Friday, August 17, 2012

TGIF for Tilak?

■Exit of SEC Chief to spark mixed reactions with some dismayed and others relieved

■Capital market needs an overhaul and reforms at regulatory and investor community level after a soul-searching exercise say independent analysts

By Nisthar Cassim

 If one were to go by his recent pronouncements of being under severe pressure by a so-called mafia trying to oust him and that he would call it quits by today, then the ‘Thank God It’s Friday’ phrase must be reverberating inside the deep soul of SEC Chairman Tilak Karunaratne.

Amidst calls for his resignation and continuity, could it be a case of Hobson’s Choice for SEC Chairman Tilak Karunaratne?

Whilst calls are being made for continuity, his pre-announced resignation from today will mark the exit of the second head of the capital market regulator in nine months, a development which has raised concerns both within and outside the market.Some however are cheerful for valid reasons too in their view.

 In preparation of his exit, Karunaratne has had several rounds of meetings with the staff at the SEC Secretariat. In one encounter Chairman had said he would consider remaining if requested by President Mahinda Rajapaksa himself, prompting the staff as well as supporters of Karunaratne rushing appeals to Temple Trees.

 Some have described the circumstances under which he was quitting as ‘demoralising,’ whilst UNP MP Dr. Harsha de Silva via a press conference on Wednesday implied it would be the demise of the SEC. Joining the chorus of concerned stakeholders was the Ceylon Chamber as well, which is selective in terms of issues over which it raises the red flag.

 To recap what Karunaratne has said of late, “I am under immense pressure to resign for the reason those concerned know best,” was the remark the SEC Chief made to Reuters on Monday. “This might be mainly due to false information fed by a mafia of high net worth investors and their crony stockbrokers who have been involved in pump-and-dump deals,” he added.

 The next day he again told Reuters: “It’s better to call it a day rather than fight with these people,” in reference to investors who had made accusations against him.

 Though the post of SEC Chairman is a non-executive one, Karunaratne was widely portrayed as someone who has been pushing for investigations into stock market malpractices, including so-called pump-and-dump deals. He was said to have re-opened files which were previously closed on alleged instructions from outside. Karunaratne was seen as a crusader against unscrupulous investors and brokers who were described as the mafia. In short he wanted an independent hand.

 At the same time, there are many within the capital market stakeholder community who will welcome Karunaratne’s exit. Their relief will be on the grounds that he was being discriminative and vindictive, apart from leading the SEC to a degree of overregulation as opposed to pragmatic regulation. Given his political background, some viewed him as anti-capitalist or believed that his agenda-driven officials at the SEC misled him.

 The discriminative charge had some credence since only a set of investors were hunted for suspect irregularities. In fact UNP MP de Silva admitted that the SEC hadn’t investigated the slew of questionable deals on the stock market by the EPF.

 SEC’s vindictiveness was also reflected by the tone of its standard letters seeking for preliminary information. The SEC had portrayed a case where a mafia was demanding an investigations-free regulator. But as publicly stated at the President’s Forum, brokers and investors had only complained about overregulation and about a regime that drives fear among market participants who remain innocent until proved of any offenses. To catch a few crooks, the SEC was seen to be destroying the entire market and investor moral.

 The other allegation is that Karunaratne and the SEC weren’t discreet and professional in terms of supervision and regulation as done by the Central Bank. It was also seen to be regulating via the media as opposed to maintaining a hands-off approach as expected from capital market regulators.

It was maintained that regulators speak less but act more. Though Karunaratne cannot deny the former, his grouse could be that outside pressure prevented him from doing the latter.

 The message from the President and Finance Minister was also not about “artificially propping up” but the revival of the stock market via short, medium and long term measures. Even before any such measures could be implemented with the SEC’s concerns considered, Karunaratne was seen as rushing to conclusions as well as over-stepping his mandate.

 In that context, some of his recent actions were viewed by some as implicating and compromising his appointer – the Minister of Finance who is also the President, and the Treasury Secretary, his immediate reporting boss.

 This prompted some to allege that Karunaratne was causing a major embarrassment to the Government, though this view was checkmated by UNP MP de Silva on Wednesday when he alleged that the SEC fiasco reflected the failure of the Government.

 As per some observers, Karunaratne’s frustration may have reached a climax after the way he was allegedly treated at the capital market stakeholders’ forum convened by President Mahinda Rajapaksa. One participant sympathetic towards Karunaratne opined he should have quit immediately thereafter, given the humiliation.

 Whilst for Karunaratne his tenure at SEC was less than a year, for those who have closely tracked the developments at the capital market regulator for many years, the modus operandi of the latest Head wasn’t without questions.

 As revealed by the Auditor General’s opinion on SEC’s accounts, even the capital market regulator hadn’t strictly followed financial regulations in certain aspects. This reinforces the need for the SEC to also look within and take corrective action.

 The stock market began sliding from mid-2011 from a level which the very regulator described as unrealistic. If a correction was warranted, then the question is whether it has reached the desired level or not.

 The record net foreign buying suggests the market has not only long corrected, but despite bad mouthing about manipulations and under-regulations, foreigners are seeing value in companies that have great upside in earnings in post-war Sri Lanka. In that context, independent analysts opined that SEC may have lost sight of this in its zeal to catch the few crooks and eventually the market remains in the doldrums.

 For those who espouse the theory that economic fundamentals are key to a market revival, then the Colombo Bourse’s historical performance is unlikely to be of any use as there isn’t a credible co-relation between GDP growth and ASI’s movement.

 There is consensus that a change at the top may not be the answer, but a total overhaul and reform both at regulatory side and best practices from investor community at large. An analyst said the country had suffered enough due to loss of lives and opportunity due to extremism for 30 years, hence extremes must be avoided if post-war Sri Lanka were to ensure equitable value creation via a vibrant and credible capital market.

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Significant pick up in net foreign purchases

DNH Financial said yesterday there has been a significant pick up in net foreign purchases and this augurs well for the stock market as well as the economy overall.

