Monday, December 31, 2012

Foreign inflows increasing in Sri Lanka

COLOMBO, Dec. 31 (Xinhua) -- Returns from Sri Lanka's booming post-war tourism industry, higher remittances and long term borrowings are expected to increase foreign inflows into the country, the Central Bank said in its latest data here on Monday.

For the first eleven months of 2012, workers' remittances recorded a growth of 17.1 percent year-on-year, amounting to 5,432 million U.S. dollars, it said.

Earnings from tourism during the first 11 months of 2012 increased by 23 percent year-on-year to 905.3 million U.S. dollars, which is expected to further increase given that the island passed its record one million arrivals over the weekend.

"Higher inflows in terms of tourism earnings and workers' remittances are expected to increase foreign exchange liquidity in the market, thereby strengthening the external value of the rupee, " the Central Bank said.

It also said substantial foreign currency inflows have been recorded in the capital and financial account of the balance of payments during the first eleven months of 2012.

Foreign investments at the Colombo Stock Exchange (CSE) increased to 280 million U.S. dollars, on a net basis, by the end of November 2012, while there have been a significant increase in foreign investments in government securities, with net inflows to Treasury bills and Treasury bonds during the first 11 months of 2012 reaching 833 million U.S. dollars.

Meanwhile, long-term loans obtained by the government during the first 10 months of 2012 amounted to 2,614 million U.S. dollars. In addition, long-term borrowings by commercial banks during the period amounted to 973 million U.S. dollars.

Gross official reserves amounted to 6,490 million U.S. dollars by the end of November 2012, equivalent to 4.1 months of imports by the end of November, while total reserves were equivalent to five months of imports.

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Sri Lankan bourse at 10-week high after another bad year

* Foreign inflow hits record high of $303.8 mln

* Rupee down 10.7 percent on year

 Dec 31 (Reuters) - Sri Lanka's main share index closed at 10-week high on Monday amid record foreign inflows, but the bourse still shed 7 percent in 2012 to end in red for a second year running.

Many retail investors avoided the market during the year due to high interest rates and a lack of confidence in the local regulatory environment.

The head of the Securities and Exchange Commission (SEC) resigned in August, citing pressure to quit, and analysts said boosting the confidence of retail investors through strong regulatory measures and reducing market interest rates will be key to gains in the coming year.

Retail investors account for around 60 percent of the daily trade in the bourse.

On Monday, the main share index closed 0.64 percent, or 35.87 points firmer, at 5,643, its highest close since Oct. 19, Reuters data showed.

It fell 7.1 percent for this year, compared to an 8.5 percent decline in 2011.

The island nation saw a foreign inflow of 38.63 billion Sri Lanka rupees ($303.81 million) in 2012, compared with last year's $168 million outflow.

"We see a positive sentiment next year as interest rates have started to fall," a stockbroker said on condition of anonymity. "Foreign buying in select blue chips still continues."

Treasury bill yields eased by between 21 and 49 basis points at a weekly auction last week in line with a surprise cut in interest rates earlier this month.

Foreign investors bought a net 137.4 million rupees worth of shares, extending net foreign buying this year to a record 38.63 billion rupees.

The day's turnover was 289.3 million rupees, far below this year's average of 883.6 million rupees. Last year's daily average was 2.3 billion rupees. The rupee fell to 127.50/60 to the dollar in dull trade amid mild importer demand for dollars, currency dealers said.

The currency has depreciated 10.7 percent in 2012 after the central bank allowed a flexible exchange rate regime in February this year. ($1 = 127.1500 Sri Lanka rupees) (Reporting by Shihar Aneez; Editing by Toby Chopra)

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Sri Lanka stocks end 2012 down 7.1-pct

Dec 31, 2012 (LBO) - Sri Lanka's stocks closed up 0.6 percent Monday, down 7.1 percent for the year, on top of an 8.5 percent loss in 2010, though the market has gained from mid 2012, brokers said.

 The Colombo All Share Price Index closed at 5,643.00 up 36 points and the S&P SL20 index closed up 16.3 points at 3,085.33 up 0.5 percent.

 Turnover was 289 million rupees with interest seen in John Keells Holdings, which closed at 219.90 up 50 cents, Nestle Lanka which closed up 93.50 rupees at 1,593.50 and Ceylon Tobacco which closed up 10.90 rupees at 830.00 brokers said.

Though the market ended the year down, there has been strong foreign investor interest with valuations coming to more realistic levels.

Sri Lanka has seen a net 280 million US dollars flowing into equity markets by the end of December 2012.

NDB stockbrokers said the benchmark index had gained 13.6 percent during the second half of the year.

Data from Bloomberg newswires showed that Sri Lanka was the 11th worst performing market coming in just ahead of Mauritius stock which fell 8.28 percent.

The worst performing index was the General Market Index in Cypress which had fallen 60 percent.

The best performing market tracked by Bloomberg was Venezuela which had so far risen 302 percent amid high inflation. Turkey was a distant second with a 53 percent gain.

 In 2012 Venezuela had recorded official inflation of 19.9 percent down from 27.6 percent in 2011 as the country's authoritarian president Hugo Chavez upped election related spending supported by loose monetary policy.

The oil exporting nation's Central Bank had sold 40 billion US dollars of foreign exchange up to November to defend a soft dollar peg, Governor Nelson Merentes said in a statement on December 29.

A steep devaluation of the Bolivar of up to 60 percent is expected in the first quarter of 2013 to bring the currency close to an unofficial 'black market' rate.

Sri Lanka's Central Bank has better monetary policy though the country registered inflation close to Venezuela up to 2007.

Sri Lanka's stocks rose 125 percent in 2009 after the end of a 30 year war. In 2010 the market rose another 96 percent partly helped by loose monetary policy and margin credit which fired an asset price bubble.

The credit bubble broke in 2011 amid a balance of payments crisis and rising interest rates. Rates are now falling.

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Sri Lanka Mobitel launches 4G services

Dec 31, 2012 (LBO) - Mobitel, a unit of Sri Lanka Telecom, the country's largest fixed access provider, said it had launched fourth generation services (4G) using LTE (long term evolution) technology,

 Mobitel said it was the first company in South Asia to trial the services in May 2011 with downlink speeds exceeding 96Mbps.

 "Mobitel will be able to yield the best out of the mobile 4G/LTE services with the power of its parent company SLT’s extensive fibre network which will be beneficial to the country’s future," the firm said in a statement.

Mobitel said it was one of 10 companies in the world to launch a 3.5G HSPA network in 2007.

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Foreign inflows boom

Foreign inflows to the country are on the rise as per Central Bank data released on Friday.

 It said that with respect to the services account and current transfers in the BOP, earnings from tourism and workers’ remittances continued to grow at a healthy rate.

Tourist arrivals in November 2012 increased by 20.1% to 109,202, with arrivals during the first eleven months of 2012 totalling 883,353 reflecting a growth of 16.5%. Earnings from tourism in November 2012 grew at a healthy rate of 30.1% compared to the corresponding month of 2011, to $ 114.7 million.

 Earnings from tourism during the first 11 months of 2012 increased by 23% year-on-year to $ 905.3 million. With the record high earnings from tourism in November 2012, and similar expectations for December 2012, earnings from tourism in 2012 are expected to be well above the level recorded for 2011, with tourist arrivals expected to be in the proximity of one million.

 Inflows on account of workers’ remittances increased at a rate of more than 12.7%, year-on-year, in November 2012. For the first eleven months of 2012, workers’ remittances recorded a growth of 17.1%, year-on-year, and amounted to $ 5,432 million.

“Higher inflows in terms of tourism earnings and workers’ remittances are expected to increase foreign exchange liquidity in the market, thereby strengthening the external value of the rupee,” the Central Bank said.

It also said substantial foreign currency inflows have been recorded in the capital and financial account of the BOP during the first eleven months of 2012.

 Foreign investments at the Colombo Stock Exchange (CSE) increased to $280 million, on a net basis, by end November 2012, while there have been a significant increase in foreign investments in Government securities, with net inflows to Treasury bills and Treasury bonds during the first 11 months of 2012 amounting to $ 833 million.

 Meanwhile, long-term loans obtained by the government during the first 10 months of 2012 amounted to $ 2,614 million. In addition, long-term borrowings by commercial banks during January-November 2012 amounted to $ 973 million.

 Foreign Direct Investment (FDI), including foreign loans obtained by BOI companies, amounted to $ 615 million for the first nine months of 2012, and more inflows are expected to have materialised during the remainder of the year.

 Gross official reserves amounted to $ 6,490 million by end November 2012, while total international reserves, which include gross official reserves and foreign assets of commercial banks, amounted to $ 8,059 million. In terms of months of imports, gross official reserves were equivalent to 4.1 months of imports by end November 2012, while total reserves were equivalent to five months of imports.

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Net foreign inflow to CSE tops Rs. 39 b mark

Net foreign inflow to the Colombo stock market on Friday crossed the Rs. 39 billion mark thanks to a fresh infusion of Rs. 619.5 million.

 Despite economic downturn and allegations against capital market regulation, record foreign inflow in 2012 remains the most emphatic endorsement and confidence over future prospects of Sri Lanka and returns from select listed firms.

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Sri Lanka welcomes one millionth tourist

Achieving another remarkable milestone in the country’s booming tourism industry, Sri Lanka Tourism welcomed the arrival of 1,000,000th  tourist in year 2012 at Bandaranaike International Airport last night.

Lakshman Yapa Abeywardhana, Deputy Minister of Economic Development, Chairman of Sri Lanka Tourism- Bhashwara Gunarathna , Kamal Rathwaththa – Deputy Chairman Of Airport and Aviation(LTD), Managing Director of Sri Lanka Tourism Promotion Bureau – Rumy Jauffer with a group of representatives from travel and tourism industry warmly welcomed the guest  Ms. Jiang Ying and her husband  from China who arrived in Sri Lanka via  flight UL 889 from Beijing at 10.00 p.m. Sri Lanka Tourism took steps to arrange a special ceremony to welcome the 1,000,000th guest.

