 million shares were done between Rs.176 and Rs.178.90 gaining Rs.1.70 to close at Rs.178.50.

Brokers noted that Citrus Leisure had attracted interest this week while JKH saw over 0.3 million shares crossed at Rs.208 with a further 200,000 shares done on the floor at around the same value.

Distilleries too saw a crossing of 250,000 shares at Rs.145 while the counter closed Rs.2 up at Rs.145 with nearly 0.2 million shares traded on the floor between Rs.144 and Rs.145.

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Thursday, March 29, 2012

Sri Lanka shares becalmed

Mar 29, 2012 (LBO) - Sri Lankan shares were barely changed Thursday with some interest seen in financial services and trading volumes picked up from low levels, brokers said.

 The main All Share Price Index fell 0.09 percent (4.78 points) to 5,411.79, while the more liquid Milanka index rose 0.52 percent (25.60) to close at 4,907.02.

 Turnover was 1.2 billion rupees, according to stock exchange provisional figures.

Index heavyweight John Keells Holdings closed at 208.40 rupees, up 3.10 rupees, after hitting a high of 210, while Commercial Bank ended at 99.70, down 30 cents.

Over 2.6 million shares of Citrus Leisure changed hands with the share ending at 30 rupees, down 20 cents.

Environmental Resources Investments were the most actively traded stocks, ending at 16.90 rupees, up 60 cents.

Sampath Bank was also actively traded, closing at 178.20 rupees, up 1.40, and Blue Diamonds, which closed at 6.20 rupees, up 20 cents.

source -

JKH dominates bourse, indices edge down

JKH continued to dominate activity on the Colombo bourse yesterday gaining Rs.4 to close at Rs.205 on slightly over 1.1 million shares traded contributing the day’s top turnover of Rs.228.4 million.

However, both indices edged down – the All share by 11.44 points (0.21%) and the Milanka by 6.97 points (0.14%) with 56 gainers trailing 141 losers on a turnover of Rs.627.25 million, up from the previous day’s Rs.578.6 million.

Sampath Bank saw its share price drop Rs.7.40 to Rs.177.50 on over 0.3 million shares traded with investors cashing in on a scrip dividend made by the bank.

Citrus Leisure closed flat at Rs.30.20 on nearly 0.9 million shares while Spence Hotels gained 90 cents to close at Rs.70.90 on 0.2 million shares traded on the floor plus two crossings of 300,000 shares each done at Rs.70.

Dipped Products closed 10 cents up at Rs.101.90 on nearly 0.2 million shares and HNB (non-voting) closed flat at Rs.92 on 0.2 million shares. Carsons too closed flat at Rs.480 on 30,175 shares.

source -

Wednesday, March 28, 2012

Market snapshot -28.03.12

source - CAL Research

Remittances, exporter conversions boost Sri Lanka rupee

* Dollars converted ahead of festival season

* Shares fall in thin volumes; interest rates weigh

 (Reuters) - Sri Lanka's rupee closed firmer on Wednesday as exporters and residents receiving remittances from workers abroad sold dollars ahead of festivals in April to mark the local new year.

The rupee strengthened to 129.20/129.30 per dollar from Tuesday's close of 129.80/130.00. The currency has recovered 1.8 percent since it hit a record low of 131.60 on March 19.

Dealers see the rupee extending gains now that demand for imported commodities ahead of the festival season is easing, and the expatriate remittances boost the dollar supply.

The rupee has fallen 11.6 percent since the central bank stopped defending the currency on Feb. 9.
The stock market slipped in thin volumes on Wednesday as investors remained cautious of rising interest rates, the rupee's volatility and an expected fall in corporate profits.

The nation's main share index edged down 0.16 percent to 5,416.57. The day's turnover was 627.2 million rupees ($4.83 million), well below this year's daily average of 1.37 billion.

Foreign investors were net buyers of 39.2 million on Wednesday, extending the net foreign inflow so far this year to 20.2 billion rupees ($155.5 million).

The Colombo bourse is one of the worst performers this year among Asian markets, with a 10.8 percent loss.

T-bill yields rose between 21-25 basis points at auction on Wednesday with the 364-day T-bill rate hitting a 30-month high of 11.32 percent.

($1 = 129.9000 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by John Stonestreet)

source -

Sri Lanka shares end down 0.2-pct

Mar 28, 2012 (LBO) - Sri Lankan shares closed weaker Wednesday with some interest seen in conglomerates although trading volumes were low, brokers said.

 The main All Share Price Index fell 0.15 percent (8.07 points) to 5,428.01, while the more liquid Milanka index rose 0.50 percent (24.22) to close at 4,888.39.

 Turnover was 627 million rupees, according to stock exchange provisional figures.

Index heavyweight John Keells Holdings closed at 205.30 rupes, up 4.30, with 1.2 million shares done.

Aitken Spence Hotel Holdings ended at 70.70 rupees, up 70 cents, with just over eight million shares traded.

Sampath Bank, the most actively traded stock, closed at 176.80 rupees, down 8.10 rupees.

Environmental Resources Investments, alo actively traded, closed at 16.30 rupees, down 80 cents.
 Orient Garments, which was also actively traded, ended at 19.90 rupees, up 1.20.

source -

Solid start for Access Engineering on Bourse

Share price of debutant peaks to Rs. 29.30 before closing at Rs. 26.30; market cap of Rs. 26.3 b makes it most valuable in Construction and Engineering sector and 17th overall

Colombo stock market debutant Access Engineering Ltd. (AEL) yesterday produced a solid start, with its share price peaking to Rs. 29.30 before closing at Rs. 26.30, up by Rs. 1.30 from its IPO price.

The credible performance propelled AEL to the most valuable stock in the four firms in the Construction and Engineering sector as well as the 17th most valuable overall with a market capitalisation of Rs. 26.3 billion. The other three companies in the Construction and Engineering sector are Colombo Dockyard, MTD Walkers and Lankem Developments.

 In total AEL saw 1.22 million shares transacted via 786 trades for Rs. 33.2 million, which was the fourth highest turnover.

 AEL got off the blocks with the first trade amounting to 44.200 shares at Rs. 26, whilst the last trade was 500 shares at Rs. 25.90. Notable blocks included 140,800 shares at Rs. 28 each and 110,110 shares at Rs. 26.

 Analysts said AEL’s debut exceeded market expectations given the fact that the Rs. 500 million IPO saw only an oversubscription of 1.5 times with less participation from retailers. AEL’s IPO, the first for 2012, made available a 2% stake or 20 million ordinary shares at Rs. 25 each.

 AEL Chairman Sumal Perera was present on the floor of the CSE to witness the debut along with senior executives of the company and managers to the issue, NDB Investment Bank.

 Prior to the IPO, AEL raised Rs. 4.5 billion in June 2011 through an issue of shares where the minimum investment was Rs. 10 million.

 Funds raised via the IPO, which was themed ‘A New Hope,’ will be used 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 the UDA.

 AEL was also the first construction company pioneered by Sri Lankan entrepreneurs to be listed on CSE.

 Established in 2001, Access Engineering Limited has established itself as a leading construction company offering innovative value engineering solutions comprising design, procurement, construction and commissioning of numerous multidisciplinary engineering projects for both the Government and the private sector of Sri Lanka.

 Over this short span of existence, Access Engineering has carved out a name and stature for itself in the construction and engineering sector of the country, which has resulted in the company seeing continuous unprecedented growth while leveraging proficiency and competencies it possesses to generate value for its stakeholders. It has also in its short period of existence won many construction industry and national business excellence awards.

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Sri Lanka the sole frontier market at present for Aberdeen

Despite the bearish sentiments from locals, especially retailers, Sri Lanka is currently the most appealing frontier market for Aberdeen Asset Management’s Asia Division, which manages Euro 24 billion worth of funds.

An article in, Aberdeen Asia Diision Managing Director Hugh Young was quoted as saying Sri Lanka is the only frontier market in which the manager invests is Sri Lanka, citing stocks such as Aitken Spence, DFCC Bank, the National Development Bank, and Keells.

“Young said Sri Lanka does not have the same risks as other frontier markets because it is home to both multinational and home-grown companies,” the article added.