“Net foreign buying has positively surprised rising to Rs. 27 billion on an YTD basis. Encouraged by a weaker Rupee and healthy corporate results in select 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,” DNH said.

 Taking into consideration the medium to longer term investment horizon of FIIs, DNH believes that foreign buying in domestic equities will accelerate this year, but on a highly selective basis encouraged by a weak rupee and positive growth prospects for the Bourse.

“Although we view investment opportunities mainly from a bottom-up perspective, at a macro level, we expect economic growth to continue notwithstanding our expectation of a rise in inflationary pressures due to cost push factors caused by the rupee depreciation and high oil prices, which will impact the balance of payments,” DNH Financial added.
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Bourse dips as foreigners take a breather, locals wait

Amidst suspense at the SEC, the Colombo stock market ended its two-day rally yesterday, a development which brokers linked to “foreigners taking a breather” as well as profit taking and a correction in prices in the backdrop of lacklustre activity.

 The ASI dropped by 30.94 points (-0.63%) to close at 4,908.72, MPI lost 58.83 points (-1.28%) to close at 4,521.32 and the S&P index dropped 20.90 points (-0.75%) to close at 2,778.88. Turnover was Rs. 209 m.

NDB Stockbrokers’ daily market report, headlined ‘Foreigners take a breather,’ said the Bourse witnessed reduced activity levels and lost ground after gaining in the first three days of the week.
“Profit taking was seen in index heavy john Keells Holdings, hence the counter dipped around 2%. Distilleries witnessed renewed interest whilst accumulation was seen in Seylan Bank,” it added.

 Lanka Securities said: “The market saw a correction as recent hot picks such as John Keells Holdings, Commercial Bank and Sampath Bank saw their share prices dropping. Turnover levels fell as activity on the above-mentioned stocks witnessed little activity. Retail investors also remained on the sidelines,” it added.

“Investors are just holding to see what is really going to happen in the SEC and who is going to be the new head,” Reuters said in its report, quoting an analyst who didn’t wanted to named.

 Increasing interest rates continue to haunt the Bourse as it lacks buying power, noted Softlogic Stockbrokers after Wednesday’s T-Bill auction resulted in a five bp gain in the 12-month yield rates to 13.23%.

 Despite being relatively inactive, there was a foreign net inflow of Rs. 26 million with participation being 20% of market turnover.

 Top contributors to turnover were John Keells Holdings with Rs. 46.4 million, Panasian Power with Rs. 21.3 million and Seylan Bank non-voting with Rs. 12.9 million. Most active counters for the day were Commercial Credit which announced a Rs. 1 dividend, Swarnamahal Financial Services and HVA Foods.

 Notable gainers for the day were Harischandra Mills up by 13.9% to close at Rs. 2,899, Kelsey Homes up by 7.6% to close at Rs. 15.60 and Asian Alliance Insurance up by 3.6% to close at Rs. 84. Notable losers for the day were SMB Leasing down by 10% to close at Rs. 0.90, Tess Agro down by 4.4% to close at Rs. 2.20 and Hemas Holdings down by 3.9% to close at Rs. 22.10.

 The Diversified sector became the highest contributor to the market turnover (due to John Keells Holdings) and the sector index lost 0.97%. The share price of John Keells Holdings decreased by Rs. 4 (2.01%), to close at Rs. 195.

 The Bank, Finance and Insurance sector emerged as the second highest contributor to the market turnover (due to Seylan Bank non-voting) and the sector index came down by 0.75%. The share price of Seylan Bank Nonvoting slid Rs. 0.50 (1.89%) to close at Rs. 26.

 The rupee ended a tad weaker at 131.95/132.00 against the dollar from Wednesday’s close of 131.95/97 on importer dollar demand, dealers said.

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Bourse slides with profits taken

The Colombo bourse was unable to sustain gains of the previous two days with both turnover and the indices declining – the All Share down 30.94 points (0.63%), the Milanka losing 58.83 points (1.28%) and S&P down 20.90 points (0.75%) on a turnover of Rs.208.7 million, down from the previous day’s Rs.1.04 billion, with 114 losers outpacing 74 gainers and 119 counters closing flat.

JKH was the day’s business generator closing Rs.4 down at Rs.195 on over 0.2 million shares done between Rs.192.20 and Rs.198.80 generating a turnover of Rs.46.4 million.

Panasian Power followed with 8.5 million shares done between Rs.2.50 and Rs.2.60 closing 10 cents up at Rs.2.50 and contributing Rs.21.3 million to turnover. One large parcel of 7.7 million shares was among the trades.

Brokers said that the market was largely retail driven and that the decline in the indices was not too bad given the fact that turnover was low.

"The indices gained about 100 points in the previous two days and some profit taking was seen," a broker said. "Earlier selling that was present in the market took effect."

Among the most traded stocks were Seylan Bank (non-voting) down 50 cents to Rs.26, Citrus Waskaduwa closing flat at Rs.7.50 on nearly 1.7 million shares, LIOC closing flat at Rs.16.40 on over 0.5 million shares, Commercial Credit up 40 cents to close at Rs.15.10 on nearly 0.3 million shares and Overseas Realty down 10 cents to Rs.13.20 on nearly 0.3 million shares.

J.L. Morison announced a second and final dividend of Rs.2 per share for 2011/12 with dates to be notified and Commercial Credit & Finance a first and final dividend of Re.1 per share for 2011/12 after shareholder approval at a Sept.21 AGM with the share trading XD from Sept. 24 with payment on Oct. 2.

Free Lanka Capital Holdings announced a first and final dividend of five cents per share for 2011/12 following shareholder approval at a Sept. 26 AGM with the share trading XD from Sept. 27 and with payment on Oct. 5 while Lanka Aluminium announced a first and final dividend of 50 cents per share following shareholder approval at a Sept. 24 AGM XD from Sept. 25 with payment on Oct. 3.