 Sri Lanka Tourism gavec special gifts for being the lucky couple from China to pass the milestone, so that their next stay in Sri Lanka will be absolutely free.             

Ms. Jiang Ying, being the happy visitor to arrive in Sri Lanka as the 1,000,000th tourist for the year 2012, said "I had heard a lot about Sri Lanka from my friends. I found out details about your country before deciding my holiday destination. I was simply bewitched by the photos on the internet. Sri Lanka is as beautiful and breathtaking as presented in the photos. Moreover, Sri Lankans are very hospitable and kind."

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Dialog invests $ 10 m to roll out Sri Lanka’s first commercial 4G-LTE service

Sri Lanka dials 4G LTE

Sri Lanka’s telecommunications sector entered the 4G era yesterday with the launch of commercial LTE services in the city of Colombo by Dialog Broadband Networks (DBN), the fixed telecommunication services arm of the Dialog Axiata Group.

 Dialog’s cutting edge broadband network is based on 4th Generation TD-LTE technology, and represents quantum advancement in fixed broadband services delivered to Sri Lankan homes and enterprises.

Commencing with the City of Colombo at launch, Dialog’s LTE network will be made available across all major cities and towns in Sri Lanka in the immediate future.  The launch by Dialog also signifies the return or revival of fixed telecom segment with the rapid expansion of rich multi-media content and users wanting a more robust broadband service, a global phenomenon.

 Dialog Axiata Group CEO Dr. Hans Wijayasuriya told the Daily FT that the company is investing $ 10 million in the first stage of the roll out of the 4G-LTE service with 200 base stations. In mid-2012, Dialog launched trials of the first 4G LTE mobile services.

 Powered by the very latest in high speed wireless broadband technology, Dialog’s LTE network facilitates a simplified home or office broadband experience for Sri Lankan consumers. The LTE home/office device provided by Dialog enables ‘plug and play’ connectivity to the LTE network and comes complete with in-built Wi-Fi, four Local Area Network (LAN) data ports, an USB port and the option of two voice (telephone) lines. 

 With home/office Wi-Fi coverage built in as a standard feature, connectivity to Dialog’s LTE network enables the transformation of connected homes and offices in to high speed wireless zones supporting a wide range of wireless devices such as tablets, smart phones and laptops. The LTE terminal also supports connectivity to smart TVs and Local Area Network (LAN) connected devices such as PCs and printers.

 Commenting on the launch of the country’s first commercial LTE service, TRCSL Director General Anusha Pelpita said: “The TRCSL is proud to note the commencement of commercial LTE services in Sri Lanka. The smooth introduction of the latest generation of telecommunication and broadband services requires consistent forward planning by the TRCSL and I am happy that our efforts have resulted in Sri Lanka’s telecommunications sector delivering high quality and affordable services to Sri Lankan consumers.”

 “It is an honour and privilege to lead Sri Lanka’s ICT sector in to the LTE era,” said Dr. Hans Wijayasuriya, Chairman, Dialog Broadband Networks (DBN) and Group CEO Dialog Axiata PLC.

“The aggressive advancement of Sri Lanka’s telecommunications sector has been made possible by the progressive policies of the Telecommunications Regulatory Commission of Sri Lanka, and the enabling environment which has been created which encourages investment in the latest technology to the benefit of Sri Lankan consumers. Carrying this lead forward, our LTE network will expand rapidly to cover most towns and cities of Sri Lanka in the near future, and consistent with the revolution we delivered in the mobile telecommunications sector over the past decade, we will deliver the benefits of LTE technology in a form which will be available and affordable to a vast majority of Sri Lankan citizens and businesses,” he added.

 Dialog’s LTE service features entry level home and office packages starting at Rs. 1,400 for a 4Mbps connection with a 25GB data allocation. Subscribers would be further facilitated with a simple and convenient process to upgrade entry level packages to higher capacities depending on their specific broadband service requirements. Customers of the service would also enjoy ‘burst’ speeds well in excess of the nominal 4 Mbps connection speed at no extra cost.

The Dialog Axiata Group is Sri Lanka’s premier quad play connectivity provider with a service portfolio spanning mobile and fixed telecommunications, high speed broadband and digital television.

 Dialog Axiata PLC is a subsidiary of Axiata Group Berhad (Axiata), and operates Sri Lanka’s largest and fastest growing mobile telecommunications network. The company is also one of the largest listed companies on the Colombo Stock Exchange in terms of market capitalisation.

 Dialog Axiata supplements its market leading position in the mobile telecommunications sector with a robust footprint and market presence in Sri Lanka’s fixed telecommunications sector through its fully-owned subsidiary Dialog Broadband Networks Ltd. (DBN).

 DBN operates CDMA fixed wireless telephony services alongside TD-LTE and WiMAX 16D high speed broadband services, and is also a leading provider of radio and optical fibre based transmission infrastructure facilities and data communication services.

 Dialog is also the market leader in Sri Lanka’s digital television markets through its fully owned subsidiary and Dialog Television Ltd. (DTV). DTV operates a Direct-to-Home (DTH) digital satellite TV service and is the market leader in Sri Lanka’s PayTV sector, providing customers digital quality entertainment both on monthly rental and pay-as-you-watch payment schemes.

 DTV supports a broad array of international and local content in both High Definition (HD) and Standard Definition (SD) formats alongside a wide portfolio of Sri Lankan television channels and delivers high quality infotainment to a viewer base in excess of 250,000 Sri Lankan households.

 Dialog has been at the forefront of innovation in the mobile industry in Sri Lanka since the late ’90s, propelling the nation’s mobile telephony infrastructure to a level of advancement on par with the developed world.

 The company delivers advanced mobile telephony and high speed mobile broadband services to a subscriber base in excess of 7.5 million Sri Lankans, via a 2.5G, 3G/3.5G infrastructure.

 Dialog also provides a comprehensive suite of international roaming services across a global footprint comprising of more than 200 countries, and operates a wide portfolio of international telecommunication services, including but not limited to retail and wholesale international voice and data services.

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ASPI hits two month high

Markets closed the last trading week of 2012 on a relatively positive note, with the main ASPI hitting a two month high on Friday to close at 5607.13 (up 90.64 points W-o-W). The MPI and S&P SL 20 too recorded marginal gains with the MPI increasing 1.50% to close the week at 5120.17 points while the S&P SL 20 Index increased 1.15% to close at 3068.99 points Turnover levels which were understandably low over the holiday-shortened week were driven largely by crossings in select counters; off-market transactions in JKH, SAMP and BIL accounted for approximately 78.0% of the week's total turnover. JKH accounted for the highest turnover value for the week, recording a value of LKR 781.01mn to represent 61.29% of total market turnover. Browns Investments contributed 8.48% of total turnover as it contributed LKR 108.01mn while Sampath Bank accounted for 7.47% of the market with a contribution of LKR 95.22mn.

Total turnover value for the week amounted to LKR 1.27bn, a drop of 76.21% compared to last week's total turnover of LKR 5.36bn. The daily average turnover value for the week meanwhile amounted to LKR 424.77mn, a 60.35% decline compared to last week's LKR 1.07bn. Market Capitalization increased 1.63% (or LKR 34.47bn) to LKR 2153.94bn from last week's value of LKR 2119.47bn. On a sectoral level, the Diversified sector was the highest contributor to the week's turnover value which, with the help of JKH accounted for 71.46% or LKR 910.64mn. The Bank & Finance sector followed suit with a contribution of 13.56% or LKR 172.83mn while the Hotels and Travel sector accounted for LKR 34.92mn or 2.74% of the market's total turnover.

Terms of volume too, the Diversified sector dominated, accounting for 56.63% (or 27.16mn shares) of the market's total trades for the week.

The Bank & Finance sector contributed 12.33% of the total traded volume as 5.91mn shares were traded while 3.69mn shares in the IT sector changed hands, consequently accounting for 7.68% of the week's turnover volume. The highest price gainer for the week was Miramar Beach Hotel which gained 21.49% to close the week at LKR 97.80 compared to last week's close of LKR 80.50.

Kalamazoo followed suit, gaining 18.18% (W-o-W) to close at LKR 2600.00 while Singalanka closed at LKR 103.00, up 16.91% W-o-W. Also amongst the price gainers were Lake House Printers and Gestetner of Ceylon Plc with gains of 16.67% and 15.49%, respectively. Namunukula Plantations was the highest price loser for the week, declining 10.95% (W-o-W) to LKR 73.20 relative to last week's close of LKR 82.20. Arpico Finance declined 10.90% to close at LKR 69.50 while Abans Finance Plc dropped 7.77% over the week to close at LKR 35.60. Foreign investors closed the week in a net buying position once again this week albeit lower than that of last week. Net foreign inflows for the week totaled LKR 0.74bn relative to last week's LKR 1.19bn, representing a W-o-W decline of 37.69%, as average daily net inflows amounted to LKR 247.34mn compared to LKR 238.16mn last week.

Total foreign purchases decreased 63.76% (W-o-W) to LKR 0.81bn (relative to last week's total of LKR 2.24bn) while total foreign sales decreased 93.40% (W-o-W) to LKR 0.07bn (from last week's total of LKR 1.05bn). In terms of both volume and value, Odel and JKH led foreign purchases; Free Lanka meanwhile led sales in terms of volume while Environmental Resources Warrant 3 led foreign sales in terms of value.