 Here is the full article titled “Aberdeen’s Young: Why I am avoiding frontier markets.”

Hugh Young is steering clear of opportunities in frontier markets over fears of a repeat of the collapse seen in Vietnam in 2009.

 Young, who is managing director of Aberdeen Asset Management’s Asia division and oversees £24bn in AUM, has not jumped on the frontier markets bandwagon because he sees them as too risky.
“Frontier markets are a popular marketing story, but the region can also be dangerous. Vietnam is a good example, everyone got excited, but the companies were dreadful. A lot of money poured in and now the market has collapsed,” he said.  The Ho Chi Minh City Stock Exchange’s VN index peaked in February 2007 at 1,137, then bottomed out in February 2009 at 241. It is currently trading at around 454.

 What happened in Vietnam has deterred Young from investing in other popular frontier markets, which are currently attracting investor attention.  “People are getting very excited about Burma, for example, despite the lack of access to it. There is one company – Yoma Engineering and Trading – the share price of which has increased fivefold. We were tempted, but we tend to buy the reality rather than what people promise. We prefer to wait to see if they do what they are saying.”

The only frontier market in which the manager invests is Sri Lanka, where he holds blue-chip Aitken Spence, DFCC Bank, the National Development Bank, and online supermarket Keells.

 Young said Sri Lanka does not have the same risks as other frontier markets because it is home to both multinational and home-grown companies. Meanwhile, he favours Asian financials, although he has been avoiding major banks in China and Australia for some time, finding better opportunities in Singapore, the Philippines, Malaysia and India.

“In this part of the world, banks are pretty much plain vanilla, just offering mortgages and credit cards. They do not do the daft things that banks do in the West. The tight regulatory environment put in place here eliminates the chance of them making the same mistakes,” he said.

 Last year, Young reduced his exposure to cyclicals including consumer stocks, and bought into other areas, including HSBC, which he has bought back into for the first time in 15 years after the bank renewed its focus on Asia. (

source -

Tuesday, March 27, 2012

Plantations: Rubber for Protection; Tea for Risk Takers

A summery of the research report published by the CAL Research focussing the future of the Rubber Plantation companies in Sri Lanka.

Plantations: Rubber for Protection; Tea for Risk Takers

Global rubber shortage is looming.

• The Association of Natural Rubber Producing Countries (ANRPC) forecasts global supply
to be 11.4mn metric tons in 2012, which includes a forecast of nonmember countries increasing
production by 22%

• c.60% of natural rubber demand is driven by increasing tire sales and tire demand is expected to
increase by 4.7% annually through 2015. In 2012, the ANRPC estimates natural rubber demand
to be 11.9mn metric tons

• Global stockpiles are c.1.5mn metric tons, with Thailand holding c.27% and China holding

• CAL estimates that supply may meet demand in 2013E

In Sri Lanka, production is still falling short of demand (+c.3% YoY in the running deficit).

 • In 2011, Sri Lanka had a running deficit of 11.8mn tons, indicating an increasing shortfall
in local production

• Further, the government has increased CESS on nonvalue added rubber exports (+c.50%), which
may have an impact on prices as well.

Sri Lanka rubber sector is also expected to rise on FX uplift.

• Assuming that NSA’s remain unchanged (i.e.not factoring increase in rubber prices), the
rubber plantations stand to gain 17% due to the LKR fall.

Efficient low cost rubber planters with greatest exposure to rubber to benefit most.

*  Along with expected increases in oil prices

• Brent futures are an indication of future rising spot prices.

• Spot prices have increased 15% in Feb 2012 YoY

*  Expect rubber prices to continue its climb

• TOCOM rubber future prices indicate that rubber prices will increase steadily by 1.5% over the next six months (Mar-Aug 2012).

[CAL's Decision Rule: . Plantations with increasing exposure to rubber and/or palm . Rubber yields & >800 kgs/hectare and gross profits in rubber & >55%]

source - CAL Research

Foreign Holding Update - 23 03 2012

source - CAL Research

Sri Lanka Economy - Update: 27 Mar 12

* Trade deficit in January 2012 at US$ 965.5mn

*  Earnings from exports in January 2012 stood at US$ 918mn, declining 0.6% from January 2011, which was largely attributable to the decline in earnings from agricultural exports.

*  Industrial exports, which contribute about 80% to the total exports, grew by 3.3% to US$ 733mn in January 2012.

*  The expenditure on imports increased by 20.1% (Y-o-Y) to US$ 1,883mn in January 2012.

*  Expenditure on petroleum imports increased by 18.9% to US$ 484mn in January 2012 compared to that of January 2011, reflecting a substantial increase in prices.

* Tourist arrivals in January 2012 increased by 15.7% to 85,874 while earnings from tourism grew by 22.9% to US$ 88mn compared to the corresponding month of 2011.

* Workers' remittances amounted to US$ 473mn in January 2012 compared to US$ 377mn in January 2011, recording a Y-o-Y growth of 25.4%.

source - acuity stock brokers

Monday, March 26, 2012

Market snapshot -26.03.12

source - CAL Research

Subasinghe family ups stake in Ceylinco Insurance

The biggest outside shareholder, the Subasinghe family and connected parties, last week upped their stake in Ceylinco Insurance Plc.

 A 0.21% stake amounting to 42,700 shares of the illiquid Ceylinco Insurance traded on Friday for Rs. 30 million. The block was done at Rs. 700 per share, a big discount in comparison to Thursday’s closing of Rs. 750, Rs. 774.70 closing price in the previous week and Rs. 775 highest last week.

The buyer was Subasinghes’ Global Rubber Industries Ltd., which previously held a 20.17% stake.  The seller was high net worth investor Dr. T. Senthilverl. As at end last year, the Subasinghe family and connected parties held a 28.04% stake.

 Their other holdings are held by Prabash Subasinghe (5.24%) and Global Sea Foods (2.64%).  Analysts said their collective stake now must be above 29% but below the mandatory offer trigger of 30%.

 Last week a total of 44,913 shares of Ceylinco Insurance transacted via 14 trades for Rs. 31.5 million before closing at Rs. 725, down by Rs. 49.70 from the previous week.

 The Subasinghe family first bought into Ceylinco Insurance in February last year at Rs. 500 per share level followed by another block in March at Rs. 750 levels.

 The acquisition by the Subasinghe family of a further stake in Ceylinco Insurance narrows the difference between them and internal or Ceylinco-founder-related shareholding.

 At present around a 33% stake in Ceylinco Insurance is controlled by Ciesot Ltd. (22.86%) and Pictet & Cie (10.68%). These companies are believed to be those set up by Lalith Kotelawala whilst Ceylinco Insurance’s Gratuity Fund and Pension Fund owns a nearly 10% stake.

 A few blocks remain at large including that of Nation Lanka Finance (2.82%) and Castle Realty Ltd. (2.63%).

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Sunday, March 25, 2012

Geneva: No immediate impact on stocks, foreign investment

By Duruthu Edirimuni Chandrasekera

The Colombo bourse is unlikely to be negatively impacted, at least in the short term, on Sri Lanka's loss in the US-backed resolution in Geneva, according to analysts.

Some say that foreign investment in the stock market will not be hampered immediately while others believe that it's too early to make predictions. "It may be too early to comment on the expectations of the foreign investors," Thakshila Hulangamuwa Vice President, Asha Phillips Securities said. He added that what will be mostly counted on is if the country provides an investor friendly environment in all aspects along with transparency and proper policies adopted by the government on a long-term basis.

While also acknowledging that the US-led resolution was angled at certain governance issues which is also a sensitive area for investors, Mr. Hulangamuwa noted that the issue will be focused mostly on how effective the expected implementation of the LLRC (Commission) recommendations would take place on a reasonable time frame.

Analysts pointed out that the Geneva resolution is unlikely to affect foreign direct investment (FDI) to the country. "Most of the recent past and expected foreign investment into the country is from either Chinese origin or links to Chinese firms," Chamikara Gunawardane, Director Invstoreye Ltd, a private research company said.

