Sri Lanka stocks closed up 0.30 pct


Sri Lanka stocks ended a streak of losses and closed up 0.30 percent Friday.
The Colombo All Share Index closed at 5,738.24 up 17.38 points and the S & P SL 20 Index closed 5.62 points higher at 3,098.42 up 0.18 percent.
Turnover was 475 million rupees. Top contributors to turnover were JKH with 100 million rupees, Distilleries with 47 million rupees and Commercial Bank (NV) with 44 million rupees.
Aitken Spence PLC slipped 0.30 cents to close at 131.70 rupees down 0.23 percent. AVIVA NDB Insurance PLC gained 5.10 rupees to close at 370.20 rupees up 1.40 percent.
Commercial Bank slipped 0.90 cents to close at 110.20 rupees down 0.81 percent. DFCC Bank slipped 1.50 rupees to close at 114.00 rupees down 1.30 percent. Hatton National Bank gained 0.70 cents to close at 112.70 rupees up 0.63 percent.
Dialog Axiata PLC closed flat at 8.50 rupees.
Index heavy John Keells Holdings PLC gained 1.90 rupees to close at 205.40 rupees up 0.93 percent.
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...by i3gconsultants@ 08:10:24 on 2012-10-13

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Mixed reactions to SEC’S credit, broker trading rules relaxation.


The removal of credit restrictions by the Securities and Exchange Commission (SEC), effectively providing brokers with the facility to extend more credit, met with strong positive and negative feedback from market analysts on both sides of the issue.
Speaking to Mirror Business, former Director General of the SEC, Aritha Wickramanayake said, “Credibility and not credit is the main issue that the market is facing today. I’ve always maintained that credit has in fact never been an issue for brokers and the idea that there is a lack of credit is an artificial perception that some are trying to create and I think that with the way the market performed after the restriction was lifted, this point has proved itself.”
“Quite obviously, the extension of unlimited credit also creates systemic risks and this is made worse in a downturn. With restrictions on credit, it would have been possible to at least make sure that in a situation where the market did drop, the extension of credit would not be able to cause a systemic collapse because of the limits that were in place and this is no longer the case,” Wickramanayake asserted.
Whilst expressing hope that the decision to lift restrictions was an informed one, Wickramanayake went on to question what the long-term impact of rolling back regulations would be.
“If the SEC hasn’t made this decision after carefully weighing out the consequences that I fear that they are being misguided and this is not going to sustain the market over the long term. There are lots of people who burnt their fingers in the last downturn, when credit was freely available,” Wickramanayake cautioned.
“The SEC should not concern itself over daily market fluctuations in the first place but instead, should be looking at making sure that the proper systems are in place to facilitate growth over the long term and I hope that this is the case,” he added.
Nevertheless, reactions to the SEC’s latest regulatory changes have been extremely polarizing.
Speaking with Mirror Business, Director at Capital Trust Securities (Pvt.) Ltd., Sarath Rajapakse strongly welcomed the moves to roll back in regulations implemented during the tenure of former Chairperson of the SEC, Tilak Karunaratne.
This move will definitely help the smaller brokerages which were unable to extend credit because of these regulations. They were unable to find capital previously but now we feel that several billion rupees in trading money will finally be allowed to enter the market and we can almost certainly expect the market to start trending upwards as a result.
When asked about whether freely available credit in the market could create the kind of systemic risk that Wickramanayake cautioned against, Rajapakse said, “We had downturns in the past and even then, whilst the war was still going on, we never had a default up to date. The idea that these restrictions help anyone is something that has been imagined by parties who wanted to smother the market; such draconian measures would not be found in developed markets like those in New York, Tokyo or London.”
Rajapakse went on to blame the imposition of regulations itself, starting from July 2010, as being responsible for the downturn in the Colombo bourse.
“Things like price bands and other limits might be found in pick pocket markets like those in Indonesia and Thailand but we are not aiming to be a back water market. In 2009/2010, we were one of the best performing markets in the world but with more and more stringent regulations, the market finally yielded and that resulted in the upward movement of the market being artificially interrupted,” Rajapakse claimed.
In terms of what kind of impact deregulation will have on market performance, one analyst speaking on condition of anonymity with Mirror Business projected that no real change in performance would be seen during an upswing in the market.
“The change in rules was brought about mainly in favour of retailers who are running behind stocks. Strategic and institutional investors will not be affected directly as a result of these changes and it is they and not retailers and punters who drive the market. So, in the current conditions, I don’t see any major changes in performance taking place.”
“There is a greater issue of instability that is created as a result of the SEC going back and forth on regulations. This does not provide the security and stability that is required to attract investors. If the SEC is to implement new regulations, then it is crucial that once implemented, they are not changed for at least a period of one year, so that investors know what to expect.”


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...by i3gconsultants@ 14:10:21 on 2012-10-10

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Sri Lanka stocks close down 0.24 pct


Sri Lanka stocks closed down 0.24 percent Tuesday with indices seeing sharp gains earlier in the day on news that the regulator has loosened credit and broker stock sales restrictions, brokers saidSome blue-chips stocks gained ground. The Colombo All Share Index closed at 5,833.32 down 13.85 points and the S & P SL 20 Index closed 19.39 points higher at 5,384.44 up 0.36 percent. Turnover was 528 million rupees. Top contributors to turnover were JKH with 54 million rupees, Environment Resources Investments with 33 million rupees and E-Channeling with 33 million rupees. E-Channeling PLC gained 0.10 cents to close at 6.40 rupees up 1.59 percent. Aitken Spence PLC slipped 3.30 rupees to close at 130.70 rupees down 2.46 percent. Commercial Bank slipped 0.10 cents to close at 112.10 rupees down 0.09 percent. DFCC Bank dropped 1.40 rupees to close at 116.80 rupees down 1.18 percent. Hatton National Bank closed at 113.20 rupees down 0.44 percent. Dialog Axiata PLC gained 0.10 cents to close at 8.80 rupees up 1.15 percent. Index heavy John Keells Holdings PLC gained 3.30 rupees to close at 213.80 rupees up 1.57 percent.


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...by i3gconsultants@ 13:10:00 on 2012-10-10

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Sri Lanka SEC loosens credit, lifts broker stock sales curbs


Sri Lanka's Securities and Exchange Commission had loosened broker credit margins and lifted rule that banned directors, workers and spouses of broking firms from selling stocks within six months of their purchase.The SEC said brokers could now extend credit to clients up to three times the net capital (after deducting 50 percent of the value of fixed assets) without deducting debtors from net capital. A rule that imposed a 20 percent upper limit on off market transactions (crossings) on the Colombo Stock Exchange has been lifted. The SEC has also lifted a rule that stopped executive directors, employees and spouses and their nominees of broking firms from selling shares purchased in under six months. Two heads of the SEC was ousted over the past year after sections of brokers protested to Sri Lanka's president as the regulator tightened rules credit and started to take action against 'pump and dump' scams. The benchmark index rose steeply over the last month, following the appointment of a new SEC chairman, but stocks have lost ground over past week amid some profit taking.

