Wednesday, October 31, 2012

Budget ahead, Bourse at seven-week low

Stocks dipped on Tuesday to a more-than seven-week low as most investors waited on the sidelines ahead of the announcement of 2013 Budget, while the rupee fell on importer dollar demand, dealers said.

The Colombo Stock Exchange’s main index fell 0.55%, or 30.26 points, to end at 5,520.62, its lowest since 7 September.“At the moment, investors are looking for the direction with lack of liquidity,” said a stockbroker who declined to be identified.

 Analysts said investors were waiting for an indication of the market’s direction from the annual budget, scheduled for 8 November, and a raft of quarterly earnings due out from next week.

 Turnover was Rs. 307.8 million ($ 2.37 million), a third of this year’s daily average of Rs. 925 million.

 Foreigners were net buyers of Rs. 12.6 million worth of shares, extending the net foreign inflow so far this year to Rs. 33.73 billion.

 The rupee ended weaker at 130.15/25 to the dollar from Friday’s close of 129.75/95, dealers said.

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Downtrend continues on low turnover

All indices down in lackluster trading
 October 30, 2012, 8:31 pm

The downturn on the Colombo bourse continued unabated yesterday with turnover at a low Rs.307.8 million, down from Rs.314.7 the previous trading day, and all indices down –the All Share by 30.26 points (0.58%), the Milanka by 41.05 points (0.85%) and S&P by 14.84 points (0.50%) with 146 losers way ahead of 60 gainers while 44 counters closed flat.

"It was another quiet day with two crossings of Chevron where 200,000 shares changed hands at Rs.200 in a deal worth Rs.40 million and slightly over 1.1 million Tokyo (voting) was cross at Rs.28.70 in a transaction worth Rs.32 million accounting for a fair slice of the day’s business," a broker said.

"The indices dipped sharply on selling pressure across the board with activity driven by trades on manufacturing, banking and diversified counters, inclusive of crossings," John Keells Stockbrokers said.

Foreign purchases amounted to Rs. 74.25 million resulting in a net inflow of Rs. 12.64 million.

On the trading floor JKH which closed Rs.1.80 down at Rs.206.30 on over 0.1 million shares traded between a low of Rs.206.30 and a high of Rs.208 and led the turnover league contributing Rs.26.6 million to the day’s business volume.

Balangoda closed Rs.1.50 up at Rs.39 on an unusual 0.6 million shares done between Rs.37.60 and Rs.39.90 generating a turnover of Rs.24.1 million while Commercial Bank (voting) dipped 70 cents to close at Rs.102.80 on over 0.1 million shares traded between Rs.102.80 and Rs.104.60 contributing Rs.12.7 million to turnover.

Much of the Balangoda volume comprised a few large trades, brokers said.

Only four of the most traded stocks closed up yesterday – Asian Hotels up Rs.1.70 to close at Rs.77 on nearly 0.2 million shares, NDB up 10 cents to close at Rs.133.60 on 63,072 shares and Lion up Rs.1.50 to close at Rs.250 on 20,624 shares in addition to Balangoda which was a gainer.

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Tuesday, October 30, 2012

Stock Market Review for the week ending October 26, 2012

Bourse struggles with dearth in liquidity

Trading for the week on Monday started on a subdued note with the market opening higher initially but closing lower with the ASPI and Milanka eventually declining. The ASPI & Milanka lost 95 and 46 points to close at 5553 and 5090 points respectively. Activity remained subdued with market turnover recording only Rs. 257 million which is the lowest recorded since mid-August. John Keells was the top contributor with a contribution of 15% to the market turnover supported by institutional and high net worth interest. Institutional interest in Chevron, Commercial Bank and Central Finance was witnessed.

On Tuesday, the market opened on a negative note and recovered during the day closing marginally higher. The ASPI gained 2 points to close at 5556, while the Milanka gained a point to close at 5091. Turnover levels improved recording Rs. 972 million with a 7% stake in Environmental Resources changing hands in at least three crossings. Substantial investor interest resulting in high activity in the warrants of Environmental Resources also witnessed. Continued investor interest in fundamentally strong counters such as JKH, Chevron and Asian Hotels was witnessed. A crossing of 362,000 shares in John Keells at a level of Rs. 208.00 marked investor confidence in sound blue chips.

The market opened higher on Wednesday but closing lower with the ASPI and Milanka shedding 13 and 15 points to close at 5543 and 5075 respectively. Turnover levels took a dip with only Rs. 291 million being recorded implying a dearth in liquidity paralleled by an increase in rising interest rates at the weekly issue of treasury bills. Interest in selective blue-chip stocks continued and included John Keells, Hatton National Bank and Commercial Bank. Commercial Bank was the top contributor followed by John Keells and Chevron. A net inflow of foreign funds was seen with foreign purchases amounting to nearly 45% of the day’s turnover.

Activities at the Colombo market saw an upside momentum in mid hours of trading on Thursday and both indices closed up. The ASPI increased by 33 points to close at 5,576 and the MPI gained 28 points to close at 5,104. The turnover for the day was Rs. 271.9Mn.

Top contributors to turnover were Chevron Lubricants at Rs. 31.6Mn, Distilleries at Rs. 22.5Mn and People’s leasing at Rs. 20.9Mn. Most active counters for the day were Environmental Resource Investments, Dankotuwa Porcelain and Nation Lanka Finance.

Chevron Lubricants became the top contributor towards the day’s turnover and activity on the counter was backed by foreign participation. Several block trades were witnessed among Balangoda Plantations which saw a 4.2% price increase and closing at Rs.37.41.

Environmental Resources also witnessed a significant price appreciation of 6.2% closing higher at Rs.15.46 driven largely by retail investor interest. Retail interest was also seen among counters such as SMB leasing (Voting and Non Voting), Blue Diamonds (Voting) and Lanka Orix Finance. A crossing of 100,000 DIST shares also concluded at Rs.145/-.

The market plummeted on the last trading day of the week as the ASPI fell by 25 points and the Milanka by 21 points to close at 5550 and 5082 respectively. The falling trend could be attributed to limited activity on the last day of the week as the turnover levels recorded was as low as Rs. 314 million. Ceylon leather recorded the highest turnover for the day and was seen to come from stocks that included JKH, HNB non-voting, Vallibel One and Chevron. The highest gainer for the day was Property Development achieving an impressive 12% increase closing at Rs.52.60.

(Courtesy: Innovest Investments Pvt Ltd – an Investment Management Company licensed by the Securities & Exchange Commission of Sri Lanka.)

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Discussion: Integrity at the Colombo bourse

On Thursday 1st November, The European Chamber of Commerce Sri Lanka (ECCSL) will host a panel discussion on ‘Capital Markets: Integrity and Development’ at the Palm Lounge, Galle Face Hotel.

Financial experts with a wealth of industry experience from both the private and government sectors have been invited to speak.

Dr. B. M. S. Batagoda - Deputy Secretary to the Treasury, Ministry of Finance and Planning will kick off proceedings with a discussion on "Government Policy on the Equity Market". Other guest speakers include Dr. Harsha De Silva - Member of Parliament, who will be speaking on "Importance of an Independent Regulator (Capture and Impact)", Sunil Handuneththi - Member of Parliament, speaking on "The Role of the People in Safeguarding their Stock Market Investments", Dr. Dilesh Jayanntha - Independent Economic Advisor to the ECCSL speaking on "Equity as a Long-term Investment Option" and industry expert, K.C. Vignarajah speaking on "Energizing the Stock Market and Good Corporate Governance".

This panel discussion comes at a crucial time when reforms in the financial sector are integral for the economic success of the country.

"Post-war Sri Lanka needs to bring in large amounts of investment into the country and we need to move up along the value chain as other countries are also competing at the lower end of the scale Mynamar, Vietnam, Bangladesh, etc." claims Dr. Harsha De Silva, a guest speaker at the event.

"We need to diversify our product mix available to the world. It’s a critical equation in moving to the next stage of development. It is in that context that the equity market and the corporate debt market become important.

"What we need to do is to build confidence in investors that they can come to Sri Lanka with their money with the hope of achieving their objectives which naturally translate into meeting our objectives as well. Their objective is to bring money into a safe location where their money can work for them, where they can invest and expect to make a reasonable profit – that is the win-win on both sides we are looking for. Therefore, we need a properly governed capital market where contracts are honoured where rules and regulations are followed, where people who commit fraud are punished and there is policy consistency," Dr. De Silva said.

For more information, please contact the ECCSL Secretariat at: The European Chamber of Commerce Sri Lanka, 75/4 Barnes Place, Colombo 07 Tel:  +94 011 2699138  / Email:

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Monday, October 29, 2012

SDB credit outlook upgraded

Fitch Ratings Lanka has revised Sanasa Development Bank’s (SDB) Outlook to Positive from Stable. The agency has simultaneously affirmed SDB’s National Long-Term Rating at ‘BB+(lka)’.

"The revision of the Outlook reflects SDB’s improved credit metrics, which are now more in line with those of higher-rated peers. SDB’s rating continues to reflect its healthy capitalisation relative to peers, high net interest margins (NIMs), improving asset quality, and effective management of its core business - micro finance (MF) lending," Fitch said in a statement earlier this week.

"Improvements to SDB’s financial profile, including maintaining its capitalisation and asset quality, while continuing to focus on its core expertise of MF lending may lead to an upgrade. Conversely, deterioration in asset quality and capitalisation levels could result in its Outlook being revised to Stable, while a significant deviation in lending practices away from SDB’s core expertise of MF lending leading to a weakened risk profile could result in a downgrade.