"We have hardly got any major Western originated foreign investment to the country, except for the ones we got after privatization of strategically important state entities such as Colombo Gas, Lanka Lubricants, Ceylon Oxygen few decades back. If you look at any mega foreign investment to Sri Lanka especially since 1990's, they have been from Asian and the Middle Eastern countries, be it telcos, energy, food & beverage or tourism," he pointed out.

He noted that the resolution passed on Thursday will not have any immediate impact on Sri Lanka's economy. "I am more worried about our main export markets (majority to the US & EU) being affected."

source -

Capricious behaviour at the bourse

Stockmarket Review By Elton P. Ebert

The week opened with a substantial turnover of over Rs. 3 billion made possible through dealings of over 20 million Aitken Spence and two million in JKH which also brought in a foreign funds inflow of around Rs. 2.5 billion.

This was following last Friday's sensational Rs.15 billion turnover, and many expected at least a temporary bull run. But this was not to be as the market returned to its old losing ways for the rest of the week, except on Friday when a minor recovery took place promoting the All Share Index back to the 5400 mark. JKH which reached Rs.200 on Monday went into contraction with the rest of the market, but was in constant demand. Commercial Bank and HNB evoked fair interest while ERI and Free Lanka Capital were also fancied.

Nourishing interim dividends of Rs.7.50 and Rs.4.50 by Kegalle and Namunukula plantations injected enthusiasm into the two stocks which pushed the prices up while the other plantations, shares remained stagnant. Kegalle ended the week at Rs 103, while Namunukula ended at Rs.60.

Some analysts say that it is a paradox that export-based companies are still stuck in the grove because with US Dollar being quoted at these levels there should have been a big spurt in these stocks. Oil prices appear to be directed northwards which could mean plastic prices rising and as such some brokers have advised their clients to bear in mind that glass bottles will creep up in demand. Renuka Agrifoods announced a Rights issue of 2-for-5 at Rs 4 per share but the stock was on the slide ever since to close at Rs 6.

Access Engineering which issued 20 million shares at Rs.25, will commence trading on the Diri Savi Board on March 27. This stock which is in the Construction & Engineering Sector, should have many keen watchers of its price structure during the first few days of trading. Meanwhile the Rs.350-million Mackwoods IPO closed on Thursday being fully subscribed.

Many more companies are hoping to come out with their IPOs in due course. As part of its restructuring, Lankem Ceylon subsidiary Colombo Fort Hotels Ltd transfered its 19.73 stake or 118,351 shares in Beruwela Resorts Ltd. Dialog finally bought over the entire share capital of Suntel Ltd, with its share price hovering around the Rs 7 mark and ended at Rs.7.30 on Friday.

Changes in directorates: Nawaloka Hospitals - Dr. T. Senthilverl was appointed a Non Executive Director on February; People's Merchant - Dr. Chandrasena Samarasinghe was appointed CEO; Hemas Power - Husein Esufally tendered his resignation as Chairman effective April 1st and will be replaced by Imtiaz Esufally; Singer Finance (Lanka) - J.A. Setukavalar was appointed as an Independent Director. Turnover for the week was Rs.5.4 billion as against the unusual Rs.18.1 billion last week. The ASI at 5422.33 was 27 points or 0.25% lower while the Milanka was 16.39 or 0.1% better to finish at 4847.86.

source -

Rate changes raise real concerns on economic growth and stock market future

By Duruthu Edirimuni Chandrasekera

Last month's hike in policy rates by 50 basis points and the government's decision to allow the currency to freely float have raised real concerns on economic growth and the stock market in general, analysts say.

Deposit rates to rise

Analysts said that the average deposit rates which are near 7% are believe to rise at a slower pace facilitating bank and finance sector companies to fatten their net interest margins.

While they said that moving towards a much leaner free float would always improve transparency and drive real growth, on the negative there would be higher volatility especially when large import bills are serviced.

Economists noted that the weakening currency would bring in another set of challenges for Sri Lanka which is a consumption driven economy. "With the fuel prices expected to be jacked up, the cost of imported food items such as wheat, sugar, milk powder, etc will also rise in price," an economist said.
He said that the increase in interest rates will see an exit from the market as savings become more attractive due to high interest rates that are offered by all financial institutions. Analysts noted that as cost of borrowing becomes more expensive there will be a further reduction in money inflows into the market. "All institutions in the economy will face difficulty due to high cost of borrowings that will increase the finance costs and with imported inflation the profit margins will become thinner and further reducing the earnings of companies," the analyst said.

He noted that the real wages have currently reduced, and that most companies will benefit by this in the short run. However many say that the indices will remain at similar levels or could face further downward pressure, but the current levels seem to be holding up in the market for the moment.

Rate changes had to happen

According to some analysts, the Central Bank (CB) increasing policy rates and flexing exchange rates had to happen and it was more a matter of time. "Low interest rates had fuelled a credit growth that was primarily import-driven. This drove out liquidity in the market. In addition, the huge import bill fuelled by the credit growth in addition to the much higher reliance on thermal energy (due to a drought last year) imposed considerable pressure on exchange rates," Deshan Pushparajah, Head of Capital Markets, Capital Alliance said. He added that increasing policy rates will drive up interest rates and reduce demand for credit but, he noted that this will not be very positive for the financial services sector which, with increased competition would have had to rely on volume growth this year. He added that the increased rates could also drive down sales in the consumer discretionary sector which is generally credit driven (eg vehicles, etc.).

Danushka Samarasinghe, Director, TKS Securities (PVT) Ltd noted that curbing excessive credit growth through interest rate hikes is a positive rather than having to keep interest rates artificially low and resort to excessive money printing. "Higher interest rates would dent GDP growth rates, though over the medium term the economic health of the country would improve," he added.

Many say that the increased policy rates also increases the hurdle rate for investing the equity market. "This could render the market relatively unattractive vis-a-vis fixed income instruments and hence has an overall negative impact on investors and the recent market downturn is primarily to do with that," Mr. Pushparajah added.

Analysts also added that the devalued rupee will have a mixed impact on the listed companies. "Export companies and import substitution companies will benefit with the higher value for the dollar. Low margin commodity companies would potentially benefit the most out the devaluation. On the other hand, import related companies will see sales potentially slowing down to higher pricing/ lower margins," the analyst said.

However, the foreigners were adopting a wait and see approach to the devaluation. "Now that this has happened, bargain hunting foreign investors should probably come back into the market," Mr. Pushparajah noted.

Analysts also say that the credit ceiling will potentially be a serious drawback to the banks. They say that with a ceiling imposed, banks would attempt to improve their margins and hence become more actively involved in the personal loans space (where the margins are much higher - credit cards, etc).
"This could result in lower asset quality for banks this year whilst also crowding out the middle level corporates which cannot afford to pay the same margins on business loans," Mr. Pushparajah noted.
However, he also said that the ceiling should help the macro economics of the country by checking the huge credit growth and reducing the demand for consumer money.

Listed firms attractive

Analysts said that the markets will also be affected by this due to the potentially higher interest rates/ limit impositions on margin lending. Mr.Samarasinghe noted that last year the Colombo Stock Exchange became expensive based on valuations and having nosedived since its peak, the market remains relatively attractive given its growth potential.

While the foreign inflows have improved over the last two weeks, analysts said that the valuations of the companies are finally looking attractive again on a relative basis. "In addition, with the settling down of the European situation, most emerging markets across the world have seen money flowing back their way, so it's not a unique situation," Mr. Pushparajah pointed out.

Analysts said that during the past few months foreigners were however, adopting a wait and see approach due to the impending rupee devaluation. "Now that that has happened, my guess is that you will see some good money flowing in this year," Mr. Pushparajah added.

Mr. Samarasinghe noted that given the overall macro positive with growth intact and the weakening of the rupee, foreign portfolio investments are targeting Sri Lanka. Further the weakening of the currency beyond Rs 120 per US$1 is more of short term scenario resulting due to the possibility of foreign portfolios invested in the domestic bond market pulling out, Mr. Samarasinghe added.

