Sept 30, 2010 (LBO) - Sri Lankan shares edged higher Thursday, near the 7,000 point mark on the benchmark index once again, as falling interest rates pushed more money into shares, brokers said.
The All Share Price Index closed at 6,997.22, up 0.97 percent (67.31 points) while the more liquid Milanka index rose 2.79 percent (204.92) to close at 7,552.70, according to stock exchange provisional figures.
Turnover was 5.27 billion rupees.
"It was a day of strong activity on some of the fundamental stocks, mainly the banking sector," said Rakshitha Perera, research manager at Bartleet Mallory Stockbrokers. "We expect the momentum to continue with the low interst rate regime."
Retailers and institutions were both active with strong retail buying interst was seen across-the-board.
Perera said they were advising investors to realise gains wherever possible and move in to stocks trading at attractive price-to-earnings ratios.
There was strong buying of banking sector stocks, driven by a one-for-one bonus offer by DFCC Bank.
Several off-the-floor deals of Browns, John Keells Holdings, Asian Hotels and Properties, Lion Brewery, Tangerine Beach Hotels, and Tokyo Cement took place.
There was also buying interst in manufacturing stocks, food and beverage and the land and property sector.
source - www.lbo.lk
Thursday, September 30, 2010
Sri Lanka forex liberalization planned for mid-Oct: CB Governor
Sept 30, 2010 (LBO) - A second stage of relaxing foreign exchange controls may take place by mid-October when operating instructions to authorized dealers are fine tuned, central bank Governor Nivard Cabraal said.
In earlier statements the Central Bank had said Sri Lankan residents would be allowed to open bank accounts abroad, tourists allowed to open bank accounts in the island and foreign investors would be allowed to buy corporate debt.
The moves when implemented would restore key economic freedoms lost to Sri Lankan citizens after gaining 'independence' from British rule.
"We will probably do that by mid-October," Cabraal told LBO in an interview.
"We have actually already approved some of these liberalization processes but the operating instructions have to be written, they have to be tested."
Lost Liberties
Draconian foreign exchange controls were imposed in Sri Lanka in 1952, two years after the creation of the Central Bank, after it started printing money to finance the budget deficit, and maintain a foreign exchange peg with the US dollars at the same time.
Sri Lanka's pegged exchange rate central bank is based on a flawed model originally peddled by the US Treasury to encourage dollar pegs and purchases of US government debt. Such 'soft-pegged' models have wreaked havoc in South America.
Some analysts have advocated a return to a hard peg or currency board as Singapore and Hong Kong did, to restore low inflation and free flow of capital.
Sri Lanka's foreign exchange laws criminalized attempts by citizens to protect the value of their hard earned savings from being destroyed from currency depreciation.
In January Sri Lanka main opposition United National Party and the Marxist Janatha Vimukthi Peramuna raised objections to forex liberalization.
Frivolous objections by former rulers in opposition has generated calls for 'a strong government' in Sri Lanka based on arbitrary action, which has further reduced even civil liberties of the ordinary people and undermined rule of law.
Flawed Model
Foreign exchange shortages arise when a central bank maintains a peg with a foreign currency which has its own domestic inflation anchor (meaning it generates positive inflation on its own) and tries to run independent monetary policy on its own by printing extra money.
The flawed model, which was the basis of the post-World War II, Bretton Woods peg system collapsed in 1971-73 with countries with superior monetary knowledge abandoning it.
A widely acclaimed book of old newspaper stories published by the Central Bank this year, quoted the Sri Lanka's first Central Bank governor, John Exter, a US citizen, as having said in 1953, that 'problem' dogging the island was central bank money printing.
The central bank was buying Treasury bills with printed money to finance government debt.
Exter was quoted as saying in the report that "the new money has been used by the public to purchase an excessive volume of imports, thus drawing down the country's external reserves."
However instead of correcting the problem Sri Lanka imposed exchange controls, import controls and eventually closed the entire economy when the Bretton Woods system collapsed, leading to 20 percent unemployment in the 1970s.
Freer Capital
But from 1977 trade was opened. Stocks were opened to foreigners a decade later.
The central bank had already allowed foreign investors to buy into government debt. In another move state agency debt has also been opened for foreign buyers this month.
A 30 percent quota open to foreigners by in a debt issue by Sri Lanka's Urban Development Authority (UDA) has been snapped up early, according to a source close to the deal.
"It is a very interesting development. It has proved to the market - it has proved internationally - that Sri Lankan institutions can raise funds, which include funds from outside as well, and there is appetite," Cabraal said.
"And the UDA bond being oversubscribed is an indication of that situation. We would like to see specific projects being funded by specific lines."
Snapshot
The following is some of the proposed foreign exchange relaxations listed for implementation in 2010. Others including controls on imports and unification of non-resident investment accounts have already been implemented.
1) Allowing Sri Lankans to open and maintain accounts with banks abroad
2) Allowing Sri Lankans to invest in equity or short term debt instruments in overseas companies
3) Allowing foreigners to invest in rupee denominated debentures issued by local companies
4) Allowing insurance companies to invest part of their assets of the general funds or technical reserves in foreign assets
5) Allowing listed companies to list on foreign stock exchanges
6) Allowing foreigners on tour or business in Sri Lanka to open Sri Lanka rupee accounts.
source - www.lbo.lk
In earlier statements the Central Bank had said Sri Lankan residents would be allowed to open bank accounts abroad, tourists allowed to open bank accounts in the island and foreign investors would be allowed to buy corporate debt.
The moves when implemented would restore key economic freedoms lost to Sri Lankan citizens after gaining 'independence' from British rule.
"We will probably do that by mid-October," Cabraal told LBO in an interview.
"We have actually already approved some of these liberalization processes but the operating instructions have to be written, they have to be tested."
Lost Liberties
Draconian foreign exchange controls were imposed in Sri Lanka in 1952, two years after the creation of the Central Bank, after it started printing money to finance the budget deficit, and maintain a foreign exchange peg with the US dollars at the same time.
Sri Lanka's pegged exchange rate central bank is based on a flawed model originally peddled by the US Treasury to encourage dollar pegs and purchases of US government debt. Such 'soft-pegged' models have wreaked havoc in South America.
Some analysts have advocated a return to a hard peg or currency board as Singapore and Hong Kong did, to restore low inflation and free flow of capital.
Sri Lanka's foreign exchange laws criminalized attempts by citizens to protect the value of their hard earned savings from being destroyed from currency depreciation.
In January Sri Lanka main opposition United National Party and the Marxist Janatha Vimukthi Peramuna raised objections to forex liberalization.
Frivolous objections by former rulers in opposition has generated calls for 'a strong government' in Sri Lanka based on arbitrary action, which has further reduced even civil liberties of the ordinary people and undermined rule of law.
Flawed Model
Foreign exchange shortages arise when a central bank maintains a peg with a foreign currency which has its own domestic inflation anchor (meaning it generates positive inflation on its own) and tries to run independent monetary policy on its own by printing extra money.
The flawed model, which was the basis of the post-World War II, Bretton Woods peg system collapsed in 1971-73 with countries with superior monetary knowledge abandoning it.
A widely acclaimed book of old newspaper stories published by the Central Bank this year, quoted the Sri Lanka's first Central Bank governor, John Exter, a US citizen, as having said in 1953, that 'problem' dogging the island was central bank money printing.
The central bank was buying Treasury bills with printed money to finance government debt.
Exter was quoted as saying in the report that "the new money has been used by the public to purchase an excessive volume of imports, thus drawing down the country's external reserves."
However instead of correcting the problem Sri Lanka imposed exchange controls, import controls and eventually closed the entire economy when the Bretton Woods system collapsed, leading to 20 percent unemployment in the 1970s.
Freer Capital
But from 1977 trade was opened. Stocks were opened to foreigners a decade later.
The central bank had already allowed foreign investors to buy into government debt. In another move state agency debt has also been opened for foreign buyers this month.
A 30 percent quota open to foreigners by in a debt issue by Sri Lanka's Urban Development Authority (UDA) has been snapped up early, according to a source close to the deal.
"It is a very interesting development. It has proved to the market - it has proved internationally - that Sri Lankan institutions can raise funds, which include funds from outside as well, and there is appetite," Cabraal said.
"And the UDA bond being oversubscribed is an indication of that situation. We would like to see specific projects being funded by specific lines."
Snapshot
The following is some of the proposed foreign exchange relaxations listed for implementation in 2010. Others including controls on imports and unification of non-resident investment accounts have already been implemented.
1) Allowing Sri Lankans to open and maintain accounts with banks abroad
2) Allowing Sri Lankans to invest in equity or short term debt instruments in overseas companies
3) Allowing foreigners to invest in rupee denominated debentures issued by local companies
4) Allowing insurance companies to invest part of their assets of the general funds or technical reserves in foreign assets
5) Allowing listed companies to list on foreign stock exchanges
6) Allowing foreigners on tour or business in Sri Lanka to open Sri Lanka rupee accounts.
source - www.lbo.lk
Sri Lanka to cut loan provision for banks
Sept 30, 2010 (LBO) - Sri Lanka's Central Bank has decided to reduce the general provision on performing loans of banks to 0.5 percent by December 31, 2011 from the current one percent, governor Nivard Cabraal said.
"We believe our economy does not now need provisioning as high as one percent and it will be reduced gradually over the next five quarters," he told a news conference.
The reduction in the general loan provision would release about eight billion rupees with the total bank loans portfolio being around 1.6 trillion rupees today, he said.
Deputy Governor of the Central Bank K G D D Dheerasinghe said there were no fears the increased liquidity would fuel inflation.
"The reduction in provisioning would allow banks to increase loans and reduce lending rates," he said.
The reduction will be phased out at a rate of 0.1 percent per quarter, over each of the five quarters commencing with the quarter ending December 31, 2010.
The one percent provision rule was introduced in November 2006 as an extra capital cushion during a period of potential financial and economic stress.
"At that time the central bank felt there was potential instability which we wanted to control. Now we feel the imminent danger has passed, it is not a threat now, so we're reducing it."
A central bank statement said "careful assessment of the current financial landscape at present, suggests that the risk of any potential downturn in the domestic and global economic activities has substantially abated.
"Further, the benefits of the improved macroeconomic fundamentals have provided the space for the domestic economy to grow rapidly in a stable environment," it said.
"At the same time, banks too have been improving their asset quality over the past few months, which outcome need now be supported by the encouragement of further good quality credit to spur economic growth."
source - www.lbo.lk
"We believe our economy does not now need provisioning as high as one percent and it will be reduced gradually over the next five quarters," he told a news conference.
The reduction in the general loan provision would release about eight billion rupees with the total bank loans portfolio being around 1.6 trillion rupees today, he said.
Deputy Governor of the Central Bank K G D D Dheerasinghe said there were no fears the increased liquidity would fuel inflation.
"The reduction in provisioning would allow banks to increase loans and reduce lending rates," he said.
The reduction will be phased out at a rate of 0.1 percent per quarter, over each of the five quarters commencing with the quarter ending December 31, 2010.
The one percent provision rule was introduced in November 2006 as an extra capital cushion during a period of potential financial and economic stress.
"At that time the central bank felt there was potential instability which we wanted to control. Now we feel the imminent danger has passed, it is not a threat now, so we're reducing it."
A central bank statement said "careful assessment of the current financial landscape at present, suggests that the risk of any potential downturn in the domestic and global economic activities has substantially abated.
"Further, the benefits of the improved macroeconomic fundamentals have provided the space for the domestic economy to grow rapidly in a stable environment," it said.
"At the same time, banks too have been improving their asset quality over the past few months, which outcome need now be supported by the encouragement of further good quality credit to spur economic growth."
source - www.lbo.lk
Sri Lanka Aitken Spence in resort deal with Six Senses
The project, worth 35-40 million US dollars, will comprise a resort and spa and beach front residential villas on a 10.5-acre plot in Ahungalla, close at an existing Aitken Spence resort, and on a 27-acre island nearby.
The joint statement said the new resort will open in 2012 with Six Senses expecting the average revenue per room to be in the range of 400-450 US dollars.
The project will comprise a total of 40 one-bedroom villa suites and 14 two-bedroom beach front residential villas in Ahungalla as well as 15 island villas.
Sonu Shivdasani, chairman of Six Senses Resorts & Spas, said Six Senses has been interested in Sri Lanka for some time.
Six Senses currently operates thirteen high-end resorts branded as Soneva, Six Senses and Evason in the Maldives, Thailand, Vietnam, Oman and Jordan.
There are also several new developments underway in locations such as Morocco, Turks and Caicos and China.
The Six Senses Spa division has twenty-seven company-operated spas, with new spa developments underway in several locations, including India, Morocco and Oman.
Rajan Brito, deputy chairman of Aitken Spence said the entry of a high-end international resort operator like Six Senses strengthens Sri Lanka’s destination brand.
Aitken Spence Hotels presently owns or manages twenty seven hotels and resorts under the brands Heritance, Adaaran and Aitken Spence Hotels & Resorts in Sri Lanka, the Maldives, India and Oman with a total room capacity of 2300.
It is the largest resort chain in Sri Lanka and the largest international resort operator in the Maldives.
source - www.lbo.lk
Sri Lanka listed firms seen ignoring good governance code
Sept 30, 2010 (LBO) - Less than half of Sri Lanka's listed companies comply with a voluntary good corporate governance code developed by regulators and the body representing chartered accountants, an official said.
Sujeewa Mudalige, president of the Institute of Chartered Accountants of Sri Lanka, said a survey by the Securities and Exchange Commission had found less than 50 percent of listed firms comply with the code.
"Of the 240 listed companies less than 120 are complying with the joint code by the ICASL and SEC which has been there for the last 15 years," he told a forum.
"We have people sitting on the boards of these companies who simply think it is not required, that it does not add value.
"We have less than 50 percent of companies not complying with a code that's not that stringent compared with global codes.
"That's the bottom line here in Sri Lanka."
source - www.lbo.lk
Sujeewa Mudalige, president of the Institute of Chartered Accountants of Sri Lanka, said a survey by the Securities and Exchange Commission had found less than 50 percent of listed firms comply with the code.
"Of the 240 listed companies less than 120 are complying with the joint code by the ICASL and SEC which has been there for the last 15 years," he told a forum.
"We have people sitting on the boards of these companies who simply think it is not required, that it does not add value.
"We have less than 50 percent of companies not complying with a code that's not that stringent compared with global codes.
"That's the bottom line here in Sri Lanka."
source - www.lbo.lk
Sri Lanka’s Inflation Outlook ‘Benign,’ Governor Cabraal Says
By Asantha Sirimanne and Anusha Ondaatjie
Sept. 29 (Bloomberg) -- Sri Lanka’s inflation outlook is “benign” and consumer price gains won’t reach double-digits, Governor Ajith Nivard Cabraal said.