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Wednesday, August 15, 2012

Market snapshot -15 08 2012

source - CAL Research

Results Update -Jun 2012 -15 08 2012

source -CAL Research

Bourse’s value rises by Rs. 23 b

The Colombo Bourse yesterday produced a mini-rally with its value rising by Rs. 23 billion led by resurgence in blue chips and foreigners continuing to be net buyers.

The benchmark ASI gained by 1.27% and the blue chip MPI sharply by 3% whilst the S&P SL20 was up 1.45%. Despite speculated withdrawal of foreign investors over the possible exit of the regulator, net foreign inflow shot up to Rs. 144.47 million from Rs. 22 million on Monday. The year-to-date inflow also crossed the Rs. 26.5 billion mark. Trading in top blue chips John Keells Holdings, Commercial Bank and Dialog collectively accounted for 56% of the day’s total of Rs. 535 million.

Blue chips fuel gain

 Contrary to misconceptions that junk or speculative stocks fuelled the rally yesterday, as per CSE data, five of the top blue chips contributed over 30% to yesterday’s gain in the All Share Index.

 Stock        % contribution       Price Change to ASI gain   

 JKH                  20.69                       Rs. 9.40
 SLT                   5.66                        Rs. 1.20
 COMB              3.67                        Rs. 1.50
 CT Holdings     2.44                        Rs. 5.10
 Carsons             2.05                         Rs. 4.00

Today’s market rally led a number of steady counters including our key buys, John Keells Holdings, Hatton National Bank (voting and non-voting), Aitken Spence Hotel Holdings, Sampath Bank, Commercial Bank (voting and non-voting), and Ceylon Tobacco to appreciate with considerable buying interest, which we take as a welcome sign. Nevertheless, speculative play also looked to raise its head, which is likely to trigger selling pressure warranting the run to be a short-lived one.

 Hence, we take the opportunity to remind the investors to focus on the sound stocks, whilst balancing their portfolios with a higher allocation to attractive DY players (majority of the counters with expected sustainable earnings growth, produce attractive expected DYs at current low prices) – Softlogic Stockbrokers.

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SEC Chief tells Reuters quitting before Friday

Reuters: The Head of the Securities and Exchange Commission said on Tuesday he will resign this week, saying investors who were being investigated for market manipulation had made false allegations against him.

 Tilak Karunaratne has been pushing for investigations into stock market malpractices, including so-called pump-and-dump deals in which investors are lured into apparently cut-price equities. On Monday, he said he had come under intense pressure to resign.

He did not say who was pressuring him to step down but said it might be the result of false information about his activities as the head of the SEC. “I’ll be doing it within the course of this week definitely. Definitely before Friday,” he told Reuters. “It’s better to call it a day rather than fight with these people,” he said, referring to investors who had made accusations against him.

 He took office in December after his predecessor, Indrani Sugathadasa, resigned amid broker complaints that tougher regulations were hurting stock market prices.

 The stock market has fallen 19.2% since the start of the year, prompting assurances by the authorities that they were ready to make policy changes in an effort to revive the faltering market.

 Last month President Mahinda Rajapaksa, who is also the Finance Minister, met Karunaratne and high net worth investors along with top Colombo Stock Exchange officials to discuss the declining trend in the market.

 In another report Reuters quoted Colombo Stockbrokers Association Head Sriyan Gurusinghe as saying: “It is very unfortunate these chairpersons keep changing all the time. We (would) like to see a situation where one chairman comes and stays for longer period. That is very healthy for the market.”
“It’s a sad situation. Within not even a year, two chairpersons had to resign. I think the people concerned don’t understand the gravity of this problem,” a research analyst told on condition of anonymity.

“The market would actually drag further. There might be just false run on speculative stocks. Now foreign money will stop and local funds will just park their money in treasury bills and wait, what else to do. So the market would go to the doldrums.”

On Tuesday, the broader All-Share Price Index jumped 1.27% in moderate volume amid speculation over Karunaratne’s resignation, but stockbrokers said the gain was mainly due to speculative trading on some select shares, which have been under SEC investigations.

 In its report on the Colombo Bourse’s performance Reuters said the market rose more than 1%, closing before the Head of the Securities and Exchange Commission said he would quit this week.
The Colombo Stock Exchange’s main index added 1.27%, or 61.74 points, to end at 4,908.19, its highest since 6 August.

 Analysts said the market moved up in thin volume with trading limited to a small number of stocks, after Karunaratne told Reuters on Monday that he was under immense pressure to resign.
“Some investors just wanted to… push it up,” said a stockbroker.

 Stockbrokers and dealers said Karunaratne’s resignation would further dampen an underperforming Bourse, which has fallen 19.2% this year.

 Tuesday’s turnover was Rs. 535.4 million ($ 4.06 million), well below this year’s daily average of Rs. 867.8 million.

 Foreign investors bought a net Rs. 144.5 million worth of shares, extending the net foreign inflow this year to Rs. 26.33 billion.

 The rupee ended flat at 131.95/97 per dollar from Monday’s close as mild importer dollar demand was met by bank selling, dealers said.

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Tremors over Tilak’s talk!

■Analysts allege SEC Chief's action and remarks implicated and compromised President and Finance Ministry; others hail Karunaratne as a hero

By Nisthar Cassim

 Despite having the opportunity to directly vent his frustration at his appointer – the President cum Minister of Finance, the SEC Chief’s decision on Monday to tell the world via Reuters about his agony of being under pressure to quit was telling and understandably whipped up commendation as well as condemnation.

Some analysts said the fact that SEC Chairman Tilak Karunanaratne took the Reuters route reinforces the “seriousness” of his predicament and the overall status quo. They also said that his decision to speak up was justifiable and comments to Reuters were valid too. “As an independent regulator, he can speak up, issue warning or express concern and there is nothing wrong in that,” they argued.

“Given the fact that anti-SEC forces are very powerful, the Chairman’s course of action is commendable,” another added.

 However, other analysts said Karunaratne’s act of using international media to globalise a domestic issue was clearly uncharacteristic of a public official as well as a regulator, with some alleging he had certainly overstepped the limits.