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...by i3gconsultants@ 13:10:43 on 2012-10-10

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Sri Lanka pension fund equity investments controversy in court


Key trade unions in Sri Lanka have gone to court over controversial share investments made in second tier firms and banks by state managers of a retirement fund of private sector workers.Eleven trade unions that sought relief from Sri Lanka's Supreme Court alleged that stocks have been bought in companies in an alleged violation of a publicly declared investments policy of Sri Lanka's Employees Provident Fund in documents filed in court Thursday. The EPF, which is a forced saving scheme, is managed by Sri Lanka's Central Bank. The unions alleged that stocks - including those in Colombo Stock Exchange's second tier board- have been bought at inflated prices in violation of a publicly disclosed investment policy. In addition, stocks have been bought in banks leading to a situation of insider dealing as the Central Bank being the regulator of the banks was privy to non-public information, the unions have alleged. The plaint said ministers of the ruling administration has said in parliament that the investment policy has been changed, though unions or beneficiaries had not been consulted on the move. The trade unions asked for a criminal investigation into the stock trades. The unions also asked for the new policy if to be made public if it exists, and also asked courts to order the EPF to reveal information relating the trading of stocks, the buyers and sellers, the prices and quantities, which have not been revealed to the members of the EPF. People with records of criminal misappropriation have been appointed as bank directors since state purchases of stocks commenced, the plaint alleged. Sri Lanka's trade unions have earlier sought relief from the Supreme Court over an attempt by rulers to start a third state managed forced savings pension pensions scheme out of private sector worker money but no relief was given. The administration abandoned the move after protesting workers were shot dead by police.

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...by i3gconsultants@ 13:10:41 on 2012-10-10

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Best time to invest in stock market .


The Colombo stock market has gone up by over 1,000 points (more than 20%) during the last few weeks. With this growth, a large number of investors are either trying to enter the market or trying to maximize profits from their existing investments. In order to assist them in their investment decisions, this week we will discuss a topic that most investors ask.  
Is there ever a good time to invest in the stock market? This question is frequently asked by investors, and for good reason, as no one wants to invest in the stock market only to see it fall the following day or even the following week.
Is there a right time to invest in stock market?
Is there a right time to invest in the stock market? That’s the magic question people have asked for as long as the stock market has been around. The simplest answer is that there is no right time to invest in the stock market. But it may seem as if some people have figured it out, such as billionaires like Warren Buffet who seem to always know when to invest, how much to invest and where to put their money.
But, investors like him consider many more factors that have less to do with guessing the ‘right time’ and more to do with trying to predict how the stock will do based on recent reports and announcements by the company. Even then, they could be wrong.
Many investors buy into and sell out of the market more frequently than they should. They are trying to ‘time’ the market. If you have never heard of this term before, it is described as trying to pick when the stock market has hit a top or a bottom and then buying into or selling out of the market accordingly.
For example, if you are predicting that the market has hit the peak of the cycle, then you sell out of your holdings because the market has nowhere to go but down. Conversely, if you think the market has bottomed, meaning it won’t go any lower, you invest your money, since the market can only go up.
Many smart investors try to predict how stocks and the overall stock market will behave and try to invest according to what they believe will happen. Even though they may predict the market right nine out of 10 times, they will still get it wrong that 10th time and it will cost them money, either because they invested in the wrong stock, or didn’t invest in a stock that sky rocketed to the top.
It’s extremely difficult to predict how stocks or the stock market will do. Although, it is possible to predict certain trends because they are more obvious than many of the other subtler factors that can determine how well a stock does. There are people out there who claim to know exactly when to invest in the market. And a lot of people actually believe them because of what they see.
But the fact is usually that these people invest in many different sectors of the stock market and when they see success in one sector, they only share that success which makes it seem like they know what they are talking about all the time. This isn’t actually a scam (although there are scams like this), but it’s more of the person hoping his or her research pays off and more often than not, it does.
Just like people, you have companies with websites claiming to know which stocks will go up in price. And just like the people claiming to be stock market whisperers, these companies do extensive research which gives them hints about which companies will go up and which will go down. Then they share the information with the public, most of the time for a fee.
Is there a wrong time to invest in stock market?
Unfortunately, it seems that there is a wrong time. Most people have the tendency to invest at the wrong time. This is where the old adage of “buy low and sell high” comes into play. A smart investor waits for the stock to go low so he can buy low and sell high. That’s why billionaire investor Warren Buffet says, “Be greedy when others are fearful and be fearful when others are greedy.” In other words, don’t completely follow the crowd and don’t be afraid to invest when you see an idea and everyone else is scared.
It may run contrary to common thought, but smart investors across the globe see the best time to invest in the stock market when it’s performing its worst. When the stock market sinks or stalls, it is a buyer’s market. This is simply due to the fact that stocks are fluid forms of value; they change in worth often and sometimes drastically.
When the economy starts to underperform, people tend to sell of their investments. It is an obvious response to people seeing their stock portfolio values go lower and lower. These mass pull-outs of investments cause the overall market to go into panic mode, dropping prices for stocks across the board.
So, what does a wise investor with skilled investing strategies do in this situation? Buy! But of course, there are other factors at play such as market conditions, currency trading and aspects specific to a particular stock should also be taken into consideration when buying stocks.
However, if you have the cash in hand to buy into stocks while they are undervalued due to market conditions, you can make some excellent investments. But there is no perfect time of day, hour or date to buy stocks. Timing stock buys is also based on other mitigating factors.
Most investors however, do the opposite and buy high because they believe it’ll keep going higher. We see in practice, most people will only seek financial advice when the market is ‘good’, which ironically is not the best time to buy.
Financial advisers who could only earn a commission selling investment products will tell their clients to buy despite it being the worst time to do so. Hardly anyone would seek advice from financial advisers when times are bad. In fact, many financial advisers themselves would recommend ‘safer’ products when actually it is the most viable time to enter into equity markets.
Buying in a down market results in ‘cost averaging’, which means that you have a greater opportunity to gather large gains in the future.  However, there is more to understanding when to buy stocks than simply ‘buy low, sell high’ or ‘buy in a down market’.  The following are tips to help you decide when to buy stocks in order to maximize your future returns.
Tips on when to buy

  • Research about the fees that are associated with buying and selling stocks. These fees directly eat up your profits.  Because of this, it is often beneficial to buy stocks in bulk and hold for awhile rather than buying and selling rapidly. 

  • Know the company. Even if a stock is at a historically low price, you may not want to buy. Consider whether a rebound is expected and if so, what time frame this will require. You want to purchase stocks in a healthy company that will see future returns, not one that is on a fatal path downward.