“We do not see any major pressure building up,” Cabraal said at an interview in his office in Colombo today. “We will see slight increases and decreases but overall it will not be uncontrollable.”
Consumer prices in Colombo rose 5 percent in August from a year earlier, the first acceleration in six months. The Sri Lankan central bank lowered borrowing costs in July and August, in contrast to monetary authorities in Asia, including India, Malaysia and Thailand, which have raised rates to counter inflation and prevent asset bubbles.
The Sri Lankan central bank isn’t “unduly worried” about asset bubbles, Cabraal said.
Sri Lanka’s September inflation data will be released tomorrow at 3:00 p.m. in Colombo. Inflation may accelerate to 5.3 percent, according to a median estimate of eight economists surveyed by Bloomberg.
--Editors: Abhay Singh, Arijit Ghosh
source - www.businessweek.com
Sept. 29 (Bloomberg) -- Sri Lanka’s inflation outlook is “benign” and consumer price gains won’t reach double-digits, Governor Ajith Nivard Cabraal said.
“We do not see any major pressure building up,” Cabraal said at an interview in his office in Colombo today. “We will see slight increases and decreases but overall it will not be uncontrollable.”
Consumer prices in Colombo rose 5 percent in August from a year earlier, the first acceleration in six months. The Sri Lankan central bank lowered borrowing costs in July and August, in contrast to monetary authorities in Asia, including India, Malaysia and Thailand, which have raised rates to counter inflation and prevent asset bubbles.
The Sri Lankan central bank isn’t “unduly worried” about asset bubbles, Cabraal said.
Sri Lanka’s September inflation data will be released tomorrow at 3:00 p.m. in Colombo. Inflation may accelerate to 5.3 percent, according to a median estimate of eight economists surveyed by Bloomberg.
--Editors: Abhay Singh, Arijit Ghosh
source - www.businessweek.com
Benchmark T-bill rates fall
With the primary market auction more than two times oversubscribed, Treasury bill rates fell further. The six month Treasury bill yield fell to 6.95 percent from 7.02 the previous week while the 12 month Treasury bill yield fell to 7.10 percent from 7.14 percent a week ago.
These rates for tenures of six and 12 months are now much lower than the overnight repurchase rate, the policy rate for overnight bank deposits with the Central Bank, which is 7.25 percent.
The three month bill was not seen in the primary market for several weeks. "With rates this low, the government would obviously prefer to borrow on longer tenures," a dealer to The Island Financial Review.
The banking sector has been running on excessive rupee liquidity positions for the past few months; some dealers say to the tune of Rs. 30 billion on average per day.
Banks say there is little demand for credit, with too few viable project proposals coming in from the private sector. Most businesses on the other hand, especially the micro, small and medium enterprises say banks are too stringent and cautious in their lending.
Whatever the reasons, the slow growth of private sector growth is worrying the authorities and even the IMF commented that private sector credit growth was crucial for sustaining economic growth at the rate of 7 to 8 percent.
Last week the Central Bank issued the following directives to be implemented in the banking sector by the end of October: interest rates on housing loans should be brought down to 14 percent per annum, interest rates on credit card advances brought down to 24 percent per annum while interest rates on other loans and advances have to be adjusted downwards by 1to 2 percent per annum.
Dealers said the market was anticipating the government would reduce its outstanding domestic debt, as the Central Bank earlier said it would, thereby reducing the Treasury bills and bonds in circulation.
"The US$ 1 billion bond issue was subscribed at 6.5 percent and this is much lower than what the government is paying on Treasury bills and bonds. The ten year rupee denominated Treasury bond carries a yield of between 9 and 9.5 percent which is much higher than the ten year dollar bond," a dealer told The Island Financial Review.
Dealers said the government could retire some of the issued Treasury bills and bonds by buying them back. In fact the government said it would use some of the proceeds from the US$ 1 billion bond issue to retire short term foreign debts and high cost domestic debts.
"Liquidity of the banking system is high, and demand for credit is low. Businesses could be postponing their borrowings hoping that interest rates would come down further," a dealer said.
Some dealers were anticipating a policy rate cut last week, but the Central Bank left policy rates unchanged. "Despite this, Treasury bill rates have come down this week, an indication that market expectation is for rates to fall further," he said.
Another dealer said Sri Lankan banks were not leveraged, compared to American or European banks which were exposed to toxic assets which led to the global financial crisis.
"For this reason, Sri Lankan banks continue to survive on their ability to generate deposits, and the Central Bank knows this and this maybe why it did not want to cut policy rates further," he said.
source - www.island.lk
Rs. 1.6 billion recapitalisation of The Finance
The Monetary Board of the Central Bank has directed The Finance Company to recapitalise itself through Rs. 1.6 billion share issue and gave the company a December 15 deadline.
"The Monetary Board has decided that the time was now appropriate to recapitalize The Finance Company in order to facilitate the smooth operations of the company in the future. It has also been decided that the company must be managed by a capable Board of Directors representing the shareholders so that the Managing Agent could exit from the operations of TFC as soon as normalcy has been restored," the Central Bank said in a statement issued yesterday.
The following directives were issued to the once troubled finance company.
(a) Invite new investors to infuse fresh capital in the form of 40 million ordinary shares at Rs. 40 each, and in particular, attract strategic investors capable of infusing funds and playing an effective leadership role in managing TFC.
(b) Provide an opportunity for approximately 10% of the existing deposits in TFC, to be converted into 100 million non-voting shares of Rs.20 each, thereby converting deposits in the sum of Rs. 2 billion into equity. While this would enable the depositors to have an equity stake in TFC, which is already a listed company, it will also enable TFC to reduce its current liabilities and improve its balance sheet.
"The Board of Directors of TFC and the Managing Agent have accordingly been directed to implement the above scheme by 15 December 2010. In accordance with such directions, TFC would be expected to make the formal invitation to investors in due course," the Central Bank said.
"The Central bank would oversee the implementation of the above measures as well as ensure an equitable allocation of shares among investors in the interest of long term stability of the company and the financial system," it said.
source - www.island.lk
"The Monetary Board has decided that the time was now appropriate to recapitalize The Finance Company in order to facilitate the smooth operations of the company in the future. It has also been decided that the company must be managed by a capable Board of Directors representing the shareholders so that the Managing Agent could exit from the operations of TFC as soon as normalcy has been restored," the Central Bank said in a statement issued yesterday.
The following directives were issued to the once troubled finance company.
(a) Invite new investors to infuse fresh capital in the form of 40 million ordinary shares at Rs. 40 each, and in particular, attract strategic investors capable of infusing funds and playing an effective leadership role in managing TFC.
(b) Provide an opportunity for approximately 10% of the existing deposits in TFC, to be converted into 100 million non-voting shares of Rs.20 each, thereby converting deposits in the sum of Rs. 2 billion into equity. While this would enable the depositors to have an equity stake in TFC, which is already a listed company, it will also enable TFC to reduce its current liabilities and improve its balance sheet.
"The Board of Directors of TFC and the Managing Agent have accordingly been directed to implement the above scheme by 15 December 2010. In accordance with such directions, TFC would be expected to make the formal invitation to investors in due course," the Central Bank said.
"The Central bank would oversee the implementation of the above measures as well as ensure an equitable allocation of shares among investors in the interest of long term stability of the company and the financial system," it said.
source - www.island.lk
Heavy retail activity Bourse catches up lost ground
The Colombo bourse yesterday caught up the ground lost earlier in the week with both indices moving up sharply – the All Share by 84.14 points (1.23%) and the Milanka by 151.82 points (2.11%) on a turnover of Rs.3.2 billion, same as on the previous day, with retail activity strongly evident.
Brokers said that although volumes were relatively thin and some profit taking was visible, a shift in focus from fundamentally strong stock to speculative counters was visible.
"We saw that in Colombo Land, Marawila, Janashakthi and some other counters," Asmath Iqbal of John Keells Stock Brokers said.
"There was a lot of retail activity" Prashan Fernando of Acuity Stockbrokers added. "Except for Asian Hotel Properties and HNB X, there weren’t any large parcels seen."
Colombo Land, owners of the Liberty Plaza generated the day’s top turnover of Rs.277.9 million with nearly 10.7 million shares traded between Rs.23.40 and Rs.29 gaining 60 cents to close at Rs.24.
Marawila Hotels followed with nearly 8.4 million shares done between Rs.13.80 and Rs.18.30 gaining Rs.3.20 to close at Rs.16.60.
Asian Hotel Properties saw nearly 0.7 million shares traded, with over 0.5 million crossed in large parcels at a price of Rs. 200. The counter gained Rs.7.20 to close at Rs.200 on a trading range of Rs.190 and Rs.200.
Janashakthi moved Rs.1.70 to Rs.17.10 on 7.8 million shares done between Rs.15.30 and Rs.17.20.
Other counters that showed volume included Coco Lanka (2 million shares), HNB X (nearly 0.4 million shares), SMB Leasing rights (over 1.3 million), Seylan X (nearly 1.2 million shares), Vallibel Power (over 53.6 million shares) and Sierra (nearly 14.5 million shares).
All these counters closed higher than their previous close with DFCC Bank being one of the highest gainers on some volume (nearly 0.3 million shares) closing Rs.18.50 up at Rs.440.
Retail activity was intense on Colombo Land, Marawila, Janashakthi, Coco, Seylan X, Vallibel and Sierra, brokers said noting that punters were looking at relatively less pricey stock.
source - www.island.lk
Brokers said that although volumes were relatively thin and some profit taking was visible, a shift in focus from fundamentally strong stock to speculative counters was visible.
"We saw that in Colombo Land, Marawila, Janashakthi and some other counters," Asmath Iqbal of John Keells Stock Brokers said.
"There was a lot of retail activity" Prashan Fernando of Acuity Stockbrokers added. "Except for Asian Hotel Properties and HNB X, there weren’t any large parcels seen."
Colombo Land, owners of the Liberty Plaza generated the day’s top turnover of Rs.277.9 million with nearly 10.7 million shares traded between Rs.23.40 and Rs.29 gaining 60 cents to close at Rs.24.
Marawila Hotels followed with nearly 8.4 million shares done between Rs.13.80 and Rs.18.30 gaining Rs.3.20 to close at Rs.16.60.
Asian Hotel Properties saw nearly 0.7 million shares traded, with over 0.5 million crossed in large parcels at a price of Rs. 200. The counter gained Rs.7.20 to close at Rs.200 on a trading range of Rs.190 and Rs.200.
Janashakthi moved Rs.1.70 to Rs.17.10 on 7.8 million shares done between Rs.15.30 and Rs.17.20.
Other counters that showed volume included Coco Lanka (2 million shares), HNB X (nearly 0.4 million shares), SMB Leasing rights (over 1.3 million), Seylan X (nearly 1.2 million shares), Vallibel Power (over 53.6 million shares) and Sierra (nearly 14.5 million shares).
All these counters closed higher than their previous close with DFCC Bank being one of the highest gainers on some volume (nearly 0.3 million shares) closing Rs.18.50 up at Rs.440.
Retail activity was intense on Colombo Land, Marawila, Janashakthi, Coco, Seylan X, Vallibel and Sierra, brokers said noting that punters were looking at relatively less pricey stock.
source - www.island.lk
Agni Capital drives investement
Agni Capital has made significant strides in promoting investments into Sri Lanka.
Agni Capital was the catalyst behind the recent Rs 1 billion investment by Malaysian-based conglomerate Genting Group in Union Bank of Colombo, and an estimated similar sized investment by the Indian-based Religare Group into Bartleet TransCapital and its subsidiary Bartleet Mallory Stockbrokers last week.
Religare Enterprises Limited is a global financial services group with presence across Asia, Africa, Middle East, Europe and the Americas. Religare Enterprises has over a million clients with brokering arms in the UK and several other countries.
The founders of Religare Enterprises also own and run Fortis Healthcare which is shortly poised to become India's largest domestic hospital chain by number of beds with the completion of their upcoming hospitals. The entry of the promoter group into Sri Lanka with interests in both financial services and healthcare bodes well for Sri Lanka and is viewed as a significant development.
Agni Capital founded by Sri Lankan born Gane Ramachandra invests their own proprietary funds in specific opportunities and also manages corporate investments. Agni Capital operates with a mission to identify potential investment ideas and opportunities and to springboard them on to a strong growth trajectory.
"Our role is to identify opportunities, restructuring the company where required, packaging and structuring the deal for these opportunities to raise capital thus helping these small and medium sized companies grow with the right financial or strategic partners.
We select the appropriate corporate investor from our extensive network of corporate and investment partners and present them with opportunities which we believe will fit well within their investment needs, scope and philosophy. Today, Sri Lanka is enjoying strong leadership and stability, which in turn has increased investor confidence.
The Sri Lankan economy suffered for three decades, and the country is now poised to achieve its full development potential," Ramachandra said. The Managing Director of Agni Capital said that at present international investor confidence is increasing by the day on Sri Lanka, and what needs to be done now is to attract and infuse new capital into the economy and transform Sri Lanka into a noteworthy economic power in Asia and retake its previous enviable position in Asia.
"The global investment community is setting its sights on Sri Lanka and Agni is privileged to act as a bridge to unlock the full development potential of Sri Lanka, its domestic businesses and its people. We are confident that our operating model is best suited for Sri Lankan businesses and meeting their diverse expectations by offering compelling value and flexibility," Ramachandra said.
source - www.dailynews.lk
Agni Capital was the catalyst behind the recent Rs 1 billion investment by Malaysian-based conglomerate Genting Group in Union Bank of Colombo, and an estimated similar sized investment by the Indian-based Religare Group into Bartleet TransCapital and its subsidiary Bartleet Mallory Stockbrokers last week.
Religare Enterprises Limited is a global financial services group with presence across Asia, Africa, Middle East, Europe and the Americas. Religare Enterprises has over a million clients with brokering arms in the UK and several other countries.
The founders of Religare Enterprises also own and run Fortis Healthcare which is shortly poised to become India's largest domestic hospital chain by number of beds with the completion of their upcoming hospitals. The entry of the promoter group into Sri Lanka with interests in both financial services and healthcare bodes well for Sri Lanka and is viewed as a significant development.
Agni Capital founded by Sri Lankan born Gane Ramachandra invests their own proprietary funds in specific opportunities and also manages corporate investments. Agni Capital operates with a mission to identify potential investment ideas and opportunities and to springboard them on to a strong growth trajectory.
"Our role is to identify opportunities, restructuring the company where required, packaging and structuring the deal for these opportunities to raise capital thus helping these small and medium sized companies grow with the right financial or strategic partners.