Point of view

Although negative sentiment has weighed markets down through most of 2012, total returns on the broad Index have shown a marginal improvement since last year (-7.7% vs. -8.5% in 2011).

Corporate earnings for the trailing 12-months to September 2012 have in fact improved, rising approximately 3.0% since September 2011. Market PERs have consequently decreased, with the PER1 at end-December at 11.85x relative to 13.47x in the same period last year. Foreign inflows to the bourse meanwhile have remained consistently buoyant through 2012, hitting an all-time2 Y-T-D high of LKR 38.58bn, a stark contrast to the net foreign outflows experienced over the last 3 years.

With interest rates having declined 250bps since its peak in September (rates rose from 8.71% in January to 13.82% in September and is currently 11.32%), prospects for equities in 2013 are likely to be strong, particularly in the context that slower GDP growth will likely imply lower rates.

Markets are likely to remain fundamentals-driven in 2013 as corporates continue to consolidate their post-war boom position.

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DCSL’s financial stability further cemented with AAA Fitch Rating

Fitch Ratings Lanka Ltd. has assigned the Distilleries Company of Sri Lanka PLC (DCSL) with an AAA rating (Stable Outlook), which verifies the financial stability of the company.

The DCSL Group, led by its flagship Distilleries Company of Sri Lanka PLC, manages one of the nation’s most successful, diversified blue chip portfolios spanning beverages, telecommunications, plantations, hotels, textiles, financial services, creative and media services and logistic services.

 The DCSL Group is among the top five corporate conglomerates in Sri Lanka with assets in excess of Rs. 67 billion and an annual turnover of approximately Rs. 63 billion.

“Achieving AAA status reinforces the success of our financial model and boosts confidence among the banking and investment community. The company has been popularly known to maintain its stability over a period. The AAA rating has verified the company’s status with the achievement of this independent validation,” said D.H.S. Jayawardena, Group Chairman.

 The AAA rating denotes the highest notch in a credit score for a Sri Lankan company and provides a secure backdrop for prospective lenders to support expansion with minimum or no risk going forward.

 DCSL has a long-standing reputation for being cash rich, which has been consolidated further with this rating. Financial costs are a significant component for any organisation. With the relatively high interest rates in the market, DCSL will be able to leverage its minimal risk status to obtain low interest loans. As a cost-conscious entity, DCSL will leverage its stability to maximise shareholder wealth. 

 The Distilleries Company of Sri Lanka PLC is a company that can reference a history that is close to a century. Inscribed on its corporate DNA is experience, maturity, innovation, fortitude and the will to succeed.

 Fitch Ratings is a global rating agency dedicated to providing the world’s credit markets with independent and prospective credit opinions, research, and data. With 49 offices worldwide, Fitch Rating’s global expertise, built on a foundation of local market experience, spans capital markets in over 150 countries. Fitch Ratings is widely recognised by investors, issuers, and bankers for its credible, transparent, and timely coverage.

 Jayawardena added: “I wish to thank our shareholders, management, employees, customers, suppliers, financial institutions, the Government of Sri Lanka and the regulators for the confidence vested in our capabilities.”

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Sunday, December 30, 2012

Prospects for equities positive in 2013 as interest rates fall

ASPI hits 10-week high

The All Share Price Index on the Colombo Stock Exchange hit a ten-week high last week with the ASPI closing at 5,607.13 points on Friday, up 90.64 points from the previous week’s close with brokers saying that the market closed the last trading week for the year "on a relatively positive note."

Acuity Stockbrokers said that although negative sentiment had weighed markets down most of this year, total returns on the broad index have shown a marginal improvement since last year dropping 7.7% against 8.5% in 2011.

Corporate earnings for the trailing 12-months to September 2012 had improved rising 3% since September 2011, the brokerage said, with the market price earnings ratios consequently decreasing.

Foreign inflows in the bourse had remained consistently buoyant throughout the year hitting an all-time high of Rs.38.58 billion year-to-date. This was in stark contrast to the net foreign outflows experienced over the previous three years.

Acuity was hopeful that prospects for equities in 2013 would be strong with interest rates having declined 250 basic points since its peak in September. The brokerage noted that the rates had risen from 8.71% in January to 13.82% in September and is currently at 11.32%.

The report noted that share market prospects looked good particularly in the context that lower GDP growth was likely to push down interest rates.

"Markets are likely to remain fundamental-driven in 2013 as corporate to continue consolidate their post-war boom position," the report said.

While the ASPI was up 90.64 points week-on-week last week, the MPI and S&P SL20 too recorded marginal gains with the MPI up 1.5% and S&P up 1.15%.

Turnover levels were low due to the holiday-shortened week and were driven largely by crossings in JKH, Sampath and Browns Investments which together accounted for approximately 78% of the week’s total turnover, Acuity said.

JKH was the week’s highest turnover generators with Rs.781.01 million representing 61.29% of the total market turnover. Browns Investments contributed 8.48% and Sampath 7.47%.

Foreign investors closed the week as net buyers with inflows of Rs.0.74 billion, down from the previous week’s Rs.1.19 billion. Average daily net inflows amounted to Rs.247.34 million against Rs.238.16 million the previous week.

John Keells Stock Brokers said that the indices had edged higher during the holiday-shortened week with turnover driven by trades on JKH and Browns Investments inclusive of crossings. Foreign interest was mainly on JKH resulting in a net inflow of Rs.742 million for the week, JKSB said.

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The debt overhang in the stock market

By R.M.B Senanayake

In 2009 the government security forces finally vanquished the LTTE and regained control over the whole island. There was a sense of euphoria among the brokers and the retail investors and they thought there would be an enormous peace dividend with the economy as well as company earnings growing significantly. A bull run was widely anticipated.

On May 13, 2009, the All Share Price Index was at 1,884 with a volume of four million shares traded with a turnover of a mere Rs 138 million. From then on the ASPI began to rise driven by the sentiment generated by the war victory. By the end of 2009 it had risen to 3,335 (increase of 77%) with a volume of 16 million shares (increase of 400%) traded with a turnover of Rs 765 million (increase 454%). The market continued to rise in 2010 and at the end of 2010 the All Share Price Index was 6,635 ( 99% growth) volume was 154 million shares ( increase 862%)and turnover Rs 2.09 billion ( increase 173%). How did such phenomenal growth take place?

While investor sentiments were running high, this doesn’t explain the growth in the volume of shares traded. The liquidity of shares available for trading was rather low since 75% of company shares are tightly held by the controlling shareholders and only 25% of the share capital of the listed companies is traded. How then did this growth in volume take place?

Driven by credit

 Trading was fuelled by the broker firms providing credit with few restrictions. CSE rules fixed the collateral requirement for margin finance providing at a limit of 50% of a portfolio’s market value. The Exchange did not fix any interest rates. Both collateral and the interest rate affect the borrower’s decision to borrow.  As market prices of shares soared, the broker firms became lax in the grant of credit to clients. The 50% limit was exceeded and no margin calls were made from the borrowers as is the usual custom.  As prices continued to rise the collateral requirement was overlooked and unlimited credit was given to clients to buy shares expecting them to sell and book profits since the market was rising.

Broker firms even did not bother to collect interest although they debited the interest payable to the clients’ accounts. Share prices along with the volumes and turnover rose up to 220 million shares traded for Rs 4 billion and reached a peak of 600 million shares with turnover of Rs 4.9 billion. The market continued to rise in 2011 up to the end of June. On April 12, the All Share Price Index was 7,575 (growth for the year 13.8%). It fell below 7,000 from June 21, 2011.

The increase in volumes and turnover were largely fuelled by liberal broker credit provided to share traders.  Broker firms extended credit several times the value of the clients’ portfolios and also several times the brokers’ own equity. In short the leverage was excessive. Unlike the concepts of accounting leverage based on Total Assets / Equity  Economic Leverage refers to the volatility of the un-levered investments in the assets ( in this case the portfolios of clients’ shares pledged as collateral) to the equity. The collateral was going up and up in values. But as the share prices weakened after June 2011 the volumes declined along with the turnovers. Volumes fell below 100 million, almost half the earlier level. But in August the volumes again rose as did the prices of the shares. The market correction seemed to be over.

Some analysts then started calling it a bubble and allegations were made of market manipulations. These allegations led the Securities and Exchange Commission to investigate and it realized that the broker firms were excessively leveraged. The SEC imposed limits on credit - relating it to equity of the broker firms. By this time the broker firms had extended an enormous amount of credit.

The bubble bursts

From the October 3  the All Share Price Index fell continually until December 21, 2011. The volumes traded also fell and reached 15 million from the previous high levels over 200 million. The Index revived in the last week of December 2011 and regained the 6,000 mark. Volumes and turnover also increased. But it was a fools rally. The downward trend continued with occasional rallies which petered out after a few days. The rally in volumes also disappeared. On December 21, 2012 the volume traded was below 10 million. Compare this with the heady days when it was over 200 million. The decline in prices this year (2012) is about 5% or 326 points.

The present volumes are too small to sustain the incomes of the broker firms. What should be done to increase the volumes and turnover? The economy is still growing at over 6.5% and the company earnings are still high although they may come down in the 4th quarter owing to the credit restrictions that prevailed.

What then is the problem? Economists refer to economic leverage which is a concept a little different from the accounting concept of leverage.  It refers to the volatility of the underlying asset bought for cash or credit. When the collateral held by the broker firms on the credit extended to their clients started falling in value, few broker firms took corrective action. Normally clients live in hope that the market would revive and refuse to accept a permanent decline in the prices of their share portfolios. But the rules require the broker firms to mark their portfolios to market.