  • First, be sure that you are well-educated. Do your own research: Ask other investors, try to gather information from the regulator, publications and articles and by speaking to persons in the industry about the company, the industry and any fees you may incur from purchasing stocks.

  • Know the industry. Selection of the market leader and the industries is critical.

  • Trust your gut. Money, including investments is tied to emotions. Follow research and advice, also trust your instincts. Make decisions so that you will be able to sleep well at night.

No one likes to lose money in an investment. Therefore, perhaps more complicated than simply buying a stock is the process of selling stock. Stock is easy to sell. Simply contacting your broker or utilizing the website of your online stockbroker can effect this transaction for you in minutes.  It’s not the act of selling stock, but rather timing stock sales to maximize profits where the need for precision lies.
There is no such thing as the best time to sell stock when speaking of the hours in a day. The best time to sell stock is pertinent to each investor, the market state and the stock in question. Certainly, the best answer to when is the best time to sell a stock is to be selling stock before it declines in value.  This in theory is nice: Make the most money one can on a stock or bond and get out and sell. However, in reality well timing stock sales takes practice, diligence and at times a lot of patience.

Most investors fail to make basic criteria before investing: Profit goals. When investing in a stock, one should establish a set amount of profit to make on a stock. When this limit is reached, selling stock should not be a thought, but rather an act. For example, to purchase stock in Company X for the price of Rs. 10 per share at its current trading value establishes your starting point. Say you set your profit goals for this particular stock at 30% or a Rs.3.00 increase in stock price- a healthy return on any stock investment. So, when the stock reaches Rs.13, you have reached your profit goal for this stock and you should sell. Walking away with 30% gain on your investment is excellent and far better than your money would have earned in near any other place.
The average investor who loses money, or simply does not maximize the amount of money they could have made buying and selling stocks usually falls into this pitfall: Not selling stocks. Many investors watch their stocks soar up and then unable to contemplate their stock no longer increasing in value, hold on to as it falls. This is the most common problem with investors timing stock sales. They simply cannot let go of their stocks and therefore follow them all the way down.

Tips on when to sell
Good selling techniques matter because losses are difficult to recover.

  • Use all published information. These resources will often not only have numerical data but information about the company, the market and opinions of experts. The great thing is most of this information is free and available at anytime.

  • Follow the company closely. Ideally, you want to get to the highest point and sell them. This, however, is not always reasonable and requires access to a magic crystal ball. A good rule of thumb is to sell stocks before they have plunged 10% below a recent high. After this point, you are likely not to see an increase and will incur unnecessary losses.

  • The problem in investing in shares is that when you see your share price rising, you don’t want to sell. Greed takes over and you always hope for a higher price. So, you keep waiting and waiting. And, should the market suddenly tumble, chances are high you will panic and sell and probably lose out too. Fix an exit price and when your share reaches that, sell.

  • Follow the industry. Independent companies do not operate in a bubble. It is important to understand the broader industry in which the company exists in order to predict future gains or losses.

  • Trust your gut. Money, including investments is tied to emotion. Follow research and advice and trust your instincts. Make decisions so that you will be able to sleep well at night.
In conclusion, the bottom line is that the market is unpredictable. You can try to predict it, try to find the right time to invest or the wrong times to avoid, but you will never get it correct 100% of the time. Too many factors are involved for you to figure out the perfect time to invest.
The stock market is dependent on consumer behaviour. Trying to figure out when the right or wrong time to invest is extremely difficult. Even though it seems as if some people have figured out a way to predict the market, their prediction is just as good as your local weatherman telling you that it will rain tomorrow. Sure, it may rain, but it’s just an educated guess because there is a chance that it may not rain. It’s the same with the stock market, even though a stock may increase in value, there is always a chance that it will not. There is no surefire way to predict the stock market!
(Sources: stocksicity.com, investorguide.com, rediff.com)

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...by i3gconsultants@ 15:10:57 on 2012-10-02

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ASI tops 6,000 level and dips on profit taking in blue chips


The Colombo stock market yesterday enjoyed a momentary peak when the All Share Index (ASI) surpassing the psychological resistance level of 6,000 points, before profit taking on blue chips dragged it down, whilst turnover was a healthy Rs. 1 billion.




“The benchmark index surpassed the 6,000 mark during the first hour without much resistance and turnover. However, following the profit taking in some of the blue chip counters, the index glided down to  close in negative territory at  5,964, a marginal decline of 8 points,” Softlogic Stockbrokers said.  
“Despite the ASPI managing to cross the 6,000 level for the first time after early January, the trend did not sustain as the broader market fell 7.7 points to close the day in the negative territory,” NDB Stockbrokers added.


DNH also said the Bourse opened on a positive note crossing the key psychological resistance level of 6,000 but succumbed to profit taking, closing the session at 5,964, whilst Asia Wealth said: “The activities at the Bourse showed hype during initial hours of trading with the ASI reaching the 6,000 level, however did not sustain towards the latter part of trading, with both indices falling in the red at the closure.”