 The SEC Chief’s inference that higher-ups (possibly suggesting the Finance Minister or Treasury Secretary) were being misled by “false information” fed by “a mafia” was also cited as a serious indictment on the President and Finance Ministry.

“This suggests that the Finance Minister and Secretary are gullible to be misled or are incompetent to comprehend the truth versus falsehood,” these analysts opined.

 Ironically, the very allegation of the President being misled or being under pressure resulting in the exit of Karunaratne’s predecessor Indrani Sugathadasa surfaced at the President’s Forum with the capital market in late July, but it was summarily dismissed by President himself, who emphatically said, “No one can mislead me”.

“In any case, if he wished to, Karunaratne could have presented all findings in his possession as regulator to the Minister of Finance and pressed his case directly rather than sensationalising it via the media,” they emphasised. The fact that the SEC Chief is telling the world the regulator is under pressure from a group of investors also implies that the President, who is also the Minister of Finance, is incapable of addressing the issue.

 Be that as it may, other observers also noted that the SEC Chief’s comments on Monday to Reuters were unwarranted because previously he had raised his concerns at the well-publicised recent COPE meeting, the President’s Forum in late July and at least three meetings with Finance Ministry Secretary Dr. P.B. Jayasundera since then as part of the follow-up.

 In fact at the meeting with legislators, COPE Chairman D.E.W. Gunasekera assured that he would convey to the President the importance of ensuring the capital market regulator was independent and free of outside interferences. It was after these several opportunities of flagging off his concerns that the SEC Chief took the international media route.

 Some brokers and investors, who flagged off the loss of Rs. 300 billion in market’s value as a major concern, were quick to allege that SEC Chief's comments were highly damaging to the market, apart from bringing disrepute to the country. 

 Other market participants lamented the looming exit of the SEC Chief, whom they described as a hero and man of integrity. “He was serving the SEC on an invitation from the President and wasn’t using official perks like some State sector bosses. He was building consensus and support for greater regulation to quell manipulation by a group of investors who are not only of high net worth but also ‘highly networked,’” they said.

 Independent analysts have repeatedly warned that the integrity and development of the Colombo bourse have been compromised by extreme courses of action by both select investors and the regulator.

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COMBank’s 1H pre-tax profit soars to Rs. 7.7 b

Exceptional balance sheet indicators, with deposit growth averaging nearly Rs. 7 billion per month and gross loan book growth of more than Rs. 5 billion per month in the first six months of 2012 have combined with strong gains in non-interest income to generate stellar first half results for Commercial Bank Plc.

The benchmark private sector bank reported profit before tax of Rs. 7.708 billion for the six months ended 30 June 2012, up by 34.06% over the first half of the previous year, and profit after tax of Rs. 5.321 billion, an increase of 31.91%, emphatically reiterating its status as one of the country’s best performing corporate entities.

“Clearly, public trust and confidence in the bank continue to grow by leaps and bounds,” Commercial Bank Chairman Dinesh Weerakkody said. “We have achieved solid growth in deposits and a healthy increase in lending in the six months under review, building further on our strong performance of 2011.”

Managing Director and CEO Ravi Dias said the bank’s performance reflects its resilience even in challenging conditions. “The solid foundation we have built and our continued commitment to best practice and sound fundamentals has proven its value in no uncertain terms,” he said. The bank’s net income for the six months was up 40.29% to Rs. 16.550 billion, with interest income growing by 32.55% due to the increase in its loan portfolio. Non-interest income (foreign exchange and other income) improved by 105.63% to Rs. 6.091 billion, mainly due to a growth of Rs. 2.930 billion or 329.35% in exchange income.

 The increase in foreign exchange income was largely due to the relatively higher volume of foreign currency operations of the bank and the translation gains recognised consequent to the depreciation of the Sri Lanka Rupee against the US Dollar during the six months period under review. In addition, the other income of the bank, which mainly comprises of commission income and investment income, recorded an increase of Rs. 198.6 million or 9.58%.

 Net interest income of the bank grew by 18.38% over the corresponding six months of last year to Rs. 10.459 billion. The main contributory factor for this increase in net interest income was the increase in interest income on the loans and advances portfolio of the bank by Rs. 5.866 billion, or 44.25% during the six month period under review. This was mainly due to the increase in the performing loans and advances portfolio of the bank by Rs. 29.094 billion, or 10.69%.

 At the same time, the total interest expenses of the bank too increased by Rs. 4.232 billion or 46.21% during the six months under review primarily due to the growth in the volume of deposits of the bank by Rs. 41.826 billion or 13.13% to Rs. 360.287 billion, and also due the continued increase in the market interest rates.

 Commercial Bank’s total income for the six months was up 41.49% to Rs. 30.393 billion. Total assets increased by 10.99% or Rs. 48.489 billion, from Rs. 441.099 billion at 31 December 2011 to Rs. 489.588 billion at the end of the review period.

 Net provisions for bad and doubtful debts increased to Rs 1.008 billion as against a net reversal of Rs 300.6 million for the first half of 2011, made possible by the reduction of the general provision rate from 0.9% to 0.7% between 1 January and 30 June 2011. The increase in net provisions for bad and doubtful debts for the first half of 2012 was mainly as a result of a more stringent provision policy adopted by the bank.

 Non-interest expenses increased by 21.79% to Rs. 6.783 billion, largely on account of increased personnel costs and expenses linked to the expansion of the bank’s delivery channels in Sri Lanka. The bank opened five new service points and added 22 new terminals to its ATM network during the period under review.

 The bank’s total capital adequacy ratio stood at 12.22% as at 30th June 2012, as against the prescribed minimum of 10%. The gross non-performing advances ratio increased from 3.43% as at 31 December 2011 to 3.66%, while the net non-performing advances ratio moved from 2.08% to 2.14% during the same period.

 Provision cover as at 30 June 2012 improved to 41.66%, from 39.53% for 2011. Return on equity too improved from 20.76% in 2011 to 22.97% at the end of the first half of 2012.