We select the appropriate corporate investor from our extensive network of corporate and investment partners and present them with opportunities which we believe will fit well within their investment needs, scope and philosophy. Today, Sri Lanka is enjoying strong leadership and stability, which in turn has increased investor confidence.
The Sri Lankan economy suffered for three decades, and the country is now poised to achieve its full development potential," Ramachandra said. The Managing Director of Agni Capital said that at present international investor confidence is increasing by the day on Sri Lanka, and what needs to be done now is to attract and infuse new capital into the economy and transform Sri Lanka into a noteworthy economic power in Asia and retake its previous enviable position in Asia.
"The global investment community is setting its sights on Sri Lanka and Agni is privileged to act as a bridge to unlock the full development potential of Sri Lanka, its domestic businesses and its people. We are confident that our operating model is best suited for Sri Lankan businesses and meeting their diverse expectations by offering compelling value and flexibility," Ramachandra said.
source - www.dailynews.lk
‘We are watching you!’
- SEC says will not hesitate to curb market distortions, misbehaviour
- More than half of listed companies flout Governance Code
SEC Chairperson Ms. Indrani Sugathadasa said the Colombo Stock Exchange (CSE) was doing well with the price bands introduced to curb highly volatile stocks, ensuring the market was fair and safe for investors.
She said the CSE had tremendous potential to grow and contribute to the national economy. "Market capitalisation is about 42 percent of GDP which was 22 percent at the beginning of this year. The huge potential for growth also warrants vigilance and the regulator is more aware of the need of creating a fair market that would protect investors."
Earlier this year, the SEC imposed a ban on four stocks analysts termed ‘junk stocks’ after their prices increased without any improvements to the fundamental financials of these companies. The ban was lifted and a market-wide trading band of 10 percent was imposed. This brought stability into the market and the SEC later withdrew the price band and introduced a formula to capture specific stocks instead.
"There were mixed sentiments about the price bands but this was necessary to contain undue volatility in the market and the new formula was working well," Ms. Sugathadasa told a forum last morning.
"We are closely watching the market and would assist in its growth, however, we would not hesitate to use the tools at our disposal to dispel market distortions and misbehaviour," she said.
Ms. Sugathadasa made these comments at a meeting organised by the SEC and The Institute of Chartered Accountants of Sri Lanka in honour of visiting Chairperson of the International Organisation of Securities Commissions Executive Committee, Ms. Jane Diplock.
No longer a window dressing...
Ms. Diplock said the global financial crisis was a result of market misbehaviour and unethical practices where good governance was at best treated by companies like a window dressing. The crisis proved that good governance and profitability went hand and in hand and could no longer be separated. Investors would be interested in investing in markets where good governance was strong, she said.
More than half of listed companies...
The Institute of Chartered Accountants of Sri Lanka (ICASL) President Sujeewa Mudalige, quoting a SECreport, said that more than half of Sri Lanka’s listed companies failed to comply with a governance code the institute had formulated together with the SEC.
"The bottom line is this, less than half of Sri Lanka’s 240 listed companies are complying with a 15 year old governance code that was formulated by the institute and SEC. More than half are not. This code is not as stringent compared to global standards. The problem in Sri Lanka is that you have people sitting in company boards thinking that good governance did not add value to business," Mudalige said.
source - www.island.lk
Wednesday, September 29, 2010
Sri Lankan stocks close up 1.23-pct
Sept 29, 2010 (LBO) - Sri Lankan shares regained some lost ground Wednesday while regulators imposed a price band on two more stocks to curb price volatility, brokers said.
The All Share Price Index closed at 6,929.90, up 84.13 points or 1.23 percent, while the more liquid Milanka index ended at 7,347.78, up 2.11 percent or 151.82 points, according to stock exchange provisional figures.
Turnover was 3.3 billion rupees.
At end of trade, the 10 percent price band was imposed on Eastern Merchants voting and Coco Lanka non-voting shares, the Colombo Stock Exchange said in a statement.
Colombo Pharmacy Company, which was taken over by Environmental Resources Investments (ERI) closed at 2,550.00 rupees, up 265.50 (11.63 percent) with 500 shares traded.
Eastern Merchants closed at 600.00 rupees, up 125.00 (26.32 percent) with 700 shares changing hands, according to stock exchange provisional figures.
"It would help the market participants if there was a bit more transparency on the price bands and regulatory actions," said a market analyst.
"Many companies with severely odd and unexplainable trading patterns seem to have escaped the regulator's net."
MTD Walkers closed at 585.00 rupees, up 23.20 (4.13 percent) with 3,100 shares traded, and Singalanka Standard Chemicals at 220.00 rupees, up 45.00 (25.71 percent) with 500 shares changing hands, brokers said.
source - www.lbo.lk
The All Share Price Index closed at 6,929.90, up 84.13 points or 1.23 percent, while the more liquid Milanka index ended at 7,347.78, up 2.11 percent or 151.82 points, according to stock exchange provisional figures.
Turnover was 3.3 billion rupees.
At end of trade, the 10 percent price band was imposed on Eastern Merchants voting and Coco Lanka non-voting shares, the Colombo Stock Exchange said in a statement.
Colombo Pharmacy Company, which was taken over by Environmental Resources Investments (ERI) closed at 2,550.00 rupees, up 265.50 (11.63 percent) with 500 shares traded.
Eastern Merchants closed at 600.00 rupees, up 125.00 (26.32 percent) with 700 shares changing hands, according to stock exchange provisional figures.
"It would help the market participants if there was a bit more transparency on the price bands and regulatory actions," said a market analyst.
"Many companies with severely odd and unexplainable trading patterns seem to have escaped the regulator's net."
MTD Walkers closed at 585.00 rupees, up 23.20 (4.13 percent) with 3,100 shares traded, and Singalanka Standard Chemicals at 220.00 rupees, up 45.00 (25.71 percent) with 500 shares changing hands, brokers said.
source - www.lbo.lk
Sri Lanka hotel share, warrants issue approved
Sept 29, 2010 (LBO) - Sri Lanka's stock exchange has approved the issue of new shares and attached warrants by Hotel Reefcomber to raise cash to revamp the hotel, a statement said.
Hotel Reefcomber, which owns the Amaya Reef hotel on the southwest coast, plans to consolidate 10 shares to one and then sell a rights issue of two new shares for every existing one.
It has 157.3 million shares in issue.
The firm plans to sell 31.4 million shares at 25 rupees to raise 786 million rupees to refurbish the hotel.
The rights come with equity warrants that give the holder the right to buy a new share at a specified price in the future.
Reefcomber intends to give away four warrants with each new rights issue, two of which are to be exercised in 2011 and 2012 at 30 rupees each, and the other two to be exercised at 40 rupees each in 2015.
The stock exchange approval is subject to shareholder approval of the issue, according to the letter of approval released by the hotel.
source - www.lbo.lk
Hotel Reefcomber, which owns the Amaya Reef hotel on the southwest coast, plans to consolidate 10 shares to one and then sell a rights issue of two new shares for every existing one.
It has 157.3 million shares in issue.
The firm plans to sell 31.4 million shares at 25 rupees to raise 786 million rupees to refurbish the hotel.
The rights come with equity warrants that give the holder the right to buy a new share at a specified price in the future.
Reefcomber intends to give away four warrants with each new rights issue, two of which are to be exercised in 2011 and 2012 at 30 rupees each, and the other two to be exercised at 40 rupees each in 2015.
The stock exchange approval is subject to shareholder approval of the issue, according to the letter of approval released by the hotel.
source - www.lbo.lk
Sri Lanka mini-hydro power firm to list
Sept 29, 2010 (LBO) - Hydro Power Sri Lanka, mini-hydro power firm which has a generating capacity of 3.2 MegaWatts is selling 35 million shares to raise 350 million rupees to build more plants, the Colombo Stock Exchange and officials said.
The firm operates two 1.6 MegaWatt plant in the Gampola area in Sri Lanka's hill country and is planning to add 5.37 MW of new capacity with the proceeds, through several plants owned through three 100 percent owned subsidiaries.
In the year to March 2010 the firm has earned 115 million rupees in revenue selling power to the national grid and net profits of 57 million rupees, head of finance Sanjaya Prasad said.
The company now has 109 million shares issued. The firm is now a 50:50 joint venture between Free Lanka Power Holdings and Pussellawa Plantations.
The issue, managed by Taprobane Holdings Limited will open for subscription in mid October.
Last year one plant which was rated at 1.2MW and had generated 4.2 GigaWatthours of energy indicating a plant factor of 40.5 hours, but this year it will be able to sell up to 1.6MW of power to the grid.
It had nine years left in the power purchase agreement with the state-run Ceylon Electricity Board.
The second 1.6MW plant had generated 5.3GWh of energy at a plant factor of 38.1. It had seven years left in the power purchase agreement with the grid operator.
The Colombo Stock Exchange said the firm has been approved for a main board listing. Hydro Power Free Lanka is selling 32 percent of the stock to the public.
source - www.lbo.lk
The firm operates two 1.6 MegaWatt plant in the Gampola area in Sri Lanka's hill country and is planning to add 5.37 MW of new capacity with the proceeds, through several plants owned through three 100 percent owned subsidiaries.
In the year to March 2010 the firm has earned 115 million rupees in revenue selling power to the national grid and net profits of 57 million rupees, head of finance Sanjaya Prasad said.
The company now has 109 million shares issued. The firm is now a 50:50 joint venture between Free Lanka Power Holdings and Pussellawa Plantations.
The issue, managed by Taprobane Holdings Limited will open for subscription in mid October.
Last year one plant which was rated at 1.2MW and had generated 4.2 GigaWatthours of energy indicating a plant factor of 40.5 hours, but this year it will be able to sell up to 1.6MW of power to the grid.
It had nine years left in the power purchase agreement with the state-run Ceylon Electricity Board.
The second 1.6MW plant had generated 5.3GWh of energy at a plant factor of 38.1. It had seven years left in the power purchase agreement with the grid operator.
The Colombo Stock Exchange said the firm has been approved for a main board listing. Hydro Power Free Lanka is selling 32 percent of the stock to the public.
source - www.lbo.lk
Sri Lanka The Finance to raise cash, convert deposits to shares
Sept 29, 2010 (LBO) - The Finance Company, a Sri Lankan finance company recovering after a run, is to raise 1.6 billion rupees in fresh capital by attracting new investors and convert deposits into shares, a statement said.
The Central Bank said its Monetary Board has decided that it is now time to recapitalize the company in order to "facilitate the smooth operations of the company in the future."
The new scheme is to be implemented by December 15, 2010.
It has asked The Finance Company (TFC) to invite new investors to infuse fresh capital in the form of 40 million ordinary shares at 40 rupees each.
TFC also has to "attract strategic investors capable of infusing funds and playing an effective leadership role in managing the firm."
The central bank said TFC will also provide an opportunity for about 10 percent of its existing deposits to be converted into 100 million non-voting shares of 20 rupees each, converting about two billion rupees in deposits into equity.
"While this would enable the depositors to have an equity stake in TFC, which is already a listed company, it will also enable TFC to reduce its current liabilities and improve its balance sheet," the statement said.
The regulator intervened to stabilize The Finance Company (TFC) after it suffered a run with the collapse of several firms in its parent Ceylinco Group.
Merchant Bank of Sri Lanka, the investment banking unit of state-owned Bank of Ceylon, was later appointed as the managing agent of TFC in mid-2009.
"As a result of such interventions, the company has now recovered from the initial shock, while public confidence has been restored," the central bank said.
"It has also been decided that the company must be managed by a capable Board of Directors representing the shareholders so that the Managing Agent could exit from the operations of TFC as soon as normalcy has been restored."
The Finance Company is recovering and had reduced losses to 431 million rupees in the June 2010 quarter compared with a loss of 693 million rupees the year before.
source - www.lbo.lk
The Central Bank said its Monetary Board has decided that it is now time to recapitalize the company in order to "facilitate the smooth operations of the company in the future."
The new scheme is to be implemented by December 15, 2010.
It has asked The Finance Company (TFC) to invite new investors to infuse fresh capital in the form of 40 million ordinary shares at 40 rupees each.
TFC also has to "attract strategic investors capable of infusing funds and playing an effective leadership role in managing the firm."
The central bank said TFC will also provide an opportunity for about 10 percent of its existing deposits to be converted into 100 million non-voting shares of 20 rupees each, converting about two billion rupees in deposits into equity.
"While this would enable the depositors to have an equity stake in TFC, which is already a listed company, it will also enable TFC to reduce its current liabilities and improve its balance sheet," the statement said.
The regulator intervened to stabilize The Finance Company (TFC) after it suffered a run with the collapse of several firms in its parent Ceylinco Group.
Merchant Bank of Sri Lanka, the investment banking unit of state-owned Bank of Ceylon, was later appointed as the managing agent of TFC in mid-2009.
"As a result of such interventions, the company has now recovered from the initial shock, while public confidence has been restored," the central bank said.
"It has also been decided that the company must be managed by a capable Board of Directors representing the shareholders so that the Managing Agent could exit from the operations of TFC as soon as normalcy has been restored."
The Finance Company is recovering and had reduced losses to 431 million rupees in the June 2010 quarter compared with a loss of 693 million rupees the year before.
source - www.lbo.lk
Sri Lanka DFCC Bank rating confirmed at 'AA(lka)'
Sept 29, 2010 (LBO) - Fitch Ratings Lanka has confirmed DFCC Bank's (DFCC) National Long-term rating at 'AA(lka)' with a stable outlook, a statement said.
The agency has also affirmed DFCC's senior debentures at 'AA(lka)' and subordinated debentures at 'AA-(lka)'.
"DFCC's ratings are driven by its strong capitalisation supported by ongoing high profitability," the rating agency said.
"However, the ratings also take into account DFCC's relatively high exposure to riskier project finance and the challenges in securing long-term funding for its longer tenure project loans."
Fitch said the affirmation of DFCC's ratings comes on the back of the ongoing, albeit gradual economic recovery, which together with increased recovery efforts helped ease non-performing loan (NPL) pressures faced by the bank in 2008-2010.
Absolute NPLs which peaked in June 2009 fell by 19 percent at the end of the 2010mfinancial year.
A sudden spike in NPLs at end-June 2010 - driven by a few large customers - also eased by end-August 2010, Fitch said.
"However, the continued loan contraction resulted in DFCC's NPL ratios remaining high in relation to the sector."
Nevertheless, Fitch said, DFCC's conservative provisioning policies combined with its large capital cushion resulted in un-provided NPLs accounting for just 15 percent of equity against 25 percent among its rating category peers.
DFCC's consolidated loan book contracted by 14 percent over March 2009-June 2010, due to weak credit demand particularly project loans and an increased focus on managing NPLs.