Lending is concentrated on MF, with housing and property loans accounting 65%, leasing 11%, pawn broking 12%, and lending to Sanasa societies and unions 6%. Loans are generally small ticket loans with an average tenor of one to three years. Loans grew 12% in H112 and 32% in 2011, driven by branch expansion.

Fitch expects NIMs to improve, after a decline in H112, as loans are re-priced. SDB’s NIMs remain high relative to peers, reflecting its traditional focus on micro lending which generates high yields. NIMs decreased to 8.4% at end-H112 from 9.7% in 2011 due to increased funding costs. The bank’s pre provision return on assets decreased to 2.7% in H112 (2011: 3.6%), due to losses at some branches, but remains in line with peers.

SDB has been able to manage the quality of its loans despite MF borrowers being more sensitive to economic cycles. However, non-performing loans (NPLs) could increase through the bank’s exposure to the agriculture sector (13% of total loans) as the prevailing drought takes its toll on its MF borrowers. NPL ratios have been on an improving trend, declining to 4.3% in H112 from 4.4% in 2011 and 5.7% in 2010, while its net NPLs/equity improved to 17.9% at end-H112 (end-2010: 24.5%)

Capitalisation may decline given that following its public listing in May 2012 SDB is no longer allowed to receive its regular capital injections under regulatory requirements. SDB’s Tier 1 ratio has historically remained healthy due to regular capital injections from shareholders and foreign funds. Its Tier 1 ratio and equity to assets ratio decreased to 15.5% and 13.3% respectively at end-H112 from 17.3% and 14.4% at end-2011. Funding is predominantly through deposits, which accounted for 73% of assets at end-H112. The Sanasa Group, consisting of over 8,000 co-operatives, accounted for 30% of total deposits which have a high rollover rate.

SDB was established in 1997 as a licensed specialized bank and a main credit institution for the Sanasa Group. It had 81 branches at end-June 2012," the ratings agency said.
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Saturday, October 27, 2012

Bourse closes week on negative note

Turnover remains low, all indices down

The Colombo bourse closed the week on a negative mode with turnover low and all indices down – the All Share by 25.84 points (0.46%), the Milanka by 21.30 points (0.42%) and S&P by 12.24 points (0.41%) with 79 gainers outpaced by 117 losers while 51 counters closed flat.

The day’s turnover of Rs.314.8 million was up from the previous day’s Rs.271.9 million, but brokers were unhappy about the low business volumes currently generated.

"The market was down with Ceylon Leather Products, where there was a crossing of 1.5 million shares at Rs.93.80 and floor trades of nearly 0.3 million done between Rs.87 and Rs.93.80, generating the most business," a broker said.

Ceylon Leather closed flat at Rs.88.10 on the floor contributing Rs.23.4 million to turnover.

JKH closed Rs.1.50 up yesterday at Rs.209 with 93,301 shares done between Rs.207 and Rs.209.50 generating a turnover of Rs.19.4 million which was the second highest for the day.

HNB (non-voting) too closed 60 cents up at Rs.113.60 with slightly over 0.1 million shares done between Rs.113 and Rs.115 contributing Rs.13.6 million to turnover.

Brokers said that there was retail participation in floor trades on Ceylon Leather as well as HNB and Vallibel One which closed 10 cents down at Rs.19.20 on nearly 0.5 million shares done between Rs.18.90 and Rs.19.30 generating Rs.8.7 million turnover.

Chevron which generated top turnover on Thursday continued to attract interest closing flat at Rs.200 on 39,545 shares done between Rs.197.70 and Rs.201.

Colombo Fort Land and Buildings closed flat at Rs.36.70 on nearly 0.2 million shares, Balangoda closed flat at Rs.37.50 on nearly 0.2 million shares and Haycarb closed Rs.3 up at Rs.175 on 35,638 shares.

Other gainers among the most traded stocks included Access up 20 cents to close at Rs.20 on nearly 0.3 million shares, Seylan (non-voting) up 80 cents to close at Rs.34.60 on nearly 0.2 million shares and NDB up 10 cents to close at Rs.133.50 on 37,802 shares.

Hayleys Exports announced that a special resolution to change the name of the company to Hayleys Fibre PLC had been unanimously passed by shareholders at an EGM held yesterday.

Softlogic Holdings said in a Stock Exchange filing that Fitch Ratings had assigned a national long term A-(lka) rating with stable outlook.

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Market Snapshot - 26-10-2012

source - CAL Research

Weekly Foreign Holding Update

source - CAL Research

Friday, October 26, 2012

Results Update - September Quarter - 2012

Results Update - September Quarter - 2012

source - CAL Research

Seylan Bank posts impressive results in 3Q

Seylan Bank recorded an impressive Q3 performance with profits before VAT and income tax reaching Rs. 3,130 million for the nine months ended 30 September 2012 – a 120% growth over the corresponding period last year.

Profit before VAT and Income Tax (before the exceptional VRS costs) for the nine months ending September 2011 was Rs. 1,424 Million. Profits after tax for the nine months increased to Rs. 1,604 million from Rs. 303 million recorded last year.

 Despite controlled credit expansion, the bank’s strong performance continued to be driven by growth in its core banking operations. Net interest income increased by 12% to Rs. 6,418 million for Q3 2012, resulting from selective growth in quality advances and effective management of margins.

Despite challenging market conditions the bank was able to maintain its net interest margins at 4.95%, a slight improvement as compared to 4.91% in December 2011.

 Non-interest income increased from Rs. 1,698 million to Rs. 1,816 million in the nine months of 2012.
 This was achieved despite a general slowdown in import related activities, through diversifying into various other trade finance and cash management services.

 During the nine months under review the bank maintained its focus 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 six per cent from December 2011.

 The bank grew its deposits base by Rs. 13.8 billion 15% (annualised) and the advances portfolio by Rs. 12.7 billion 14% (annualised) despite a fiercely competitive and rising interest rate environment.

 Through focused and sustained recovery efforts the bank has reduced its NPA ratio (net of IIS) from 14.24% in 2011 to 12.99% by end Q3 2012.

 General Manager/CEO Kapila Ariyaratne said: “The bank has set its sights on reducing this to a single digit by end 2013 through adding quality assets, rehabilitating troubled loans and through effective recovery strategies.”

During the nine months in 2012, the bank opened eight new branches/convenient centres and relocated 3 branches to more customer friendly locations. As at 30 September 2012, the bank network comprised of 139 branches/convenient centres and 145 ATMs.

 The bank intends to increase the number of branches to 150 by 1Q 2013.

 Preparing for future growth, the bank has planned for a debenture issue via a private placement in November 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.

 Chairman of Seylan Bank Mohan Pieris, PC, stated: “We are focused on achieving our Strategic Plan, which we formulated in the latter part of last year. This year’s record performance is a testament that we are well on our way to achieve our targets. We have also taken steps to improve our capital and governance structures for future growth that has been planned.”

As a result of the strong nine months profits posted, earnings per share were at Rs. 6.33 (annualised), while return (profit before tax) on assets and return on equity was at 1.93% and 11.87% respectively.
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Lionhart sells more of ERI, Caledonian now owns 13%

Biggest shareholder Lionhart shed further stakes worth Rs. 587 million in ERI this week.

 On Tuesday it sold 24 million shares or a near 7% stake of ERI for Rs. 361.6 million to Caledonian Securities.

A fortnight ago the Daily FT exclusively reported the first set of purchases by Caledonian, whilst this week following the additions, the foreign investor disclosed to the CSE that it now owns 13.12% or nearly 46 million shares of ERI.

 Lionhart also sold 24 million each of Warrants 0003 and Warrants 0006 for Rs. 107.7 million and Rs. 117.3 million respectively.

 As at June 2012, Lionhart Investments Ltd. held a 75% stake in ERI and with recent shedding, the current stake is estimated to be below 60%.

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Bourse, rupee up

Reuters: Stocks edged up on Thursday, led by top fixed line operator Sri Lanka Telecom in thin trade, while inflows from remittances boosted the rupee, dealers said.

The Colombo Stock Exchange’s main index rose 0.60 per cent or 33.47 points to 5,576.72.
“The Bourse is up mostly on retail buying while some institutional buying was evident,” said one broker.

 Analysts said that many investors were waiting for direction from the annual Budget, scheduled for 8 November.

 The day’s turnover was Rs. 271.9 million ($ 2.09 million), less than a third of this year’s daily average of Rs. 931 million.

 Net foreign inflows were Rs. 58 million, taking the total so far this year to Rs. 33.84 billion.
 The rupee ended firmer at 129.75/95 to the dollar compared to Wednesday’s close of 130.05/10, due to dollar inflows from remittances, dealers said.

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Thursday, October 25, 2012

Access Engineering pre-tax profits up 84%

Access Engineering PLC said its group pre-tax profits rose 84 percent for the quarter ended September 30, 2012.

"Turnover for the six months ended 30th September 2012 of Rs.6,057 million and Rs. 4,784 million has recorded a growth of 131% and 88% at group and company level over the corresponding period of last year. At company level, the highest contribution to revenue was from the highways construction sector followed by building construction and production income sectors. This growth in top line has resulted in the company reporting a before tax profit of Rs. 973 million and Rs. 823 million which is a growth of 84% and 74% at group and company level compared to the corresponding period of last year," the company said in a statement yesterday (24).