 As a Group, the Commercial Bank, its subsidiaries and associates announced pre-tax profit of Rs. 7.725 billion, recording a growth of 33.78%. Group profit after tax for the period was up 31.62% to Rs. 5.320 billion.

 Commercial Bank is the largest private bank in Sri Lanka, and the only Sri Lankan bank to be listed two years consecutively in the world’s Top 1000 Banks. It operates a network of 220 service points in Sri Lanka and a network of 522 ATMs, the single largest ATM network operated by a bank in the island. It also operates 17 service points a network of 14 ATMs in Bangladesh and is the fourth largest foreign bank in that country.

 The bank has been adjudged ‘Best Bank in Sri Lanka’ for 14 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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Country’s oldest company enters Bourse via subsidiary

Considered Sri Lanka’s oldest commercial establishment, George Steuart will enter the Colombo stock market by listing its finance industry subsidiary, a development which analysts described as momentous.

This is following the Colombo Stock Exchange (CSE) approving in principle an application submitted by George Steuart Finance Ltd for the listing of 22.5 million ordinary voting shares of the company on the Diri Savi Board of the CSE by way of an Introduction.

 Having founded in 1835, the parent marks 177 years of its existence in the country this year and the listing of the subsidiary is spearheaded by its new controlling shareholder Dilith Jayaweera and new Board re-engineering growth prospects.

 George Steuart & Company currently operates a highly diversified portfolio of twelve subsidiaries involved in a plethora of business activities, from tea to pharmaceuticals, to travel and recruitment, to telecommunications and education, real estate, insurance, advertising and financial services.

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Market snapshot -14 08 2012

source - CAL Research

Results Update -Jun 2012 -14 08 2012

source - CAL Research

Tuesday, August 14, 2012

SEC Chief tells world via Reuters he is under “immense pressure to resign”

Reuters: The Head of the Securities and Exchange Commission on Monday said he was coming under immense pressure to resign on false accusations by some investors under investigation for “pump-and-dump” deals.

“I am under immense pressure to resign for the reason those concerned know best,” Tilak Karunaratne, the Head of SEC told Reuters.

 Karunaratne did not elaborate who was pressuring him to step down, but said it might be the result of false information about his activities as the Head of the SEC.

“This might be mainly due to false information fed by a mafia of high net worth investors and their crony stockbrokers who have been involved in pump-and-dump deals.”

Karunaratne has called for investigations into market manipulation and malpractice, including so-called pump-and-dump deals in which naive investors are lured into apparently cut-priced equities.
 His comments come barely two weeks after the Treasury Secretary P.B. Jayasundera said Sri Lanka was ready to make significant policy changes in an effort to revive its faltering stock market which has fallen 20.2% since the start of the year.

 Karunaratne was appointed to the post after his predecessor Indrani Sugathadasa resigned in December “to uphold her principles,” amid broker complaints that tougher regulations were hurting stock market prices.

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Weekly foreign holding update - 10 08 2012

source - CAL Research

Market snapshot -13 08 2012


source - CAL Research

Sunday, August 12, 2012

Market snapshot -10 08 2012

source - CAL Research

Results Update -Jun 2012 -10 08 2012


source - CAL Research

Results Update -Jun 2012 -08 08 2012

source - CAL Research

Results Update -Jun 2012 -07 08 2012

source - CAL Research

Results Update -Jun 2012 -06 08 2012

source - CAL Research

Results Update -Jun 2012 -02 08 2012

source - CAL Research

Results Update -Jun 2012 -31 07 2012

source - CAL Research

Confirmed: Mafia operates in the Colombo stock market, says COPE

Duruthu Edirimuni Chandrasekera

The Parliamentary Committee on Public Enterprises (COPE) is ‘convinced’ that a ‘mafia’ operates in the stock market, a conclusion it arrived at after Tuesday’s meeting with officials of the Securities and Exchange Commission (SEC), according to COPE Chairman D.E.W. Gunasekera.

“There’s a mafia operating in the Colombo stock market, there’s no question about it,” he told the Business Times, adding that this came out based on SEC evidence at the meeting. Mr. Gunasekara said it emerged that some 90% of the controlling shares of listed firms are with a few ‘big’ investors as per SEC data.

An opposition parliamentarian on the committee agreed and told the Business Times that there was an agreement by COPE that ‘there’re things which are ‘radically’ wrong with the Colombo share market. “We also agreed that there is a mafia of a few operating in an immoral manner,” he added, noting that this has to be corrected.

He said that both government and opposition members were seen ‘firing’ questions at the SEC pertaining to the regulator’s probes. “It’s important that we don’t leave it to be controlled by a few unscrupulous individuals,” he reiterated. Mr. Gunasekera added that a report on SEC action against offenders over the last few years was requested by COPE from the SEC. “We wanted the details such as names, offences, etc of the perpetrators,” he said.

He said while the 15 member-COPE committee’s ‘assessment’ of SEC performance varied, they didn’t find any fault with the actions that the regulator has taken during the last year. “We found no fault with the SEC. Had they not acted, the NSB – TFC deal would have eroded the market,” he said, emphasising that the regulator’s intervention ‘saved’ the stock market. “They deserve credit.”

He added that in his capacity as the chairman, he had not allowed ‘names’ of those behind the NSB – TFC deal to be divulged. “This is because it’ll disturb the market,” he said, adding that both government and opposition members had ‘fired’ questions about the NSB – TFC deal which happened some months back.

He said the SEC was reprimanded as to why no action was taken to amend the SEC Act during the past year. “At the last COPE meeting also we raised this and SEC had said they’ll make sufficient progress this year, but we were concerned as to why there wasn’t progress, because these amendments will grant them more teeth,” he added. He also said that the SEC had informed COPE that the amendments to the Act will be fast-tracked.

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Just 2% of investors control 95.7% of the stock market – CSE data shows

Duruthu Edirimuni Chandrasekera

Just a fraction of investors in the Colombo stock market are responsible for the bulk of the transactions, data from the Colombo Stock Exchange (CSE) shows. The number of shareholders in the market rose by 32.6 per cent to 206,465 by the end of December 2011 against the previous year.