"However we believe the foreign fund inflows would be sufficient to weather any sudden outflows although in the short term high exchange rate volatility and pressure on the rupee should be expected." He further said that in the eyes of the foreign investors Sri Lanka is a growth story, having recorded 8% plus GDP growth rates in the past two years. "Amidst the global economic slowdown we believe the country would record +6.6% real growth in 2012 which provides sound justification for their view," he said.

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Retail interest in CSE expected to revive this week

Retail interest in the Colombo stock market is expected to revive this week as the CSE upgrades its trading system on Monday, Acuity Stockbrokers said in a market report.

 It noted that government’s recent sale of large blue chip stakes to foreign investors failed to ease pressure on the rupee with the rupee hitting a new low against the US dollar on the back of import demand.

The Central Bank (CB) however hastened to reassure markets saying that it expects further foreign exchange into the country in addition to the recent inflows via equities, capitalizing by private commercial banks and investments in Sri Lanka investment bonds and treasuries, the report further said.

"The CB added that this increase in foreign exchange inflows, along with a deceleration of import demand should stabilize the rupee in coming weeks," it added.

The Acuity reported noted that markets slumped last week as net foreign inflows which bolstered volumes the previous week and on Monday dwindled over the week.

By Friday however, markets won back some of its mid-week losses with the ASPI picking up 72 points and volumes hovering just below Rs.1 billion.

The All Share Price Index closed the week down 26.72 points (0.49%) from a week earlier while the MPI was down 16.39 points (0.34%) with Aitken Spence, JKH and Commercial Bank dominating turnover.

These three counters together accounted for 59.18% of the total turnover with Spence alone contributing 43.98% of the week’s total turnover value following he EPF sale of 5% stake of the company to a foreign buyer.

Nevertheless, the week’s turnover value was down 70.3% to Rs.5.42 billion from 18.22 billion the previous week.

Acuity said that market capitalization too had declined 0.48% last week to Rs.1,988.3 billion.

Foreign investors remained net buyers posting a net buying position of Rs.2.39 billion last week against the previous week’s net buying position of Rs.14.93 billion. The total inflow was Rs.3.33 billion was mostly accounted for by Aitken Spence. Meanwhile, total foreign sales increased significantly by over 100% to Rs.937.3 million from Rs.283.1 billion a week earlier.

John Keells Stockbrokers (JKSB) also noted that the market had declined during the week before rebounding sharply on Friday with activity driven by large cap diversified counters and Commercial Bank. Foreign purchases of Aitken Spence resulted in a net foreign inflow of Rs.2.4 billion for the week, JKSB said.

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Saturday, March 24, 2012

Stock market unfazed by Geneva outcome

Despite the Geneva outcome, the Colombo stock market yesterday bounced back ending four sessions of losses.

 The All Share Price Index improved by 1.36% or 73 points powered by select blue chips such as JKH whilst turnover was satisfactory as well.

 Most analysts linked the bearish trend until Thursday to the uncertainty over the outcome of UN Human Rights Council sessions. However, with it successfully passing the resolution against Sri Lanka ending speculation, the market took a position and recovered, they added.

“The market was resilient despite the negative outcome of the UNHRC,” NDB Stockbrokers said adding that indices remained in the positive territory throughout the day.

 Another broker to stress the rebound despite Sri Lanka losing the UNHRC vote was Lanka Securities.

 Foreign interest continued in John Keells Holdings (JKH) and helped turnover to improve. A parcel of Blue Diamond was also traded at a premium to the market. Diversified sector was the highest contributor to the market turnover (due to JKH) and the sector index declined by 1.03%. The share price of JKH increased by Rs 3.70 (1.94%) to close at Rs 194.80.

 NDBS said speculative counters such as Environmental Resources, PC Pharma and PC House seeing continued interest.

 Bank, Finance and Insurance sector was the second highest contributor to the market turnover (due to Commercial Bank and Vallibel Finance – VFIN) and the sector index gained 1.24%. Commercial Bank share price closed flat at Rs 100.00 while the share price of VFIN gained Rs 0.90 (2.47%) to close at Rs 37.40.

 Blue Diamond also contributed significantly to the market turnover with its share price appreciating Rs 0.50 (8.77%) to close at Rs 6.20. Reuters quoting unnamed analysts said that many investors remained cautious about interest rates, the rupee and an expected fall in overall company profits.

The day's turnover was Rs. 926.9 million, well below last year's daily average of Rs. 2.3 billion.

Volume was 39 million. Last year's daily average was a record 102.7 million.

 Foreign investors were net sellers of Rs. 9.3 million on Friday. But they have been net buyers of Rs. 20.1 billion worth of shares so far this year, after a net outflow of 19.1 billion last year.

 The Colombo bourse is one of the worst performers this year among Asian markets, with a 10.74 percent loss.

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CSE shrugs off losing streak

* Indices up sharply, turnover tops Rs. 927 mn.

The Colombo bourse yesterday shrugged off a four-day losing streak posting a turnover of Rs.927.08 million, up from the previous day’s Rs.354.1 million, with both indices gaining sharply – the All Share by 72.63 points (1.36%) and the Milanka by 67.04 points (1.40%) with 176 gainers strongly outpacing 34 losers.

JKH dominated activity with nearly a million shares traded including some crossings between Rs.191.10 and Rs.195.10 closing Rs.3.70 up at Rs.191.50 posting the day’s top turnover of Rs.183.5 million.

There was a crossing of over 1.1 million JKH at Rs.191.50 with board buying at Rs.192. The stock eventually moved higher to close at Rs.195.

``Foreign interest in JKH is evident,’’ a broker said.

Commercial Bank followed closing flat at Rs.100 on slightly over 0.6 million shares done with Ceylinco Insurance coming third on the turnover league closing 25 cents down at Rs.725 on 42,820 shares traded.

Among the other most traded stock included PC Pharma up 10 cents to Rs.21 on 0.9 million shares, Lion up Rs.5 to Rs.200 on 89,529 shares and LIOC up 30 cents to Rs.21 on nearly 0.7 million shares.

Blue Diamonds saw over 1.9 million shares done closing 50 cents up at Rs.6.20. However, there was an off the floor crossing of 8 million plus shares one at Rs.8, about Rs.2 above the market at the time of the transaction.

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Friday, March 23, 2012

Sri Lanka rupee edges up on thin inflows

* Market sees thin trade, low import dlr demand

* Cbank's dlr buying won't help rupee-dealers

* Stx up on market heavyweight John Keells

COLOMBO, March 23 (Reuters) - Sri Lanka's rupee closed a tad firmer on Friday on light inflows from worker remittances and low importer dollar demand a day after the island nation's treasury secretary forecast the currency would strengthen to at least 125, dealers said.

The rupee closed at 130.00/130.10 a dollar, edging up from Thursday's close of 130.10/130.30. It hit a record low of 131.60 on Monday mainly due to importer demand for greenbacks for the upcoming April festive season.

"There were some inward remittances and some export conversions. They wanted to covert when they see that the rupee is stabilising," said a currency dealer on condition of anonymity.

However, many dealers were skeptical of a rupee recovery, since the central bank has been absorbing all the dollars coming into the country to boost its foreign exchange reserves.

The rupee has fallen 12.1 percent since the central bank stopped defending a specific price on Feb. 9.
The stock market rose more 1.36 percent or 72.63 points to hit 5,422.33 ending forth straight session losing streak as investors picked up shares of conglomerate John Keells holding PLC.

Shares in Keells rose 1.94 percent to 194.80 rupees a share.

Analysts also said that many investors remained cautious about interest rates, the rupee and an expected fall in overall company profits.

The day's turnover was 926.9 million rupees ($7.12 million), well below last year's daily average of 2.3 billion. Volume was 39 million. Last year's daily average was a record 102.7 million.

Foreign investors were net sellers of 9.3 million on Friday. But they have been net buyers of 20.1 billion rupees ($154.32 million) worth of shares so far this year, after a net outflow of 19.1 billion last year.

The Colombo bourse is one of the worst performers this year among Asian markets, with a 10.74 percent loss. ($1 = 130.2500 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Bryson Hull)

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Sri Lanka shares end up 1.4-pct

Mar 23, 2012 (LBO) - Sri Lankan shares closed firmed Friday with trading also improving although interest was seen mainly in low value or speculative stocks, brokers said.