Embarking on the theme of ‘Capacity Building’ which is earmarked, during the 6 months ended the company has made further investments amounting to Rs. 551 million in property, plant and equipment. The company declared a dividend of Rs. 0.25 per share for the year ended 31st March 2012 which was paid in June 2012.

Operating activities of the company have generated a net cash inflow of Rs. 936 million with the net cash outflow from investing activities amounting to Rs.950 million mainly due to capacity building initiatives that were undertaken by the company.

Access Engineering has successfully completed many landmark infrastructure projects in the island such as the Hambantota International Airport project (Cargo and Fire Rescue Buildings, Airport Access Road, Fuel Hydrant for the Apron, Pipe Laying and a Water Tower), design and build of 1137 housing units at Henamulla, Outer Circular Highway Piling Project which is the largest piling project awarded to a single contractor, Unity Container Terminal Rehabilitation Project at the Colombo Harbour, Hambantota Water Supply Project, Batticaloa Water Supply project, Ibbagamuwa - Madagalla Road Project, Galagedara - Rambukkana Road Project, Jaffna Rehabilitation & Improvement Project (3 major roads), Dialog Aerial Optical Fiber Network Project and the Veyangoda Railway Flyover Project.

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Tourist arrivals up 18% in Sept.

Tourist arrivals jumped 18.1% to 71,111 in September from a year earlier, Government data showed yesterday.

In the first nine months of this year, the cumulative figure was 693,772, up by 16% over the corresponding period of 2011.

 The number of visitors has risen year-on-year in the past 41 months since the civil war ended in May 2009.

 The Tourism Board expects over one million tourists in 2012, yielding revenue of more than $ 1 billion, up from last year’s record $ 830.3 million.

 Revenue from tourism rose 24.2% to $ 641.8 million in the first eight months of 2012 from the same period last year.

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Bourse weaker, Rupee dips

Stocks fell on yesterday as retail investors sold telecom shares, led by top fixed line operator Sri Lanka Telecom in thin trade amid margin calls, dealers said.

The ASI lost 0.24% or 13.52 points.

“The index fell on retail selling on Telecom, while many were stuck with their position with the recent fall and others were waiting to see the direction,” said a stockbroker on condition of anonymity.

 The day’s turnover was Rs. 291.9 million ($ 2.25 million), less than a third of this year’s daily average of Rs. 935 million.

 The market saw a net foreign inflow of Rs. 97.7 million, extending the net inflow to Rs. 33.78 billion so far this year.

 The rupee ended weaker at 130.05/10 to the dollar compared to Tuesday’s close of 129.95/130.05, on seasonal importer demand for dollars, dealers said.

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Bourse edges down on lackluster trading

The Colombo bourse edged down yesterday with lackluster trading and a low turnover with all indices losing ground – the All Share by 13.52 points (0.24%), the Milanka by 15.81 points (0.31%) and S&P by 5.17 points (0.17%) on a turnover of Rs.291.9 million, down from the previous day’s Rs.972.58 million, with 93 gainers and 92 losers almost on even keel while 62 counters closed flat.

"Trading was totally lackluster with no crossings or block trades unlike the previous day to help turnover," a broker said. "Retail activity was not very much in evidence."

"The indices trended lower on the back of sharp drops in a few large caps, including the two listed telco operators. Subdued activity levels were dominated by JKH, COMB (voting and nonvoting), and LLUB, which collectively accounted for over 50% of market turnover," John Keells Stockbrokers said.

Foreign purchases amounted to Rs. 132.01 million, resulting in a net inflow of Rs. 97.69 million.

Commercial Bank (non-voting) was the day’s biggest business generator with nearly 0.7 million shares done between Rs.90 and Rs.95 closing Rs.2 up at Rs.92 and generating a turnover of Rs.62.2 million.

Brokers said that some big parcels were transacted at Rs.95 with the rest of the trades being done closer to Rs.90.

JKH which ranked number two in terms of turnover was down 50 cents to close at Rs.207.50 trading between Rs.207.10 and Rs.209 generating Rs.43.1 million business volume.

Chevron closed Rs.3 down at Rs.197 with over 0.1 million shares done between Rs.197 and Rs.200 contributing Rs.29.1 million turnover while Commercial Bank (voting) closed Rs.1.10 down at Rs.104 trading between Rs.104 and Rs.106 contributing Rs.19.2 million to the day’s business volume.

Asian Hotels (nearly 0.2 million shares) closing flat at Rs.77, NDB up a rupee to close at Rs.134 on 61,924 shares and Central Finance down 40 cents to close at Rs.166 on 26,290 shares were among the blue chips that were in the most traded list.

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Wednesday, October 24, 2012

Sri Lanka stocks close down 0.24 pct

October 24, 2012 (LBO) – Sri Lanka stocks closed down 0.24 percent Wednesday losing gains made earlier in the day.

 The Colombo All Share Index closed at 5,543.25 down 13.52 points and the S & P SL 20 Index closed 5.17 points lower at 3,008.40 down 0.17 percent.

 Turnover was 291million rupees. Commercial Bank (X) led the day’s turnover with 62 million rupees, JKH with 47 million rupees and Chevron with 29 million rupees.

Aitken Spence PLC gained 4.00 rupees to close at 127.20 rupees up 3.25 percent.

Chevron Lubricants Lanka PLC slipped 3.00 rupees to close at 197.00 down 1.50 percent.

Commercial Bank slipped 0.80 cents to close at 104.30 rupees down 0.76 percent. DFCC Bank dropped 0.30 cents to close at 108.30 rupees down 0.28 percent. Hatton National Bank PLC gained 2.90 rupees to close at 115.00 rupees up 2.59 percent. Sampath Bank PLC slipped 0.30 cents to close at 199.00 rupees down 0.15 percent

Dialog Axiata PLC slipped 0.10 cents to close at 8.00 rupees down 1.23 percent.

Index heavy John Keells Holdings PLC slipped 0.40 cents to close at 207.60 rupees down 0.19 percent.

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Sri Lanka East West Properties to rent broadcast towers

Oct 24, 2012 (LBO) - Sri Lanka's East West Properties Plc, which has interests in warehousing and tourism will rent out broadcast towers after it acquired a media firm with access to spectrum.

 East West Properties said it had gained control of Peoples Media Network, which has licenses to operate radio and television networks. The firm was now putting transmission towers.

"These sites will be marketed as common user facilities for other radio and television broadcasters and telecommunication companies," managing director Vijitha Wijesuriya told shareholders in the annual report.

The firm has already started building transmission facilities Hunnasgiriya, Nayabedda and Karagahatenna.

East West chief Nahil Wijesuriya has a history of being in media. In the 1990s he has previously founded ETV, one of the pioneer privately owned television stations in Sri Lanka.

East West Properties and the time funded the project with a loan, according information disclosed in annual reports at the time.

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CB optimistic!

* Keeps policy rates unchanged

* BOP in US$ 305mn surplus by August

* Official reserves US$ 7bn

* Inflation to stay within single-digit range

* Export fall moderate

 * Private sector credit growth down, govt. borrowings higher

A policy u-turn by the Central Bank earlier this year is bearing fruit with credit growth easing and the balance of payments reporting a surplus, an optimistic Central Bank said in its monthly monetary policy review yesterday (23), downplaying the impact of the global economic crisis and surging government borrowings.

The Central Bank announced it would keep key policy interest rates tight to contain inflation with private sector credit growth easing considerably although government borrowings from the domestic banking sector was growing at a higher pace.

Private sector credit growth reached 28.7 percent year-on-year in August, falling below 30 percent since March 2011. New loans to the private sector amounted to Rs. 14 billion in August after averaging Rs. 31.5 billion each month during the first seven months of this year.

The Central Bank said government borrowings were growing at a higher rate, but did not give out any numbers.

Total outstanding debt of the government reached Rs. 6,161 billion as at end July 2012, the Central Bank said in a separate report, growing by Rs. 1,027.6 billion during the seven month period this year. According to the 2012 budget, the government’s borrowing limit for the full year is Rs. 1,104 billion.

According to the 2012 budget, the government’s debt requirement for 2012 was Rs. 776.2 billion from domestic sources and Rs. 327.8 billion from external sources. However, by end July 2012, the domestic debt component grew by Rs. 381.6 billion from end December 2011 while foreign debt surged by Rs. 646 billion.

The estimates are based on expectations that the budget deficit would reach 6.2 percent by the year’s end. However, by end July the deficit reached 5.56 percent of GDP.

Yesterday, Central Bank said inflation would remain at single digit levels going forward.

The Balance of Payments recorded a US$ 305.9 million surplus by end August with official reserves reaching US$ 7 billion.

The Central Bank said export earnings fell moderately while imports fell substantially.

It said the global recession would impact negatively on emerging and developing economies.

The full text of the Central Bank’s Monetary Policy Review for October 2012 follows:

"The tight monetary policy measures implemented by the Central Bank to moderate private sector credit expansion continued to prove effective and the overall private sector credit growth moderated substantially to 28.7 per cent, year-on-year in August, falling below 30 per cent for the first time since March 2011," the Central Bank said.

"In absolute terms, the expansion of credit in August was Rs. 14 billion compared to the average monthly increase of Rs. 51.8 billion in the first quarter of 2012. Despite the slowdown of credit to the private sector, broad money growth in August was higher than the previous month, reflecting higher public sector borrowing.