Lanka Securities said cash map for yesterday was 71.14%, which was encouraging as there was only one crossing. Foreign participation was 29.9% of total market turnover and net foreign buying was Rs. 111.6 million.
Softlogic said John Keells Holdings (-0.7%), Nation Lanka Finance (-1.5%), Nestle (-2.0%), and Aviva NDB Insurance (-9.2%) led to the downfall of the index.
JKH touched its 52-week high again at Rs. 230, before witnessing some selling pressure, bringing the share down. The counter also recorded the only crossing for the day of 223,000 shares at Rs. 230. The counter closed the day with a dip of 0.7% at Rs. 227.50.
Dialog gained strong investor attention with three large blocks of 1.6 million, two million and 15.6 million shares being dealt on board at the same price of Rs. 9.10. The counter recorded 21 million in volume with Rs. 191.7 million turnover as it traded between Rs. 9 and Rs. 9.20 to finally close the day at Rs. 9.10, marginally up 10 cents.
Touchwood, a counter which has been generating a steep upward trend over the past two weeks, saw a sharp dip in value  as the counter fell 12.2% during the  to close the day at Rs. 18.70.
Heavy volumes of 7.2 million (with Rs. 146.7 million turnover) were recorded in the counter as it fell to a low of Rs. 17.90 before marginally recovering. Strong selling pressure was witnessed in the counter which is one of the retail favourite counters, according to Softlogic.
It also said LOLC regained some buying interest with 2.2 million shares changing hands for Rs. 113.7 million. Accumulation in the counter was prevalent with the counter gaining a mere 20 cents despite strong buying interest. The counter closed the day at Rs. 50.60.
NDBS said institutional and high net worth interest was seen in index heavy John Keells Holdings, whilst Commercial Bank and Central Finance witnessed further accumulation. Retailers were seen active in counters such as Touchwood and LOLC.
It said Access Engineering also contributed Rs. 47 million for turnover with its share price gaining 10 cents to close at Rs 21.90.
The Bank, Finance and Insurance sector became the top contributor to the market turnover (due to LOLC) and the sector index lost 0.98%. The share price of LOLC gained Rs. 0.10 (0.20%) to close at Rs. 50.60.
The Telecommunication sector was the second highest contributor to the market turnover (due to Dialog Axiata) and the sector index increased by 1.00%. The share price of Dialog closed flat at Rs. 9.
The Land and Property sector also contributed heavily to the market turnover (due to Touchwood) and the sector index edged up 0.35%. Touchwood’s share price dipped Rs. 3.30 (15.49%) to close at Rs. 18.00.
DNH Financial said losers modestly outpaced gainers, with George Steuart, Touchwood and Lake House Printers, declining by 18.9%, 15.5% and 10.1%, smoothening out advances in Ceylon Printers, Mercantile Shipping and Equity One, which rose by 11.9%, 11.3% and 10.8% respectively.
“Profit taking seems to continue following the sharp upward trend that was witnessed during the last month as the 6,000 mark appears to be a psychological barrier for the investors,” Softlogic said, adding, “We at Softlogic Equity Research have identified two new sectors, namely Finance and Hotel, that require investor attention. The Finance sector profitability is likely to have bottomed out, while the Hotel sector is likely to witness a strong winter season.”
DNH Financial said even though the market has been largely trading in a narrow band during the past week, its upward days have been accompanied by generally increasing volumes while downward days by decreasing volumes.
“Given that share volumes reflect the supply and demand for stocks and consequently investor confidence, this in our view says a considerable lot about market sentiment, which appears to be largely positive. While we are encouraged by the Bourse’s break through the 6,000 level during today’s trading session, we continue to advise investors to however adopt a highly selective approach investing in quality stocks and maintaining a healthy investor horizon,” DNH added.


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...by i3gconsultants@ 14:10:32 on 2012-10-02

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Bourse ends week on the up


The Colombo stock market ended the week on the up though indices were bit erratic on sentiments and profit taking.
Softlogic Stockbrokers said the trading day commenced with the benchmark index and the S&P SL20 index recording losses. However the more liquid MPI saw an upward climb of 14 points during the initial hour. Amidst significant fluctuations in the indices the ASPI settled at 5,971.99 points dipping 0.2% from its intra-day peak of 5,982.78 points (+0.6%) while the MPI index saw its peak at 5,654.54 points (+1.4%) before cementing its stride in the green at 5,645.95 points.



Turnover remained steady with 15 crossings constituting 53% of the day’s turnover.
The core contributors to the MPI index were; East West Properties (+5%) , Colombo Fort Land and Buliding (+4.5%), PC House (+4.2%),  Free Lanka Capital (+3.4%) and John Keells Holdings (+1.8%) while the major gains of the S&P SL20 index were derived from National Development Bank (+3.2%) and DFCC Bank (+1.9%) as the index headed +0.6% for the day to close at 3,240.98 points.
Commercial Bank spearheaded the turnover backed by strong accumulation leading to 6 large off-board deals constituting around 5.95 million shares being handled off-market at a 52-week high price of RS.115.00. The counter saw its price taking a steep upward movement to close at its intra-day peak of RS.116.00. Hatton National Bank [Non-Voting] too regained interest as it saw a block of 200k shares being transacted off-board at RS.166.00.
John Keells Holdings, surrounded by consistent investor focus, was seen renewing its 52-week high yet again  at RS.229.90 (+2.2%) whilst emerging to be a substantial contributor  to the index as it added 5 parcels constituting of c.829k  shares to the off-board transaction list at a prices of RS.228.00 and RS.229.00 before closing at RS.229.10.
National Development Bank edged up amidst strong investor focus despite some profit taking in the counter to touch an intra-day gain of 4.9% at RS.152.00 and closed with a gain of 3.2% at RS.149.40. Aviva NDB Insurance extended its losses as it touched a low of RS.362.00 (-9.2%) before its close at RS.374.70. NDB Capital Holdings which renewed its 52-week high price at RS.510.00 yesterday closed with a dip of 2.8% at RS.479.80.
With recent activity noted in Access Engineering and Touchwood Investment, both counters saw a gradual up climb in their share prices during the day as they touched intra-day highs of RS.22.10 and RS.21.60 respectively. The former witnessed an on-board pick of c.240.9k shares at RS.21.00. Renewed interest was observed in Dipped Products and Dunamis Capital. The latter witnessed a crossing carrying 7 mn shares consisting of a 2.8% stake, which was executed at RS.15.00 while the former recorded two off-board deals amounting to c.904k shares at RS.110.00 and RS.115.00.
Interest in Asiri Hospital Holdings persisted amidst some profit taking which leading to its price slipping 0.9% at its intra-day low of RS.11.40. Leasing companies; Lanka Orix Leasing Company and People’s Leasing Company denoted some interest today. The latter which witnessed some large trades this week continued its trend while the former gained 0.2% at its close of RS.50.50. Madulsima Plantations was seen trading at a 52-week high of RS.22.50 (+7.7%) whilst the largest gain among plantation sector counters stemmed from Elpitiya Plantations (+7%). ACL Cables gathered interest with an on-board trade of 186k shares taking place at RS.75.00.
Retail play was observed in Touchwood Investments (+11.5 %), Access Engineering (+0%), Seylan Developments (+8.9%), Free Lanka Capital (+3.4%), First Capital Holdings (+7.1%), Swarnamahal Finance (-1.9%) and PC House (+4.2%) which topped the day’s most active counters.


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...by i3gconsultants@ 12:09:00 on 2012-09-30

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Net foreign inflow tops Rs. 30 b; Bourse rebounds