 The main All Share Price Index rose 1.36 percent (72.63 points) to 5,422.33, while the more liquid Milanka index rose 1.40 percent (67.04) to close at 4,847.86.

 Turnover was 927 million rupees, according to stock exchange provisional figures. figures.

Index heavyweight John Keells Holdings closed at 194.80 rupees, up 3.70.

Tea Smallholder Factories was the day's highest gainer, closing at 56.10 rupees, up 11.10 rupees followed by two warrants of Environmental Resources Investments.

 ERI shares were the most actively traded, closing at 16.80 rupees, up 1.70 rupees.

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Sri Lanka rupee edges up on treasury comments

* Rupee to strengthen to at least 125/dlr-Treasury sec

* Dealers wary of rupee rebound as cbank buys dlrs

* Stx down; foreign outflow at 10.4 mln rupees

COLOMBO, March 22 (Reuters) - Sri Lanka's rupee closed a tad firmer on Thursday after the island nation's treasury secretary forecast the currency would stabilise at 125 to the dollar, dealers said.

An hour before the market closed, Treasury Secretary P.B Jayasundera said the rupee should strengthen to that level once seasonal importer demand for dollars ends in mid-April.

The rupee closed at 130.10/130.30 a dollar, edging up from Wednesday's close of 130.25/130.50. It hit a record low against the dollar of 131.60 on Monday mainly due to importer demand for greenbacks for the upcoming April festive season.

"It looks that the initial pressure for rupee is off for bit," said a currency dealer on condition of anonymity.

However, many dealers were skeptical of a rupee recovery, since the central bank has been absorbing all the dollars coming into the country to boost its foreign exchange reserves.

The rupee has fallen 12.2 percent since the central bank stopped defending a specific price on Feb. 9.
The stock market fell for a forth straight session, losing 0.64 percent or 34.40 points to 5,349.70 in low trade as investors remained cautious about interest rates, the rupee and an expected fall in overall company profits.

T-bill rates rose by 35 to 33 basis points to 11.11 percent to 10.75 percent at an auction on Wednesday.

The day's turnover was 354.1 million Sri Lanka rupees ($2.72 million), lowest since Jan.6 and well below last year's daily average of 2.3 billion. Volume was 15 million. Last year's daily average was a record 102.7 million.

Foreign investors were net sellers of 10.4 million on Thursday. But they are net buyers of 20.1 billion rupees worth of shares so far this year, after a net outflow of 19.1 billion last year.

The Colombo bourse is one of the worst performers this year among Asian markets, with a 11.93 percent loss. ($1 = 130.0500 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Bryson Hull)

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Nation Lanka Finance poised for strong growth

Opens new head office in Colombo:

Indunil HEWAGE

Nation Lanka Finance PLC which was awarded the license to operate as a finance company under the Finance and Business Act of the Central Bank is looking at increasing its asset and deposit portfolio by four-fold by the end of the financial year.

Nation Lanka Finance, a fully fledged financial services company in Sri Lanka is poised for a strong and stable growth in the coming years . A company official said, “they hope to achieve this target by expanding its branch network across the country by opening another 10 branches before the end of 2012.”

Nation Lanka Finance Director Asanga Seneviratne said, “the future seems bright for them as this year's demand for this segment in the country has increased. The product we offer for the micro finance sector is very strong with a large customer base, and this would all help to boost the bottom line.” Nation Lanka has a customer base of 15,000 and a diverse clientele, ranging from micro finance and SMEs to corporate clients.

The company also believes that the assistance extended to the micro finance sector would help entrepreneurs elevate themselves to SME level.

“Nation Lanka has been supporting the country's rural, semi urban, micro finance and SME sectors for over 25 years. We are hopeful that we can provide much needed financial assistance and services to the North and East to assist in the development of those areas. We are planning to add another 10 branches before the end of 2012, with this our entire branch network across the country would be 22,” Nation Lanka Finance PLC Chairman Jayantha Dharmadasa said.

The product portfolio of the company includes fixed deposits, leasing, higher purchase, personal loans, pawning, real estate and micro finance. Nation Lanka also owns a majority stake in Millennium Housing, which is one of the largest housing development companies in terms of units built and of Nation Lanka Equities Stock Brokers.

Nation Lanka's new head office was ceremonially opened at Dickmons Road, Colombo 5 yesterday.

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Thursday, March 22, 2012

MBSL accomplish another successful year

Merchant Bank of Sri Lanka (MBSL) has accomplished another successful year in 2011 with impressive financial results.

 It has posted an after tax profit of Rs. 332 million during the financial year ended on 31 December 2011 whilst turnover had risen by 2.4% to Rs. 1.6 billion.

“When we look at the performance of the Bank we can see a strong organic growth in its business volume amidst highly competitive environment through Leasing, Hire Purchase, Trade Finance, Investments, share issue management etc. The growth of MBSL was characterised by diversified sources of income across new products, new customers, and new locations while grabbing business opportunities from across every business segments,” a MBSL spokesman said.

 MBSL is a public limited liability company listed on the Colombo Stock Exchange in 1991, which was incorporated in March 1982 in Sri Lanka and a subsidiary company of Bank of Ceylon. MBSL provides a comprehensive range of financial services of Leasing, Trade Finance and Corporate advisory activities. MBSL has achieved long term institutional rating of AA, short term rating of PI by RAM Rating Lanka Ltd in 2010. The subsidiaries of MBSL are Merchant Credit of Sri Lanka, MBSL Saving Bank Ltd, MBSL Insurance Company Ltd and its associate company is a stock broking company well known as Lanka Securities (Pvt) Ltd. During 2011, the Bank continued to focus on improving interest income from leasing which in total grew by 48% compared to 2010.

 Treasury bills and money market income grew by 68%, which is a commendable performance considering the relatively stable interest rates witnessed during the year.

 Interest received from Margin trading too witnessed a notable growth represented 144 % in 2011 due to trade related income taking centre stage as local capital market started activities to pickup after a dismal year in 2009. In 2011 also Leasing division represented the highest contribution as against other portfolio in the bank as a core sector by 67%. 

 Trade finance division contributed 16% and corporate advisory division (Capital market) contributed 11% of this year. MBSL continued to expand its portfolio in Financial Leases, Operating Leases and Hire-purchases portfolio amidst turbulent and highly competitive market conditions and recorded a substantial increase of 43% during the year.  A Corporate brand campaign was launched in the fourth quarter of 2011 followed by Product communications to increase awareness. Although it reflected a heavy cost impacting the bottom line, it, contributed to the highest ever disbursements in a month recorded in December 2011.  It shows an increasing trend in the total assets.

 The total assets of the bank increased to Rs. 9.9 billion which is a significant increase of 38% compared to the last year among which Lease receivable grew by 43%. Similarly Loans and Advances rose by 39%.  Moving forward, the growth momentum of the bank will be supported by increasing the overall “brand equity” through new product development, brand building, business/market expansion and promotional activities.  Also Marketing department is geared to implement aggressive plans this year to further expand the MBSL presence in the Market.  As the Bank celebrates its 30th anniversary this year, it plans to increase its branch network to 30 covering many parts of the island by the end of March 2012.

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Rupee a tad weaker, stocks remain bearish

(Reuters): Sri Lanka’s rupee closed a tad weaker on Wednesday in spite of a state bank’s dollar sales and a central bank forecast of a firmer rupee in the coming weeks due to dollar inflows.

The rupee closed at 130.25/130.50 a dollar, weaker than Tuesday’s close of 129.90/130.00. It hit a record low against the dollar of 131.60 on Monday mainly due to importer demand for greenbacks for the forthcoming April festive season.

 Three currency dealers said a state bank sold dollars at 131 to keep the rupee stable.

 However, state-run Bank of Ceylon, through which the central bank usually directs the market, said the dollar sale was from worker remittances and was not a central bank intervention.

 The rupee has fallen 12.3 percent since the central bank stopped defending a specific price on Feb. 9.
 Standard Chartered Bank on Wednesday in a research note said depreciation pressure on the rupee will persist despite the central bank’s recovery forecast.