"Although disbursements at DFCC increased in Q211, its loan growth is likely to remain low in the year ending 31 March 2011 (FY11)," Fitch said.
Growth at its subsidiary, DFCC Vardhana Bank - accounting for 28 percent of group loans - picked up faster, due to the working capital nature of its loans.
Project loans and leases accounted for 57 percent and eight percent of group advances at and are largely matched with long-term borrowings from bilateral and multilateral funding partners.
DFCC's profitability as measured by return on assets (ROA) increased to three percent in the 2010 financial year from 2.5 percent the year before, driven mainly by wider net interest margins.
Higher provisioning costs in the first quarter of the 2011 financial year resulted in a lower ROA of 1.8 percent after adjusting for the one-off 2,921 million rupee gain on the sale of a 10.7 percent voting stake in its associate Commercial Bank.
"DFCC's margins continued to benefit from its high proportion of equity-funded assets and a high investment in treasury bonds in H209, when interest rates were at their highest," Fitch said.
"The contribution from associate companies to the group's pre-tax profit was 24 percent in FY10 and would be considerably lower in the coming year due to the sale of part of its stake in Commercial Bank."
The rating agency said DFCC's ratings are sustained by its high levels of capitalisation - equity/assets of 26.5 percent and Tier 1 capital adequacy ratio of 26.2 percent at end-June 2010.
However, Fitch noted that as DFCC diversifies into commercial banking, its strong capital position could come under pressure.
"Also, any sustained deterioration in its asset quality or profitability, which is likely to erode its strong equity base, could place downward pressure on its ratings."
source - www.lbo.lk
The agency has also affirmed DFCC's senior debentures at 'AA(lka)' and subordinated debentures at 'AA-(lka)'.
"DFCC's ratings are driven by its strong capitalisation supported by ongoing high profitability," the rating agency said.
"However, the ratings also take into account DFCC's relatively high exposure to riskier project finance and the challenges in securing long-term funding for its longer tenure project loans."
Fitch said the affirmation of DFCC's ratings comes on the back of the ongoing, albeit gradual economic recovery, which together with increased recovery efforts helped ease non-performing loan (NPL) pressures faced by the bank in 2008-2010.
Absolute NPLs which peaked in June 2009 fell by 19 percent at the end of the 2010mfinancial year.
A sudden spike in NPLs at end-June 2010 - driven by a few large customers - also eased by end-August 2010, Fitch said.
"However, the continued loan contraction resulted in DFCC's NPL ratios remaining high in relation to the sector."
Nevertheless, Fitch said, DFCC's conservative provisioning policies combined with its large capital cushion resulted in un-provided NPLs accounting for just 15 percent of equity against 25 percent among its rating category peers.
DFCC's consolidated loan book contracted by 14 percent over March 2009-June 2010, due to weak credit demand particularly project loans and an increased focus on managing NPLs.
"Although disbursements at DFCC increased in Q211, its loan growth is likely to remain low in the year ending 31 March 2011 (FY11)," Fitch said.
Growth at its subsidiary, DFCC Vardhana Bank - accounting for 28 percent of group loans - picked up faster, due to the working capital nature of its loans.
Project loans and leases accounted for 57 percent and eight percent of group advances at and are largely matched with long-term borrowings from bilateral and multilateral funding partners.
DFCC's profitability as measured by return on assets (ROA) increased to three percent in the 2010 financial year from 2.5 percent the year before, driven mainly by wider net interest margins.
Higher provisioning costs in the first quarter of the 2011 financial year resulted in a lower ROA of 1.8 percent after adjusting for the one-off 2,921 million rupee gain on the sale of a 10.7 percent voting stake in its associate Commercial Bank.
"DFCC's margins continued to benefit from its high proportion of equity-funded assets and a high investment in treasury bonds in H209, when interest rates were at their highest," Fitch said.
"The contribution from associate companies to the group's pre-tax profit was 24 percent in FY10 and would be considerably lower in the coming year due to the sale of part of its stake in Commercial Bank."
The rating agency said DFCC's ratings are sustained by its high levels of capitalisation - equity/assets of 26.5 percent and Tier 1 capital adequacy ratio of 26.2 percent at end-June 2010.
However, Fitch noted that as DFCC diversifies into commercial banking, its strong capital position could come under pressure.
"Also, any sustained deterioration in its asset quality or profitability, which is likely to erode its strong equity base, could place downward pressure on its ratings."
source - www.lbo.lk
Sri Lanka to invite offers for commodity exchange
Sept 29, 2010 (LBO) - Sri Lanka will shortly call for international expressions of interest to set up a commodities exchange, and the successful bidder will have to assist in developing a regulatory framework, a top official said.
"We are going to call for expressions of interest (EOI) to set up a commodities exchange," deputy director general of the Securities and Exchange Commission Malik Cader told senior executives at the LBR-LBO chief executive officers forum in Colombo.
"It will be an international tender, we want to very transparent on that. There is a lot of interest from big players."
The EOI will be called before the end of the year, Cader said.
The successful bidder would also help develop a regulatory framework.
"It will be another SEC like thing," Cader said. "We need to do the regulatory framework; we want a full package of the whole thing."
Commodities exchange trade notional spot as well as futures contracts. The contracts however can be settled in cash or physically.
The exchange will also have to be linked with facilities like warehouses for physical delivery, Cader said.
Sri Lanka has the opportunity to even develop an international contract in tea, provided a benchmark blend can be agreed upon. Such a contract if priced in a currency like the dollar can even be traded on other exchanges.
Trading a contract on other exchanges provide access to larger pools of liquidity. In March 2010 Chicago Mercantile Exchange launched dollar a crude palm oil contract in partnership with Malaysia with final settlement tied to the Malaysian ringgit contract.
Domestic currency denominated contracts have less international appeal as currency fluctuations have to be separately accounted and provided for.
source - www.lbo.lk
"We are going to call for expressions of interest (EOI) to set up a commodities exchange," deputy director general of the Securities and Exchange Commission Malik Cader told senior executives at the LBR-LBO chief executive officers forum in Colombo.
"It will be an international tender, we want to very transparent on that. There is a lot of interest from big players."
The EOI will be called before the end of the year, Cader said.
The successful bidder would also help develop a regulatory framework.
"It will be another SEC like thing," Cader said. "We need to do the regulatory framework; we want a full package of the whole thing."
Commodities exchange trade notional spot as well as futures contracts. The contracts however can be settled in cash or physically.
The exchange will also have to be linked with facilities like warehouses for physical delivery, Cader said.
Sri Lanka has the opportunity to even develop an international contract in tea, provided a benchmark blend can be agreed upon. Such a contract if priced in a currency like the dollar can even be traded on other exchanges.
Trading a contract on other exchanges provide access to larger pools of liquidity. In March 2010 Chicago Mercantile Exchange launched dollar a crude palm oil contract in partnership with Malaysia with final settlement tied to the Malaysian ringgit contract.
Domestic currency denominated contracts have less international appeal as currency fluctuations have to be separately accounted and provided for.
source - www.lbo.lk
Sri Lanka to clamp down on equity warrants
Sept 29, 2010 (LBO) - Sri Lanka is capping equity warrants to 15 percent of a company's capital, limiting the term to two years ahead and would also require firms to maintain a minimum public float, a top regulatory official said.
"These rules are in line with international benchmarks and is similar to rules in India and Malaysia," deputy director general of the Securities and Exchange Commission Malik Cader said after addressing a group of senior business executives at the LBR- LBO chief executive officers forum in Colombo.
An equity warrant gives a holder the right to buy a new share in a company (exercised) at a future date at a specific price and is similar to a derivative contract.
Crudely valued, a warrant is worth at least the difference between the current price of an ordinary share and the specified price at which it is exercised. But any exercised warrants would dilute the value of the ordinary share.
If the market price of the ordinary share is lower than exercise price at the exercise date, the warrants would expire without diluting the capital. The uncertainty makes warrants, which are similar to a derivative contract, highly speculative.
Unless a firm is on track to make increasingly higher profits every year, a warrant would be worthless.
Warrants are usually give free as a sweetner when companies issues fresh shares to existing shareholder to raise additional capital through a 'rights' issue.
Though warrants have been issued in Sri Lanka for years, amid the current boom, warrant issues have increased with Environmental Resources Investments, a firm which has bought into several other operating businesses, being a prolific issuer.
The market valuation of warrants can be skewed in a firm which is closely held by insiders, whose underlying shares can also be suffering the same fate, compounding the problem. Illiquid companies are favourite targets of price manipulators.
Cader said firms in the main board of the Colombo Stock Exchange would have to maintain a 25 percent public float to issue warrants and those on the second board would have to maintain at least 10 percent.
The regulator will also shortly release a consultation paper on devising minimum public floats, which though required at the time of listing are not maintained later.
source - www.lbo.lk
"These rules are in line with international benchmarks and is similar to rules in India and Malaysia," deputy director general of the Securities and Exchange Commission Malik Cader said after addressing a group of senior business executives at the LBR- LBO chief executive officers forum in Colombo.
An equity warrant gives a holder the right to buy a new share in a company (exercised) at a future date at a specific price and is similar to a derivative contract.
Crudely valued, a warrant is worth at least the difference between the current price of an ordinary share and the specified price at which it is exercised. But any exercised warrants would dilute the value of the ordinary share.
If the market price of the ordinary share is lower than exercise price at the exercise date, the warrants would expire without diluting the capital. The uncertainty makes warrants, which are similar to a derivative contract, highly speculative.
Unless a firm is on track to make increasingly higher profits every year, a warrant would be worthless.
Warrants are usually give free as a sweetner when companies issues fresh shares to existing shareholder to raise additional capital through a 'rights' issue.
Though warrants have been issued in Sri Lanka for years, amid the current boom, warrant issues have increased with Environmental Resources Investments, a firm which has bought into several other operating businesses, being a prolific issuer.
The market valuation of warrants can be skewed in a firm which is closely held by insiders, whose underlying shares can also be suffering the same fate, compounding the problem. Illiquid companies are favourite targets of price manipulators.
Cader said firms in the main board of the Colombo Stock Exchange would have to maintain a 25 percent public float to issue warrants and those on the second board would have to maintain at least 10 percent.
The regulator will also shortly release a consultation paper on devising minimum public floats, which though required at the time of listing are not maintained later.
source - www.lbo.lk
Foreign investors gobble Lankan debt US$ 1bn sovereign bond issue closes in 14 hours
* Yield at 6.25 percent, lower than issues in 2007, 2009
Central Bank’s Public Debt Department Superintendent C. J. P. Siriwardena said the global issue of the US$ 1 billion sovereign bonds closed within 14 hours after opening at 9 a.m. Hong Kong time on Monday (27), attracting bids amounting to more than US$ 6.3 billion.
The 10 year bonds yielded 6.25 percent through competitive bidding in an issue managed by jointly HSBC, Royal Bank of Scotland, Bank of America Merrill Lynch and Bank of Ceylon. The three foreign banks have also been appointed as sovereign ratings advisors to the government for the next four years.
"There are two things that make this bond issue different from the previous sovereign bond issues. The first being the extension of the yield curve from five years to ten, while the second, the size, US$ 1 billion from the previous issues of US$ 500 million. Investor response was overwhelming," Siriwardena told The Island Financial Review.
"The fact that investors picked up the issue at 6.25 percent is also a reflection of their confidence in Sri Lanka’s economy. Inflation is benign, the exchange rate is stable, reserves are strong and the economy has shown strong growth during the first and second quarters (7.1 percent and 8.5 percent), this is why they accepted the bonds at this rate for ten years," he said.
The proceeds from this sovereign bond issue would be utilized for infrastructure development activities carried out by the government and also to restructure the existing government debt portfolio by retiring high cost domestic debt and short term foreign currency denominated debt.
A sovereign bond issue for US$ 500 million, after the end of the conflict last year, was 13 times oversubscribed and was priced at 7.4 percent. This issue was the second since October 2007, which was also for US$ 500 million priced at a much higher rate of 8.25 percent.
"Orders were received from 362 investors globally. By geographic distribution, 52.5 percent of the bonds were allocated to investors in the United States, 25 percent to investors in Europe and 22.5 percent to investors in Asia. By investor type, 85 percent of the bonds were allocated to Fund and Asset Managers and the balance to Pension Funds, Insurance companies and banks," the Central Bank said in a statement last afternoon.
"The Offering is of 144A / Reg. S format and the bonds will mature in October 2020. The bonds are rated B+ by two international rating agencies, Standard & Poor’s and Fitch Ratings and will be listed on the Singapore Exchange.
"The current coupon rate of 6.25 percent for the 10 year sovereign bond is significantly lower than the cost of borrowings as compared to previous two international offerings in 2009 and 2007," the Central Bank said.
source - www.island.lk
Investors confident
Even before Sri Lanka decided to float the US$ 1 billion sovereign bond issue, which was 6.3 times oversubscribed and closed within 14 hours of the issues opening, on Monday (27), officials said foreign investors were keen on investing in government paper.
Central Bank Deputy Governor K. G. D. D. Dheerasinghe told The Island Financial Review that top officials had been on road shows to Singapore, Hong Kong, London and the US before deciding to float the bond issue.
"Investors were happy with our briefing them about Sri Lanka’s economy and they were making inquiries as to whether we would be issuing a debt instrument any time soon," he said. Dheerasinghe said these road shows were not specifically promoting the bond issue.
Central Bank Public Debt Department Superintendent C. J. P. Siriwardena said officials had met with investors in Singapore, Hong Kong, London, Boston, New York, Los Angeles and San Francisco with regards the bond issue. "They were happy and convinced about Sri Lanka," he said.
source - www.island.lk
Central Bank Deputy Governor K. G. D. D. Dheerasinghe told The Island Financial Review that top officials had been on road shows to Singapore, Hong Kong, London and the US before deciding to float the bond issue.
"Investors were happy with our briefing them about Sri Lanka’s economy and they were making inquiries as to whether we would be issuing a debt instrument any time soon," he said. Dheerasinghe said these road shows were not specifically promoting the bond issue.
Central Bank Public Debt Department Superintendent C. J. P. Siriwardena said officials had met with investors in Singapore, Hong Kong, London, Boston, New York, Los Angeles and San Francisco with regards the bond issue. "They were happy and convinced about Sri Lanka," he said.
source - www.island.lk
Sri Lanka extends yield curve with $1 billion issue
Sri Lanka comes to market with its largest and longest-dated sovereign ever, achieving the objective of extending its yield curve to 10 years.