If they did not sell out they would have to take a haircut (reduction in the value) on their net capital which consists of their equity and trade debtors among other items. Some brokers sold out their clients’ portfolios despite the protests of clients. But the majority did not do so and instead agitated against the haircuts imposed by the SEC in the computation of their net capital. They wanted extension of the time period before the imposition of the haircuts. The SEC obliged them and the period was extended to 120 days before the 100% hair cut was imposed on their debtors (counted as assets although the clients were not paying up and should have really been classified as bad debts). These should be written off where there was no collateral value or were only partly provided for rather than carried as an asset in their balance sheets. The period of time held before the debt is treated as a bad debt subject to the haircut was extended by the SEC to 120 days. But the broker firms agitated and got the rule relaxed and the time period allowed before the broker firms were required to force sell or face 100% haircut was not enforced.

De-leverage process must take place before the market can recover

Thus the de-leverage process was halted. The broker firms found that their clients were unwilling to reduce their credit positions while their collateral was falling in value. These firms are still hoping that the market would recover and hence are continuing to hold the clients’ shares pledged as collateral. Other broker firms that forced reductions of their clients’ positions are carrying bad debts which they are refusing to write off and the SEC has given 120 days for the hair cuts to come into effect. .

According to data published in the Central Bank the total Assets of the broker community has come down to Rs 10.885 billion in June 2012 from Rs 17.084 billion in June 2011.This shows that the brokers have de-leveraged to some extent. But they still hold assets of Rs. 10 billion on a capital of Rs 6 billion. But this capital should be written down to Rs 3.9 billion vide the Central Bank Review of Recent Economic Development Highlights 2012 (page 87 Table 8.6). Since the broker firms do not own buildings or properties, the assets may include bad debts which are not recognized as bad debts. What is required is to write off bad debts not covered by collateral and where there is collateral to provide for the difference in value between the debt and the collateral.

Economic de-leverage is not an automatic process. Unless this is done the volumes and turnover will not recover to allow 27 broker firms to run profitably. The foreigners are attracted to our market because of the fall in value of the rupee by 15% making the shares cheaper in dollar terms for them to buy. But having brought in their money they will face the exchange risk unless they are allowed to hedge this risk in the forward exchange market which is not permitted. But the authorities cannot hold the rupee unless foreign capital or migrant remittances continue to flow in excess of our foreign payments. Let the broker firms clean up their balance sheets by taking the haircuts and then making them good by pumping fresh capital to bring up their net capital up o the required minimum.

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2013 expected to be good year for tea

by Steve A. Morrell

In an encouraging development, tea sales in November and December 2012 have reflected some positive indicators that 2013 would be good for this key export commodity.

Brokers last week agreed they had never had below ‘red line’ performances irrespective of bad times that had overtaken the estate sector in the past, even in extreme minus situations. Shippers too didn’t have it really bad. No tea trading company or tea broker had so far closed down or declared insolvency.

The Sunday Island also sourced information from the grower sector. The small plots responded that subject to each plot being worked by family units, were able to sustain themselves and keep their heads above the water.

The larger small holders who had sufficient tea land to also run their factories were indebted to banks for their livelihood. Their income levels were crisis-stricken because of their substantial wages bill.

The formal estate sector, or the Plantation companies, collectively said their costs were high, and although prices were good, were unable to translate such prices to profits because of continuous costs which continued to plague their existence. In most instances, costs exceeded Rs. 400 per kilo.

JKH Tea Brokers reported in their pre-Christmas Tea Report, that collective tea sales averages for December were Rs. 424.63. They conceded that although these prices were good they would not comment on the estate sector viability.

Brokers agreed that the first sales of 2013 would clearly indicate that prices would move up, and possibility that Colombo could record Rs. 600 averages in the short term could not be ruled out.

Hasitha de Alwis, Director, Marketing Sri LankaTea Board, said he agreed black tea prices would increase first quarter, 2013. Supporting his assertion, he pointed out that currently Kenya, India, Indonesia and some other black tea producing countries had all shown deficit crop returns. Sri Lanka would also be a deficit producer, but only about one million kilos, which was not much.

World deficit in black tea was about 70 million kilos. This would naturally translate to increased prices.

The Tea Board also commented that China had surplus production of 135 million kilos in green tea. Exports from China were mainly concentrated to Morocco, Uzbekistan and a few other countries. But, this hardly dented their prices because 75 to 80 percent green tea production was consumed locally.

Additionally, Russia, CIS countries and strengthened Gulf States buying, further buoyed upward price trends for black tea, which would be sustained, these brokers said.

Pakistan had shown more positive interest. Pakistan was one of Sri Lanka’s major buyers until they were attracted by lower prices from Kenya. They, however, would not comment if increased Pakistan buying would be sustained.

Uva and Western High growns sold at Rs 439.86 per kilo. Expectations were that with the on-set of the western quality season setting in, with bright weather conditions reported from these elevations; cold nights and wide hygrometric differences would herald good quality. These phenomena were indicators that prices would move up, optimistic brokers predicted.

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Weekly Foreign Holding Update 28-12-2012

                                             (click image to enlarge)

source - acuity research

Sunday Business News Articles

Sunday Island

The Sunday Times

The Nation

Sunday Observer

Lakbima News

The Sunday Leader

Saturday, December 29, 2012

Foreign buying boosts Bourse to 10-week high

Reuters: Stocks gained on Friday, led by heavy foreign buying in market heavyweight John Keells Holdings, while local retailers bought speculative shares amid falling interest rates.

The Colombo Stock Exchange’s main index rose 0.65%, or 36.22 points, to close at 5,607.13, its highest since 19 October.

 Foreign buying accounted for 68% of turnover and offshore investors bought a net Rs. 619.5 million worth of shares, extending net foreign buying this year to Rs. 38.52 billion.

 Trading in John Keells Holdings, which gained 0.87% to Rs. 219.9, accounted for 67.6% of turnover.

“Foreigners bought Keells and we see some positive sentiment locally with retail investors buying some speculative shares after the recent fall in fixed deposit yields,” a stockbroker said on condition of anonymity. Treasury bill yields eased by between 21 and 49 basis points at a weekly auction on Monday in line with a surprise cut in interest rates earlier this month. The day’s turnover stood at Rs. 930.6 million ($ 7.33 million), compared to this year’s daily average of Rs. 886 million.

 The rupee closed steady at 1270/10 to the dollar for a third session in dull trade, currency dealers said.

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Thursday, December 27, 2012

Best in Travel 2013 - Top 10 countries

1. Sri Lanka

Cut-price paradise back on the map

Best for: Culture, off the beaten track, value for money

Battered tragically by the 2004 Boxing Day tsunami and wracked by civil war from 1983 to 2009, many areas of the country have remained off limits to even the most intrepid traveller. Now the bitter conflict is over, investment is fuelling the tourism industry, and visitor numbers are steadily increasing. Prices are affordable, and with low-cost flights from the convenient travel hub of Bangkok, Sri Lanka is emerging as one of the planet’s best-value destinations.

Sri Lanka

Endless beaches, timeless ruins, welcoming people, oodles of elephants, killer surf, cheap prices, fun trains, famous tea, flavourful food – need we go on?

The Undiscovered Country

You might say Sri Lanka has been hiding in plain sight. Countless scores of travellers have passed overhead on their way to someplace else, but years of war and challenges such as tsunamis have kept Sri Lanka off many itineraries.

But now – as you’ve probably heard – the war is over and Sri Lanka’s looking up. If you’ve ‘done’ India, grown blasé about Southeast Asia or simply want to explore a place whose appeal and pleasures are myriad, then it’s time you dropped in.

So Much in So Little

Sri Lanka’s attributes are many. Few places have as many Unesco World Heritage Sites (eight) packed into such a small area. Its 2000-plus years of culture can be discovered at ancient sites filled with mystery. Legendary temples boast beautiful details crafted by artisans through the centuries.

Across whole swaths of the country, that thing that goes bump in the night might be an elephant heading to a favourite waterhole. Safari tours of Sri Lanka’s pleasantly relaxed national parks encounter leopards, grouchy water buffaloes, all manner of birds and a passel of primates.

When you’re ready to escape the tropical climate of the coast and lowlands, head for the hills, which are verdant, virescent and virally infectious with allure. Impossibly green tea plantations and rainforested peaks beckon walkers, trekkers or just those who want to see it on a spectacular train ride.

And then there are the beaches. The beaches! Dazzlingly white and all so often untrod, they ring the island so that no matter where you go, you’ll be near a sandy gem. Should you beat the inevitable languor, you can surf and dive world-class sites without world-class crowds.

It’s So Easy

Distances are short: see the sacred home of the world’s oldest living tree in the morning (Anuradhapura) and stand awestruck by the sight of hundreds of elephants gathering in the afternoon (Minneriya). Find a favourite beach to call your own, meditate in a 2000-year-old temple, exchange smiles while strolling a mellow village, marvel at birds and wildflowers, try to keep count of the little dishes that come with your rice and curry. Stroll past colonial gems in Colombo and then hit some epic surf.

Sri Lanka is spectacular, it’s affordable and it’s still mostly uncrowded. Now is the best time to discover it.

Read more:

Sri Lanka farmers earn US$31mn from Nestlé

Dec 27, 2012 (LBO) - The Sri Lanka unit of Nestlé, a Swiss-based food group said it had paid 4 billion rupees (31 million US dollars) to dairy and coconut farmers in the island to buy milk and coconuts during 2012.

 The firm has a network of 23,000 dairy farmers and 5,000 coconut farmers supplying raw materials.

 "It's nice to end the year having made such a positive impact on the lives of so many," Alois Hofbauer, managing director of Nestlé Lanka Plc said in a statement.

"I'm extremely proud of our landmark contribution in uplifting the livelihoods of Sri Lankan farmers this year and pleased we have proved once again that it is possible to do well by doing good."

The firm said it bought 50 million coconuts during the year. Nestle is a top exporter of coconut milk powder from Sri Lanka.