“We are reviewing our forecasts and expect it to trade in a wide 120-140 range over the coming weeks,” it said.

 The stock market meanwhile fell 0.55 percent on lingering uncertainty about high interest rates, the rupee and an expected fall in overall company profits.

 The day’s turnover was 376.2 million rupees ($2.88 million), well below last year’s daily average of 2.3 billion. Volume was 18.1 million. Last year’s daily average was a record 102.7 million.

 The Colombo bourse is one of the worst performers this year among Asian markets, with a 11.36 percent loss.

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Wednesday, March 21, 2012

Market snapshot -21.03.12

source - CAL Research

Sri Lanka shares end down 0.6-pct

Mar 21, 2012 (LBO) - Sri Lankan shares closed weaker Wednesday for the second straight day with trading falling sharply and interest seen mainly in low value or speculative stocks, brokers said.

 The main All Share Price Index fell 0.55 percent (29.92 points) to 5,384.10, while the more liquid Milanka index fell 1.11 percent (54.05) to close at 4,821.87.

 Turnover fell to 376 million rupees, according to stock exchange provisional figures.

Index heavyweight John Keells Holdings closed 195 rupees, down five.

Beruwela Walk Inn was the day's biggest loser, closing at 120 rupees, down 18 rupees.

Environmental Resources Investments was the most actively traded stock, closing at 15.40 rupees, up 40 cents with 616,673 shares traded.

Asia Asset Finance was also actively traded, closing at four rupees, up 10 cents.

Free Lanka Capital Holdings, another actively traded stock, closed flat at two rupees.

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Markets becalmed

■  Rupee recovers on State bank dollar supplies; stocks down

Reuters: TWO State banks sold dollars to boost the rupee on Tuesday after it hit a record low of 131.60 a day earlier, despite strong importer demand for greenbacks due to the forthcoming April festive season.

 The rupee, however, retreated to close at 129.90/130.00 a dollar, up from Monday’s close of 130.00/131.00.

“Two State banks sold dollars at 129.00 and the rupee recovered slightly,” a currency dealer said on condition of anonymity. Two others confirmed the move.

State-run Bank of Ceylon, through which the Central Bank usually directs the market, said the dollar sale was for its own purposes and was not an intervention by the central bank.
 The other State-run bank, People’s Bank declined to comment.

 Many dealers said the reason for the sharp rupee depreciation was due to the Central Bank buying dollars to boost reserves. The Central Bank spent more than $ 2.7 billion in the second half of 2011 to defend the rupee against depreciation.

“The Central Bank has to meet reserves target to borrow the next tranche of the International Monetary Fund loan. So it is buying all the dollars in the market,” a currency dealer said.

 The IMF has said it is hoping to recommend the release of the next tranche of $ 800 million, which is expected to be decided at its Executive Board meeting in early April.

 Central Bank Governor Ajith Nivard Cabraal on Friday said he would give a fair amount of dollars to the market from an expected inflow of $ 365 million due by the end of the month.

 Central Bank Chief Economist Swarna Gunaratne said the monetary authority did mop up more than $ 115 million in dollars from a share sale by the State-run pension fund, the Employees Provident Fund (EPF).

 However, she said the Central Bank would not absorb another $ 20 million expected later this week from another share sale.

 The rupee has depreciated 12 per cent since the Central Bank stopped intervening to defend a specific price on 9 February.

 Analysts expect the rupee to recover in April on declining dollar demand and expected exporter conversions.

 Citibank on Tuesday in a research note forecast a recovery to 120 a dollar by the end of the year.
“Major triggers would likely be IMF tranche disbursals as well as corporate bond issuances, both of which are expected to occur around April,” the research note.

 The stock market meanwhile fell 35.44 points to 5,414.02 on retail selling with many investors steering clear given lingering uncertainty about high interest rates, the rupee and the potential for lower company earnings.

 The day’s turnover was Rs. 627.4 million ($ 4.8 million), well below last year’s daily average of 2.3 billion. Volume was 27.1 million. Last year’s daily average was a record 102.7 million.

 The Colombo Bourse is one of the worst performers this year among Asian markets, with a 10.87 per cent loss.

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Bourse loses steam after mega deals

* Turnover and indices down

The Colombo Stock Exchange lost steam yesterday after the mega deals in JKH and Aitken Spence primarily on EPF selling had been concluded.

Turnover dropped to Rs.627.5 million, down from the previous day’s Rs.3.1 billion, and both indices were down – the All Share by 35.44 points (0.65%) and the Milanka 13.16 points (0.27%) with 62 gainers trailing 139 losers.

"The market was a bit quiet with activity centered on JKH and the Commercial Bank," a broker said.

JKH where nearly 0.5 million shares were done closed flat at Rs.200 edging up slightly beyond that level in intra-day trading while Commercial Bank closed flat at Rs.99.90 on nearly 0.6 million shares traded.

Brokers said that a foreign fund that had been recently selling Commercial Bank in quantity continued on the sell side.

Other stocks showing volume but declining in price at close of trading included ERI, HNB non-voting and Aitken Spence.

ERI closed 90 cents down at Rs.15 on over 2.5 million shares, HNB X was down 70 cents to close at Rs.92 on over 0.2 million shares and Spence lost 50 cents to close at Rs.115.50 on over 0.1 million shares.

Guardian gained Rs.10 to close at Rs.225 on 75,831 shares while Dialog was up 10 cents to close at Rs.7.20 on nearly 1.6 million shares.

Kegalle Plantations announced a dividend of Rs.7.50 per share for 2011/12 XD from March 29 and with payment on March 30 while Namunukula announced a dividend of Rs.4.50 per share for 2011/12 XD from March 29 and with payment on March 30.

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ATS-7: CSE transparency in question

By Hiran H. Senewiratne

Stockbrokers and investors yesterday expressed concern over the decision of the Colombo Stock Exchange (CSE) to install the latest Automated Transaction System (ATS-7) where the cost of the system was still a closely guarded secret despite broker firms being members of the exchange and investors contributing towards the upkeep of the CSE through various fees.

Many stockbrokers speaking to The Island Financial Review questioned the CSE’s of not making known the cost of the problematic system. "This has created skepticism among many of us," they said.

A top official attached to Lanka Securities (Pvt) Limited, not wanting to be named, said that the CSE had not divulged the cost of the newly installed the ATS-7 despite broker firms being members of the exchange.

He also said that the new system deprived brokers prime valid information, which the brokers earlier had. "The new system had taken off basic data from the system, which was created a major issue," he said.

Director/CEO Asha Phillip Securities Limited, Dimuthu Abeysekera, also said that he was unaware of the exact amount the CSE invested in the new ATS-7 and expects figure would be at least indicated in the CSE annual report.

Head of Research of Bartleet Religare Securities, Nikitha Tissera said that they, being one of the members of the CSE, was unaware of the cost incurred by the CSE for the ATS-7.

"Nobody knows how much the CSE has invested in the new system, which has certain issues that needs to be addressed soon to enhance the public confidence and to encourage trading with the CSE," he said. At present, the CSE consists of 15 brokering companies.

Good governance activist and a an investor at the CSE, former Chairman of the Ceylon National Chamber of Industries, K.C Vignarajah said that transparency is important for any organization, because the public is involved in the CSE.

"The recently installed ATS-7 in the CSE creates issues due to its technicalities and functions, due to transacting of odd slots of shares and high profile shares. But, these issues should be addressed soon by the CSE to keep public confidence in tack," Vignarajah told The Island Financial Review.

When asked whether or not the investing public had the right to know how much the CSE had invested in the ATS-7, Vignarajah said, "The CSE is like a club and therefore it is an internal issue, but it will benefit everyone if there was more transparency."

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Tuesday, March 20, 2012

Sri Lanka shares end down 0.7-pct

Mar 20, 2012 (LBO) - Sri Lankan shares closed weaker Tuesday with turnover also falling sharply after some big deals the previous two days where foreign investors bought into two conglomerates, brokers said.

 The main All Share Price Index fell 0.65 percent (35.44 points) to 5,414.02, while the more liquid Milanka index fell 0.27 percent (13.16) to close at 4,875.92.