According to the table seen here, 951 account holders representing 0.5% have more than Rs 100 million in share value range while their total share portfolio value is Rs 13 billion and they control 88.9% in the market. As opposed to this, some 170, 938 accounts or 85.2% of investors hold only 0.7% of the market, which constitutes less than Rs 500, 000 in share value. “We can safely say that that 0.5% corresponding to high net-worth investors control 88.9% of the CSE, while only 85.2% who are essentially retailers or small shareholders control 0.7%,” an analyst told the Business Times.

Some 61,679 account holders had between 100 to 999 shares, while between 1000 to 9,999 shares are owned by 79,611 accounts, the CSE data says. It also says that some 2, 856 account holders control 4.1% of the CSE. Their value range in shares is Rs 10 million to Rs 50 million. Only 567 account holders hold 2.7% of the market and their share values range between Rs 50 million and Rs 100 million. The analyst said that these figures show that some 2.2% investors holding share value range between Rs 10 million and above control 95.7% of the market.

“These ‘few’ people are the ones who are mostly affected by the CSE’s downturn,” he added.

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Friday, August 10, 2012

Bourse sinks to 3-week low; ASI’s negative return back to 20%

Reuters: Stocks fell for a fifth straight session on Thursday, hit by concerns about rising interest rates and a delay in promised Government measures to boost the market, analysts said.

 The Colombo Stock Exchange’s main index lost 0.78%, or 37.99 points, to end at 4,851.88, its lowest since 18 July.

“Due to high interest rates, the local investor interest was not seen. But there had been foreign interest on some select blue chip counters,” a stockbroker said on condition of anonymity.

 Even though the Central Bank has kept policy rates steady for the past four months, it has allowed yields on treasury bills to increase 132-186 basis points.

 This has made fixed-income instruments more attractive compared to equities.

 Analysts said that the failure to implement measures promised at a meeting with Treasury Secretary P.B. Jayasundera, including more retail credit, was hurting trade in shares.
 The Bourse has fallen 20.13% in 2012.

 The day’s turnover was Rs. 773.6 million ($ 5.87 million), below this year’s daily average of Rs. 879.7 million.

 Foreign investors were net buyers for a 14th straight session, picking up a net Rs. 85.9 million worth of shares, extending the net foreign inflow this year to Rs. 26.14 billion.

 The rupee edged down at 132/20 per dollar from Wednesday’s close of 131.95/132 on importer demand for dollars, dealers said.

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Market snapshot -09 08 2012

source - CAL Research

Wednesday, August 8, 2012

Locals blinded as net foreign inflow tops Rs. 26 b

The Colombo Bourse’s silver lining – net foreign inflow – continues to strengthen, with the year-to-date figure having now topped the Rs. 26 billion mark.

 The first two days of the fresh week had seen a net inflow of over Rs. 100 million each in addition to marking the 12th straight session of such inflows.

 Independent analysts remain dismayed by the lack of local investor interest when foreigners continue to be bullish, seizing attractive buying opportunities.

Softlogic Stockbrokers said the Bourse extended its bearish momentum despite the release of the monetary policy review, indicating that the current policy stance is appropriate in order to reach the growth estimates.

 The benchmark index took a volatile path as it merely gained 0.08% at its intraday high of 4932.24 points yet lost ground to close with a dip of 30 points. Similarly the MPI took a sluggish trend losing 15 points as 11 out of 25 counters recorded dips.

 It said diversified conglomerate John Keells Holdings, with its contributions to Monday’s net foreign inflow, secured momentum, spearheading the turnover yesterday backed by a boost following a large off-market transaction of 251,000 at Rs. 185.

 Tokyo Cement, which was seen reaching a 52-week low of Rs. 27.40 recently, crept up the turnover renewing its 52-week low at Rs. 26.90. Backed by recent foreign accumulation, both its voting and non-voting shares gained interest.

 The former witnessed two onboard blocks amounting to 950,000 shares being transacted at Rs. 27 while the latter saw a block of 300,000 shares being picked on board at Rs. 19.80.  Both the counters closed flat at Rs. 27 and Rs. 19.80 respectively.

 Softlogic also said high market calibre counter Ceylon Tobacco followed breathing in Rs. 28 million via an off-board transaction where 700,000 shares were dealt at the 52-week high block trade price of Rs. 700. The counter closed flat at Rs. 700.10 after reaching an intra-day high of Rs. 720 (+2.9%).

 Banking sector players Sampath Bank and Hatton National Bank were seen among the top slots of the turnover list. The latter gained investor interest with its earnings growth (+32% YoY, +11% QoQ) as it saw an intra-day high at Rs. 134.00 (+1.7%) whilst the former witnessed active participation closing with an appreciation of 0.6% for the day at Rs. 156.

 Both counters impacted the S&P SL20 index’s slide to the green during trading hours with their respective weightages being 7.27% and 5.63% before the index closed with a marginal dip.

 Renewed participation was seen in Colombo Dockyard with the majority of its volumes (25,000 shares) traded at a stagnant price of Rs. 190. Dialog Axiata regained interest during the final trading hour, registering two blocks of 1.2 million shares in total at Rs. 6, pushing up the turnover beyond the Rs. 200 million mark.

 Liquid counter Piramal Glass, which witnessed some foreign selling yesterday, saw three blocks amounting to 175,000 shares across the board being dealt at Rs. 6 before closing flat at Rs. 5.30. Further, Power and Energy sector penny stock Panasian Power recorded several sizeable blocks across the board, Softlogic Stockbrokers said.

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Seylan Bank 1H pre-tax profit up 142% to Rs. 2 b

Seylan Bank said yesterday it has recorded an impressive first half performance with a profit after tax of Rs. 1.02 billion for the six months ended 30 June 2012.

 Profit before VAT and income tax rose to Rs. 2.01 billion, as opposed to Rs. 832 million (before the exceptional VRS costs), a 142% growth over the corresponding period last year.