By Mei Tuicolo | 29 September 2010
Keywords: sri lanka | sovereign | bank of america merrill | baml | hsbc | rbs | bond
The Democratic Socialist Republic of Sri Lanka has sold $1 billion of fixed-rate senior unsecured 10-year bonds -- the largest and longest-dated sovereign from the South Asian island nation ever. The notes pay a 6.25% coupon and were re-offered at par for the same amount of yield. On a spreads basis that translated into 373.1bp over 10-year Treasuries.
The market has seen credit spreads tighten and yields rally recently and as a result, demand for emerging market paper and longer-dated notes has picked up. Sri Lanka's new credit took advantage of both those trends.
A single-B credit doesn’t appeal to everybody, but it is included in the emerging market bond index, which helps and [hence it] appeals to emerging market-based funds globally," said a banker, noting that such funds were a key target as the country went on the road to meet up with key investors.
Sri Lanka was on the road throughout the course of last week, speaking with investors and selling a story not only of an emerging market sovereign credit, but of improved fundamentals surrounding the economy that led to a ratings upgrade by Standard and Poor’s earlier this month.
Following that upgrade, the new 2020 bonds received a B+ rating from both S&P and Fitch.
Based on the strong reception received from investors, the borrower went straight to the market with a yield guidance of 6.5%. The guidance was left unchanged throughout Hong Kong trading day on Monday, and by midday New York time, after US accounts had had a chance to look at the trade, the lead managers confirmed a final guidance of 6.25% to 6.375%. By then, they had already secured an order book of over $3 billion.
By the time the order books closed, the demand totalled $6.5 billion from 310 accounts. Incidentally, this equalled the size of the order book for Sri Lanka's $500 million 2015 sovereign issue last year, which was used as the most comparable benchmark for this deal.
During the Hong Kong trading session yesterday the bonds reached a high of 101.00 on a cash price basis. By the end of the day they had fallen slightly to 100.75 for a yield of 6.15%.
“At 10bp tighter (on a yield basis) this is a very solid performance without leaving too much value on the table for investors,” said one banker familiar with the deal.
The notes were issued under the 144A/Reg-S format and attracted strong interest from US-based accounts, which took 52.5% of the bonds.
“It was an asset that suited investor preferences in the US extremely well,” said one source. “Leading into the trade, there was a strong bid for 10-year assets in the US,” he added.
Europe bought a quarter of the notes offered and Asia took the remaining 22.5%. There were mixed reactions to the allocation with one source commenting that some accounts in Asia were asking why it was heavily skewed towards US accounts.
What it came down to, explained another source, was that the US was able to provide good quality orders, particularly through asset and fund managers.
Indeed, the bonds saw a strong bid from real money accounts, and fund managers and asset managers received 85% of the bonds, while the remainder was evenly distributed between pension and insurance funds, private banks and commercial banks.
Bank of America Merrill Lynch, HSBC and the Royal Bank of Scotland were joint lead managers for the offering.
source - www.financeasia.com
By Mei Tuicolo | 29 September 2010
Keywords: sri lanka | sovereign | bank of america merrill | baml | hsbc | rbs | bond
The Democratic Socialist Republic of Sri Lanka has sold $1 billion of fixed-rate senior unsecured 10-year bonds -- the largest and longest-dated sovereign from the South Asian island nation ever. The notes pay a 6.25% coupon and were re-offered at par for the same amount of yield. On a spreads basis that translated into 373.1bp over 10-year Treasuries.
The market has seen credit spreads tighten and yields rally recently and as a result, demand for emerging market paper and longer-dated notes has picked up. Sri Lanka's new credit took advantage of both those trends.
A single-B credit doesn’t appeal to everybody, but it is included in the emerging market bond index, which helps and [hence it] appeals to emerging market-based funds globally," said a banker, noting that such funds were a key target as the country went on the road to meet up with key investors.
Sri Lanka was on the road throughout the course of last week, speaking with investors and selling a story not only of an emerging market sovereign credit, but of improved fundamentals surrounding the economy that led to a ratings upgrade by Standard and Poor’s earlier this month.
Following that upgrade, the new 2020 bonds received a B+ rating from both S&P and Fitch.
Based on the strong reception received from investors, the borrower went straight to the market with a yield guidance of 6.5%. The guidance was left unchanged throughout Hong Kong trading day on Monday, and by midday New York time, after US accounts had had a chance to look at the trade, the lead managers confirmed a final guidance of 6.25% to 6.375%. By then, they had already secured an order book of over $3 billion.
By the time the order books closed, the demand totalled $6.5 billion from 310 accounts. Incidentally, this equalled the size of the order book for Sri Lanka's $500 million 2015 sovereign issue last year, which was used as the most comparable benchmark for this deal.
During the Hong Kong trading session yesterday the bonds reached a high of 101.00 on a cash price basis. By the end of the day they had fallen slightly to 100.75 for a yield of 6.15%.
“At 10bp tighter (on a yield basis) this is a very solid performance without leaving too much value on the table for investors,” said one banker familiar with the deal.
The notes were issued under the 144A/Reg-S format and attracted strong interest from US-based accounts, which took 52.5% of the bonds.
“It was an asset that suited investor preferences in the US extremely well,” said one source. “Leading into the trade, there was a strong bid for 10-year assets in the US,” he added.
Europe bought a quarter of the notes offered and Asia took the remaining 22.5%. There were mixed reactions to the allocation with one source commenting that some accounts in Asia were asking why it was heavily skewed towards US accounts.
What it came down to, explained another source, was that the US was able to provide good quality orders, particularly through asset and fund managers.
Indeed, the bonds saw a strong bid from real money accounts, and fund managers and asset managers received 85% of the bonds, while the remainder was evenly distributed between pension and insurance funds, private banks and commercial banks.
Bank of America Merrill Lynch, HSBC and the Royal Bank of Scotland were joint lead managers for the offering.
source - www.financeasia.com
SLDB performance improves
In March 2009, Sri Lanka Development Bonds (SLDB) for US$ 200 million attracted only US$ 184 million.
However, the first issue after the war in June 2009, an SLDB issue had been oversubscribed by 135 percent, raising US$ 115.8 million of which US$ 50 million was to be rolled over while the balance went in to replenish reserves of the Central Bank after a US$ 125 million loan repayment was made. The offered SLDBs in this issue amounted to US$ 50 million with a two year maturity period at the 6 month LIBOR for US Dollars plus 4.97 per cent.
In August 2009, the Public Debt Department of the Central Bank issued US$ 190 million Sri Lanka Development Bonds (SLDB) at a rate of LIBOR 6 month rate for US dollars plus 449.8 basis points (4.49 percent) to pay-up maturing bonds amounting to US$ 175 million. This offer was for two year SLDBs for US$ 150 million made on August 6 which was oversubscribed 1.3 times with bids from local and foreign commercial banks amounting to US$ 195.5 billion. The bank accepted US$ 190 million of these bids.
In March 2010, the government accepted US$ 92 million after a US$ 100 million Sri Lanka Development Bond issue was 1.34 times oversubscribed with total bids from local and foreign commercial banks amounting to US$ 134 million. The government accepted US$ 55 million on development bonds with a three year maturity period at about 4.35 percent. US$ 37 million development bonds with a two year maturity period were accepted at about 4.20 percent.
source - www.island.lk
UDA's Rs. 10 billion debenture issue oversubscribed
A "significant' achievement says managers and bankers to the issue BOC Chief
The Bank of Ceylon-managed and marketed Urban Development Authority (UDA) debenture issue worth Rs. 10 billion has been successfully oversubscribed yesterday.
BOC Chairman Gamini Wickramasinghe said that the response had been "magnificent" and the fact that the mega listed debenture issue being oversubscribed on the fourth day of its official opening was a significant achievement for both the UDA as well as the BOC.
The UDA issued 100 million fully secured, redeemable, five year debentures of Rs. 100 each with a minimum subscription of Rs. 10,000. It had three interest rate options beneficial to institutional as well retail investors. Its official opening was on September 23rd.
Mr. Wickramasinghe said that apart from the attractive interest rates and the options, the issue was a success because of the eventual economic value of the development project for which UDA will be using the funds raised.
UDA will be using the funds for the construction of houses for the people who are presently living in small houses/ shanties. These houses will be constructed within the city limits as well as in the Colombo suburb areas. It is estimated that nearly 66,000 families could be resettled under this programme and the UDA is planning to get the assistance of private developers as well.
BOC Chairman said that the project has a humanitarian aspect as poor dwellers in the future will enjoy decent and healthy living. Additionally valuable prime land in the city could be released for substantial commercial development.
"This debenture issue is a win-win for all stakeholders," Wickramasinghe added.
BOC Chairman also said that the success of the UDA issue will certainly be an eye opener as well as an encouragement for other state entities to explore raising funds via the capital markets and that BOC is ever willing to extend its expertise.
Apart from the benefit of these debentures being listed on the Colombo Stock Exchange (CSE), the type A of the debenture is fully secured, redeemable, Five (05) Year Debentures, of LKR 100 each bearing interest at a fixed rate of Eleven percent (11%) per annum on the Principal sum payable annually at the expiry of every One (01) year period from the date of allotment of the Debentures.
Type B was Fully secured, redeemable, Five (05) Year Debentures, of LKR 100 each bearing interest on the Principal sum at a floating rate, payable bi-annually at the expiry of every Six (06) month period from the date of allotment of the Debentures.
Type C was Fully secured, redeemable, Five (05) Year Debentures, of LKR 100 each bearing interest at a fixed rate of Ten percent (10%) per annum on the Principal sum payable monthly at the expiry of every One (01) month period from the date of allotment of the Debentures.
source - www.dailynews.lk
The Bank of Ceylon-managed and marketed Urban Development Authority (UDA) debenture issue worth Rs. 10 billion has been successfully oversubscribed yesterday.
BOC Chairman Gamini Wickramasinghe said that the response had been "magnificent" and the fact that the mega listed debenture issue being oversubscribed on the fourth day of its official opening was a significant achievement for both the UDA as well as the BOC.
The UDA issued 100 million fully secured, redeemable, five year debentures of Rs. 100 each with a minimum subscription of Rs. 10,000. It had three interest rate options beneficial to institutional as well retail investors. Its official opening was on September 23rd.
Mr. Wickramasinghe said that apart from the attractive interest rates and the options, the issue was a success because of the eventual economic value of the development project for which UDA will be using the funds raised.
UDA will be using the funds for the construction of houses for the people who are presently living in small houses/ shanties. These houses will be constructed within the city limits as well as in the Colombo suburb areas. It is estimated that nearly 66,000 families could be resettled under this programme and the UDA is planning to get the assistance of private developers as well.
BOC Chairman said that the project has a humanitarian aspect as poor dwellers in the future will enjoy decent and healthy living. Additionally valuable prime land in the city could be released for substantial commercial development.
"This debenture issue is a win-win for all stakeholders," Wickramasinghe added.
BOC Chairman also said that the success of the UDA issue will certainly be an eye opener as well as an encouragement for other state entities to explore raising funds via the capital markets and that BOC is ever willing to extend its expertise.
Apart from the benefit of these debentures being listed on the Colombo Stock Exchange (CSE), the type A of the debenture is fully secured, redeemable, Five (05) Year Debentures, of LKR 100 each bearing interest at a fixed rate of Eleven percent (11%) per annum on the Principal sum payable annually at the expiry of every One (01) year period from the date of allotment of the Debentures.
Type B was Fully secured, redeemable, Five (05) Year Debentures, of LKR 100 each bearing interest on the Principal sum at a floating rate, payable bi-annually at the expiry of every Six (06) month period from the date of allotment of the Debentures.
Type C was Fully secured, redeemable, Five (05) Year Debentures, of LKR 100 each bearing interest at a fixed rate of Ten percent (10%) per annum on the Principal sum payable monthly at the expiry of every One (01) month period from the date of allotment of the Debentures.
source - www.dailynews.lk
SMB Leasing to raise Rs 581 million from rights issue
The company proposes to issue more than 381 million ordinary voting shares at a ratio of six shares for every seven shares held at an issue price of 80 cents, and 460 million ordinary non-voting shares at a ratio of twenty three shares for every five held at 60 cents per share.
Each new share will be accompanied by a free warrant exercisable in December 2011, at an exercise price of 1 Rupee for ordinary voting shares, and an exercise price of 80 cents for ordinary non-voting shares. The conversion of these warrants to shares by December 2011 is expected to result in an additional equity inflow of Rs 749.5 million.
In the event of an under-subscription of the issue of non-voting shares, SMBL has entered in to an arrangement with Seylan Bank PLC to issue ordinary non-voting shares and the corresponding number of warrants in lieu of outstanding debt.
“We expect the rights issue to generate a lot of interest from shareholders because it represents an opportunity to participate in the growth and future profits of SMB Leasing, following its restructuring and consolidation,” Company CEO Surath Peiris said. He said the rights issue of ordinary non-voting shares of the company will enable the company to convert the outstanding debt owed to Seylan Bank PLC to equity, improve its core capital adequacy requirements and fund new growth opportunities arising from the post-conflict resurgence of the economy.
One new area of revenue and growth for SMBL would be the company’s appointment as a sole distributor and transport solutions provider for the Northern and Eastern provinces by Lanka Ashok Leyland PLC.
A Memorandum of Understanding ratified by the two companies last week paves the way for SMBL to act as the sole distributor for LAL vehicles.
source - www.dailynews.lk
Retail interest in less pricey stock CSE continues to adjust down, profit taking seen
"Both profit taking and the monthly settlement cycle pushed down indices though retailers continued to be active on shares like Dialog, Colombo Land, Reefcomber, Bogala and Seylan (non voting)," Prashan Fernando of Acuity Stockbrokers said.
Brokers noted that the market had eased on Monday and the All Share Price Index closing seven points down and the Milanka lost 31 points with both indices being in negative territory. But most of yesterday, unlike on the previous day when the All Share cleared the 7,000 point barrier and thereafter lost steam before close of trading, the indices were in negative territory.
Dialog was the day’s biggest turnover generator with nearly 26.4 million shares done between Rs.11.90 and Rs.12.10 gaining 10 cents to close at Rs.12 contributing Rs.316.7 million to business volume.
Colombo Land was up Rs.6.30 to Rs.23.40 on over 12.7 million shares traded between Rs.17.20 and Rs.23.60 while Reefcomber gained Rs.2.70 to close at Rs.20.50 on nearly 8 million shares done between Rs.19.80 and Rs.21.50.
Bogala Graphite gained a hefty Rs.28.60 on nearly 1.8 million shares traded between Rs.59 and Rs.100 with the counter closing at Rs.79.
Seylan X dropped Rs.3.30 to close at Rs.58.10 on over 2.3 million shares done between Rs.58 and Rs.62.
Among the blue chips, JKH was up Rs.3.10 to Rs.305 on nearly 0.4 million shares done between Rs.299 and Rs.305 though some of the others including Carsons, DFCC and the NDB were down.