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Hottest destinations for 2013

Travel bible, Lonely Planet, has revealed the best places to visit in the New Year: these are the cities and countries that need to be at the top of your jet-to list

By Gemma White, Editor, Scene magazine

Published: 15:10 December 26, 2012

Sri Lanka

 Topping the list of super-hot holiday destinations for 2013 is Sri Lanka, which, lucky for us is just over a four-hour short-hop flight from the UAE. With the island’s aficionados long extolling the peaceful vibe of the Indian Ocean island country, visitors can expect to fulfill a whole range of vacay fantasies, from adventure sports to sun-lounging; and exploring to eco-tourism.

Be among the first to re-discover the remote Wilpattu National Park, which was recently reopened after over two decades spent closed to the public, while wildlife fans will love the elephant and leopard-watching to be experienced at Yala National Park. And speaking of wildlife-watching, January to April is the best time to head to Dondra Head on the south coast to catch sight of the blue whales passing through the region.

To catch the surfer dudes in action (or try a spot of surfing yourself), head to Arugam Bay, whilst the beaches of Uppuveli and Nilaveli near the Eastern capital of Trincomalee are enticing lounge lizards away from the traditional beach hubs of Negombo and Vankalai.

For a list of places to explore, you could spend months taking in the historical marvels of the island country, but a visit to Sigiriya, the huge stone and ancient rock fortress and palace ruins are a must – and is thought to have been inhabited in prehistoric times. Also, take time to wander the historic streets of Galle (119km from Colombo), where European architecture meets South Asian design influences to glorious effect.

Lonely Planet’s Top spots for 2013

1. Sri Lanka
2. Montenegro
3. South Korea
4. Ecuador
5. Slovakia
6. Solomon Islands
7. Iceland
8. Turkey
9. Dominican Republic
10. Madagascar

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Bourse up 0.83%, Odel raises more than Rs. 2.5bn via rights issue

The Colombo Stock Exchange closed 0.83 percent higher with all indices closing in positive territory on Wednesday (26).

The All Share Price Index gained 46.02 points (0.83 percent) to close at 5,570.91.

The Milanka Price Index of more liquid stocks closed 21.01 points higher, up 0.42 percent to 5,060.83 while the S&P SL20 gained 0.71 percent, closing at 3,060.37, 21.59 points higher.

Turnover reached a little more than Rs. 242.4 million on 8.3 million shares changing hands during the day.

Foreign purchases amounted to Rs. 167.8 million, leading to a net inflow of Rs. 119.1 million.

CLPL.W0014 was the biggest gainer, moving up 60 cents (12 percent) to close at Rs. 5.60 followed by AUTO, which gained Rs. 81 (11.11 percent) to close at Rs. 810.

SEMB was the biggest loser, down 10 cents (20 percent) to 50 cents followed by ASCO, down Rs. 17.40 (9.41 percent) to Rs. 184.90.

In a stock exchange filing, Odel PLC said it raised a little more than Rs. 2.5 billion (Rs. 2,543,588,620) via a rights issue which were listed on the bourse. The 1:1 issue was for a consideration of Rs. 20 with 127,179,431 shares allotted and listed.

Meanwhile, Lanka Hospitals Corporation PLC said Gnanadurai Ramesh Krishnan, Vice President Integration and Growth, Fortis Healthcare International, has been appointed alternate director to Sunil Godhwani with effect from December 24.

"The market opened the day on a positive note following the Christmas holidays with the ASPI closing 0.8% higher to end the session at 5571. Market turnover meanwhile improved to LKR242 mn with trading in John Keells Holdings accounting for 62% of the total. Gainers outpaced losers with Lanka Aluminium, Ceylon Leather(W0014) and SMB Leasing rising by 12.1%, 12.0% and 11.1% offsetting losses in Property development, Hikkaduwa Beach Resort and Asia Capital which declined by 7.6%, 7.5% and 7.4% respectively," DNH Financial said.

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Wednesday, December 26, 2012

Sri Lankan stocks at 6-wk high on foreign buying

Dec 26 (Reuters) - Sri Lanka's stock market advanced on Wednesday, led by foreign buying in market heavyweight John Keells Holdings, but the day's turnover was thin, with most investors on holiday.

The Colombo Stock Exchange's main index rose 0.83 percent or 46.02 points to close at 5,570.91, its highest since Nov. 14.

Foreign buying accounted for 69.3 percent of turnover and offshore investors bought a net 119.1 million rupees worth of shares, extending net foreign buying this year to 37.9 billion rupees.

John Keells Holdings, bought by foreign investors, gained 0.46 percent to 218 rupees.

"Foreign buying helped the market to end higher and we expect to see positive sentiment when the new year starts as interest rates have fallen sharply," a stockbroker said on condition of anonymity.

Treasury bill yields eased by between 21 and 49 basis points at a weekly auction on Monday in line with a surprise cut in interest rates earlier this month.

The day's turnover stood at 242.4 million rupees ($1.91 million), compared to this year's daily average of 885.8 million rupees.

Stock and money markets were closed on Tuesday and Thursday for Christmas and a Buddhist religious holiday.

The rupee closed steady at 127.00/10 to the dollar, in dull trade, currency dealers said. ($1 = 126.9500 Sri Lanka rupees) (Reporting by Shihar Aneez; Editing by Ron Popeski)

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Bourse sluggish as brokers look to 2013 growth cycle

The bourse closed marginally higher on Tuesday (24) ahead of the Christmas holiday but sentiments were sluggish with turnover reaching Rs. 101.27 million, a five month low as brokers urge investors to focus on counters that would benefit by the 2013 growth cycle.

The All Share Price Index closed 8.4 points higher, up 0.15 percent, at 5,524.89 while the Milanka Price Index of more liquid stocks closed 0.09 percent lower, down 4.76 points at 5,039.82. The S&P SL20 closed 4.54 points higher at 3,038.78, gaining 0.15 percent.

Foreign purchases amounted to Rs. 11.76 million, resulting in a net inflow of Rs. 3.34 million.

"The indices ended on a mixed note amid mediocre turnover levels dominated by banking, chemicals and oil palm counters," John Keells Stockbrokers said.

According to DNH Financial: "The market opened the week on a quiet note and the ASPI and MPI closed virtually flat at 5525 and 5040 as investors remained on the sidelines on account of the Christmas holidays. Turnover fell to LKR101 mn, lowest in 5 months with trading in Haycarb and Bukit Darah accounting for 31% of the day’s total.

"Gainers matched losers with SMB Leasing (X), Miramar Beach and Gestetner rising by 25.0%, 20.3% and 14.3% and offsetting losses in Autodrome, Namunukula Plantations and NDB Capital which declined by 12.0%, 10.0% and 7.4% respectively," DNH said.

"With investors in a holiday mood, we expect the bourse to trade range bound as we approach the year end. We recommend clients to clean their portfolios, maintain a selective approach and focus on stocks that are likely to benefit fully from the 2013 growth cycle. Consequently, we advise investors to focus more closely on fundamentals and sectors such as banking, construction, diversified, F&B and hotels, which are expected to benefit fully from the macro-economic upswing next year," it said.

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Tuesday, December 25, 2012

Weekly Foreign Holding update - 21-12-2012

                                     (click image to enlarge)

source - CAL Research

Sri Lanka to list state firms: deputy finance minister

Dec 24, 2012 (LBO) - Sri Lanka will list more state firms in the Colombo Stock Exchange as well as encouraging more privately owned companies list, international monetary co-operation and deputy finance minister Sarath Amunugama said.

 Listing more companies "both private and public" are among a series of initiatives that the state will pursue in the next two to three years, minister Amunugama said in a speech at a award ceremony held by Sri Lanka's Securities and Exchange Commission.

 "The primary reason for small capitalization at the CSE is the fact that there are only 288 listed companies though there are more than 10,000 registered and operationally active companies in the country," minister Amunugama said in the text of a speech.

"We need to identify the reasons for why companies are reluctant to get listed and encourage them by creating more awareness of the benefits involved.

"We must show companies that CSE in an ideal forum to raise capital and make the listing process less cumbersome.

"We are hoping to increase to double the number of companies listed on CSE by 2016. The market liquidity can be increased by increasing the number of listed companies."

Others however have said that a key reason for the smaller capitalization is large sections of the economy such as energy and banking, which makes up a significant portion of stock markets in countries with more economic freedom are owned by the state in Sri Lanka.

Amunugama said unit trusts (mutual funds) could help mobilize savings.

"The development of the Unit Trust industry is important because it is one of the conduits to mobilize savings of the less sophisticated small investors," Amunugama said.

"When people are encouraged to save for long run these savings can flow as capital to industrialists who are in need of capital. The resulting investments create employment opportunities and contribute to the economic growth of the country."

Economic analysts have pointed out that Sri Lanka has a lower savings ratio than in East Asia primary because the state is a net spender running a deficit in the current account of the budget and not because citizens save less.

The current account deficit in the budget depresses the overall domestic savings number, with private savings being actually higher than the total domestic savings number.

Sri Lanka's rulers also speculate in many businesses with people's tax money and make huge losses.

Because loss-making state enterprises are classed as 'private sector' in national accounting in the country, Sri Lanka's 'private domestic savings' are dragged down further and a proper private sector savings number is not available for comparison.

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Merry Christmas for all the investor commiunity

Stock market closes positive for Christmas

The Colombo stock market yesterday closed on a positive note ahead of Christmas today.

 Amidst the holiday mood the Bourse yesterday saw lakclustre activity with Rs. 101.3 million in turnover from the trading of mere 6.5 million shares.

The benchmark All Share Index (ASI) gained 8.4 points to close in the green whilst the S&P SL 20 Index rose by 5 points. Milanka Index however dipped 5 points. The market is closed today due to Christmas.