 The bank’s strong performance was driven by growth in its core banking operations despite raising interest rates and controlled credit growth.

Net interest income increased by 15% to Rs. 4,276 million in 1H 2012, arising from selective growth in quality advances and effective management of margins.

 The bank’s portfolio grew by 18% (annualised) in the six months of the year.

 Non-interest income increased from Rs. 1,171 million to Rs. 1,237 million in 1H 2012. The main contributor to this was the growth in foreign exchange income which increased by 20% over the corresponding period last year.

 During the six months under review the bank focussed considerably on controlling its overhead costs. The efforts on improving cost efficiencies have resulted in the improvement of the cost to income ratio to 67%, a reduction of 6% from December 2011.

 The bank grew its deposit base by Rs. 10.3 billion despite a fiercely competitive environment and due to sustained and effective recovery strategies was able to reduce the NPA ratio (net of IIS) from 14.2% to 12.3%

 General Manager/CEO Kapila Ariyaratne stated: “These results prove beyond doubt that the business expansion strategies backed by improvement in operational processes and focus on customer service and risk management are beginning to yield desired results, and now provides us an excellent platform to achieve sustained growth and improved profitability.”

During 1H 2012 the bank opened seven new branches/convenient centres and relocated three branches to more customer friendly locations.  As at 30 June 2012, the bank network comprised of 138 branches/convenient centres and 139 ATMs.

 Preparing for future growth, the bank has planned a debenture issue via a private placement for early October 2012.  The bank intends to invest on identified key areas which are in line with the bank’s future growth strategies including new product development, branch expansion, service quality improvement, staff training and development and IT infrastructure.

 Seylan Bank Chairman Mohan Pieris PC stated: “We are focused on achieving our Strategic Plan, which we formulated in the latter part of last year. We have also taken steps to improve our capital and governance structure for future growth strategies that have been planned.”

As a result of the strong half-yearly profits posted, earnings per share was at Rs. 6.04 (annualised), while return (profit before tax) on assets and return of equity was at 1.90% and 11.50% respectively.

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Stocks fall on policy inaction: Reuters

Stocks fell 0.6 per cent on Tuesday in thin trade after authorities delayed promised policy measures aimed at boosting sentiment according to a report filed by Reuters.

 It said the Colombo Stock Exchange’s main index lost 0.61 per cent, or 30.28 points, to end at 4,898.22, its lowest since 26 July.

“The market fell due to the lack of positive news after waiting almost a week for the promised measures, including more retail credit,” a stockbroker said on condition of anonymity.

 Treasury Secretary P.B. Jayasundera made the promises last week in what was seen as an effort to revive the stock market which has fallen 19.4 per cent since the start of the year.

 The market shrugged off a Central Bank decision to hold key policy rates steady for a fourth straight month as expected.

 Turnover was Rs. 319.9 million, around a third of this year’s daily average of Rs. 885.4 million.

 The rupee closed steady at 131.95/132 for a third straight session as importer dollar demand was offset by greenback sales by banks, dealers said.

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Browns ventures into hospitals biz; buys 60-bed private unit at Ragama

Browns Healthcare (Pvt) Ltd. has acquired St. Peter’s Hospital Ragama with the aim of developing a chain of secondary healthcare general hospitals and diagnostic centres in the island.

 Browns Healthcare, a wholly owned subsidiary of Brown & Company PLC, is a new venture established with the aim of developing a chain of secondary care general hospitals and diagnostic centres to deliver quality care through comprehensive integrated clinical practice and personalised care to every patient.

Speaking on the acquisition, Browns Group Managing Director and CEO Murali Prakash said: “Sri Lanka has a rapidly ageing population as well as increased incidence of non-communicable diseases brought about by affluence and changing lifestyle habits. Demand for private healthcare is expected to rise and therefore, Browns will focus on expanding its presence in the healthcare sector. This is the first of such investments in this sector.”

This new acquisition aims at providing a 60-bed multi-specialty hospital offering curative, preventive and rehabilitative services. The hospital will have a 24 hour OPD/ETU, modern theatre facilities, general surgery, obstetric, gynaecological and paediatric units and a 24 hour pharmacy as well as several diagnostic services among others.

 Browns Healthcare Director/General Manager Dr. Sajeeva Narangoda said: “St. Peter’s Hospital Ragama has a history of well over 30 years, where it had catered to the ever-increasing demand for healthcare in the Gampaha District. It is with this background that Browns Healthcare has decided to acquire St. Peter’s Hospital Ragama. Keeping in line with the concepts of Browns Healthcare, a keen focus will be given to provision of affordable, high touch, quality, and patient-centric hospital care.”
The current hospital will undergo a major refurbishment process. The upgraded facility will be designed to offer quality care while assuring safety in modern, purpose-built facility. Staff and management aim to provide quality and safe services to consumers and are keen to work with patients to achieve best possible outcomes.

 Browns Hospitals will always encourage the medical, nursing and other allied health staff to adhere to highest standards of ethics and practice evidence-based medicine.

 Plans are underway to have this upgraded hospital fully operational by early 2013. The hospital will also be renamed suitably with clear indications of the Browns tie-up.

 Using their deep understanding of Sri Lankan consumer needs derived from over 135 years in business, Browns has grown quietly yet exponentially into the active and valuable company it is today – simply and unobtrusively by greatly expanding its portfolio and delivering excellence in products, services and value to Sri Lankans everywhere.

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Thursday, August 2, 2012

Message clear: Market must move up

■At Tuesday’s meeting Finance Ministry Secy. reiterates united effort by all to revive Colombo Bourse

 ■To appoint all stakeholders-comprised Consultative Committee for regular dialogue and consensus

■Credit rule to be revised to boost retail participation; fresh support to brokers in the offing, among other measures

 ■Meeting with top listed blue chips to be convened next week to enlist their support and ideas

 ■SEC told to be professional over its regulation and investigations like the Central Bank rather than sensationalising via media or driving fear

 ■Record Rs. 25 billion net foreign inflow so far in 2012 to be further consolidated

By Nisthar Cassim

 The message to stakeholders of the Colombo Bourse was loud and clear as it was repeated on Tuesday by Finance Ministry Secretary Dr. P.B. Jayasundera that the depressed market must be revived and on its part the Government has committed to spearhead this much-needed thrust.