LOLC continued galloping gaining Rs.80.40 to close at Rs.1,400 on 35,100 shares done between Rs.1,300 and Rs.1448.90.
Among the recent high flyers, Colombo Pharmacy lost Rs.565.60 to close at Rs.2,800 on 5,100 shares, Ceylinco X lost Rs.59.40 to close at Rs.325 on 6,500 shares, Aitken Spence was down Rs.47.80 to close at Rs.3,160 on 5,500 shares and Carsons lost Rs.42.20 to close at Rs.990 on 10,600 shares.
Among plantations Watawala gained Rs.4.60 to close at Rs.37.90 on nearly 1.7 million shares while Kelani Valley gained Rs.50.50 to close at Rs.210 on 15,200 shares. Several other counters in the sector showed both volume and price gains.
These included Kegalle, up Rs.11.30 to close at Rs.155.50 on over 0.1 million shares and Namunukula up Rs.8.10 to close at Rs.120 on nearly 0.2 million shares. Balangoda was up Rs.4 to close at Rs.66.50 on over 0.4 million shares.
source - www.island.lk
Tuesday, September 28, 2010
Stock Market Watch - Colombo Stock Exchange
28.09.2010 - (S.L.S.Picks) Market summery for the day
Today's negative indicators
STOCKS TO WATCH
Today's positive indicators
- Net foreign inflow of Rs 111m.n.
- Sri Lanka gets $ 6.3 b.n orders for $ 1.0 b.n bond sale.
- 50% of the total bond (half million $) comes from USA.
Today's negative indicators
- Market was down due to profit taking & month end debt clearing by the brokering firms.
STOCKS TO WATCH
- Bairaha farms
- Lanka orix leasing company
- Colombo Pharmacy
- Lanka Milk Foods
- Pan Asia Bank
Sri Lanka Shares May Extend Rally on Stock Splits (Update1)
By Shiyin Chen
Sept. 28 (Bloomberg) -- Sri Lanka’s stock rally may enter a “blow-off phase” as stock splits help draw individual investors to the world’s second-best performer this year, according to Nomura Holdings Inc.
The Colombo All-Share Index has climbed 103 percent this year, the biggest gainer after Mongolia’s MSE Top 20 Index among 91 global benchmark indexes tracked by Bloomberg. The gauge has tripled since the end of a 26-year civil war in May 2009 on optimism that the government will be able to focus on economic development and draw investment.
Commercial Bank of Ceylon Plc, the nation’s biggest private lender by assets, is among at least 12 companies that have announced share splits this year, Nomura said. The splits, along with rising share prices, have helped boost trading, with average daily turnover surging about 63 percent this quarter from the first half, according to data compiled by Bloomberg.
Sri Lanka’s “improved economic performance has not gone unnoticed by local investors or by listed companies,” analysts at Nomura led by Sean Darby wrote in a report. “The equity market is beginning to exhibit signs of ‘froth’ as stock splitting becomes more widespread to encourage retail investors to return.”
The rally in Sri Lankan stocks has been underpinned by accelerating economic growth, increased foreign investment and lower interest rates. The nation’s $42 billion economy may grow as much as 8 percent in 2010, the Central Bank of Sri Lanka said on Sept. 21, faster than an earlier forecast for a 7 percent expansion.
Borrowing Costs
Governor Ajith Nivard Cabraal has slashed the reverse repurchase rate by three-quarters of a percentage point since early July, taking advantage of low inflation to bolster the economy. That contrasts with central banks in India, Malaysia and Thailand, which have raised borrowing costs this year to check inflation or prevent asset bubbles.
Darby said Nomura first initiated coverage of Sri Lanka with a “bullish” stance on Oct. 15. The market will continue to outperform its peers within markets covered by MSCI Inc., the analyst also wrote.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net
To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net
source - noir.bloomberg.com
Sept. 28 (Bloomberg) -- Sri Lanka’s stock rally may enter a “blow-off phase” as stock splits help draw individual investors to the world’s second-best performer this year, according to Nomura Holdings Inc.
The Colombo All-Share Index has climbed 103 percent this year, the biggest gainer after Mongolia’s MSE Top 20 Index among 91 global benchmark indexes tracked by Bloomberg. The gauge has tripled since the end of a 26-year civil war in May 2009 on optimism that the government will be able to focus on economic development and draw investment.
Commercial Bank of Ceylon Plc, the nation’s biggest private lender by assets, is among at least 12 companies that have announced share splits this year, Nomura said. The splits, along with rising share prices, have helped boost trading, with average daily turnover surging about 63 percent this quarter from the first half, according to data compiled by Bloomberg.
Sri Lanka’s “improved economic performance has not gone unnoticed by local investors or by listed companies,” analysts at Nomura led by Sean Darby wrote in a report. “The equity market is beginning to exhibit signs of ‘froth’ as stock splitting becomes more widespread to encourage retail investors to return.”
The rally in Sri Lankan stocks has been underpinned by accelerating economic growth, increased foreign investment and lower interest rates. The nation’s $42 billion economy may grow as much as 8 percent in 2010, the Central Bank of Sri Lanka said on Sept. 21, faster than an earlier forecast for a 7 percent expansion.
Borrowing Costs
Governor Ajith Nivard Cabraal has slashed the reverse repurchase rate by three-quarters of a percentage point since early July, taking advantage of low inflation to bolster the economy. That contrasts with central banks in India, Malaysia and Thailand, which have raised borrowing costs this year to check inflation or prevent asset bubbles.
Darby said Nomura first initiated coverage of Sri Lanka with a “bullish” stance on Oct. 15. The market will continue to outperform its peers within markets covered by MSCI Inc., the analyst also wrote.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net
To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net
source - noir.bloomberg.com
Sri Lanka gives half of billion dollar bond to US investors
Sept 28, 2010 (LBO) - Sri Lanka has allocated investors in the United States 52.5 percent of its billion US dollar bond, which was issued at 6.25 percent but was trading at a slightly lower rate.
The central bank said in a statement that global investors’ demand for the bond exceeded 6.3 billion dollars within 14 hours of opening on September 27, 2010, being over-subscribed by more than six times.
The bond issued at 6.25 percent was quoted at slightly lower rate in the secondary market at a capital gain, indicating high demand, according to Bloomberg newswires data.
The bonds, maturing in October 2020, will be listed on the Singapore exchange.
It was the island's third international sovereign bond offering, following issues in 2007 and 2009.
The central bank said the demand underscored "the high global investor confidence based on the recent progress and the future prospects in the Sri Lankan economy since the end of the conflict in the country."
The island's 30-year ethnic war ended in May 2009, resulting in an economic recovery with growth forecast at between 7.5 to 8.0 percent for 2010.
Orders were received from 362 investors globally with 25 percent of the bonds being allocated to investors in Europe, and 22.5 percent to investors in Asia.
By investor type, 85 percent of the bonds were allocated to fund and asset managers and the balance to pension funds, insurance companies and banks, the central bank said.
The current coupon rate of 6.25 percent for the 10-year sovereign bond is significantly lower than the cost of borrowings as compared to the previous two international offerings in 2009 and 2007, it said.
"The government will use the proceeds from the bond issue to finance its current infrastructure and to restructure a part of the existing debt stock of the government to improve overall public debt management."
source - www.lbo.lk
The central bank said in a statement that global investors’ demand for the bond exceeded 6.3 billion dollars within 14 hours of opening on September 27, 2010, being over-subscribed by more than six times.
The bond issued at 6.25 percent was quoted at slightly lower rate in the secondary market at a capital gain, indicating high demand, according to Bloomberg newswires data.
The bonds, maturing in October 2020, will be listed on the Singapore exchange.
It was the island's third international sovereign bond offering, following issues in 2007 and 2009.
The central bank said the demand underscored "the high global investor confidence based on the recent progress and the future prospects in the Sri Lankan economy since the end of the conflict in the country."
The island's 30-year ethnic war ended in May 2009, resulting in an economic recovery with growth forecast at between 7.5 to 8.0 percent for 2010.
Orders were received from 362 investors globally with 25 percent of the bonds being allocated to investors in Europe, and 22.5 percent to investors in Asia.
By investor type, 85 percent of the bonds were allocated to fund and asset managers and the balance to pension funds, insurance companies and banks, the central bank said.
The current coupon rate of 6.25 percent for the 10-year sovereign bond is significantly lower than the cost of borrowings as compared to the previous two international offerings in 2009 and 2007, it said.
"The government will use the proceeds from the bond issue to finance its current infrastructure and to restructure a part of the existing debt stock of the government to improve overall public debt management."
source - www.lbo.lk
Sri Lanka Gets $6 Billion of Orders for 10-Year Bonds (Update2)
By Anusha Ondaatjie and David Yong
Sept. 28 (Bloomberg) -- Sri Lanka received more than $6.3 billion of orders for a global sale of $1 billion in bonds to help repay debt and rebuild after the end of three decades of civil war.
The October 2020 securities were sold to yield 6.25 percent, or 373 basis points more than similar-maturity U.S. Treasuries, according to data compiled by Bloomberg. The securities were marketed to investors at an indicative yield of 6.5 percent, according to two investors briefed about the sale. Bank of America Corp., HSBC Holdings Plc and Royal Bank of Scotland Group Plc managed the issue, assisted by Bank of Ceylon.
“They came in against a positive backdrop for emerging- market bonds,” said Jetro Siekkinen, a money manager in Helsinki at Aktia Asset Management, who oversees $7.8 billion bonds and bought some of the new debt. “The spread is attractive in this yield-hungry environment.”
Global investors plowed a record $27.9 billion of funds into emerging-market debt this year through Aug. 25, according to Barclays Capital Plc, citing data compiled by EPFR Global. Dollar debt sold by developing nations has rallied 13 percent this year, JPMorgan Chase & Co’s EMBI Global Index shows.
GDP, Stock Gain
Sri Lanka’s gross domestic product expanded 8.5 percent in the three months ended June 30 from a year earlier, the most since 2002, the statistics department said Sept. 16. The $42 billion economy may grow as much as 8 percent in 2010, the central bank said Sept. 21, having previously forecast a 7 percent expansion.
The Colombo All-Share Index of shares has more than tripled since the end of a 26-year civil war in May 2009, the best performance among benchmark stock indexes. The local rupee has strengthened 2.7 percent to 111.90 per dollar over the same period, according to data compiled by Bloomberg.
The central bank said in a statement today the oversubscription reflected “high global investor confidence based on the recent progress and the future prospects in the Sri Lankan economy since the end of the conflict.”
The bank said orders were received from 362 investors globally, with 85 percent of the bonds allocated to fund managers and the balance going to pension funds, insurance companies and banks.
S&P upgraded Sri Lanka’s credit rating one level to B+ from B on Sept. 14, four levels below investment grade. Fitch raised its rating outlook to positive from stable on Sept. 21. The latest debt sale is Sri Lanka’s third global offering, following $500 million issues of five-year bonds in October 2007 and October 2009.
Sri Lanka’s debt has returned 42 percent since May 18, 2009, according to JPMorgan Chase & Co.’s EMBI Global Index. That’s when government forces defeated Tamil Tiger rebels. The return compares with a 19 percent gain in China, 24 percent in Brazil and 27 percent in Russia.
source - noir.bloomberg.com
Sept. 28 (Bloomberg) -- Sri Lanka received more than $6.3 billion of orders for a global sale of $1 billion in bonds to help repay debt and rebuild after the end of three decades of civil war.
The October 2020 securities were sold to yield 6.25 percent, or 373 basis points more than similar-maturity U.S. Treasuries, according to data compiled by Bloomberg. The securities were marketed to investors at an indicative yield of 6.5 percent, according to two investors briefed about the sale. Bank of America Corp., HSBC Holdings Plc and Royal Bank of Scotland Group Plc managed the issue, assisted by Bank of Ceylon.
“They came in against a positive backdrop for emerging- market bonds,” said Jetro Siekkinen, a money manager in Helsinki at Aktia Asset Management, who oversees $7.8 billion bonds and bought some of the new debt. “The spread is attractive in this yield-hungry environment.”
Global investors plowed a record $27.9 billion of funds into emerging-market debt this year through Aug. 25, according to Barclays Capital Plc, citing data compiled by EPFR Global. Dollar debt sold by developing nations has rallied 13 percent this year, JPMorgan Chase & Co’s EMBI Global Index shows.
GDP, Stock Gain
Sri Lanka’s gross domestic product expanded 8.5 percent in the three months ended June 30 from a year earlier, the most since 2002, the statistics department said Sept. 16. The $42 billion economy may grow as much as 8 percent in 2010, the central bank said Sept. 21, having previously forecast a 7 percent expansion.
The Colombo All-Share Index of shares has more than tripled since the end of a 26-year civil war in May 2009, the best performance among benchmark stock indexes. The local rupee has strengthened 2.7 percent to 111.90 per dollar over the same period, according to data compiled by Bloomberg.
The central bank said in a statement today the oversubscription reflected “high global investor confidence based on the recent progress and the future prospects in the Sri Lankan economy since the end of the conflict.”
The bank said orders were received from 362 investors globally, with 85 percent of the bonds allocated to fund managers and the balance going to pension funds, insurance companies and banks.
S&P upgraded Sri Lanka’s credit rating one level to B+ from B on Sept. 14, four levels below investment grade. Fitch raised its rating outlook to positive from stable on Sept. 21. The latest debt sale is Sri Lanka’s third global offering, following $500 million issues of five-year bonds in October 2007 and October 2009.
Sri Lanka’s debt has returned 42 percent since May 18, 2009, according to JPMorgan Chase & Co.’s EMBI Global Index. That’s when government forces defeated Tamil Tiger rebels. The return compares with a 19 percent gain in China, 24 percent in Brazil and 27 percent in Russia.
source - noir.bloomberg.com
Sri Lanka stocks close down 0.50-pct
Sept 28, 2010 (LBO) - Sri Lanka stocks closed down Tuesday, as retail investors booked profits, while heavy trading on Bogala Graphite, East-West Properties, Colombo Land and Development Company, and Dialog Telekom pushed turnover up, brokers said.
The All Share Price Index closed at 6,845.77, down 0.50 percent (35.77 points), while the more liquid Milanka index dipped 0.50 percent (36.21 points) to close at 7,195.96, according to stock exchange provisional figures.
Turnover was 3.2 billion rupees.
"The market took a slight dip because of the evident profit taking which would present the investors with more attractive buying opportunities," said Nikita Tissera of SC Securities.
Bogala Graphite closed at 84.30 rupees, up 28.60 (51 percent) with 1.8 million shares changing hands, while Colombo Land and Development Company closed at 20.70 rupees, up 7.90 (62 percent) with 6.6 million shares traded.