The year-to-date net foreign inflow has surpassed the Rs. 30 billion mark as the Colombo stock market bounced back yesterday on the strength of a fresh round of buying, following profit taking early in the week.After a small outflow Rs. 31 million on Monday, the market has seen net foreign buying of nearly Rs. 300 million, bringing the year-to-date value to pip the Rs. 30 billion mark, an all-time high.
Analysts said the record inflow reiterates foreigners craving for Lankan equities, especially select blue chips. The inflow is also gigantic considering the outflows of Rs. 19 billion in 2011 and Rs. 26 billion in 2010.
On Wednesday, when net inflow was Rs. 190 million, foreign buying concentrated on JKH, Commercial Bank, Lion Brewery, Distilleries, Sampath Bank, and Lanka Hospitals, among select others.
DNH Financial said despite the last few days’ profit taking, the Sri Lanka Bourse is still the world’s best performer at 20.3% on a month-on-month basis, comparing highly favourably amongst global peers.
The Colombo Bourse produced a spirited rebound yesterday after dipping on profit taking. Colombo’s gain was despite Asian markets falling after the previous day’s impressive gains, while more weak manufacturing figures out of China added to concerns about the economic giant, DNH added.
From yesterday’s lowest level, the ASI reflected over a 100-point rise, showing strong recovery. Overall the ASI gained 53 points (0.90%) and is 100 points short of touching the 6,000 point level, the MPI gained by 69 points (1.26%) and the S&P SL20 Index moved up 28 points (0.89%). Turnover was a healthy Rs. 941 million.
Lanka Securities said top contributors to turnover were Dialog Axiata with Rs. 81.3 million, John Keells Holdings with Rs. 70.8 million and Ceylon Tobacco with Rs. 61 million. Two off-the-floor deals were recorded from Dialog Axiata (seven million shares at Rs. 7.50 each) and John Keells Holdings (100,000 shares at Rs. 219 each). Most active counters for the day were Kandy Hotels, Nation Lanka Finance and Central Finance and Investments.
“A healthy mix of investors sought selected blue chips such as Dialog Axiata, John Keells Holdings, and Ceylon Tobacco, as well as mid cap counters such as Nations Trust Bank, Sampath Bank, and Haycarb,” NDB Stockbrokers said.
Noteworthy gainers for the day were Kandy Hotels up by 32.2% to close at Rs. 11.90, SMB Leasing up by 25% to close at Rs. 0.50, and Ceylon Printers up by 19% to close at Rs. 2,998.90. Noteworthy losers for the day were newly-listed George Steuart Finance down by 18.6% to close at Rs. 1,020, Lanka Walltile down by 7% to close at Rs. 66.40, and Hayleys Export down by 6.3% to close at Rs.28.10.
“Cash map was 54.34%, indicating marginal net buying pressure prevailed,” Lanka Securities added.
Softlogic Stockbrokers said yesterday’s ASI gain was powered by Bukit Darah (+3.1%), Carsons Cumberbatch (+1.9%), Kandy Hotels Company (+28.9%), Distilleries (+3.2%), and Commercial Leasing and Finance (+4.4%). The S&P SL20 index was supported by Distilleries (+3.2%), Asian Hotels and Properties (+2.9%), and Aitken Spence Hotel Holdings (+2.6%).
DNH said it still views market conditions as a healthy entry point for investors to cherry pick quality stocks on weakness and keeping in mind an investment horizon spanning the medium to longer term.
“Although balance of payments pressures are likely to continue on the back of high oil prices, Sri Lanka’s economic story still appears to be intact and will provide the necessary comfort to investors justifying the current market PE of 16X, which appears relatively expensive compared to other frontier/emerging markets,” it added.
John Keells Stock Brokers said: “Renewed buying interest resulted in strong gains in both large caps and second tier speculative counters, which pushed the indices sharply higher.”


Dailyft

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...by i3gconsultants@ 18:09:51 on 2012-09-22

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Brokers more positive after meeting with SEC


Broking firms described the first dialogue with new Chairman of the Securities and Exchange Commission Dr. Nalaka Godahewa last Friday as “very positive”.
Almost all brokers – members of the Colombo Stock Brokers Association (CSBA) and non-members – attended the meeting, which involved two other SEC Commissioners, Acting and Deputy Director Generals and other Directors.

A host of issues had been highlighted by the brokers, whilst SEC had been attentive. Chairman Godahewa had requested brokers to make written submissions, which will be deliberated by the Commissioners before taking a final decision.
However, during the meeting the Chairman had remarked some matters highlighted weren’t real issues but procedural and the CSE would be roped in to address those.
Godahewa had emphasised that whilst he could be described as “market friendly,” brokers were cautioned not to abuse that friendliness by misdeeds as he could be tougher than his predecessor with regard to malpractices if found guilty. He had said the Commission would go by the SEC Act whilst capital market development mandate would be equally addressed as well.
It was assured that in the future investors would not have to worry about a fear psychosis, but investigations on suspected cases of malpractices would be carried out efficiently and professionally.

Dailyft

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...by i3gconsultants@ 01:09:35 on 2012-09-18

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Sri Lanka to entertain claims from shareholders of expropriated firms: report


Shareholders of two listed firms that were expropriated by the state last year can lodge claims for compensation from a three member tribunal, a media report said.Sri Lanka's The Sunday Island newspaper quoting a public notice said the panel wahzas made up of the Government Valuer, former chief valuer P W Senaratne and a third member, Sunil Fernando. "Such compensation shall be payable to reflect the value of the shares held by each shareholder in affected enterprises or to reflect the value of an under-utilized asset based on its ownership by one or more of the owners," the report said. Two listed companies, Hotel Developers and Pelwatte Sugar were among enterprises and assets named in the law controversial law, which was passed by a legislature in which the ruling coalition has a two thirds majority. Violating property rights of citizens by expropriation was a concept that became widespread in Eastern Europe. Analysts point out that in the feudal era, all property was owned by the king. But in post-feudal Eastern Europe, newly established property rights of people were re-taken by the 'sovereign' state, which had assumed the powers previously held by the king, especially with the spread of Marxian ideology and fascist-nationalism. The controversial law has become a valuable example to those who study rule of law, justice, citizen's freedoms, the separation of powers in a free country and absolute majoritarianism. In naming specific firms and assets as 'under-performing' or 'under-utilized' by unknown criteria by the secretly hatched law, representative who voted against the law pointed out, the legislature trespassed on the functions of the executive. The main shareholder of Pelwatte Sugar has pointed out that under the criteria set by the law itself - which involved assets given to private investors by the state within 20 years - the firm did not fall within the definition. However judicial review of the expropriated assets was specifically blocked by the law, which legal analysts said was a case where the legislature trespassed on the functions of the judiciary. After Sri Lanka gained independence from Britain, citizens and non-citizens were expropriated several times by the elected ruling class, violating property rights and killing newly emergent native entrepreneurs, but they could still go to court. The law also named a single firm, Hotel Developers, which legal analysts said was ad hominen or targeting a specific victim. Such a law, would have been struck down by courts in a free country. Before the enactment of Sri Lanka's 1972 constitution, ad hominen laws have been struck down by Britain's Privy Council, to which citizens aggrieved by the state or rulers could petition to.


LBO

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...by i3gconsultants@ 13:09:44 on 2012-09-16

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From worst to near best: What has really changed?


