Sunday, December 23, 2012

Foreign buying of Sri Lankan equities keeps market buoyant

The week ending December 21 saw top foreign-buying at Rs 35bn, strengthening the rupee and bringing interest rates down. The benchmark 12-month T-Bill interest rate dropped to 12.18% from 12.45% a week ago. The shorter term 3 month bill dropped to 10.23% from 10.44%. The rupee exchange rate against the US$ was at 125.70 from the previous week’s 130.00. Turnover at the CSE was Rs 5.36bn, an improvement from the Rs 2.47bn seen last week. Daily average turnover was Rs 1.1bn against Rs 547mn seen the previous week. Net foreign inflow to the market was Rs 1.2bn against the Rs 161mn seen on the week ending December 14. Total inflow was Rs 2.24bn against sales of Rs 1.05bn. The two main indices though dropped slightly with the ASI falling 6 points (-0.11%) to 5516.49 and the MPI losing 1 point to end at Rs 5,044.58. The S&P20 index gained 11 points (+0.38%).

In the news in a big was Softlogic Holdings with the announcement that two 19% stakes in its subsidiary Asian Alliance Insurance will be sold to DEG of Germany and FMO of Netherlands, both state-owned institutions of their respective countries, for a total sum of Rs 1.8bn. The shares totaling 14.25mn will be transacted at Rs 128.00. Softlogic Holdings paid Rs 120.00 per share of Asian Alliance Insurance when it acquired the company from Asia Capital earlier this year. The move will strengthen the balance sheet of Softlogic Holdings, which also is restructuring the Asiri Hospital Group by transferring the various shares it holds in Asiri Surgical to a common holding under Asiri Hospitals Holdings Company. In October, Softlogic Holdings placed 10% of Asiri Hospital Holdings with Actis, a private equity fund.

Kotagala Plantations paid Rs 1.58bn to acquire the entirety of Union Commodities from Chanaka de Silva. Union Commodities trades in tea, spices and food stuffs and logistics.

Distilleries Company got a thumbs-up from Fitch Ratings with a AAA (lka) rating, the highest possible rating for a local company. Ceylinco Insurance announced that it is the first local insurer to breach the Rs 10bn annual premium threshold. MBSL announced that its subsidiary MCSL Financial Services will merge with Ceylease, a subsidiary of Bank of Ceylon, pending regulatory approval.

Carried out, MBSL will have the equivalent of 41% of the merged company, making it an associate.

Commercial Credit will issue Rs 250mn in listed debt with a provision to go up to Rs 500mn. The subscription will open in late January.

Given the tight monetary policy of the last 10 months and the unexpected weather affecting agriculture, the national Gross Domestic Product for the 3rd quarter grew by just 4.8%, from the 8.5% growth seen in the same quarter last year. The agricultural sector contracted by 0.5%. The industries and services sector grew by 7.3% and 4.6% respectively against 10.8% and 6.7% last year.

 Exports contracted by 0.9% for the quarter. Full year economic growth is expected to be between 6.5 and 6.7%.

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