"Year-on-year inflation declined for the second consecutive month reaching 9.1 per cent in September. While short term pressures on inflation arising from recent revisions to administratively determined prices and uncertain global supply conditions remain elevated, the tight monetary policy stance is expected to prevent second round effects of supply side factors entrenching into future inflation, and thereby help maintain inflation at mid-single digit levels over the medium term.

"In the meantime, the global economy continued to recover at a slow pace, although the US economy showed some positive signs, supported by the recent stimulus measures implemented by the Federal Reserve. Further, the protracted economic downturn in the euro area has weakened the demand for their imports.

"With 7.4 per cent GDP growth projected for the third quarter, the Chinese economy has also showed some signs of slowdown. In view of these setbacks to the global economic recovery, the IMF has revised its outlook for global growth to 3.3 per cent in 2012, and 3.6 per cent for 2013. This slowdown is likely to have a negative impact on emerging markets and developing economies, which mainly depend on external demand.

"Reflecting such trend, growth of Sri Lankan exports too has decelerated during the last six months, albeit moderately, whilst demand management measures introduced in early 2012 have resulted in imports falling substantially. With the resultant improvement in the trade balance, together with other inflows, the balance of payments has recorded a surplus of US dollars 305.9 million by August, and helped to raise the current level of official reserves to US dollars 7 billion, which is equivalent to around 4.3 months of imports.

"Taking into account the developments discussed above, the Monetary Board of the Central Bank of Sri Lanka was of the view that the current monetary policy stance is appropriate, and decided, at its meeting held on 22 October 2012, to maintain the policy rates of the Central Bank unchanged at their current levels. Accordingly, the Repurchase rate and the Reverse Repurchase rate would remain at 7.75 per cent and 9.75 per cent, respectively," the Central Bank said.

The repurchase rate applies to overnight deposits of excess rupees of commercial banks with the Central Bank, and the reverse repurchase rate applies to overnight borrowings by commercial banks from the Central Bank.

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Treasury meets capital market stakeholders

* Dr. PB says SEC not proactive enough

*Previous budget concessions not had an impact

*Proposals made to lift withholding tax on corporate debt, stamp duties on margin account transfers

* Incentive mooted for companies with high free float

A fresh round of talks between the Treasury and capital market stakeholders took place yesterday (23) in view of the upcoming budget.

The meeting was chaired by Treasury Secretary Dr. P. B. Jayasundera. Top officials from the Securities and Exchange Commission and the Colombo Stock Exchange attended the meeting with representatives of the Colombo Stock Brokers Association, Unit Trust Association and Margin Providers Association in attendance.

Dr. Jayasundera said the country’s capital market needed to perform well and contribute to the economic development of the country.

He said capital formation was not satisfactory enough and that budget concessions provided over the last few years did not have much of an impact on the development of the bourse.

The Treasury Secretary called for quantifiable proposals from all stakeholders and said the SEC was not proactive enough in developing the market.

Sources said the meeting was very positive with the industry putting forward several proposals to uplift the country’s capital market.

One proposal to the government was the lifting of withholding tax on corporate debt investments. The corporate bond market is underdeveloped and the need to make this sector more vibrant so as to attract more foreign investment would be crucial for the overall development of the country’s capital market.

Transfers to an investor’s own margin account continued to be taxed (stamp duty), so the industry sought an exemption in this regard as well.

Tax concessions were also sought for companies with a high free float. A request was also made to encourage listed companies to payout decent dividends.

Dr. P. B. Jayasundera said the government would look at the practical aspects of the proposals and would act on them based on its capacity.

Brokers also sought incentives to upgrade their infrastructure, especially IT based capabilities, for which the Treasury chief had expressed his keen support, sources said.

Sources said the meeting was focused with none of the more controversial issues brought up for discussion, although there was a brief discussion on the need for brokers to disclose their personal trades after the SEC recently removed restrictions placed by the earlier administration.

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Capital market welcomes pre-Budget talks with Dr. PB as ‘very positive’

Capital market stakeholders yesterday welcomed the pre-Budget meeting with Finance Secretary Dr. P.B. Jayasundera and his team as ‘very positive,’ given the spirit of pragmatism and immediacy reflected.

 Almost all stakeholders who were associated with the mid-July forum with President and Finance Minister Mahinda Rajapaksa attended yesterday’s meeting under the aegis of the National Council for Economic Development (NCED). Dr. Jayasundera had indicated yesterday’s meeting was part of the follow-up process as well as consultation ahead of the 2013 Budget presentation by President Rajapaksa on 8 November in Parliament.

The Securities and Exchange Commission (SEC) led by Chairman Dr. Nalaka Godahewa, the Colombo Stock Exchange (CSE) led by Chairman Krishan Balendra, Colombo Stock Brokers Association (CSBA), the Unit Trust Association (UTA), and the Margin Providers Association (MPA) had submitted written proposals as well as explained the rationale for same.

 Heads of these organisations, commissioners, directors and senior officials/representatives attended yesterday’s meeting, whilst among investors present were Harry Jayawardena and Nimal Perera as well as K.C. Vignarajah.

 Sources said that support for the development of listed corporate debt market (which currently faces a 10% withholding tax), improving new listings – both from private and public sectors, attracting new funds/investors both foreign and local as well as market infrastructure development had been discussed.

 Measures to improve liquidity and free-float of listed shares, simplification of procedures for foreign portfolio investors, rationalisation of residual levies (stamp duty on transfers within margin trading accounts) as well as investor education and promotion had figured during the discussions, which lasted around two hours.

 Dr. Jayasundera had called on capital market stakeholders to prioritise the most immediate recommendations for consideration by the Government for the upcoming Budget, whilst other measures could be earmarked as medium and long term.

 He also assured capital market stakeholders that the Finance Ministry would continue with the regular dialogue to iron out issues and develop a dynamic, attractive, and inclusive capital market in the country.

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Bourse up slightly

The Colombo Stock Exchange barely lifted its head on Tuesday (23) with all three indices closing in positive territory with gainers slightly behind losers 107 to 110.

The All Share Price Index closed 0.05 percent higher gaining 2.88 points to 5,556.77 while the Milanka Price Index of more liquid stocks closed 0.03 percent higher at 5,091.56, up 1.47 points. The S&P SL20 closed at 3,013.57, 0.12 percent higher after gaining 3.55 points.

Turnover amounted to Rs. 972.6 million with a little more than 87.2 million shares changing hands during the day.

"The indices trended lower during the early hours of trading but recovered to end the day slightly higher, supported by renewed buying interest which resulted in gains in several large caps. Activity levels were boosted by crossings on GREG and JKH," John Keells Stockbrokers said.

Foreign purchases amounted to Rs. 750.29 million recording a net inflow of Rs. 139.02 million.

Year-to-date the bourse had fallen 8.52 percent.

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Stocks recover from six-week low; Rupee down

Reuters: Stocks recovered from six-week lows with top fixed line operator Sri Lanka Telecom jumping seven per cent in thin trade on Tuesday, dealers said.

 The Colombo Stock Exchange’s main index edged 0.05 per cent or 2.88 points up at 5,556.77, from its lowest close since 7 September

“The market moved on some block deals while many were waiting to see the direction, especially ahead of the Budget,” said a stockbroker on condition of anonymity.

 The Budget is to be unveiled next month.

 Dealers said investors shrugged off a Central Bank decision to keep the key policy rates steady.
 The day’s turnover was Rs. 972.6 million ($ 7.50 million), slightly above this year’s daily average of Rs. 938 million.

 The market saw a net foreign inflow of Rs. 139 million, extending the net inflow to Rs. 33.69 billion so far this year.

 The rupee ended weaker at 129.95/130.05 to the dollar compared to Monday’s close of 129.75/80, on seasonal importer demand for dollars, dealers said.

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Tuesday, October 23, 2012

Sri Lanka Hotel Sigiriya net up 24-pct

Oct 23, 2012 (LBO) - Profits are Hotel Sigiriya Plc, which is located in central Sri Lanka, rose 24 percent to 16.5 million rupees in the September 2012 quarter, from a year earlier, interim accounts showed.

 The firm reported earnings of 2.82 rupees for the quarter. In the six months to September the firm reported profits of 24.3 million rupees up 40 percent from a year earlier.

 Earnings for the six months were 4.16 rupees a share.

Revenues during the September 2012 quarter rose 17 percent to 61million rupees from a year earlier and cost of sales rose at a slower 2.0 percent allowing gross profits to grow 23 percent to 51 million rupees.

But administrative expenses rose 15 percent to 30.2 million rupees and finance expenses rose seven times to 1.5 million rupees.

Sri Lanka is going through a tourism boom after a 30-year civil war ended.

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Rate cut will boost equity markets

A cut in policy rates if implemented today will boost equity markets whilst yesterday investor sentiments were negative with retailers adopting a wait and see attitude.

“The market started on a positive note, but went on to lose ground while activity remained low. Turnover saw the lowest levels since mid August,” NDB Stockbrokers said.

“The monetary policy review is due and a possible reduction in policy interest rates may boost the equity markets,” NDBS added.

“Retail interest remained subdued due to force selling and it was evident that retail investors were adopting a ‘wait-and-see’ approach,” noted Asia Wealth Management.

Reuters said the market slumped on Monday to its lowest level in six weeks with turnover skidding to a two-month low on retail selling on margin calls ahead of the Central Bank’s Board meeting on rate policy later in the day. Analysts said investors remained on the sidelines ahead of an announcement on Central Bank monetary policy due on Tuesday.