The stock exchange said a 10 percent price band has been imposed on Bogala Graphite as well as Metropolitan Resource Holdings from September 29 to October 19, 2010.
The price bands are imposed to curb excessive price volatility.
East-West Properties closed at 16.40 rupees, up 3.30 (25 percent) with 4.6 million shares changing hands, while Dialog Axiata, a unit of Axiata of Malaysia closed at 12 rupees, up 10 cents, brokers said.
John Keells Holdings closed at 305 rupees, up 3.10. Hayleys closed at 349.00 rupees, down 3.00.
source - www.lbo.lk
The All Share Price Index closed at 6,845.77, down 0.50 percent (35.77 points), while the more liquid Milanka index dipped 0.50 percent (36.21 points) to close at 7,195.96, according to stock exchange provisional figures.
Turnover was 3.2 billion rupees.
"The market took a slight dip because of the evident profit taking which would present the investors with more attractive buying opportunities," said Nikita Tissera of SC Securities.
Bogala Graphite closed at 84.30 rupees, up 28.60 (51 percent) with 1.8 million shares changing hands, while Colombo Land and Development Company closed at 20.70 rupees, up 7.90 (62 percent) with 6.6 million shares traded.
The stock exchange said a 10 percent price band has been imposed on Bogala Graphite as well as Metropolitan Resource Holdings from September 29 to October 19, 2010.
The price bands are imposed to curb excessive price volatility.
East-West Properties closed at 16.40 rupees, up 3.30 (25 percent) with 4.6 million shares changing hands, while Dialog Axiata, a unit of Axiata of Malaysia closed at 12 rupees, up 10 cents, brokers said.
John Keells Holdings closed at 305 rupees, up 3.10. Hayleys closed at 349.00 rupees, down 3.00.
source - www.lbo.lk
Sri Lanka tops Post Office long haul value report
This led to an 11% difference between the country and Sri Lanka, where UK arrivals are up 51% year-on-year. In addition, Mexico and Kenya also surpassed last year’s top three destinations for value (Thailand, Malaysia and Bali), which is based on a ‘basket’ of 10 tourist items including suncream, a postcard and stamp and various beverages. “Price, as always, remains the big issue and it is good news to see so many long haul destinations with low resort costs,” said Post Office Head of Travel Money Sarah Munro.
“It means that UK tourists planning winter sun trips will be spoilt for choice.” Meanwhile, Dubai came up 6.7% cheaper than Egypt and prices increased 30% in Miami. Canada, Hong Kong and Australia (Sydney) were amongst the most expensive resort priced destinations.
source - www.traveldaily.co.uk
Housing for shanty dwellers, land for commercial purposes: UDA debenture gets Rs 8.5 b
The Urban Development Authority (UDA) debenture issue received applications worth Rs 8.5 billion as at yesterday. The debenture applications have been received mainly from institutions such as banks and insurance companies, Bank of Ceylon Investment Deputy General Manager P A Lionel told Daily News Business.
It is expected to set up a housing project of 65,000 housing units for persons living in unauthorized lands in the Colombo city with this debenture.
The total number of applications received as at September 24 is 57. The number of applications of which payments were made by bank drafts and cheques was 53. The number of payments made by bank guarantees is four as informed by the Bank of Ceylon to the Colombo Stock Exchange.
Colombo Stock Exchange trading will commence after the allocation of debenture shares to the public.
The UDA has decided to utilize the debenture in two ways in which it will gain productive results for slum dwellers in the Colombo city. The first method is to build housing units by the UDA with an allocated funds from the debenture. Simultaneously, UDA will engage in a number of other projects with the balance money of the debenture.
The contribution from the UDA will be 10 percent for these projects of which the rest will be borne by foreign parties as a loan to the UDA, UDA Chairman Janaka Kurukulasuriya told Daily News Business.
“We have already identified land for construction of housing units in Mattakkuliya and Borella and some land outside Colombo city such as Ekala and Muthurajawela. The land in Muthurajawela is 50 acres in extent and we have already quoted tenders for 500 units,” Kurukulasuriya said.
source - www.dailynews.lk
Lanka Tiles records Rs 379 m profit
In financial year 2009/2010, the company's profit after tax increased 34 percent to Rs 379 million, the highest in its 25 year history.
These figures are proof of Lanka Tiles' commitment to strong corporate governance, operational efficiency, prudent investments, and shareholder value creation, the company said.
The Company's shares performed exceptionally well, a stunning achievement given the country's sometimes turbulent stock market. The company also paid out the highest amount of dividends in its recent history, rewarding its shareholders for the trust they had reposed in it.
Lanka Tiles Chairman Anthony Page said shareholders can 'expect this trend to continue in the future.'
In spite of the challenges posed by difficult global and domestic economic circumstances, Lanka Tiles was able to achieve commendable financial results. The company's gross revenues increased by 10.9 percent to Rs 2.852 billion, despite an economy-wide slowdown in foreign demand for Sri Lankan products.
source - www.dailynews.lk
Bids for Sri Lanka dollar bond over $ 2.5 b
Sri Lanka has received bids of more than $2.5 billion for its 10-year dollar bond, and the deal looks set to price tighter than the expected 6.5 percent, sources said on Monday.
Sri Lanka is the latest emerging sovereign to venture into bond markets as investors’ risk appetite has returned with a vengeance this month, and its offer has met with solid demand.
Fund managers reported that the book size was at $2.5 to $3 billion so far, compared with the expected $1 billion to be sold. Books have closed in Europe and Asia.
Sources had earlier told Reuters the deal would price around 6.5 percent. Sri Lanka plans to use the bond’s proceeds to fund the budget and to pay short-term debt.
“Given the books are at these levels already and the U.S. is yet to put in (orders), 6.375 percent (yield) looks likely,” one fund manager in London said. Asian orders had been around $1 billion. The Sri Lankan central bank had said earlier it planned to issue $1 billion of sovereign bonds. A source with knowledge of the deal said Colombo would likely cap the issue at $1 billion.
This will be the island’s third global debt issue since 2007, when it issued a maiden $500 million, five-year bond.
The government sold another $500 million, five-year bond in 2009. Bank of America Merrill Lynch , HSBC Holdings Plc and Royal Bank of Scotland Group Plc are managing the sale.
“We are seeing considerable interest for emerging market bonds, and Sri Lanka will play right into that,” said Scott Bennett, who manages $1.5 billion in Asian fixed income as head of Asian Investment at Aberdeen Asset Management in Singapore.
The sale comes a week after Standard & Poor’s raised the country’s sovereign credit rating by a notch to B-plus from B, citing growth prospects and government efforts to narrow the budget deficit.
source - www.dailynews.lk
Sri Lanka is the latest emerging sovereign to venture into bond markets as investors’ risk appetite has returned with a vengeance this month, and its offer has met with solid demand.
Fund managers reported that the book size was at $2.5 to $3 billion so far, compared with the expected $1 billion to be sold. Books have closed in Europe and Asia.
Sources had earlier told Reuters the deal would price around 6.5 percent. Sri Lanka plans to use the bond’s proceeds to fund the budget and to pay short-term debt.
“Given the books are at these levels already and the U.S. is yet to put in (orders), 6.375 percent (yield) looks likely,” one fund manager in London said. Asian orders had been around $1 billion. The Sri Lankan central bank had said earlier it planned to issue $1 billion of sovereign bonds. A source with knowledge of the deal said Colombo would likely cap the issue at $1 billion.
This will be the island’s third global debt issue since 2007, when it issued a maiden $500 million, five-year bond.
The government sold another $500 million, five-year bond in 2009. Bank of America Merrill Lynch , HSBC Holdings Plc and Royal Bank of Scotland Group Plc are managing the sale.
“We are seeing considerable interest for emerging market bonds, and Sri Lanka will play right into that,” said Scott Bennett, who manages $1.5 billion in Asian fixed income as head of Asian Investment at Aberdeen Asset Management in Singapore.
The sale comes a week after Standard & Poor’s raised the country’s sovereign credit rating by a notch to B-plus from B, citing growth prospects and government efforts to narrow the budget deficit.
source - www.dailynews.lk
Sri Lanka Sells $1 Billion of 10-Year Bonds in Overseas Markets
By David Yong and Gabrielle Coppola
Sept. 27 (Bloomberg) -- Sri Lanka sold $1 billion of dollar-denominated bonds due in 10 years, the nation’s second overseas debt sale since the end of a 26-year civil war in May 2009.
The securities were sold to yield 6.25 percent, according to Bloomberg data. Bank of America Corp., HSBC Holdings Plc and Royal Bank of Scotland Group Plc managed the sale, assisted by Bank of Ceylon, said a person familiar with the offering who declined to be identified because he’s not allowed to speak publicly.
Standard & Poor’s raised Sri Lanka’s credit rating one level to B+ from B on Sept. 14, four levels below investment grade. Fitch raised its rating outlook to positive from stable on Sept. 21. The sale is Sri Lanka’s third global offering, after raising $500 million each from five-year bond auctions in October 2007 and October 2009.
“They came in against a positive backdrop for emerging- market bonds and it should be no surprise if they price at the lower end of the guidance,” said Jetro Siekkinen, a money manager in Helsinki at Aktia Asset Management, who oversees $7.8 billion including Sri Lanka’s 2015 dollar debt. He plans to buy the bonds.
Sri Lanka’s debt has returned 40.7 percent since May 18, 2009, according to JPMorgan Chase & Co.’s EMBI Global Index. That’s when government forces defeated Tamil Tiger rebels. The return compares with a 19 percent gain in China, 24 percent in Brazil and 27 percent in Russia.
To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Gabrielle Coppola in New York at gcoppola@bloomberg.net
source - noir.bloomberg.com
Sept. 27 (Bloomberg) -- Sri Lanka sold $1 billion of dollar-denominated bonds due in 10 years, the nation’s second overseas debt sale since the end of a 26-year civil war in May 2009.
The securities were sold to yield 6.25 percent, according to Bloomberg data. Bank of America Corp., HSBC Holdings Plc and Royal Bank of Scotland Group Plc managed the sale, assisted by Bank of Ceylon, said a person familiar with the offering who declined to be identified because he’s not allowed to speak publicly.
Standard & Poor’s raised Sri Lanka’s credit rating one level to B+ from B on Sept. 14, four levels below investment grade. Fitch raised its rating outlook to positive from stable on Sept. 21. The sale is Sri Lanka’s third global offering, after raising $500 million each from five-year bond auctions in October 2007 and October 2009.
“They came in against a positive backdrop for emerging- market bonds and it should be no surprise if they price at the lower end of the guidance,” said Jetro Siekkinen, a money manager in Helsinki at Aktia Asset Management, who oversees $7.8 billion including Sri Lanka’s 2015 dollar debt. He plans to buy the bonds.
Sri Lanka’s debt has returned 40.7 percent since May 18, 2009, according to JPMorgan Chase & Co.’s EMBI Global Index. That’s when government forces defeated Tamil Tiger rebels. The return compares with a 19 percent gain in China, 24 percent in Brazil and 27 percent in Russia.
To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Gabrielle Coppola in New York at gcoppola@bloomberg.net
source - noir.bloomberg.com
Good time to target inflation, says IMF Concerned about slow growth of credit
"The idea is simply that many central banks around the world have found that targeting the money supply is not always the best way to achieve inflation objectives since the relationship between the intermediate target (the money supply) and the ultimate target (inflation) has become increasingly unpredictable. The Central Bank of Sri Lanka has long recognized this and spoken of a desire to move eventually toward a regime that more directly targets inflation, because this is what everybody is interested in at the end of the day," Dr. Mathai told The Island Financial Review.
Since peaking at 28.2 percent in June 2008, inflation has subsided reaching the lowest of 0.7 percent in September 2009. Inflation, the point-to-point change in the Colombo Consumers’ Price Index, was 5 percent in August 2010.
"International experience suggests a number of preconditions for introducing inflation targeting. Among other things, it has proven difficult for countries to introduce inflation targeting when inflation is still running very high, or when exchange rates are inflexible. With inflation in Sri Lanka now reasonably low and the rupee increasingly flexible, we think the CBSL is in a good position to think of reforming its monetary policy framework. We have worked together with the CBSL on some of the technical modelling framework required for such an inflation targeting regime," he said.
According to economists, when targeting inflation directly, instead of using policy rates to target money supply, the Central Bank would have to abandon excessive intervention in the foreign exchange market which keeps the exchange rate at an unrealistic position and also refrain from intervening in the primary Treasury bill markets.
Maintaining artificially stable exchange rates, inflation and interest rates is referred to economists as the impossible trinity.
In 1990, New Zealand was the first country to abandon its monetary targeting framework for an inflation targeting one, and has experience low inflation and high growth except for brief periods in 1995 and 2000.
Canada followed New Zealand in 1991, and brought down inflation from 5 percent in 1991 to 2.5 percent in 2006.
Australia, Brazil, Chile, Iceland, Israel, South Korea, Mexico, Norway, Philippines, Poland, South Africa and Turkey are some of the other countries directly targeting inflation.
In inflation targeting, authorities announce a band in which inflation is maintained.
Credit growth slow...
With inflation and interest rates at low levels, the banking sector could spark off inflation if credit for consumption grows too fast, but Dr. Mathai said it was certainly not a cause for concern right now.
"We see no signs of demand-driven inflation right now and our primary worry is not that an overly fast expansion of credit could fuel inflation, but we are more concerned that credit has been relatively slow to pick up, as it is the lifeblood of the economy and will be needed to support growth.
"Even there, however, we need to recognize that GDP growth has already accelerated quite nicely, and we are certainly not urging the banks to extend credit willy-nilly. But we do need a more careful diagnosis of why leading corporates may still be cautious in demanding credit. One reason may be that many of them are cash-rich, having had a strong recent quarter, and can rely on internal funds, but I don’t think we have a complete answer," Dr. Mathai said.
source - www.island.lk
Monday, September 27, 2010
Jet Airways to fly to Colombo from Delhi, Mumbai
Jet Airways will be launching daily direct flights to Colombo from Mumbai and Delhi from November 5. The introduction of these two new flights connecting the Sri Lankan capital are in addition to the existing daily Chennal–Colombo service which was launched in 2004 when the airline started its
international operations.
The airline will be operating with 170-seater Boeing 737-800 aircraft, offering eight Premiere and 162 economy class seats, on Delhi-Colombo and Mumbai-Colombo sectors.
On Delhi-Colombo sector, flight 9W 257 will depart Delhi at 1330 hours and arrive in Colombo at 1705 hours (local time) and on the return leg, 9W 258 will depart Colombo at 0750 hours (local time) and reach Delhi at 1130 hours.