 Despite low activity, market enjoyed another day of net foreign inflow though small. Foreigners bought Rs. 11.8 million worth of shares and sold Rs. 8.4 million, resulting in a net inflow of Rs. 3.3 million and year to date figure of Rs. 38.4 billion.

“Colombo bourse closed in the green ahead of holidays despite the lackluster momentum. Mid-day turnover read Rs. 63 million which gathered some force to cross the Rs. 100 million mark at the end of trading depicting the lowest turnover since 17.04.2009,” Softlogic Stockbrokers said.

 It said ASI’s gain was assisted by improvements made by Nestle Lanka (+3.4%), Bukit Darah (+2.9%) and Sri Lanka Telecom (+2.6%).

 Investor attention was centered on Haycarb as a parcel of 50,000 shares which was transacted on-board at Rs. 175 each led the counter to spearhead the day’s turnover. Its price gained 4.2% as it touched Rs. 177.9 on thin volumes before settling at Rs. 175 (+2.5%).

 PC House highlighted the trading screen, being the key contributor to the day’s volume. Two large blocks of 1.5 million shares and 750,000 shares changed hands at its peak of Rs. 5.3 (+1.9%).

 Bukit Darah secured focus as interest weighed higher on the buying side. A few trades at mid-day led the share to touch Rs. 690.0 (+2.9%) at its intra-day high before it closed at Rs. 689.7.

 Softlogic Holdings edged up the top turnover slot at the last few minutes of trading with an on-board block of 95,000 shares which changed hands at Rs. 10.50. Its price gained 1.9% at its close of Rs. 10.5.

Banking cluster players National Development Bank and Sampath Bank gathered some interest as each counter denoted gains of 1.4% and 1.5% at their respective intra-day high price levels of Rs. 139 and Rs. 202.0 on thin volumes.

 Further, Lanka Milk Foods which encountered significant foreign interest during the past week, continued to depict buying interest while it closed at its peak of Rs. 100 (+2.9%).

 Piramal Glass saw some renewed activity as two tranches amounting to 206k shares were seen transacted at price levels of Rs. 5.80 and Rs. 5.90.

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Benchmark interest rates plunge, but concerns remain

Benchmark Treasury bill yields plunged further yesterday (24) in response to the Central Bank’s policy rate cut earlier this month.

The Public Debt Department of the Central Bank re-issued maturing Treasury bills amounting to Rs. 15 billion at yesterday’s primary market auction. Bids totalled Rs. 37.9 billion of which Rs. 16.5 billion were accepted with yields falling across all tenures.

The 12-month bill yield fell sharply by 49 basis points to 11.69 percent from 12.18 percent a week ago. The six-month yield fell 21 basis points to 11.32 percent and the three-month Treasury bill yield fell 23 basis points to 10 percent.

Currency dealers said the Treasury bill auctions do not reflect actual market trends, with money market interest rates being significantly higher.

"These auctions can be manipulated in that captive funds such as the EPF and NSB are used by the government to buy up its securities and at cheaper rates," a dealer said not wanting to be named.

"Authorities seem to be trying to push higher growth at any cost, and this was why monetary policy rates were slashed by 25 basis points earlier this month. Unless we have strong foreign direct investment flows, such manipulations will lead to faster economic growth followed by longer periods of downturn," the dealer said.

Last week, the three-month, six-month and 12-month Treasury bill yields stood at 10.23 percent, 11.53 percent and 12.18 percent respectively. The average weighted prime lending rate of the commercial banking system, applicable to high net worth borrowers, reached 14.15 percent by the end of last week.

The three-month Sri Lanka Inter Bank Offered Rate (SLIBOR) stood at 13.23 percent, six-month SLIBOR at 13.77 percent and 12-month SLIBOR at 14.27.

Currency dealers said money markets were short, with Central Bank seen printing currency in recent times.

The Central Bank recently pointed out that captive sources were being used to finance the government. It also urged the government to improve its fiscal discipline in order make monetary policy more affective.

"The expansion of credit to the public sector, which includes the government and public corporations remains a concern. Being less sensitive to changes in interest rates, net credit to government depends on the budget deficit and the government’s strategy to finance the deficit, while credit to public corporations depends mainly on the operational losses they incur," the Central Bank said in its recent report ‘Recent Economic Developments: Highlights of 2012, Prospects for 2013’ released last month.

"It is essential that public sector borrowing from the banking sector is restricted to the budgeted levels, in order for the monetary authority to maintain monetary expansion at the targeted level, which is essential for the success of monetary policy implementation," it said.

"The high interest rates and the tight liquidity condition which prevailed in the market towards the latter part of the year made the T-bonds market illiquid. Hence, there had been less demand for T-bonds in latter part of 2011. Consequently, only Rs. 514.6 billion or 95.45 per cent of initially planned borrowings of Rs. 539.2 billion under T-bonds was raised in 2011. Further, nearly 96.00 per cent of the total borrowings made through T-bonds in 2011 came from captive sources such as EPF, ETF, and NSB. Due to the above mentioned developments, Rs. 79.6 billion was raised through new issuances of T-bills, on book value terms, nearly twice the initially planned new issuance of T-bills in 2011," the Public Debt Department of the Central Bank said in a separate report.

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Softlogic Holdings FY14 profit forecast revised upwards by 22%

CT Smith Stockbrokers has revised upwards the net profit forecast of Softlogic Holdings Plc (SHL) for the financial year 2014 consequent to the sale of a 38% stake in Asian Alliance Insurance (AAI) Plc.

“Given that the divestment will be taking place in early 4Q13E, we expect a material bottom line contribution to be only for FY14E. Consequently we have broadly maintained our FY13E net profit forecast for SHL at Rs. 281 million (down 16% YoY), which excludes the estimated non-recurrent gain of Rs. 100 million, whilst we have revised up our FY14E net profit forecast by 22% to Rs. 599 million,” CT Smith Stockbrokers said.

“The revision is largely due to the estimated finance cost saving of Rs. 250 million adjusted for the reduction in consolidated share of profit AAIC,” the broking firm added.

 SHL, in an attempt to reduce the burden of its high debt position, last week announced that it will divest a 38% holding in Asian Alliance Insurance (AAIC) for a total consideration of Rs. 1.8 billion.

The transaction would result in an estimated capital gain of Rs. 100 million. The stake reduction would also result in SHL’s direct holding in AAIC declining from 95% to 57%, with SHL’s effective stake in AAIC falling from 74% to 41%. Management meanwhile stated that no mandatory offer would be required on the part of the buyers.

 The two foreign buyers involved in the transaction are Germany’s development finance institution DEG and Dutch State-owned development bank FMO. Subsequent to the completion of the transaction, which is subject to certain conditions being fulfilled, both foreign parties would nominate a director to the Board of AAIC.


Initially SHL and 72% owned subsidiary Softlogic Capital (SCAP) together acquired 73.5% of AAIC at Rs. 120 per share in August 2011, whilst a mandatory offer was made thereafter to the shareholders of listed conglomerate Richard Pieris (RICH) who owned a further 25.0% of AAIC and accepted the offer.

 Subsequent to the mandatory offer, SHL and SCAP owned 37 million shares representing 98.6% of AAIC, for a total investment of Rs. 4.4 billion. In September 2011, however, SHL disposed of 1.5 million shares (4.0%) of the insurer at Rs. 121 per share.

 CT Smith said SHL’s high level of debt has led to a deterioration of recent earnings: While 1H13 EBIT fell 21% YoY to Rs. 1.525 million, the decline in 1H13 PBT was a steeper 78% YoY to Rs. 241 million. Net finance cost has risen 52% YoY to Rs. 1.295 million in 1H13; this is mainly due to the group increasing its interest bearing borrowings to Rs. 21,982 million as at 30 September 2012 (vs. Rs. 19,559 million as at 30 September 2011) and higher interest rates; effective interest rate paid rose to 14.7% in 2Q13 (vs. 11.8% in 2Q12 and 13.1% in 1Q13). The group’s net debt: equity ratio was 139% as at 30 Sep 2012 while its net debt: EBITDA was ‘12.0X and 2Q13 interest cover was 1.0X.

 Assuming SHL utilises the entirety of the Rs. 1.8 billion proceeds to retire debt, CT Smith said it estimates the group’s net debt to fall to Rs. 16.5 billion as end 4Q13E down from September 2012 net debt of Rs. 18.3 billion. Using an effective interest rate of 14% in FY14E, the consequent pre-tax finance cost savings from the proceeds is estimated at Rs. 250 million.

 AAIC reported a net loss of Rs. 128 million in 2011 (vs. a net profit of Rs. 368 million in 2010), amidst a steep decline in stock market related investment income. It however reported a lower net loss of Rs. 26 million in 1H2012 (vs. a 1H2011 net loss of Rs. 172 million), with stock market related provisions of Rs. 236 million being shown within other comprehensive income. Its book value per share as at 30 September 2012 was Rs. 22.9 per share.

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Monday, December 24, 2012

Sri Lankan stocks edge up; turnover at 6-mo low on holiday

Dec 24 (Reuters) - Sri Lanka's stock market inched higher on Monday but turnover slumped to a near six-month low ahead of holidays this week, while the rupee fell from an eight-month high due to importers buying dollars.

Colombo Stock Exchange's main index edged up 0.15 percent or 8.40 points to close at 5,524.89. Turnover fell to 101.3 million rupees ($797,600), compared to this year's daily average of 888.6 million rupees.

Stockbrokers said most investors were already on holiday, with both stock and money markets closed on Tuesday and Thursday for Christmas and a Buddhist religious holiday respectively.

Treasury bill yields eased by between 21 and 49 basis points at a weekly auction in line with a cut in interest rates by the central bank earlier this month.