 The Colombo Stock Exchange’s main index fell 1.69 per cent, or 95.64 points, to 5,553.89, its lowest close since 7 September.

“Colombo stocks nose-dived after the short lived uptick in the bourse late last week. By 11 a.m. the benchmark index had dipped approximately 40-50 points as it hovered around the 5,600 mark up until the final hour of the day. However a further dip was witnessed during the final hour of trading as the index settled at 5,553.9,” Softlogic Stockbrokers said.

 The low level of activity continued to haunt amidst the lack of investor interest, it added.

 The day’s turnover was Rs. 257.1 million ($ 1.99 million), lowest since 17 August, and less than a third of this year’s daily average of Rs. 945 million.

 The market saw a net foreign inflow of Rs. 36 million, extending the net offshore inflow to Rs. 33.55 billion so far this year.

“The slide down in the Bourse seems to be continuing though on low volumes suggesting the deterioration of selling pressure. However the lack of buying interest seems to be the main factor bringing down the market on low volumes. The market valuations remain strong and the expected earnings of the September quarter is likely to suggest a marginal recovery in the overall economy,” Softlogic said.

“Taking note of these developments we advise investors to further accumulate counters with a higher weightage towards the banking and finance sector,” it added.

“There is selling pressure as some brokers forced retailers to settle debts and they had to come down and sell at lower prices,” a stockbroker said on condition of anonymity.

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Travel Editor at Lonely Planet gives thumbs up for Sri Lanka

Lonely Planet’s Travel Editor Tom Hall has given the thumbs up for Sri Lanka for global travellers looking for a holiday.

In its article on Sunday, Where to visit next? Lonely Planet said this question dominates conversations at Lonely Planet more than any other. It’s inevitable when hundreds of self-confessed travel geeks clock up hundreds of thousands of miles a year between them, exploring virtually every destination on the planet in the process.

Once summer holidays are done, we begin to debate where the hottest destinations to visit next will be, which places have seen significant change, and where everyone is talking about right now. This is what informs Best in Travel, our annual collection of simply the best places to visit and things to do in the year ahead.

 People across Lonely Planet work all year to publish Best in Travel. The first step comes in the spring, when the team behind the book gathers suggestions from dozens of authors, editors and staff.

 Tony Wheeler, Lonely Planet’s co-founder (and Independent on Sunday travel columnist), and other travel experts then rank the destinations in order. What are the criteria? Topicality, above all – it’s got to feel of the moment – but, like any traveller, we also look for value for money and that special something that elevates one place above another. Then, a team of writers – many of those involved in choosing the places – sets about writing the words explaining our selection.

 Next, if previous years are anything to go by, the winners will celebrate and the debate will continue.

 Thanks to Twitter and Facebook, we’ll know within seconds whether huge numbers of people agree with the selection.

“I think I might go on holiday; Sri Lanka looks nice,” said the travel editor Hall. Following is the article by Hall titled ‘Where to go in 2013: Sri Lanka. Why go in 2013? Serenity returns to Serendib’. This article also got featured in UK’s Independent.

 Dubbed Serendib – the origin of the word serendipity – by seafaring Arab traders centuries ago, Sri Lanka has been anything but serene in recent decades. Battered, tragically, by the 2004 Boxing Day tsunami and wracked by a civil war from 1983 to 2009, many areas of South Asia’s most compact country have remained off limits to even the most intrepid traveller. Now the bitter conflict with the Tamil Tiger rebels is at an end, investment is again fuelling the tourist industry and visitor numbers are steadily increasing. Prices are affordable. Indeed, Sri Lanka is emerging as one of the planet’s best-value destinations.

 North of the capital Colombo, on Sri Lanka’s west coast, Kalpitiya and the Puttalam lagoon are eco-tourism hotspots with bird watching and kayaking. Near Dondra Head, on the south coast, mighty blue whales are regular visitors from January to April while land-based wildlife thrills include the leopards and elephants of Yala National Park, and the more rugged and remote Wilpattu National Park, open once more after being closed for more than two decades during the civil war.

 The gloriously arcing beaches of the nation’s east coast are now challenging traditional southern favourites. Arugam Bay’s sandy crescent is one of Asia’s best surf spots and further north, Uppuveli and Nilaveli near Trincomalee stretch for several pristine kilometres. Fast-forward five years, and both beaches will definitely be accorded “where to go next” status in glossy travel magazines. Why wait that long?

 Explore the glorious labyrinth of Galle’s 17th-century Dutch fort. In past centuries, the Unesco-listed colonial town was a prosperous hub of global trade and now boutique hotels and an emerging arts scene instil a cosmopolitan allure. Further north, you can discover Sri Lanka’s imposing ancient cities, emerging from a verdant landscape.

 All around the country, tuck into great-value local cuisine including grilled seafood, spicy kottu (roti chopped and mixed with vegetables) and multi-course mini banquets of different curries at family run guesthouses. Indian and Thai cooking may be world-renowned, but Sri Lanka’s time in the global gourmet spotlight can’t be far away.

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Bourse falls sharply, sentiments weak

The Colombo bourse fell sharply on selling pressure Monday (22) with all three indices closing in the red amidst weak investor sentiments, brokers said.

The All Share Price Index fell 1.69 percent to close at 5,553.89 down 95.64 points (down 8.57 year to date) while the Milanka Price Index of more liquid stocks lost 46.39 points to close 0.9 percent lower at 5,090.09. The S&P SL20 fell 1.05 percent, down 31.96 points to close at 3,010.02.

"The market opened on a flat note but turned into a sea of red due to persistent selling pressure. The negative market breadth reflected the weak sentiment prevailing in the market. There were 175 shares on the declining side and only 31 shares advanced," Bartleet Religare Securities said.

Activity was low with only 12.2 million shares changing hands during the day generating a turnover of Rs. 257.06 million. Foreign inflows amounted to Rs. 79.5 million leading to a net foreign buying position of Rs. 36 million.

"Sharp drops in several large caps dragged the indices lower amidst renewed selling pressure across the board. Activity levels remained subdued and were led by trades on JKH, Commercial Bank, and Chevron Lubricants, which collectively accounted for over 30% of turnover," John Keells Stockbrokers said.

JKH closed 0.49 percent higher at Rs. 207 with 189,087 shares changing hands during the day. Commercial Bank fell 0.47 percent to Rs. 105 on 196,352 shares. Chevron Lubricants closed 0.26 percent higher at Rs. 196.50 on 104,332 shares.

Commercial Development Company was the biggest gainer, moving up by 15.64 percent to close at Rs. 75.40 with just one share being traded.

Bogala Graphite gained 7.69 percent to close at Rs. 29.40.

Selinsing was the biggest loser, down 16.6 percent to Rs. 1,105 while Commercial Leasing and Finance fell 12.19 percent to Rs. 3.60.

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Monday, October 22, 2012

Blue chips and fundamentally-sound stocks key contributors to Bourse’s recent revival

The rebound in the Colombo stock market between late July and end September has largely been emphatic though a few sceptics continue to write it off as being not genuine or link it to play on junk and speculative stocks.

Some well-versed and qualified finance industry professionals too have succumbed to this notion, which some experts opined had checkmated sustenance of the recent revival. This apart, some uncertainty on interest rate scenario, spike in inflation and quick profit taking weakened overall investor sentiments. Some brokers, however, based on fundamentals and attractive valuations, suggest there remains a host of buying opportunities. This recommendation is largely on blue chips and fundamentally-sound second tier stocks.

 The Daily FT has tracked the performance of top 30 stocks by market capitalisation, the price change on a year-to-date basis as of end June (when market was depressed) and end September (peak of recent revival) as well as compiled the list of double digit contributors to the benchmark All Share Index’s gain. This analysis confirms the larger rebound has been fuelled by the top tier stocks whilst fundamentally-sound companies too have benefitted from the retail-driven revival with sharp gains, reversals or their dip reduced. Between the last week of June and that of September, the ASI had gained by 22% and market capitalisation by Rs. 417 billion. The most emphatic development is the Rs. 10 billion increase in net foreign inflow between mid-July and last week.

 For comments from – DNH Financial, Asia Wealth, Softlogic Stockbrokers, and CT Smith and table of double digit ASI movers – See page 2

 Below are some observations from four brokers – DNH Financial, Asia Wealth, Softlogic Stockbrokers, and CT Smith.

 DNH Financial in its weekly report opined that despite the last few days’ profit taking, the Sri Lanka Bourse is still up 19% for the past three months in dollar terms and is the best performing market in Asia during the period even though the market is down 4% and 20% respectively on a MTD and YTD basis.

 In terms of relative valuations, although trading at a higher multiple than Pakistan, at its current PE of 11.9X ($ terms), the Sri Lanka Bourse appears attractively valued when compared to other Asian markets such as India, which is currently trading at 16.0X, or Taiwan and Japan, which are trading 24.6X and 22.2X respectively.

“We expect the market to trade sideways over the coming week pending the release of 3Q2012 corporate results. As such we advise investors to be appropriately positioned to take advantage of the likelihood of a moderate rerating in the market once the heavy weight stocks announce their results,” DNH said.

 While the market’s rise last month is mainly attributable to retail buying rather than significant institutional or foreign interest, DNH still views market conditions as a healthy entry point for investors to cherry pick quality stocks on weakness and keeping in mind an investment horizon over the medium to longer term.