The statistics by Bloomberg yesterday showed that the Colombo Stock Exchange (CSE) had become the third best performing market in the world during the period from August 10, 2012 to September 10, 2012.
Since the controversial resignation of the former Securities and Exchange Commission Chairman on August 12, the market has been on an upswing with market players expecting lenient and market-friendly regulations from the new Chairman Dr. Nalaka Godahewa, who, according to independent analysts has a strong case of ‘conflict of interest’ against him, being the Chairman of a listed firm.
Unlike his predecessor who just said she was resigning to ‘uphold her principles’, Karunaratne went on record that he was under pressure to resign by a group of powerful investors, as he was trying to reopen certain investigations pertaining to market misconduct that had been put in the backburner.
Since the appointment of Dr. Godahewa on August 24, the main All Share Price Index (ASI) has risen over 13 percent amidst much retail and high net worth interest. Yet, strangely enough, since his appointment there hasn’t been any revision in the SEC regulations.
However, despite the positive sentiment, independent analysts have advised investors to be cautious about the current Bull Run, based on prior experiences, not ruling out the possibility of the creation of a bubble.


Dailymirror

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...by i3gconsultants@ 12:09:02 on 2012-09-15

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Manipulation to make CSE best performing market soon - Harsha .


Market manipulation would make the Colombo Stock Exchange (CSE) the number one performing stock market in the world soon, UNP National List MP Dr. Harsha De Silva said yesterday.
He made this statement referring to reports where statistics have showed CSE as the third best sock market in the world.
The statistics by Bloomberg showed that the CSE’s All Share Price Index had become the third best performing index in the world during the period from August 10, 2012 to September 10, 2012.
Dr. De Silva said anything would be possible when those who manipulate the CSE are controlling the Securities Exchange Commission (SEC) which governs the stock market.
“Don’t be surprised if the CSE becomes the number one stock market in a few days time, as all obstacles for market manipulation had been cleared,” he said.
Since the controversial resignation of the former Securities and Exchange Commission Chairman, Tilak Karunaratne on August 12, the market has been on an upswing with market players expecting lenient and market-friendly regulations from the new Chairman Dr. Nalaka Godahewa.
According to independent analysts, Dr.Godahewa has a strong case of ‘conflict of interest’ against him, being the Chairman of a listed firm.
Unlike his predecessor who said she was resigning to ‘uphold her principles’, Karunaratne went on record that he was under pressure to resign by a group of powerful investors, as he was trying to reopen certain investigations pertaining to market misconduct that had been put in the backburner.
Since the appointment of Dr.Godahewa on August 24, the main All Share Price Index (ASI) has risen over 13 percent amidst retail and high net worth interest. Yet, strangely enough, since his appointment there has neither been any revision in SEC regulations nor to the macro economic fundamentals of the country.


Dailymirror

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...by i3gconsultants@ 12:09:09 on 2012-09-15

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Bourse continues to zoom


The Colombo bourse continued to zoom yesterday with turnover hitting Rs.3.23 billion, up from the previous day’s Rs.1.9 billion, and all three indices up sharply – the All Share by 149.68 points (2.59%), the Milanka by 168.76 points (3.11%) and S&P by 81.76 points (2.61%) with 212 gainers strongly outpacing 54 losers while 41 counters closed flat.Brokers said that the focus was on banking and blue chip stocks with some retailers previously focused on penny stock migrating to midcaps and blue chips.JKH saw three crossings totaling slightly over 0.8 million shares at prices of Rs.216 and Rs.217 with the block trades worth Rs.174.9 million. Additionally, over 0.9 million shares of the conglomerate were done between Rs.213.60 and Rs.218.30 on the trading floor with the counter closing Rs.5.60 up at Rs.218 contributing Rs.403 million to turnover.Commercial Bank saw two crossings of slightly over 4.2 million shares at Rs.115 contributing Rs.483 million to turnover while floor trades in this counter saw nearly 2 million shares done between Rs.113 and Rs.115.90 with the share closing Rs.3.50 up at Rs.216.60 contributing the day’s top turnover of Rs.224.7 million.There was also a crossing of 3.85 million Dialog at Rs.7 contributing Rs.27 million to turnover. Additionally, nearly 5.8 million Dialog was done on the floor closing 70 cents up at Rs.7.30 contributing Rs.40.9 million to turnover.Among the banking stocks that were most traded yesterday were HNB, both voting and non-voting, with 0.4 million voting shares done closing Rs.7 up at Rs.166 and nearly 0.3 million non-voting shares closing Rs.2.80 up at Rs.118.50.Among low priced counters that demonstrating volume were Nation Lanka Finance with nearly 10.6 million shares traded closing Rs.1.10 up at Rs.124.30, over 4.7 million Vallibel One closing Rs.3.40 up at Rs.23.50, over 13.2 million e-Channelling closing 50 cents up at Rs.6.40, over 2.9 million Touchwood closing 90 cents up at Rs.19.30 and over 2.4 million Access Engineering closing Rs.1.20 up at Rs.19.


The Island

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...by i3gconsultants@ 12:09:20 on 2012-09-15

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Dummy accounts, Mercs and BMWs used by crooked brokers to boost bourse


The former chief of the Securities and Exchange Commission (SEC) Thilak Karunaratne has urged retail investors to foray into the Colombo Stock Exchange via unit trusts, because most brokers could not be trusted, with some of them being investigated for using dummy accounts to manipulate the market while some firms were showing their newly bought Mercedes and BMW as assets against which more credit could be generated.Addressing the annual general meeting of the International Chamber of Commerce recently, Karunaratne said the SEC must be given more powers to minimise market manipulation so that the bourse can thrive with all types of investors having access to a level playing field."I encourage retail investors to enter the bourse via unit trusts because some brokers cannot be trusted. Their advice must be taken with a pinch of salt," he said.Some brokers had been clamouring for a relaxation of broker credit and had blamed the regulator for the bourse’s recent slump."Not all brokers, but some crony brokers have been exerting pressure on the SEC for a relaxation of credit restrictions. This was despite the fact that around Rs. 5.7 billion of unutilized credit was available in the system. We had introduced a formula for credit based on a broker firm’s assets and some of them were showing us their Mercedes and BMWs as assets," Karunaratne said.He charged that the post conflict rise of the stock exchange was driven by manipulation and unrestrained credit. "Of course there was the post conflict euphoria but the market’s rise was unbelievable. The market PE peaked at 29 percent at one time and this was ridiculous," he said."Some brokers were using dummy accounts, apart from their own accounts, to trade shares in the stock exchange. These crony brokers and dishonest investors made it seem as if the SEC was over regulating the stock exchange, but this is far from it. They had entered the market with nothing and in a short time built up large fortunes. Despite the measures we took to minimise the manipulation the market still grew," Karunaratne said.The SEC had introduced credit restrictions to broker firms, which were later relaxed, because the entire system was at risk from the build-up of a credit bubble, a fact appreciated by four broker firms who wrote to President Mahinda Rajapaksa commending the SEC’s efforts.JB Securities Ltd, IIFL Securities Ceylon (Pvt) Ltd, CT Smith Stockbrokers (Pvt) Ltd and Somerville Stockbrokers (Pvt) Ltd in their letter to the President said; "The net capital computation formula before the 16th July directive was extremely accommodative to the current environment. It does not require haircutting based on impact cost (illiquid securities require a greater hair cut) and value at risk (volatility) when determining the collateral value. Thus the degree of credit that can be extended is much greater than if a best practice standard was in force. Further, the required minimum net capital is a mere Rs. 35 million from which a leverage of 3x is permissible."Foremost in our minds is the steps that can be taken to reduce systemic risk – risk of collapse of an entire market as opposed to the risk associated with any individual entity, group or component of a system. In particular we are most concerned with contra party risk and the comingling risk of client credit balances, i.e. there is no delineation between client and contra creditors from all other creditors during bankruptcy."In the normal course of business some clients maintain credit balances in their brokerage account. As per CSE rules client funds have to be segregated into a separate designated account. Although these funds are maintained in a segregated account there is no legal ring fencing of these balances thus in the event of a firm bankruptcy these client credit balances will be pooled with all other assets of the firm. In the event of such an occurrence there exists a strong possibility of a contagion risk to ALL other brokers where market participants will lose confidence in their stability."The market slump began in 2011 and continued until recently after Karunaratne resigned from office, to be the second SEC Chairperson to do so after Indrani Sugathadasa less than a year earlier, after influential investors and their crony brokers lobbied successfully for a halt to investigations into rampant market manipulation.He said the slump was due mostly to macroeconomic fundamentals, which some brokers had concurred with (see The Island Financial Review of August 27, 2012)."We have a net inflow of foreign investments into the bourse this year because the market is attractively valued with a PE of 10.59 percent. But the recent uptrend in the bourse is disturbing with the PE moving above 13 percent and some stocks are rising in price and a careful look at fundamentals will show that it is not worth the while," Karunaratne said, urging retail investors to be cautious.He said retail investors should form an association which would have to be natured by the SEC and stock exchange so that independent monitoring could be possible."Such associations in Canada, Malaysia and Thailand can even take listed companies to courts if proper information is not made public," Karunaratne said adding that the many of the recent IPOs had been overvalued.He said the SEC had finalised a draft amendment to the SEC Act which would give the SEC more powers to deal with market manipulation.