 Turnover was 627 million rupees, according to stock exchange provisional figures.

Index heavyweight John Keells Holdings closed flat at 200 rupees while Aitken Spence ended at 115.60 rupees, down 40 cents.

A foreign investor bought a five percent stake in Aitken Spence, Monday, while on Friday Malaysia's Khazanah Nasional Berhard bought into John Keells Holdings.

Namunukula Plantations, which announced an interim dividend of 7.50 rupees a share and is part of the Richard Pieris group, was the second highest gainer Tuesday, ending at 58 rupees, up 5.60 rupees or over 10 percent.

Kegalle Plantations, which announced a dividend of 7.50 rupees and is also in the Richard Pieris group, gained two rupees to close at 96.90 rupees.

 Environmental Resources Investments was the most actively traded stock, closing at 15 rupees, down 90 cents.

source -

Foreign Holding Update - 16 03 2012

source - CAL Research

Continuous buying pushes net foreign inflow to over Rs. 20 b

Continuous foreign buying in to select listed companies saw the year to date net inflow top the Rs. 20 billion mark by yesterday.

 The Colombo stock market began a fresh week with year to date net inflowing being at Rs. 17.7 billion and a further Rs. 2.5 billion was added bringing the total to Rs. 20.2 billion, Arrenga Capital said.

The inflow yesterday was as a result of a foreign fund picking up 5.1% stake or 20.5 million shares in business tycoon controlled Aitken Spence for Rs. 2.35 billion from EPF.

This boosted foreign buying overall to Rs. 2.75 billion with selling amounting to only Rs. 216.5 million.

 Owing to Rs. 14.5 billion of foreign buying, the Friday’s star JKH saw fresh interest with a block of 1.5 million shares done at Rs. 200 each, up by Rs. 4.90 from its previous close. Foreign shareholding in JKH rose by a further 0.75 million to 417 million.

 Deal on Spence originally boosted investor sentiments but as the day progressed midst shivers over plunging rupee, the stock price indices lost momentum.

 Arrenga Capital said the market continued to depict a volatile behaviour amidst continued strong foreign inflows, clearly indicating the lack of confidence from the local investor calibre.

“The overall lack of confidence could be related to the prevalent macroeconomic uncertainties including a depreciating rupee as it touched a further all time low of LKR130.0/USD,” it added.

 The ASI initiated trading touching a high of 5,485.8 points, but could not retain the momentum as it closed flat at 5,449.5 points, yet remained in the positive territory during most of the trading hours. On the contrary, the liquid MPI showed a gradual upward trend amidst gains made in few heavyweights, thus closing up at 4,889.1 points.

 Apart from Spence and JKH, banking sector player, National Development Bank also saw a single block of 509,500 shares being crossed off at Rs. 123 per share, before closing at Rs. 120.5 with a 1.6% drop. Commercial Bank of Ceylon, continued with interest as the counter registered several large on board transactions, whilst similar interest was evident in Vallibel One. Meanwhile, Ceylon Tobacco continued to see block trades as the counter recorded a single parcel carrying 50,000 shares being dealt at Rs. 510 per share, trading at a 52 – week high.

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IMF bullish on Sri Lanka

International Monetary Fund (IMF) Sri Lanka Resident Representative Dr. Koshy Mathai reiterated the fund’s stance on the recent policy reversals of the Central Bank regarding the exchange rate and interest rates and the government’s decision to increase domestic fuel prices, saying the policy moves were encouraging and could help the economy.
 Addressing a special forum convened by HSBC Sri Lanka yesterday morning, Dr. Mathai said that Sri Lanka’s economy was in strong position compared with many other economies in the world. "Right now there is not much to worry about and I have a lot of optimism. We remain bullish on Sri Lanka’s economic growth prospects. Inflation is low, the debt to GDP ratio is declining, and the government is committed to brining down the fiscal deficit."

The debt to GDP ratio which was over 108 percent several years ago had declined to 78 percent last year. The deficit which was at 9.9 percent of GDP in 2009 is expected to be brought down to 6.8 percent in 2011.

"The economy is at very credible position but it does not stand out compared to most other economies which have done much more, but nevertheless, the debt stock favours Sri Lanka, where the growth rate outstrips interest rates, so debt to GDP would eventually drop," Dr. Mathai said.

Dr. Mathai said the economy did face a problem on the external sector front which became manifest six to nine months ago. The Central Bank had sold nearly US$ 3 billion since July 2011 to keep the exchange rate stable in the face of severe import demand and also printed more than Rs. 300 billion to keep rupee interest rates stable. The IMF had not been too happy with these policy decisions and had delayed payment of a US$ 400 million tranche under the US$ 2.6 billion standby facility arrangement. However, early February 2012, the Central Bank made a U-turn, floating the exchange rate and curbing credit growth, which was extremely high and fuelling import demand, by increasing interest rates and slapping a ceiling on commercial bank credit growth.

"We are extremely happy these policy decisions were taken. It is a step in the right direction. But most importantly, we are encouraged by the fact that the Central Bank and the government implemented a comprehensive mix of policies with a commitment to remain flexible. And this is important because no single policy will bare the full burden of the necessary adjustments that would have to be made, and also if the external account does improve then the rupee would be allowed to appreciate, if it does not, then the rupee would be depreciated a little bit more and perhaps interest rates would also be further tightened," Dr. Mathai said, adding that no one could predict if and when things would improve.

But he did say that authorities shored up the foundation for strong, more sustainable, growth.

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EPF sells major Spence stake for fear of post-mandatory offer reprisal

* 20.5 m Spence shares sold to Aberdeen Fund for Rs. 2.3bn

* Says even willing to sell remainder if the offer was attractive

By Ravi Ladduwahetty

Hot on the heels of the Employees Provident Fund (EPF) selling its 8.4% stake amounting to 71 million shares in premier blue chip John Keells Holdings PLC to Malaysia’s Khazanah Fund worth Rs. 14.5 billion just last Friday for a capital gain of around Rs. 800 million, the pension provider followed suit yesterday by selling a 20.5 million share stake in the rival - diversified and leisure –rich blue chip Aitken Spence for Rs. 2.3 billion (Rs. 2,357.5 million) to a Foreign Fund Manager.

The EPF was the third largest shareholder of Aitken Spence as at December 31, 2011, where the pension provider had 29.836 million shares. With the sale of 20.6 million shares yesterday and with the sale of the earlier 1.2 million shares three weeks ago, the remaining EPF portfolio in Aiken Spence was 7.936 million as at end yesterday.

The 20.5 million shares sold yesterday was picked up by one of the six Aberdeen Funds operating in Colombo where all six Funds have injected funds into the Vauxhall Street blue chip and the Fund that picked up the stake yesterday was widely believed to be the Aberdeen Asia Pacific Fund. However, CT Smith Stockbrokers which clinched the deal for the lone buyers’ broker remained tight-lipped on the name of the buyer. Managing Director/CEO Rohan Fernando said that it was in the best interests of all concerned that the name of the buyer was withheld.

The reason for the decision of the EPF to sell a majority stake in the Vauxhall Street blue chip was the fear of a reprisal following the mandatory offer by the Harry Jayawardena - led Melstar Corp, where with the completion of the offer the shares of the diversified blue chip might be even delisted, frontline market sources told The Island Financial Review last night.

No one will know what the future will hold for Aitken Spence following the mandatory offer where the offer was made at Rs. 110, then increased to Rs. 112.83 and it increased to Rs. 115 and that was also the price that we sold it to Aberdeen. This decision has been made being fully aware and being acutely conscious of business tycoon Harry Jayawardena not known to pay dividends all this time when Aitken Spence was even listed and we do want to compromise the interests of the public whose savings over a life time were with the EPF, sources close to the deal said.

When contacted by The Island Financial Review, EPF Superintendent Kalyani Gunatilleke said that the Fund did not mind selling the remaining Spence shares if the offer price was attractive. She said that the EPF had not even met the buyer, but was aware of the transaction only when the brokers- CT Smith contacted her yesterday morning.