 Although Balance of Payments pressures are likely to continue on the back of high oil prices and inflationary conditions may persist, Sri Lanka’s economic story still appears to be intact and will provide the necessary comfort to investors justifying the current market PE.

 While anecdotal evidence suggests that investors generally do not tend to concentrate significantly on fundamentals during a bull run phase, the current lull in the market should be viewed as chance for investors to do their homework and seek out companies that will generate firm top line growth with robust cash flows and benefit from the strong domestic consumption cycle.

“Given that intrinsic values are more stable than extrinsic values (which are largely affected by external factors), we advise investors to look beyond the absolute price of a stock to its fundamental value which will ultimately determine its true worth, remembering that price deviations from value can occur only short term,” DNH added.

 Asia Wealth Management said the growth prospects for the Sri Lankan economy remain strong compared with the region and are attractively valued on a P/E basis. This is further reiterated by the Central Bank’s decision to tighten monetary policy via open market operations in order to reduce inflation to more acceptable levels. This is evident in the net foreign inflow of around Rs. 1.1 billion recorded last week.

 Commenting on the Bourse’s performance last week, Asia said activities at the Colombo Bourse remained muted for a second week as retail investors showed reluctance to respond to the policy directives enacted by the SEC in order to maintain the positive momentum that was witnessed since mid August.

 This is evident in the low turnovers and volumes that would have been recorded over the course of the week, in the absence of large transactions on certain blue chip counters such as John Keells Holdings and Colombo Dockyard.

“This may possibly be due to fear instilled in the minds of minority shareholders over potential conflicts of interest that may arise as a result of the reversal of certain SEC policy measures as highlighted in the media, particularly with regard to the reversal of the policy with respect to trade restrictions imposed on directors and employees of licensed stockbrokers. Although the SEC maybe justified in its actions, policy decisions made in a haphazard and non-transparent manner raises risks for all parties concerned,” Asia said.

 Softlogic Stockbrokers said following the 1,000 point bull run in September, the Bourse has taken a breather, with profit taking and margin calls dragging down the index close to +350 points. Amidst the slip in the index, most banking sector counters have lost ground with price depreciations to almost 15%.

“The plunge in banking counters has forced us to re-look at the banking sector, which could be identified as one of the cheapest sectors in the market with the capacity of a strong growth potential. We advise our investors to aggressively re-enter the banking sector as most counters trade below 10X PER on 2012E earnings. It is also pointed out that we are biased towards the larger banks amidst caps placed on credit growth,” Softlogic said.

 CT Smith Stockbrokers in its monthly report said the Colombo Bourse rose 15% in September recording the highest MoM gain since September 2010. The average daily turnover rose to Rs. 1.67 billion as against Rs. 635 million in August.

“The indices were largely driven by a retail rally, which began end August and peaked in September, amidst declining interest rates. Since the sharp rise in prices during the month resulted in seemingly higher valuations across the board, a near term correction seems likely. Nevertheless foreign funds picked up fundamentally-strong counters which also witnessed sharp price increased during the month,” CT Smith said.

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Friday, October 19, 2012

Bourse turns bullish after 3-day bear run

The Colombo stock market saw a welcome rebound yesterday after being beset by a bear run in the past three days.

 The All Share Index gained by 39 points and MPI by 74 points with turnover was a healthy Rs. 943 million.

The rebound since Friday is welcome considering the fact over Rs. 100 billion in value had been lost despite the SEC implementing three directives beneficial to the market. However, analysts said profit taking was understandable after the market had risen sharply between late August and early October.

 The low turnover of Rs. 372 million on Wednesday was seen as an indicator that selling pressure prevalent previously had eased off. Consequently fresh round of buying was envisaged and the exact thing took place yesterday.

 A development that remains emphatic is the persistent foreign buying, which resulted in a net inflow of over Rs. 200 million yesterday too.

 NDB Stockbrokers said fundamentally-sound counters such as John Keells Holdings, Chevron, Distilleries and Commercial Bank contributed to the turnover. Institutional and high net worth investor participation was seen in John Keells Holdings, Chevron and Hunas Falls Hotels. Retail activity remained low with counters such as Nation Lanka Finance and Asiri Hospitals gaining interest.

“The Bourse took a break from the bear run as all three indices turned green after three days of consecutive losses of +150 points, with fresh buying notably in steady counters,” Softlogic Stockbrokers said.

 All three indices trended upwards and remained in the green during most of the trading hours albeit some intraday volatility, it added.

 Sri Lanka Telecom (+3.3%), Aitken Spence (+2.3%), Nestle Lanka (+1.7%), Asian Hotels & Properties (+2.8%) and Commercial Bank (+1.2%) weighed on the broader index positively as it closed with a 38.9 point advance. The liquid MPI overrode the ASPI as it peaked at 5,148.0 (+93 points) before settling at 5,129.9 points. Sturdy gains were registered in Free Lanka Capital Holdings (+3.9%), Lanka Hospital Corporation (+4.7%), Nations Lanka Finance (+6.5%) and Nations Trust Bank (+3.5%) representing the MPI calibre.

 Softlogic said high net worth and institutions proved to be active with the amount of on board heavy trades which drew the top turnover slot. Retailers too were notable with play in Lanka Hospital Corporation, Nations Lanka Finance and East West Properties.

“But the overall tone of the market, the investors are yet on a ‘wait-and-see’ mode despite the emergence of some buying on the selected lot,” Softlogic opined.

 Yesterday heavyweight, John Keells Holdings, emerged strong as the blue chip infused some life to the otherwise subdued turnover levels as two large off market deals carrying around 900,300 shares in the counter at its close of Rs. 205.0 constituted around 30% of the day’s turnover.

 It closed in the green with a marginal 0.5% gain at Rs. 203.9. Renewed investor play was witnessed in Hunas Falls Hotels as the counter saw a block of 899,000 shares (around 15% stake) being crossed off at Rs. 65.

 Considerable investor participation was evident in Chevron Lubricants as the counter saw a parcel of 100,000 shares being taken on board at Rs. 195. The counter advanced 2% at its close of Rs. 195. Interest extended in both Distilleries and Colombo Dockyard, as each witnessed a large on-board deal of 216,000 and 130,000 shares at Rs. 141 and Rs. 223 respectively.

 Among the banking sector, Commercial Bank (+1.2%), National Development Bank (+2.3%) and Sampath Bank (+1.3%) retained buying interest as the former saw several large deals being handled in the market. High Dividend plays, Nestle Lanka and Ceylon Tobacco both attracted interest as each appreciated 1.7% and 0.3% respectively.

 Further renewed play was evident in plantation sector counter Namunukula Plantations as the counter saw several large trades on board including a 136,800 share parcel being dealt at Rs. 80 each.  The counter closed flat at Rs. 80. Interest continued in Asiri Hospital Holdings as a block of 899,000 shares was seen taken on board.

 Retail activity prominently evolved around Lanka Hospitals Corporation, Citrus Leisure, Free Lanka Capital Holdings, Touchwood and HVA Foods.

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Bourse shrugs off this week’s losing streak

* All indices and  turnover up

The Colombo bourse yesterday shrugged off this week’s losing streak with turnover up to Rs.621.1 million from the previous day’s Rs.371.1 million, and all three indices up – the All Share by 38.92 points (0.70%), the Milanka by 74.39 points (1.47%) and S&P by 14.72 points (0.29%) with 174 gainers leaving 60 losers trailing while 24 counters closed flat.

Brokers said that the market had looked up with retail sentiment more positive and block trades in Hunas Falls Hotels and JKH contributing a good slice of the day’s turnover.

"The indices rebounded sharply on the back of renewed buying interest which resulted in strong gains on several large caps. Activity levels were boosted by crossings on JKH and HUNA, but remained subdued vs. average daily turnover levels during the previous month," John Keells Stockbrokers said.

Foreign purchases amounted to Rs 325.20 million, resulting in a net inflow amounting to Rs. 210.74 million.

Mercantile Investments sold off a long-held stake in Hunas Falls, the country’s most popular honeymoon hotel, to Amaya Leisure associated with the Hayleys group at a price of Rs.65 a share. The deal, where nearly 0.9 million shares changed hands, was worth Rs.58.4 million.

There were also crossings of 0.9 million JKH at Rs.205 per share with the two transactions on this account worth Rs.184.6 million.

On the trading floor, Chevron Lubricants led the turnover league with nearly 0.2 million shares done between Rs.191 and Rs.196 generating Rs.31.9 million business and closing Rs.3.90 up at Rs.195.

Distilleries saw over 0.2 million shares done, closing Rs.1.50 down at Rs.140 trading between Rs.139.10 and Rs.144 and contributing Rs.30.6 million to the day’s turnover.

Brokers said that many blue chips saw price appreciation with Dockyard up Rs.3 to close at Rs.223, Commercial Bank (voting) up Rs.1.20 to close at Rs.106, Nestle up Rs.19.70 to close at Rs.1,210, NDB up Rs.4.30 to close at Rs.136 and Ceylon Tobacco up Rs.1.90 to close at Rs.700 among the most traded stocks.

Dockyard with over 0.1 million shares traded between Rs.220 and Rs.223 contributed Rs.29 million to turnover, Commercial Bank with 0.2 million shares done between Rs.105 and Rs.106.50 generated Rs.21.6 million and Nestle with 14,334 shares transacted, the bulk of which was done at Rs.1,199.90 although the stock closed at Rs. Rs.1,210, contributed Rs.17.2 million to turnover.