The Island

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...by i3gconsultants@ 17:09:35 on 2012-09-12

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Sri Lankan companies could list in Tokyo: Ambassador Karannagoda


Sri Lankan firms could list securities and raise money in the Tokyo Stock Exchange, which is easier and less costly than listing in the US or London, Sri Lanka's ambassador to Japan, Wasantha Karannagoda has said.Tokyo Stock Exchange, which has a market capitalization of 3,300 billion US dollars, is interested in having Sri Lankan firms gaining a listing through Japanese Depository Receipts, Sri Lanka's embassy said in a statement following discussions with TSE officials. Ambassador Karannagoda was quoted as saying that the listing process at the TSE was easier and less costly when compared to the New York Stock Exchange (NYSE), London Stock Exchange (LSE) or the NASDAQ. Sri Lankan firms including John Keells Holdings and Hatton National Bank have previously raised money through the issue of global depository receipts in Luxembourg. Tokyo Stock Exchange was set up in 1878, a few years before Colombo Brokers Association, the forerunner of the Colombo Stock Exchange and a pioneer stock exchange in Asia, began in 1896, trading plantations stock. Colombo became a financial centre that raised money for companies in other Asian countries including Malaysia, with the islands currency fixed by a currency board allowing free flow capital. A few Malaysian firms are still listed in Colombo. However after independence from British rule Sri Lanka established a money printing central bank leading to exchange controls in less than two years. It was followed by violations of property rights through expropriations soon after, relegating the country to the backwoods of Asia. Corrected - market cap US$3,300bn


LBO

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...by i3gconsultants@ 17:09:00 on 2012-09-12

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Sri Lanka stock rally takes pause


Sri Lanka's stocks closed marginally lower Tuesday ending a 10 straight days of gains that followed the replacement of a regulator who was tough on securities fraud, brokers said.The Colombo All Shared Index closed at 5,590.90 down just 1.13 points lower (0.02 percent) and the S & P SL 20 index closed at 3,034.00 up 7.50 points (0.25 percent). Turnover was 1.9 billion rupees with a large stake in Serendib Hotels, boosting volumes. The top contributor to the index was Selinsing an illiquid palm oil stock that rose 500 rupees to 1,599 with only a single share being traded, according to stock exchange data. Sri Lanka Telecom, another illiquid stock large cap stock closed up 1.20 at 44.70 rupees, becoming the second largest contributor to the days index gain. Some of the finance companies which had shot up in recent days lost ground Tuesday. Finance companies have been rising despite new car registrations plunging, interest rates rising and prospects of higher bad loans looming, analysts said. Sri Lanka's stocks which weakened as interest rates rose ending a credit driven rally started to go up after the stock market regulator was replaced for the second time. Politically connected investors and brokers blamed SEC rules and investigations of micro cap fraud including pump and dump scams for the falling market. Abans Finance fell 1.70 rupees to close at 42.10 rupees, Arpico Finance fell 5.70 to close at 89.50, Asia Asset Finance fell 20 cents to close at 3.10, Associated Motor Finance fell 23.10 rupees to close at 391.90 rupees, Capital Alliance Finance fell 1.00 rupee to closed at 29.00. Central Finance fell 3.30 to close at 162.50 and Commercial Credit and Finance fell 20 cents to close at 17.40 rupees but Alliance Finance rose 20.50 to close at 721.80. Dankotuwa Porcelain closed up 6.10 rupees at 24.10, Citrus Leisure closed up 2.60 at 34.00 rupees and HVA Food closed up 1.30 at 19.00 rupee being among the top contributors by volume.


LBO

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...by i3gconsultants@ 17:09:31 on 2012-09-12

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Bourse up for 10th session in a row


Sri Lankan stocks extended gains for a 10th straight session yesterday, jumping 1.73 percent to a seven-month high in strong volume led by blue chips.The Colombo Stock Exchange’s main index gained 95.18 points, to 5,592.03, its highest close since February 2.It has risen 11.55 percent in the last 10 sessions on the hopes that the new Securities and Exchange Commission head, Nalaka Godahewa, will come up with new market friendly ideas to revive the market, which has fallen 9.51 percent this year.
The bourse is at an overbought region since August 28, Thomson Reuters data shows.The 14-day Relative Strength Index yesterday was at 89.854, well above the upper neutral range of 70. Danushka Samarasinghe, research head at Colombo-based TKS Securities, said blue chips have been heavily discounted and given their growth prospects, they are warranted for sharp price appreciation.
“However, with the market having a sharp correction in the recent past with a revival in sentiment, the broad market is recording a sharp price appreciation.Therefore market participants should be mindful not to chase after overvalued counters purely on a speculative bias,” he told Reuters.
Turnover was Rs.1.89 billion ($14.28 million), more than double this year’s daily average of Rs.880.3 million.The bourse saw foreign inflows of Rs.38.8 million worth of shares, extending the net inflow so far this year to Rs.28.7 billion.The rupee closed firmer at 132.25/30 against the dollar, from Friday’s close of 132.30/35 on exporter dollar sales, dealers said.