She also said that this was nothing new as there was a purchase of the Spence shares in EPF around two to three weeks ago by the same Aberdeen Fund where 1.2 million shares were purchased, also at Rs. 115. "The deal yesterday would also have been triggered by the John Keells Holdings transaction last Friday which is a booster for both the Colombo Stock Exchange and Sri Lanka as an investment destination," she said

Meanwhile, there was also a sale of 1.5 million shares of John Keells Holdings PLC yesterday where 1.5 million shares were sold at Rs. 200 The total turnover of the market was Rs. 3.1 billion where the net inflows was Rs. 2.7 billion, out of which Rs. 2.3 billion came from the sale of the EPF shares in Aitken Spence shares to the Aberdeen Fund while the remaining Rs. 400 million shares came from the sale of the JKH shares.

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Monday, March 19, 2012

Sri Lanka shares becalmed despite big deals

Mar 19, 2012 (LBO) - Sri Lankan shares closed barely changed Monday although foreign buying into a local conglomerate pushed turnover up over three billion rupees, brokers said.

 The main All Share Price Index was stagnant at 5,449.46, while the more liquid Milanka index rose 0.51 percent (24.83) to close at 4,889.08.

 Turnover was 3.1 billion rupees, according to stock exchange provisional figures.

A foreign investor bought a five percent stake in Aitken Spence, amounting to 20.5 million shares, from the Employees' Provident Fund, a state-managed retirement fund of private citizens.

The deal was done in three off-market deals totaling 2.36 billion rupees at 115 rupees a share.

Aitken Spence was the highest contributor to the daily turnover. Aitken Spence closed Monday at 116 rupees, up 80 cents.

The EPF on Friday had sold 71 million shares in another conglomerate, John Keells Holdings, to Malaysia's Khazanah Nasional Berhard.

John Keells Holdings closed Monday at 200 rupees, up 4.90 rupees.

Brokers Lanka Securities said foreign participation stood at 47.4 percent of the total market activity with foreign investors being net buyers with a net foreign inflow of 2.5 billion rupees.

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Sri Lanka Aitken Spence 5-pct stake bought by foreign investor

Mar 19, 2012 (LBO) - A five percents stake in Sri Lanka's Aitken Spence Plc was bought by a foreign buyer from the Employees' Provident Fund, a state-managed retirement fund of private citizens.

 The EPF sold 20.5 million shares to a foreign party an official said without elaborating.

 The deal was executed in three off-market deals totaling 2.36 billion rupees at 115 rupees.

The EPF on Friday sold 71 million shares in John Keells Holdings to Malaysia's Khazanah Nasional Berhard.

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Khazana entry an all-round boost as net foreign inflow tops Rs. 17 b

The entry in to Sri Lanka by Malaysia’s sovereign wealth fund Khazanah Nasional Berhad via John Keells Holdings (JKH) is being hailed as a all round boost for the country, the Colombo stock market as well as the premier blue chip.

JKH which has many first to its credit is also the first stock on the Colombo Bourse to draw interest from a sovereign fund. Khazanah on Friday via its Special Purpose Vehicle (SPV) Broga Hill Investments Ltd., acquired an 8.85% stake in JKH for Rs. 14.5 billion. Of the stake, EPF sold 8.4% stake for Rs. 13.7 billion and the rest it collected from the market.

  “Khazanah is a long term player and its entry and the mega investment is a vote of confidence on Sri Lanka, CSE and JKH,” analysts said. Khazanah, is estimated to be managing over $ 36 billion in assets. Among its investments are Malaysia’s telecom firm Axiata as well as financial services giant CMIB Group, which incidentally tied up with John Keells Stock Brokers. The Friday’s investment in JKH and the CIMB tie up aren’t related.

 In a statement following the investment Khazanah’s Managing Director, Tan Sri Dato’ Azman Haji Mokhtar said: “The entry into JKH offers Khazanah and its group of companies opportunities to participate across a wide range of businesses where the JKH group is involved in.”

At the same time, it allows Khazanah to participate in Sri Lanka’s positive growth story, and is in line with our strategy of investing in the region.”

It also said Sri Lanka has already been a positive experience for Khazanah’s investee companies. Axiata’s subsidiary, Dialog, is the largest mobile telephony player in Sri Lanka, while CIMB Group has established an investment banking joint venture in the country.

“Sri Lanka is currently experiencing a strong economic revival post-conflict as evidenced by recent economic growth of about 8% per annum,” the Khazana’s statement added. Central Bank last week however downgraded 2012 GDP growth forecast to 7.2%.

 Analysts said that entry of Khazanah could also trigger interest by Singapore Government investment firm Temasek. There was talk that Temasek was originally keen to buy a big block in JKH but following the introduction of the Revival or Expropriation Bill, it backed out.

 The investment by Khazanah saw the year to date net foreign inflow top Rs. 17 billion mark. This has boosted sentiments of broker who viewed it as a major plus for Colombo Bourse reversing fortunes after suffering net outflow between 2009 and 2011. The year to date net inflow of $ 146 million is almost close to $ 168 million net outflow figure of 2011 whilst in 2010 it was $ 240 million.

  “We strongly believe that if the market can witness massive foreign inflows, the much expected Bull Run could easily be achieved in near future,” Asia Wealth Management said. Apart from bringing in much needed dollar inflow to the economy, Asia Wealth put Khazanah’s investment in context saying it took place despite the adversities in the current economic sphere and negative ambiance placed over human rights issues by UN Human Rights Council.

 There was speculation that Khazanah could be having an appetite for more of JKH but couldn’t be confirmed.

 Some expressed concerns over EPF’s sell out. “EPF may have booked hefty capital gains and the sale has brought in much needed foreign funds but when a foreign fun exits usually EPF or some other local fund buys back at a premium which ultimately results in outflow,” they added. However other analysts dismissed this view as subjective and not the case always.

 Whilst the foreign interest is a major boost, Colombo Bourse continues to struggle with year to date negative return remaining at 10% level. After being world’s most consistent best performer for 2009 and 2010, CSE is currently the worst performer. On the other hand the MSCI’s Asia Pacific index excluding Japan has so far gained by over 13%.

 Reuters quoting unnamed analysts reported on Friday that foreign investors still see the market as overheated, and have also been discouraged from investing by lack of liquidity, insider trading, and market manipulation, mainly driven by local retail investors.

 DNH Financial said on dollar terms Colombo was the worst performer down 19% year to date. However it emphasised there still remains strong opportunity.

“Despite the country’s robust macro-economics, it is very disappointing to note that the Sri Lanka bourse has significantly underperformed all global markets this year and is currently the worst performing equity market in the world, down 19%YTD in dollar terms,” DNH said.

“While most market commentators have cited no credible reason for the market’s decline, we believe that it is purely a matter of negative sentiment that has stifled investment flows into the bourse over the last couple of months, while in contrast, foreign investors have been cherry picking investments in blue chip counters. Consequently, we believe the biggest risk to the bourse now is not one of fundamentals but that of negative sentiment that is denting performance and barring the market from re-rating to higher levels,” DNH stressed.

 Khazanah is the strategic investment fund of the Government of Malaysia entrusted to hold and manage the commercial assets of the Government and to undertake strategic investments. Khazanah is involved in various sectors such as power, telecommunications, banking, airport management, infrastructure, property development, broadcasting, semiconductor, steel production, electronics, investment holding, technology and venture capital. Some of the key listed companies in Khazanah’s investment portfolio include Telekom Malaysia Berhad, Tenaga Nasional Berhad, CIMB Group, Malaysia Airlines System Berhad, Malaysia Airport Holdings Berhad, UEM Land Holdings Berhad, Axiata Group Berhad and Time dotCom Berhad.

 Khazanah made a total of 13 investments amounting to RM5.8 billion (Rs. 238 billion) in 2011 and eight divestments that brought in proceeds of RM7.7 billion, generating gains amounting to RM2.0 billion. In total between 2004 and 2011, Khazanah has made 89 investments worth RM45.5 billion and 45 divestments valued at RM31.7 billion, recording gains on divestments of RM13.6 billion. One Malaysian Ringgit is Rs. 41.

 The JKH group has business interests in several key sectors of the Sri Lankan economy including tourism, transportation, leisure and tourism, property, retail and financial services.

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