Lanka Hospitals (Apollo) saw over 0.3 million shares done closing Rs.2.50 up at Rs.46.40 trading between Rs.42.80 and Rs.46.40 while NDB saw 75,338 shares done between Rs.131.60 and Rs.136 generating a turnover of Rs.10.1 million.

Shaw Wallace & Hedges announced the resignation of CEO/Director M.N. Gunasekera with effect from October 16 and Ceylon & Foreign Trades announced a first and final dividend of five cents per share for 2011/12 with dates to be notified.

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Mercantile exits, Amaya buys 16% Hunas Falls stake for Rs. 58 m

Amaya Leisure Plc yesterday picked up a 16% stake in Hunas Falls Hotels Plc for Rs. 58.4 million.

The stake, amounting to 899,000 shares, was done at Rs. 65 each as a crossing. Hunas share price closed yesterday at Rs. 64.90, up by Rs. 5.30.  Seller of the block was Mercantile Investments and Finance Plc, which was the second largest shareholder after Hayleys Group subsidiary Carbotels Ltd., which holds 50.22%. Hayleys and Amaya are related parties.

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SEC Chief hosts foreign investor-savvy brokers for lunch

Securities and Exchange Commission (SEC) Chairman Dr. Nalaka Godahewa yesterday hosted a select group of stockbrokers who are active in wooing foreign investments to CSE for an informal lunch.

Daily FT learns the move by Godahewa was to find out factors which draw foreign funds and individuals making portfolio investments in the CSE, their concerns as well as steps needed to improve the Colombo Bourse’s attractiveness.

 The CSE this year has seen an all-time high net foreign inflow of Rs. 33.7 billion after last two years saw a flight of Rs. 45 billion.

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Thursday, October 18, 2012

Slump on bourse continues third day running

Lackluster trading continued on the Colombo bourse yesterday with turnover at Rs.372.1 million, down from the previous day’s Rs.515.38 million, and all indices down – the All Share by 21.73 points (0.39%), the Milanka by 38.58 points (0.76%) and S&P by 19.61 points (0.65%) with 102 gainers outpaced by 110 losers while 99 counters closed flat.

Brokers said that it was a very quiet trading day with Colombo Dockyard, LIOC, Commercial Bank and Distilleries being the main turnover generators.

"The indices ended lower for a third consecutive day mainly on the back of selling pressure on several large caps. Activity levels remained subdued and were led by trades on DOCK, LIOC, and COMB, which collectively accounted for over 20% of turnover," John Keells Stock Brokers said in a market report.

Foreigners were net buyers, though marginally so, with purchases at Rs. 62.05 million and sales at Rs. 54.51 million leaving a inflow of Rs. 7.54 million.

Dockyard closed flat at Rs.220 with over 0.1 million shares done between Rs.217 and Rs.222 generating a turnover of Rs.30.1 million.

Brokers said that there were a couple of largish parcels among the trades at the Rs.220 price.

LIOC closed 20 cents up at Rs.17.50 with nearly 1.6 million shares done between Rs.17.30 and Rs.17.60 with some large parcels among the trades.

Commercial Bank closed Rs.1.50 down at Rs.104.50 on 0.2 million shares done between Rs.104.50 and Rs.107 contributing Rs.21.8 million to turnover while Distilleries closed Rs.5 down at Rs.140 on over 0.1 million shares done between Rs.138 and Rs.145 generating a business volume of Rs.18.5 million.

The majority of the most traded stocks closed down with the exception of Pan Asia, up 40 cents to close at Rs.19.50, City Housing and Real Estate up 40 cents to close at Rs.17.50 and LIOC which edged up 20 cents.

Retail activity was evident in Nation Lanka Finance where over a million shares were done closing 10 cents down at Rs.10.80 trading between Rs.10.50 and Rs.11.30.

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Bourse extends fall on lack of liquidity, margin calls

Reuters: Stocks fell for a third day on Wednesday to a more than five-week low in thin trade as lack of liquidity for retail investors dented market activity amid margin calls to settle credit transactions.

The Colombo Stock Exchange’s main index fell 0.39% or 21.73 points, to 5,586.40, its lowest level since 10 September.

“Retail investors, who dominate trading, are not active due to lack of cash. Since the market has come down, there are also broker margin calls, compelling retail investors to sell their shares,” a stockbroker said on condition of anonymity.

 The market saw a net foreign inflow of Rs. 7.5 million, extending the net offshore inflow to Rs. 33.3 billion so far this year.

 Turnover was Rs. 372.1 million ($ 2.89 million), less than half of this year’s daily average of Rs. 947 million.

 The rupee closed marginally weaker at 128.85/129.00 to the dollar compared with Tuesday’s close of 128.75/80 on importer dollar demand, dealers said.

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Wednesday, October 17, 2012

Colonial Motors to raise Rs. 197.6 m via Rights to boost new Mazda biz, working capital

■ Post Rights, subdivision of shares by 10 for 7 proposed

Colombo Motors Plc has decided to raise Rs. 197.6 million via a Rights Issue to boost its newly-acquired authorised distributorship of Mazda brand as well as working capital.

 The Rights Issue will be on the basis of one for every six shares held at Rs. 130 per share. It will involve issuance of 1,520,710 new shares.

The stated capital of the company is Rs. 91.35 million.

 The pricing of the rights was described as “fair and reasonable”.

Yesterday Colonial Motors share price dipped by Rs. 32.50 to Rs. 185.50 after a hitting a high of Rs. 223. Around 8,800 shares traded. Net asset value per share at company level si Rs. 145.22 and at Group level it is Rs. 293.95.

 Colonial said Rs. 135 million out of the total to be raised will be to invest in the wholly-owned subsidiary Colonial Motors (Ceylon) Ltd., the authorised distributor for Mazda vehicles in Sri Lanka and the Maldives, and in setting up a modern workshop at Battaramulla. The other Mazda distributor is Carmart Ltd.

 The balance Rs. 62.69 million will be used for working capital requirements of Colombo Motors.
 Post full subscription of the Rights Issue, the Colonial Motors Board has proposed to subdivide the shares on the basis of 10 for every 7. This will see the number of shares in issue of the company at 15.2 million.

 Both moves are subject to regulatory and shareholder approval.

 Colombo Fort Land and Building owns a 63.45% stake in Colonial Motors whilst related party Lankem Ceylon holds 2.23%. A few other related parties also hold minor stakes. The biggest outside shareholder is Sri Lanka Insurance Corp with 4.38% as at June 2012.

 Colonial Motors Group is also the agency for popular brand Kia and in the first quarter of FY13 saw its Group post tax profit improve by 26% to Rs. 181 million whilst net profit attributable to equity holders was Rs. 130.5 million, marginally down from Rs. 143 million in the first quarter of FY12.

 Following the hike in import duties, the motor trade has been suffering with low sales and profitability after enjoying a two-year boom under the previous regime of low taxation.

 Group sales were down by 62% to Rs. 460 million in 1Q of FY13 from Rs. 1.19 billion a year earlier. In full FY12, Group sales grew by 163% to Rs. 3.96 billion whilst net profit soared by 401% to Rs. 1.16 billion.

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Colombo bourse tumbles

The Colombo bourse continued to tumble with all three indices closing in the red on Tuesday (16) on sustained selling pressure with 57 counters advancing against 166 that declined.

After picking up sharply when early trading took the bourse to an intra day high of 5,691.52, the All Share Price Index closed at 5,608.13, down 0.81 percent or 45.67 points from the previous close.

The Milanka Price Index of more liquid stocks fell 66.24 points, down 1.28 percent to close at 5,094.10 while the S&P SL20 closed 0.62 percent lower, down 18.92 points to 3,036.94.

"Sustained selling pressure dragged the ASPI down sharply for a second consecutive day amid low turnover levels, driven by trades on banking and beverage, food and tobacco counters," John Keells Stockbrokers said.

Turnover fell to Rs. 515.38 million from Rs. 1.57 billion the previous day on a little more than 30 million shares changing hands during the day.

A parcel of 112,000 Colombo Dockyard shares changed hands in an off market deal at Rs. 220 each while a crossing of 65,000 Ceylon Tobacco shares took place at Rs. 6 per share.

Foreign inflows amounted to Rs. 168.86 million yesterday while outflows amounted to Rs. 122.87 million.

"The market continued to shed weight with the ASPI falling by 0.8% to close at 5608 while the MPI lost 1.3% to end the session at 5094. Turnover declined to LKR515mn with parcels of Asiri Hospital Holdings and Colombo Dockyard changing hands that accounted for 20% of the day’s total. Losers once again out paced gainers with Infrastructure Developers, Colonial Motors and Commercial Development falling by 18.2%, 16.1% and 13.9% off setting advances in SMB Leasing, EB Creasy and Selinsing which rose by 25.0%, 14.2% and 13.7% respectively," DNH Financial said.

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‘Gang of white collar criminals protected by restructured regulatory mechanism’

Harsha lashes out at SEC:
Opposition MP and UNP Economic Spokesman Dr. Harsha De Silva issuing a statement yesterday said a gang of white collar criminals were operating in the Colombo Stock Exchange and new directives issued by the Securities and Exchange Commission (SEC) only made them stronger.

"The true colours of the controversial chairman of the SEC Dr Nalaka Godahewa has once again come to light with his statement to counter the widely publicized letter to the SEC by good governance activist K. C. Vignarajah highlighting the on-going reversal of regulations that had been formulated, according to him, ‘to minimize, as far as possible insider dealing, market manipulation, front running, pump and dump practices’," Dr. De Silva said.