Foreign investors were net buyers of 3.3 million rupees worth of shares, extending net foreign buying this year to 37.78 billion rupees.

The rupee fell from an 8-month high to finish at 127.00/10 to the dollar, edging down from Friday's close of 126.90/127.00. ($1 = 127.0000 Sri Lanka rupees) (Reporting by Shihar Aneez; editing by Patrick Graham)

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Sri Lanka Treasuries yields fall further

Dec 24, 2012 (LBO) - Sri Lanka Treasuries yields fell further at Monday's auction held two days earlier due to Christmas holidays, with the 12-month yield falling as much as 49 basis points to 11.69 percent.

 The 3-month yield fell 23 basis points to 10.00 percent and the 6-month yield fell 21 basis points to 11.32 basis points.

 The state debt office, which is a unit of the Central Banks said 15 billion rupees of maturing bills were offered to the market and 16.9 billion rupees of offers accepted.

Sri Lanka's bill yields fallen steadily over the month with the Central Bank also signaling a 25 basis point rate cut.

Sri Lanka's Treasuries yields started to fall from around September but renewed speculative pressure in forex markets amid term auctions of cash halted the trend.

Since November 30, 3-month yields have fallen 79 basis points, the 6-month yield has fallen 77 basis points and the 12-month yield has fallen 116 basis points.

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Sri Lanka electronic retailer gets IFC finance

Dec 23, 2012 (LBO) - Sri Lanka's Softlogic Holdings Plc, said its consumer durable retail division, Uni-Walkers (Pvt) Ltd, has negotiated a 15 million US dollar financing package from the World Bank group unit International Finance Corporation.

 The IFC will give 10 million through convertible instrument and the balance as a 10 year loan with a grace period of 3-5 years, the Softlogic said in a stock exchange filing.

The money will be used to expand Uni Walkers showroom to 280 and fund working capital, the firm said.

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“Foreigners rushing into stocks; locals still turning a deaf ear”: Broker

Softlogic Stockbrokers is lamenting that locals are continuing to turn a deaf ear to record-breaking net inflow as foreigners are rushing into Lankan equities.

 It said last week’s highlight was the aggressive accumulation by the foreigners into the steady lot, which has continued throughout 2012, taking the year-to-date net foreign inflow to over Rs. 38 billion.

Last week saw Rs. 1.2 billion in net inflow up by over tenfold from Rs. 161 million.

“During the past two years, Sri Lankan stocks have come down by around 15%, whereas the listed company earnings have grown by around 40%. In this backdrop the attractiveness of the Colombo Bourse, which has grabbed the attention of the foreign nationals who go by the rule ‘always invest for the long term,’ is being turned a deaf ear by majority of the local investors with the herd mentality, who prefer short-term gains,” Softlogic Stockbrokers opined.

 According to Acuity Stockbrokers, total foreign purchases last week increased 62.07% (W-o-W) to Rs. 2.24 billion (relative to previous week’s total of Rs. 1.38 billion) while total foreign sales decreased 12.87% (W-o-W) to Rs. 1.05 billion (from previous week’s total of Rs. 1.20 billion).

In terms of both volume and value, JKH and Chevron led foreign purchases, while Tokyo Cement and Commercial Bank led foreign sales, Acuity added.

 The “surge in foreign investor interest” was also highlighted by Asia Wealth. It said both indices last week continued to oscillate within a narrow band with foreign and institutional investors being the most active players in the market. “A flurry of crossings was witnessed in number of large cap counters including John Keells Holdings, Commercial Bank, Chevron Lubricants, due to foreign institutional interest,” Asia added.

 Whilst acknowledging the fact that equity markets have been both challenging and volatile over the past few months, DNH Financial said it firmly believes the ability to generate superior returns in the medium to longer term exists provided the right strategy is implemented.

“Global macroeconomic uncertainties could force foreign asset managers to square off global positions and identify new and fundamentally solid emerging markets resulting in a flow of funds into Asian equities such as Sri Lanka,” DNH said.

“We believe that the current price weakness in the Bourse provides a strong opportunity for medium to long-term investors to pick up attractively-priced growth stocks,” the broking firm added.

 Notwithstanding the disappointing 3QGDP growth, DNH also believes that Sri Lanka’s structural story is still firmly intact, with the prospect of robust corporate EPS growth in 2013.

 DNH is advising investors to be appropriately positioned by selecting stocks in an informed manner, focusing on sectors that will outperform on a sustained basis.

 Asia Wealth noted that the Central Bank has revised the GDP growth for 2012 to 6.5% from 6.8% after the growth slowed down to 4.8% in 3Q2012.

“This was mainly due to internal and external shocks extending their existence, curbing the country’s growth potential. Even though the country’s external position witnessed some improvements after the policy measures taken during the beginning of the year, the country has challenges in achieving the target growth for 2012 due to the slowdown in the global economy. However, the CB indicated that the economy is poised to grow at 7.5%YoY for 2013E as estimated earlier and also expects the rupee to appreciate. This, coupled with a possible downward trend in interest rates, poses a positive outlook for 2013E compared to 2012,” Asia Wealth added.

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Senior Minister says SEC to get more teeth

* Civil, administrative sanctions to be introduced to deal with capital market offenders

As the country’s equities market ends a controversial year, a senior minister says steps are already being taken to clean up the market and bolster investor protection by giving the Securities and Exchange Commission (SEC) more power to take out capital market offenders.

Earlier this year SEC Chairman Dr. Tilak Karunaratne resigned citing undue interference by a group of influential investors and their crony brokers who were being investigated for market offences. He was the second SEC head to resign under a year.

"The SEC in its effort to facilitate market development and ensure that its laws, rules and regulations are in line international standards is in the process of amending the SEC Act with the objective of facilitating regulation of Demutualized exchanges, facilitating the establishment of a Central Counter Party, introducing civil sanctions and administrative sanctions to deal with capital market offenders. And we also believe that these provisions will strengthen investor protection. Implementation of a robust risk management system, a clearing corporation and a Delivery vs Payment system will enhance the CSE’s effectiveness and credibility," Senior Minister for International Monetary Cooperation and Deputy Finance Minister Dr. Sarath Amunugama said.

He was addressing a convocation last week where over 800 individuals received certificates after successfully completing an educational programme conducted by the SEC.

The capital market is a very important component of the financial sector which supplements the role of the banking system in the economic developments of the country.

"The economy of Sri Lanka has been showing progress in a number of areas in the recent past particularly after the end of the war. We have been recording 7 – 8% growth in GDP reaching a per capita income of USD 2,836 as at end 2011 which is projected to reach USD 4,000 by 2016. Inflation has reduced to single digit and is currently around 7%. Budget deficit has reduced to 6.8% of GDP while Debt: GDP ratio has reduced to 78.5%. The social economy indicators which reflect the quality of life has improved significantly with unemployment reducing to 4.2% in 2011 and poverty reducing to 8.9%. These figures have improved further in 2012," Dr. Amunugama said.

"If you are to continue near 8% economic growth annually we need consistent flow of local and foreign investments. A vibrant capital market can facilitate this economic growth by converting savings to investments and also assisting companies to raise funds.

"In reality ours is not a matured capital market yet. The capital market heavily depends on equity contribution at the moment yet the market capitalization of Colombo Stock Exchange is still below USD 20Bn and as percentage it is around 33% of the GDP. In a comparable economy we would expect market capitalization to be at least 70 – 80% of the GDP.

"Therefore, we have work to do to develop our equity market further. If we target market capitalization to be 50% of the GDP by 2016 which means we need to envisage the market capitalization of Colombo Stock Exchange to reach approximately 6.5 Trillion by 2016.

"The capital market of our country has to think beyond just equity. We need to develop our debt market and other financial instruments such as derivatives, futures. We need to look at new concepts such as commodity market development.

"The primary reason for small capitalization at the CSE is the fact that there are only 288 listed companies though there are more than 10,000 registered and operationally active companies in the country," Amunugama pointed out.

"We need to identify the reasons for why companies are reluctant to get listed and encourage them by creating more awareness of the benefits involved. We must show companies that CSE in an ideal forum to raise capital and make the listing process less cumbersome. We are hoping to increase to double the number of companies listed on CSE by 2016. The market liquidity can be increased by increasing the number of listed companies.

"However, it is also equally important to attract new funds to the market both local and foreign. Currently less than 1% of the Sri Lankan population is actively involved in the market. "This number has to be increased significantly by creating greater awareness of the investment potential. The Colombo stock market has always given good returns to the investors in the long run far exceeding the returns of conventional savings methods. Also the prices of most of stocks are currently quite attractive with overall forward P/E ratio of the market being less than 15 times. This is one reason why in 2012 we saw the highest ever net foreign inflow of Rs.37Bn. These foreign investors have seen the potential of the market and have entered at the right time. We urge the domestic funds and investors to study and understand the behavior of the foreign investors and exploit the opportunity without waiting further.

"The development of the Unit Trust industry is important because it is one of the conduits to mobilize savings of the less sophisticated small investors. When people are encouraged to save for long run these savings can flow as capital to industrialists who are in need of capital. The resulting investments create employment opportunities and contribute to the economic growth of the country.

"As I mentioned earlier Sri Lanka’s capital market primarily evolves around equity. The corporate Bond market is yet to see its full potential. One of the priorities we have identified under the 10 initiatives is developing the corporate bond market by providing the necessary regulations and infrastructure to safeguard the interest of the investors and the public. A well developed bond market can supplement the banking system in meeting the long term capital requirements of the corporate sector. We expect the volumes of the bond market to grow substantially to about Rs.1 Trillion by 2016.