 Dr. Jayasundera told the Daily FT yesterday that the capital market stakeholder meeting on Tuesday was “positive and productive”.

This was as a follow-up to the 19 July forum chaired by President and Finance Minister Mahinda Rajapaksa, at which engagement too, the message from the country’s Chief Executive was that the “market must be revived”.

For Tuesday’s meeting, Dr. Jayasundera invited almost the same parties who attended the President’s Forum. They included Securities and Exchange Commission (SEC) Chairman Tilak Karunaratne, who was accompanied by Acting Director General H. Dissabandara, two Directors Chandu Epitawala and Vajira Wijegunawardane, Colombo Stock Exchange Chairman Krishan Balendra, Director Maxi Prelis and CEO Surekha Sellahewa, Colombo Stock Brokers Association President Sriyan Gurusinghe and his members as well as non-member brokers as well as investors Harry Jayawardena, Nimal Perera, K.C. Vignarajah and C.P. de Silva.

Tuesday’s engagement was after Dr. Jayasundera separately met with SEC Commissioners and CSE Directors last week.

“The market needs to be revived via a partnership by all stakeholders as opposed to them going in different directions. Such a collective effort will bring back confidence to the market and improve sentiments. This was communicated to all stakeholders present,” Dr. Jayasundera said.

 Year-to-date the market is down by 19% with over Rs. 300 billion in value lost, whilst last year it was down by 8.5% after two years of a bull run, which made Colombo the world’s most consistent best performer. This achievement was linked to revival in investor sentiments and economic outlook following the end of the 30-year conflict.

 To ensure a regular dialogue and to find consensus over short, medium and long term measures required to revitalise the capital market, a consultative committee under the chairmanship of Dr. Jayasundera will be set up shortly. Recommendations from the Committee will be considered for the upcoming 2013 Budget as well.

 Dr. Jayasundera will also convene a meeting of top listed blue chips next week to get their views in terms of developing the capital market and get an update on their future investment profile.

 He dismissed criticism from some quarters that the Finance Ministry shouldn’t get directly involved in revitalising the market but leave the responsibilities to different agencies such as the SEC, which also has a mandate to develop the capital market apart from regulating it, the CSE and the CSBA.

“The overall policy of the development of the capital market comes under the Finance Ministry and this initiative of bringing together all stakeholders is spearheaded in that spirit. The SEC and CSE can continue with their statutory functions such as regulatory and operational roles as well as address fundamental issues, all aimed at creating an enabling environment for a vibrant capital market,” Dr. Jayasundera pointed out, in addition to stressing that there was no political interference as well.

 He said that the importance of reviving the market was acknowledged by all stakeholders at the meeting and the required policy support as well as incentives if required would be extended by the Government.

“We need to clear the mistrust if any among stakeholders and pursue a joint effort to revive the market and not destroy it and this was emphasised at the meeting. We also ironed out some of these issues and the Consultative Committee will take up any residual and future matters,” the Finance Secretary said, adding, “Positive sentiments must start from the very stakeholders before expecting it from investors.”

The SEC had been told to be more professional in its regulatory role, including the process of investigations. “The SEC can continue with its investigations, but as in the case of the Central Bank, greater professionalism along with directly dealing with the parties concerned with a level of discreetness was recommended rather than doing it via the media,” Dr. Jayasundera said.

 The SEC and CSE also can proceed with their efforts to improve governance as well as simplify procedures aimed at creating a vibrant market.  The need for pragmatic approach and a right balance with regard to regulation was also reiterated at Tuesday’s meeting.

 Dr. Jayasundera told the Daily FT that broker credit rules would be revisited to make it more transparent and simplified with an emphasis on supporting more retailers to participate in the capital market.

“The Government will also look at incentivising the brokers to improve their capacities, risk management and market development,” Treasury Secretary said.

 Tuesday’s stakeholder meeting was also told that it was important to take strength from the record net foreign inflow of over Rs. 25 billion so far this year, apart from further consolidating foreign interest.

 Last year’s net outflow was Rs. 19 billion whilst in 2010 it was Rs. 26.3 billion.

 Dr. Jayasundera said the high net inflow in 2012 was a clear testimony of the level of foreign investor confidence in the prospects of post-war Sri Lanka as well as the macro-policy framework of the Government.

 At the meeting all stakeholders present were also told not to convey conflicting or wrong messages with regard to the outcome of Tuesday’s meeting. This was because the President’s Forum as well as Dr. Jayasundera’s meeting with the SEC and CSE saw conflicting reportage by the media.

 Whilst there was a suggestion to have a joint press conference, it was later agreed that the Finance Ministry would be the spokesperson for Tuesday’s meeting.

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Press conference ruled out for more positive press release

Treasury Secy. meets capital market stakeholders

The Ministry of Finance and Planning is expected to release a statement regarding the capital market stakeholder meeting chaired by Treasury Secretary Dr. P. B. Jayasundera last Tuesday.

Sources said the meeting was positive with officials and representatives from the Securities and Exchange Commission and Colombo Stock Exchange, broker community and investors in attendance.

Holding a press conference to outline the outcome of the meeting was ruled out as officials preferred to send a more positive message to the press.

It was highlighted at the meeting that the stock exchange was receiving negative press coverage in recent weeks, and this was causing negative sentiments among investors.

The country’s capital market stakeholders can be broadly divided into two factions: One side is seeking less regulation while the other wants to see more effective measures taken to stamp out market malpractice.

As widely reported in the press, some influential investors under the SEC radar for market malpractice are believed to be trying their best to demoralise the SEC.

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Market snapshot -31 07 2012

source - CAL Research