Similarly, flight 9W 256 will take off from Mumbai daily at 0210 hours reaching Colombo at 0445 hours (local time), and flight 9W 255, on its return leg will leave Colombo at 2020 hours and reach Mumbai at 2255 hours.
This enhanced connectivity, commencing with the winter schedule, to this SAARC country will connect Jet Airways' two strategic hubs -- Delhi and Mumbai, a Jet Spokesperson said.
"Sri Lanka is fast emerging as a highly rated global tourism destination and we are happy to offer our guests seamless connections to several destinations across our network, through our important gateways points -- Mumbai and Delhi, and at the same time strengthen air connectivity to destinations within the SAARC region," Nikos Kardassis, CEO of Jet Airways said in a statement.
Jet is delighted to provide direct links from the financial and the national capital to the Emerald Isle, he added.
India and Sri Lanka boast of strong trade ties ranging from textiles to food-processing and agri-food business.
Sri Lanka is fast becoming a top tourism destination for holiday and leisure travellers across the globe and is known for its beaches, magnificent landscapes, ecologically-wondrous forests and abundance of wildlife.
source - www.hindustantimes.com
international operations.
The airline will be operating with 170-seater Boeing 737-800 aircraft, offering eight Premiere and 162 economy class seats, on Delhi-Colombo and Mumbai-Colombo sectors.
On Delhi-Colombo sector, flight 9W 257 will depart Delhi at 1330 hours and arrive in Colombo at 1705 hours (local time) and on the return leg, 9W 258 will depart Colombo at 0750 hours (local time) and reach Delhi at 1130 hours.
Similarly, flight 9W 256 will take off from Mumbai daily at 0210 hours reaching Colombo at 0445 hours (local time), and flight 9W 255, on its return leg will leave Colombo at 2020 hours and reach Mumbai at 2255 hours.
This enhanced connectivity, commencing with the winter schedule, to this SAARC country will connect Jet Airways' two strategic hubs -- Delhi and Mumbai, a Jet Spokesperson said.
"Sri Lanka is fast emerging as a highly rated global tourism destination and we are happy to offer our guests seamless connections to several destinations across our network, through our important gateways points -- Mumbai and Delhi, and at the same time strengthen air connectivity to destinations within the SAARC region," Nikos Kardassis, CEO of Jet Airways said in a statement.
Jet is delighted to provide direct links from the financial and the national capital to the Emerald Isle, he added.
India and Sri Lanka boast of strong trade ties ranging from textiles to food-processing and agri-food business.
Sri Lanka is fast becoming a top tourism destination for holiday and leisure travellers across the globe and is known for its beaches, magnificent landscapes, ecologically-wondrous forests and abundance of wildlife.
source - www.hindustantimes.com
Sri Lankan stocks close down 0.10-pct
Sept 27, 2010 (LBO) – Sri Lankan stocks failed to hold on to early gains which propelled them past the 7,000 point mark for the first time in early trade Monday and closed weaker, brokers said.
The market lost the momentum which had sent it to record highs in recent days with investors cashing-in to cover margin trades, they said.
The All Share Price Index closed at 6,881.54, down 0.10 percent (6.95 points) while the more liquid Milanka index dipped 0.43 percent (31.48 points) to close at 7,232.17, according to stock exchange provisional figures.
Turnover was 3.7 billion rupees.
"There is a possibility the market will slowdown in the coming weeks due to new regulations on credit effective from January next year, while some investors took profits," Thakshila Hulangamuwa, vice president at Asha Phillip Securities said.
"Due to a lack of participation we won't see turnover levels improving from the current range of four to five billion rupees."
Bogala Graphite, which last week said it planned to get a plant from its German parent to make lubricant, was the day's highest gainer, closing at 55.70 rupees, up 21. 20 or 61 percent.
A five-year five billion rupee bond issued by the Urban Development Authority (UDA), a state agency, was over-subscribed and will be kept open until subscription of a further five billion rupees, a stock exchange filing said.
The UDA is issuing 50 million debentures at 100 rupees each, to be doubled if oversubscribed, to raise cash to resettle squatters occupying prime property in Colombo city owned by government and to free land for private sector commercial development.
The bonds are to be listed on the main board of the Colombo Stock Exchange.
source - www.lbo.lk
The market lost the momentum which had sent it to record highs in recent days with investors cashing-in to cover margin trades, they said.
The All Share Price Index closed at 6,881.54, down 0.10 percent (6.95 points) while the more liquid Milanka index dipped 0.43 percent (31.48 points) to close at 7,232.17, according to stock exchange provisional figures.
Turnover was 3.7 billion rupees.
"There is a possibility the market will slowdown in the coming weeks due to new regulations on credit effective from January next year, while some investors took profits," Thakshila Hulangamuwa, vice president at Asha Phillip Securities said.
"Due to a lack of participation we won't see turnover levels improving from the current range of four to five billion rupees."
Bogala Graphite, which last week said it planned to get a plant from its German parent to make lubricant, was the day's highest gainer, closing at 55.70 rupees, up 21. 20 or 61 percent.
A five-year five billion rupee bond issued by the Urban Development Authority (UDA), a state agency, was over-subscribed and will be kept open until subscription of a further five billion rupees, a stock exchange filing said.
The UDA is issuing 50 million debentures at 100 rupees each, to be doubled if oversubscribed, to raise cash to resettle squatters occupying prime property in Colombo city owned by government and to free land for private sector commercial development.
The bonds are to be listed on the main board of the Colombo Stock Exchange.
source - www.lbo.lk
Sri Lanka Said to Market 10-Year Bonds at 6.5% Yield (Update1)
By Katrina Nicholas
Sept. 27 (Bloomberg) -- Sri Lanka hired banks to help it with a benchmark sale of 10-year dollar bonds, according to a person familiar with the matter.
The bonds may price to yield around the 6.5 percent area, the person said, without being more specific and asking not to be identified as details are private. The central bank unveiled plans to sell bonds in August.
The sale will be Sri Lanka’s biggest in dollars since October, when it sold $500 million of 7.4 percent notes due 2015, according to data compiled by Bloomberg. Those notes are trading at 108.5 cents on the dollar to yield 5.172 percent, from 107.75 on Sept. 24, according to BNP Paribas SA prices on Bloomberg.
Fitch Ratings raised Sri Lanka’s credit outlook to positive from stable on Sept. 21, citing improved government finances and a $2.5 billion International Monetary Fund loan. The central bank kept interest rates unchanged that same day, leaving the reverse repurchase rate at 9 percent after consumer prices in Colombo rose 5 percent in August from a year ago. That’s less than half the average rate of the five years through 2009.
The Sri Lankan rupee is at its highest against the dollar since December 2008. Standard Chartered Plc is forecasting a faster appreciation in the rupee this year if the government “initiates investment-friendly reforms.”
Bank of America Corp., HSBC Holdings Plc and Royal Bank of Scotland Group Plc will manage the dollar bond sale, and will be assisted by Bank of Ceylon, the person said. Fitch assigned the bonds a B+ rating today, its fourth-highest non-investment grade.
Benchmark typically means at least $500 million.
source - noir.bloomberg.com
Sept. 27 (Bloomberg) -- Sri Lanka hired banks to help it with a benchmark sale of 10-year dollar bonds, according to a person familiar with the matter.
The bonds may price to yield around the 6.5 percent area, the person said, without being more specific and asking not to be identified as details are private. The central bank unveiled plans to sell bonds in August.
The sale will be Sri Lanka’s biggest in dollars since October, when it sold $500 million of 7.4 percent notes due 2015, according to data compiled by Bloomberg. Those notes are trading at 108.5 cents on the dollar to yield 5.172 percent, from 107.75 on Sept. 24, according to BNP Paribas SA prices on Bloomberg.
Fitch Ratings raised Sri Lanka’s credit outlook to positive from stable on Sept. 21, citing improved government finances and a $2.5 billion International Monetary Fund loan. The central bank kept interest rates unchanged that same day, leaving the reverse repurchase rate at 9 percent after consumer prices in Colombo rose 5 percent in August from a year ago. That’s less than half the average rate of the five years through 2009.
The Sri Lankan rupee is at its highest against the dollar since December 2008. Standard Chartered Plc is forecasting a faster appreciation in the rupee this year if the government “initiates investment-friendly reforms.”
Bank of America Corp., HSBC Holdings Plc and Royal Bank of Scotland Group Plc will manage the dollar bond sale, and will be assisted by Bank of Ceylon, the person said. Fitch assigned the bonds a B+ rating today, its fourth-highest non-investment grade.
Benchmark typically means at least $500 million.
source - noir.bloomberg.com
Sri Lanka President invites US business leaders to invest in the country
Sept 27, Colombo: Sri Lanka President Mahinda Rajapaksa has met and invited leading businessmen in the United States to invest in Sri Lanka without trepidation as the country is now poised to enjoy a strong economic growth and becoming one of the best countries for investment in the world.
Business executives from a variety of business enterprises, including the hospitality and tourism industry, the beverage industry, and the aerospace and defense community met the Sri Lankan President at a luncheon held at New York City's Helmsley Hotel last week.
Sri Lanka President was in New York to attend the 65th session of the General Assembly of the United Nations.
President Rajapaksa personally greeted each of the 150 business executives at the luncheon. The executives from the Coca Cola Co., the Boeing Co., Google, Hilton Hotels and Resorts and Starwood Hotels and Resorts were among the attendees.
The President invited the entrepreneurs to join the newly formed U.S.- Sri Lanka Business Council, which seeks to expand the commercial relationship between the two countries by promoting trade and investment opportunities that benefit both nations.
US Pharmaceutical giant Pfizer has expressed hopes to invest in the Sri Lankan market and to extend support to enhance investment opportunities between Sri Lanka and the US.
During the meeting the President noted that Sri Lanka's per-capita income has been increased two fold in the past five years and the government targets is to double this figure by the year 2016.
Sri Lankan Minister of External Affairs Prof. G.L. Peiris addressing the attendees said Sri Lanka today has a promising economic future and the country is on the threshold of an economic renaissance.
"Sri Lanka is today, without any exaggeration, one of the world's best destinations for investment," Prof. Peiris has stated.
Approving the fifth tranche of a US$ 2.5 billion loan last Friday, the International Monetary Fund, which recently upgraded Sri Lanka to "middle income emerging market" status, said the overall economic conditions are improving and the economy is likely to show strong growth this year on the back of improved fundamentals and political stability
source - www.colombopage.com
Business executives from a variety of business enterprises, including the hospitality and tourism industry, the beverage industry, and the aerospace and defense community met the Sri Lankan President at a luncheon held at New York City's Helmsley Hotel last week.
Sri Lanka President was in New York to attend the 65th session of the General Assembly of the United Nations.
President Rajapaksa personally greeted each of the 150 business executives at the luncheon. The executives from the Coca Cola Co., the Boeing Co., Google, Hilton Hotels and Resorts and Starwood Hotels and Resorts were among the attendees.
The President invited the entrepreneurs to join the newly formed U.S.- Sri Lanka Business Council, which seeks to expand the commercial relationship between the two countries by promoting trade and investment opportunities that benefit both nations.
US Pharmaceutical giant Pfizer has expressed hopes to invest in the Sri Lankan market and to extend support to enhance investment opportunities between Sri Lanka and the US.
During the meeting the President noted that Sri Lanka's per-capita income has been increased two fold in the past five years and the government targets is to double this figure by the year 2016.
Sri Lankan Minister of External Affairs Prof. G.L. Peiris addressing the attendees said Sri Lanka today has a promising economic future and the country is on the threshold of an economic renaissance.
"Sri Lanka is today, without any exaggeration, one of the world's best destinations for investment," Prof. Peiris has stated.
Approving the fifth tranche of a US$ 2.5 billion loan last Friday, the International Monetary Fund, which recently upgraded Sri Lanka to "middle income emerging market" status, said the overall economic conditions are improving and the economy is likely to show strong growth this year on the back of improved fundamentals and political stability
source - www.colombopage.com
Bourse an attractive investment hub
ASPI gained 431.21 points to close at 6888.49 up by 6.7 percent from the previous week. Milanka crossed the 7000 mark during the week and was up by 7.49 percent adding 506.15 points to close at 7263.65.
The cumulative weekly turnover increased to Rs 22.55 billion with an average daily contribution of Rs 5.64 billion. The turnover gained by 5.5 percent week on week. The market capitalization was up by 6.86 percent at Rs 2272 billion. Banking and Finance sector at 43 percent continued to dominate the total market turnover with closing sector indices up by 10 percent to close at 17,359.76. Seylan, Nations Trust Bank, DFCC, HNB, Pan Asia, LOLC and Vallibel Finance were the major contributors to the sector.
The banking sector is followed by the diversified sector with 18 percent share in market turnover and a gain of 202.13 points over the previous week.
JKH rallied the market turnover tally by adding Rs 3 billion to the aggregate turnover with total share of nearly 14 percent The share closed at Rs 300 up by nearly 4 percent. Seylan bank was another major contributor to turnover at 7.69 percent with Rs 1.73 billion and share price rising by 21 percent to close at Rs 59.2.
Vallibel Finance was the most traded stock this week with volume of 61 million shares. Dialog was another active stock where 37.72 million shares were traded. Sierra Cables, SMB Leasing, Nawaloka and Seylan were other counters with heavy volumes during the week.
Foreign investors were net sellers this week amounting to a net outflow of Rs 202.8 million, averaging Rs 50.7 daily as against a net selling of Rs 2.5 million recorded last week, averaging Rs 4.5 million.
Foreign purchases amounted to Rs 2.45 billion while foreign selling amounted to Rs 2.65 billion. Foreign trading levels increased this week with both buying and selling showing an average increase of 32 percent and 42 percent respectively.
Top gainer for the week was Colombo Pharmacy up by 224 percent to close at Rs 2915 vis a vis last weeks price of Rs 900.10.
ERI and a high networth investor picked up a strategic stake in Colombo Pharmacy. Ceylinco Insurance, People's Leasing Finance and Lake House Printers were other significant gainers. Top losers were Watapota down by 40 percent, Dankotuwa and Equity losing by 23.85 percent and 22.35 percent respectively.
Point of view
The bourse continued its bullish trend through the week with foreign investors, retailers, institutional investors and high net worth individuals rallying on driving the bourse to new heights.
The Colombo bourse has outperformed most by giving a 100 percent year to date return backed by a positive economic outlook and the lowered interest rates offered through the banking system, further boosting investor interest in the market.
We expect the current momentum to continue to the with investor interest in key growth sectors and fundamentally strong stocks driving the market during the week ahead with increased participation from foreigners and institutional investors.
source - www.dailynews.lk
Subscribe to:
Posts (Atom)