"In order to have a more efficient stock market one prerequisite will be the demutualization of the CSE. We are confident that demutualization of the CSE will give the exchange the opportunity to position itself better to respond to the interests of its stakeholders and become more competitive and customer driven. Developing infrastructure of stock brokers and other stakeholders too will increase the efficiency of the capital market.

"In Sri Lanka still has less than 1% of the population invests in the stock market. One main obstacle to attract investors to the market is the lack of awareness. To reap the benefits of the capital market investments every Sri Lankan needs to be financially literate. The road map to develop the capital market highlights the significance of educating not only investors but other professionals involved in the industry. This awards ceremony to confer Diplomas and Certificates to industry professionals and other stakeholder will undoubtfully be a milestone in enhancing financial literacy.

"To facilitate this road map to develop the capital market the Government after consulting all the stakeholders of the capital market provided significant incentives in the National Budget 2013 by way of providing a 3 year half tax holiday for new companies that will be listed on the CSE before December 2013, and maintain a minimum of 20 % of its shares with the public. This will encourage companies to list on the CSE and thereby increase the market capitalization and liquidity. Exemption of withholding tax on interest income earned from investing in bonds and debentures listed on the CSE will increase the activities of the debt market. The Budget proposal to permit direct investments in foreign currencies in Unit Trusts without having to channel through Securities Investment Account (SIA) and the application of the 10% tax applicable to Unit Trusts to Unit Trust Management companies will strengthen the Unit Trust industry. The Budget proposals also included some other significant initiatives such as exemption of transfer of shares for margin trading from Stamp Duty, permitting Stockbrokers to claim a lump sum depreciation for expenditure on IT infrastructure, branch networking, and such other capital items and the appointment of a Presidential Task Force to implement the Capital Market Development Master Plan which will oversee the entire road map of the capital market development," Dr. Amunugama said.

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Health Care sector dominates market turnover

The main ASPI declined marginally over the week losing 6.23 points (or 0.11%) to close the week at 5516.49 points.

The MPI meanwhile followed suit declining a marginal 0.01% (or 0.62 points) to close the week at 5044.58 points. The S&P SL 20 Index in contrast, gained 0.38% W-o-W by a cumulative 11.45 points to end the week at 3034.24 points.

The highest contribution to this week's turnover value was courtesy of Asiri Central Hospitals which accounted for 34.09% of the total market turnover amid a large crossing of LKR 1.83bn on Tuesday.

JKH too aided this week's improved turnover with crossings worth LKR 1.06bn helping account for 19.87% of total market turnover. Commercial Bank was also amongst the top contributors to this week's turnover, adding LKR 570.65mn and accounting for 10.65% of total market turnover.

Turnover value for the week amounted to LKR 5.36bn, a 95.71% increase from last week's turnover value of LKR 2.74bn.

The daily turnover value in turn increased from 547.35mn last week to LKR 1.07bn. Market Capitalization however declined marginally over the week (-0.05% or LKR 962.92mn) closing the week at LKR 2119.47bn compared to last week's market capitalization of LKR 2120.4bn
The Health Care sector dominated the market's turnover value for the week, accounting for 41.29% (or LKR 2.21bn) of the market with Asiri Central Hospitals accounting for the majority (82.56%) of the sector's total contribution.

The second largest contribution to the week's turnover value was by the Diversified sector which accounted for LKR 1.17bn (or 21.93%) of total market turnover value. The Banking and Finance sector's contribution to the total market turnover meanwhile amounted to LKR 994.22 (or 18.56%).

The Health Care sector also led the highest contribution in terms of share volume, with 47.99mn shares trading over the week to account for 36.84% of total market volume.

The Banking and Finance sector accounted for 14.12% or 18.40mn shares while 16.94mn shares changed hands in the Telecom sector (13.00% of total market volume).

Harischandra Mills recorded the highest price gain over the week, closing at LKR 2499.50, relative to last week's price of LKR 2010.10 to represent a 24.35% gain. Namunukula Plantations recorded a 15.61% gain to close at LKR 82.20, while Kotagala Plantations closed the week at LKR 75.30, representing a weekly gain of 13.40%.

Asian Alliance Insurance and Mackwoods Energy were also amongst the top price gainers, recording 12.80% and 11.61% over the week. The price losers for the week was led by Miramar Beach Hotel, which declined 17.86% to close at LKR 80.50, relative to last week's close of LKR 98.00. Tea Smallholders declined 14.14% to close at LKR 42.50 while Shalimar closed down 14.12% at LKR 900.00.

Foreign investors closed the week in a net buying position of LKR 1.19bn relative to a last week's net buying position of LKR 0.18bn (565.82% W-o-W ), as average daily net inflows amounted to LKR 238.16mn compared to last week's daily average net inflow of LKR 35.77mn.

Total foreign purchases increased 62.07% (W-o-W) to LKR 2.24bn (relative to last week's total of LKR 1.38bn) while total foreign sales decreased 12.87% (W-o-W) to LKR 1.05bn (from last week's total of LKR 1.20bn). In terms of both volume and value, JKH and Chevron led foreign purchases, while Tokyo Cement and Commercial Bank led foreign sales.

GDP for Q3 2012 was the lowest recorded since Q3 2009, with Y-o-Y growth for the quarter at 4.8%, relative to 6.4% in Q2 2012 and 7.9% in Q1 2012.

Growth was dampened by slower growth in the main Services sector (4.6% Y-o-Y relative to 5.8% in Q1 2012) and negative growth (-0.10% Y-o-Y) in the Agricultural sector.

The Industry sector too indicated slower growth, recording 7.3% Y-o-Y growth in Q3 2012 relative to 9.5% Y-o-Y in the previous quarter.

The Central Bank2 consequently lowered its 2012 GDP growth forecast to 6.5% from 6.8% previously.

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Another mixed week for bourse

Stock Market Review for the week ending 21st December 2012:

Trading for this week commenced on a positive note with the market initially being in the green but went on to end the day in the red. The ASPI lost 19 points to close at 5,503 while the Milanka lost 33 points to close 5,522. Market turnover for the day was Rs 532 million on the back of several block trades witnessed among Environmental Resource (ERI), Chevron and Commercial Bank. The other top contributors to market turnover were Asiri Surgical and Ceylon Tobacco. The share price of ERI lost cents -/20 to close at Rs 14.80 while Chevron gained Rs 2.50 to close at Rs 200.00. Commercial Bank and Asiri Surgical closed flat at Rs 102.00 and Rs 9.00 respectively. A net foreign inflow of Rs 102 million was recorded.

On Tuesday the market witnessed a flurry of activity with the ASPI and Milanka gaining 4 and 27 points to close at 5,507 and 5,039 respectively. A market turnover of Rs 2.5 billion was recorded due to a strategic share transfer of 7.3 million shares of Asiri Central (ASHA). Shares in Asiri Central were disposed by Asiri Surgical to Asiri Hospital Holdings as part of the group restructuring process.

In addition HNW and institutional interest was witnessed among Commercial Bank, Sampath Bank, JKH and Dialog further boosting turnover. Asiri Central closed Rs 4.00 lower at Rs 250.00. The share price of Commercial Bank increased by Rs 1.60 to close at Rs 103.00 while Sampath closed lost cents -/10 to close at Rs 200.00. Foreign buying interest continued in JKH, however the counter dropped by cents -/80 to close at Rs 216.00. A net foreign inflow of Rs 140 million was witnessed for the day.

Yields on T-Bills dropped across due to Wednesday’s auction in a hope to revive the equity market.

However, the market closed propelling mixed sentiments due to the forthcoming festive season. The ASPI gained 5 points to close at 5,512, while the Milanka lost 18 points to close at 5,020. Market turnover for the day was Rs 464 million. The primary contributors to the turnover were Commercial Bank achieving Rs 194mn, Cargills Ceylon recording Rs 56.2mn followed by Bukit Dharah at Rs 52.5mn and PC Pharma at Rs 30mn. The share price of Commercial Bank lost Rs 1.00 to close at Rs 10.00 while Cargills appreciated by Rs 11.00 to close at Rs 154.00. Meanwhile Bukit Darah and PC Pharma dropped by Rs 3.00 and cents -/30 to close at Rs 662.00 and Rs 10.00 respectively. Meanwhile, net foreign buying was recorded at Rs 105.2 mn for the day.

After a slow start, the ASPI closed 15 points higher at 5,527 while the Milanka too gained 10 points to close at 5,020 on Thursday. A market turnover of Rs 811 million was recorded on the back of continuous local and foreign interest on blue chip counters. Crossings in JKH, Commercial Bank and Tokyo Cement helped boost turnover levels. Foreign activity in JKH continued to drive the counter as the top traded counter for the day contributing to Rs 572mn. JKH was followed by Aitken Spence with Rs 67mn, Commercial Bank with Rs 49mn and Tokyo Cement with Rs 30mn. The share price of JKH and Aitken Spence gained Rs 1.00 and Rs 1.50 to close at Rs 218.00 and Rs 119.00 respectively.

 Meanwhile Commercial Bank gained cents -/40 to close at Rs 102.40 while Tokyo Cement gained cents -/20 to close at Rs 27.50. A net foreign inflow of Rs 533mn was witnessed for the day.

On Friday the market closed on a mixed note with the ASPI losing 11 points to close at 5,516 while the Milanka gained 14 to close at 5,044. However activity levels were high as an increased market turnover of Rs 959 million boosted by crossings witnessed in Asiri Surgical, JKH and Commercial Bank. Other top traded counters were Chevron and Pan-Asia Bank. The share price of Asiri Surgical gained cents -/40 to close at Rs 9.40 while JKH lost cents -/20 to close at Rs 218.00. Commercial Bank and Chevron both gained almost Rs 1.50 each to close at Rs 103.00 and Rs 204.00 while Pan Asia Bank closed flat at Rs 19.00.

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

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