"It is well known that a certain politically influential group is behind the manipulation of the CSE to swindle unsuspecting investors and the large public funds also controlled by the same group and they are being protected by the restructured regulatory mechanism," he charged.

"However, the recent coming together of eminent persons in the caliber of Chari de Silva and Mahendra Amarasuriya to fight corruption and build good governance at the CSE with Vignarajah and others goes to show that we still have a good chance of creating a financial market that investors could interact with confidence, in spite of the temporary phenomenon where a gang of white collar criminals believe that the CSE can be controlled for their own personal gain.  I wish them continued strength to fight for truth and justice," the opposition lawmaker said.      

Vignarajah, in an email to top SEC officials, reproduced in the media including The Island Financial Review last Monday, while expressing disappointment with the new SEC directives clearly laid down his stance, asking only for transparency and disclosure.

The SEC responded on Tuesday to say safeguards were in place but took no pains to address the concerns raised by Vignarajah, except to say regulation had reverted back to the earlier status quo, which led to many irregularities in the market in the first place.

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Fresh offer for Citrus Leisure warrant holders

Citrus Leisure Plc has been granted approval by the SEC to make a fresh chance to complete the exercising of warrants in full.

 During the stipulated exercising time, in June, following the majority not seeking to exchange their warrants to shares Citrus sought concurrence of the SEC to issue 16.79 million shares to two warrant holders namely Divasa Equity Ltd., and George Steuart Engineering Ltd.

At its Commissioners’ meeting on 8 October, the SEC had considered the application made by Citrus and granted approval to exempt Divasa Equity and George Steuart Engineering from having to make a mandatory offer to shareholders of Citrus Leisure in the exercise of the warrants acquired by them, subject to the fulfilment of three conditions as undertaken by the Company in its submissions to SEC via a letter dated 25 September 2012.

 The three conditions are that 1) Citrus Leisure sends out a further letter giving an opportunity to all the warrant holders who did not exercise their rights at the time of closing, another chance to exercise the warrants in order to give the warrant holders the benefit of the current price of a share. The time to respond to further letter to warrant holders to be kept open for seven market days; 2) that Divasa Equity and George Steuart Engineering together with persons acting in concert if upon conversion of the warrants were to acquire more than 2% of the voting rights of Citrus Leisure, they will sell out such excess within a period of one month from the date of allotment to comply with the spirit of the law in terms of Rule 31(1)(b) of the Takeovers and Mergers Code and 3) that all the said parties will until such time the shares in excess are sold shall acquiesce their right to exercise the voting rights attached to the shares in excess to comply with the spirit of the law under Rule 31(1)(b) of the Code.

 Citrus was planning to raise Rs. 943.8 million via the conversion of warrants into shares but managed only to raise Rs. 36 million in June. The exercising price of the warrants was Rs. 30 whereas in between mid and end June it was trading around Rs. 23 and Rs. 27 levels. Yesterday Citrus closed at Rs. 30, down from Rs. 31.20 on Monday

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Tuesday, October 16, 2012

Sri Lanka hotel gets US$10mn IFC loan

Oct 16, 2012 (LBO) - International Finance Corporation, a World Bank group unit will loan 10 million US dollars to Sri Lanka's Soflogic group to renovate a hotel in the island's South Western beach.

 The will be used to renovate and expand Ceysands Hotel, a 66-room hotel in Bentota into a 166 room 4-star resort, Softlogic Holdings Plc said in a stock exchange filing.

 The hotel is to be managed by the Centara, a Thailand based leisure brand.

Sri Lanka is going through a tourism boom after the end of a 30-year war and many businesses are getting into tourism.

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Sri Lanka stocks closed down 0.81 pct

October 16, 2012 (LBO) – Sri Lanka stocks closed down 0.81 percent Tuesday with several blue chips losing ground.

 The Colombo All Share Index closed at 5,608.13 down 45.67 points and the S & P SL 20 Index closed 18.92 points lower at 3,036.94 down 0.62 percent.

 Turnover was 515 million rupees. Top contributors to turnover were Asiri Hospital Holdings with 56.8 million rupees, Colombo Dockyard with 46.2million rupees and Ceylon Tobacco with 46.0million rupees. Most active counters for the day were Nation Lanka Finance, Vallibel One and Free Lanka Capital Holdings.

AVIVA NDB Insurance PLC slipped 10.80 rupees to close at 359.20 down 2.92 percent.

Commercial Bank slipped 0.90 cents to close at 106.00 rupees down 0.84 percent. DFCC Bank slipped 1.20 rupees to close at 110.00 rupees down 1.08 percent. Hatton National Bank lost 0.20 cents to close at 155.40 rupees down 0.13 percent.

Dialog Axiata PLC closed flat at 8.40 rupees.

Index heavy John Keells Holdings PLC slipped 0.60 cents to close at 204.40 rupees down 0.29 percent.

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Net foreign inflow tops Rs. 33 b

Foreign buying into select blue chips continues unabated as net inflow crossed the Rs. 33 billion mark yesterday.

 Foreigners bought Rs. 1.35 billion worth of shares and their sales were only Rs. 0.5 billion, resulting in a net inflow of Rs. 813 million, bringing the total year-to-date figure to Rs. 33.4 billion. As of Friday it was Rs. 32.6 billion, according to Softlogic Stockbrokers.

Last month net foreign inflow amounted to Rs. 3.06 billion, up from Rs. 2.83 billion in August. During the quarter ended September, foreign net inflow was Rs. 8.33 billion, according to CSE data.

 The continued net inflow has proved sceptics of the Sri Lankan economy and Colombo Bourse wrong. However, foreign buying has been largely on attractive valuations of select blue chips, which the majority of local institutional investors fail to see, according to analysts.

 The foreign inflows at an all-time high is in comparison to the Rs. 19 billion outflow last year on top of Rs. 26 billion flight in 2010.

 JKH, which remains the most outstanding liquid blue chip by offering over 20% year-to-date return, saw a fresh round of foreign buying yesterday, with around 3.8 million JKH shares trading for Rs. 785 million.

 Bullish outlook by foreign funds has largely gone unnoticed by retailers in general. Last week retailers were less active whilst sentiments were low. The overall bearish view has resulted in All Share Index returning to 7% negative year-to-date return, reiterating its struggle to move to positive territory despite rebound in overall sentiments since mid-August.

Analysts said that the market had risen sharply in recent months, hence profit taking by previously-battered retailers was understandable. Others pinned the downturn of late to uncertainty over the direction of the interest rate, which has been less convincing. These analysts however took comfort of the fact that a strengthening rupee was welcome and the Government’s stated move towards a lower interest rate scenario would help the equity market.

 Presentation of the 2013 Budget next month is another key development which investors are awaiting despite successive budgets in the past being progressive as per most analysts, except that the external environment and a few local shocks have made the road bumpy this year for post-war Sri Lanka.

 Yesterday the ASPI saw a clear downward trend as it continuously glided down to close with a 69.4 point loss, whilst the MPI tumbled at a faster pace to close with an 87.7 point dip.

 Losses in the Milanka basket were predominant subsequent to the dips in Sampath Bank (-2.96%), John Keells Holdings (-0.2%), Commercial Bank (-3.0%), Colombo Fort & Building (-7.8%), Lanka Orix Leasing (-3.3%) and Nation Lanka Finance (-4.9%). The S&P SL20 Index had only Nestle Lanka and Carsons Cumberbatch closing in the green, whilst the rest were all seen strongly in the red. The index closed down by 1.3%.

 JKH led the crossing board bringing life to the turnover during the mid-hours of trading. The quadrant crossing at Rs. 205.0 per share added 3.7 million shares to the diversified counter’s total volume traded as it closed with a 0.2% loss at Rs. 205.

 Softlogic Stockbrokers said the slow market was given another boost as a triad crossing emerged in Environmental Resources Investment and its Warrants. The normal share saw a 19.9 million quantity changing hands at Rs. 15.3 whilst W:0003 and W:0006 too replicated the 19.9 million share crossings at Rs. 4.9 and Rs. 5.3 respectively.

 Interest continued in Lion Brewery with the price remaining undisturbed at Rs. 245. Browns Beach Hotel saw some active play as two notable transactions added 190,000 shares to the counter’s volume in the market. Coco Lanka continued with active play following its strategic move to be fully-fledged F&B investment holding company. However, the voting share slid 16% to Rs. 47.70 amidst profit taking despite the announcement for a rights and a subdivision with Non-Voting also was seen slipping 13.1% at close.

 The two low-cap finance sector players, Capital Alliance Finance and Swarnamahal Finance, saw some on-board deals with the former encountering two trades taking 82,000 shares at Rs. 29, whilst the latter saw five trades adding 622,500 shares at Rs. 4.5 and Rs. 4.6. Nations Finance also saw some active involvement during the day but with the share tumbling down 4.9% at close.

 Sampath Bank was made noticeable after two on-board transactions took 96,100 shares at Rs. 200 and Rs. 200.1. Commercial Bank continued with its momentum but with the share slipping 3% at its close of Rs. 106.9. NDB too moved on an active note as it closed with a 3.4% dip at end.

 Interest was also visible in Chevron Lubricants and Aitken Spence Hotel Holdings whilst Tokyo (Non-Voting) moved in with Saturday’s news of the increase in price of cement.

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