Dailymirror

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...by i3gconsultants@ 12:09:45 on 2012-09-11

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Sri Lanka SEC has appoints deputy director general


Sri Lanka's Securities and Exchange Commission has a appointed long time staffer Dhammika Perera as its deputy director general.He had headed the regulator's investigation division for several years. SEC has an acting director general. The regulator ran into a controversy after two chairman were forced to resign under pressure in less than a year.


LBO

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...by i3gconsultants@ 12:09:35 on 2012-09-11

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SRB mandatory for companies?



Last week I had the opportunity of meeting the Maldivian business delegation that was in Sri Lanka, with their head of state to sign a series of bilateral agreements with the Government of Sri Lanka. One CEO of a large resort chain in the Maldives said the climate change issues that the Maldives is up against must be publisized so that companies becomes and nations become serious to environment protection and CSR.


CSR to SRB









The United Nations celebrated Humanitarian Day with Beyonce which highlighted the role of Socially Responsible Businesses (SRB)


My mind went to the thoughts shared by my teacher Professor Uditha Liyanage at a recent conference, where he advocated that companies must move from CSR to SRB, meaning Socially Responsible Business. Professor Liyanage’s cutting edge thought was that CSR was incidental in nature and that the companies of tomorrow must be more long term driven perspective and for this, the underline ethos should be strong business strategy linked to society that will make doing good business. He also sketched out how Responsible Corporate Citizenship is in fact only the 1st step of the ladder and a typical organization must upgrades to practices like Corporate Social Responsibility(CSR) and now the need of the hour is to practice Socially Responsible Business(SRB).


Bigger than countries?


I guess this argument of Strategic Responsible Business( SRB) must be made mandatory if we are serious about the warnings coming from policy makers like in the Maldives Isles which is in fact said to become extinct due to global warming. I would take this argument further as organizations of today are in fact financially stronger the countries due to the economic meltdown and natural calamities draining their resources. If we take the works of eminent personalities in this area like D Steven White, in his Global Economic Entities of the world, he says that Eight of the top 50 Economic Entities of the world on Gross Domestic Product(GDP) are multinational corporations. Wal-Mart is stronger on GDP than Norway and Venezulela. Shell is larger than Saudi Arabia and Argentina. Exxon is bigger than oil rich Iran and Thailand. GM is larger than Denmark. British Petroleum is ahead of large economies like Greece and Colombia while China National Petroleum is way ahead of Finland, Greece, Malaysia, UAE, Portugal, Hong Kong and Singapore. Now the question is what components of these large oil companies contribute to protecting the environment and society with Socially Responsible Business(SBR)


64% company’s






If we dig deeper to this data we see that 64% of the top 175 economic entities of the world are corporates that include big names like Apple, Toshiba, BMW, Aviva, Tesco, HSBC, Nestle, AT&T, Samsung and Ford. Hence it is very clear that these organizations have the power to set a new agenda to the world as they understand the ground realities stronger. But, the question is will this new shape of Socially Responsible Business become a reality given the global economic melt downw and the shrinking purchasing power of consumers. May be another argument that can be pursues is if organizations like the United Nations must tap into the experience of these companies when deciding the new world orders for Socially Responsible Business(SRB) organizations may be the world might be a more conducive place from an environment and social front. From a Asian front, companies like Toyota valued at $221,760 million in GDP happens to be larger than economic entities like Egypt, Israel, Ireland, Chile, Philippines, Pakistan, Kuwait and even New Zealand which sure points to the importance of a company like Toyota to be more involved at policy making bodies like ASEAN & SAFTA. I guess the launch of the Prius brand by Toyota on the positioning of being the lowest carbon emission automobile is the first step in this new direction for Socially Responsible Business(SRB).


Companies in the UN


If I may cite a statement made at the last conference on Global Compact, the Secretary General of the United Nations mentioned that one day the United Nations will consist of the top companies that will give leadership to the world than just country entities. I feel this statement holds ground so strongly from an environment and social front if one is to practice Socially Responsible Business. The million dollar question is will the top economies of the world allow this to happen for corporate CEO’s to stake policy seats in powerful policy making bodies. I guess time will tell us how this new thinking comes to light.


New world Order


If I may quote one of my Harvard University lecturers-Marty Linsky, he said that now we must move away from best practices to the next best practice, we must move away from developing solutions to trying out experiments, we must create chaos to come out with out-of the box thinking to run our organizations. These words of wisdom very clearly spells out that a new ethos of working will have to come to play if we are to save countries like the Maldives that is threatened by global warming that originates from Socially irresponsible companies and nations. But for this to happen, we have to get the top business of the world into the system so that words can turn ideas to action on the ground. I believe it is only then, that Socially Responsible Business can really surface in the new world order.


Next Steps


Given that Sri Lanka is also a small economy which is around 60 billion dollars and on the fast track development agenda some of the key actions could be as follows:


1) We must move the current Best Corporate Citizen competition staged by the premium business chambers to Best Socially Responsible Business(SRB)


2) Develop an architecture for SBR on the areas of Governance, Stakeholder engagement, Transparency and Responsivess.


3) Sri Lanka must work closely with the top 16% corporate of the world and attract them to come and set up manufacturing bases in the new industrial estates but on the premise of Socially Responsible Business, just like what Cargills have done with their Food City Super market chain.


4) We must attract the Carbon credit business to Sri Lanka from the Scandinavian countries. As at now, this funding is directed to Indonesia.


5) May be we can show case our industrial strategies like Ceylon Tea – Ozone friendly tea position and the Apparel branding theme on Sri Lanka being the Ethically manufacturing destination so we take leadership on this front on the global stage for SRB.


6) Carve out an operational architecture on Social Responsible Business and include this in the National Budget of 2014 with specific financial and service support to the SME sector.


7) Develop a mechanism to evaluate the corporate and SME sector on this new way of doing business on SRB.


The author was awarded the Exemplary Leadership award for 2012 at the Association of Business/Global Education Congress & the Chief Marketing Officers Council of Asia for his outstanding service in the Public, Private and International public sector experience. He is an alumni of Harvard University(Boston).


Dailynews

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...by i3gconsultants@ 12:09:39 on 2012-09-11

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George Steuart Finance launched


George Steuart Finance Limited today unveiled to the public the new corporate name and their future plans for growth, at a launch event held in Colombo. The company also announced the approval for listing on the Diri Savi Board of the Colombo Stock Exchange in the near future. Having joined forces with the George Steuart Group, one of the oldest and most reputed mercantile establishments in the country, the company is now at an advantage to enjoy the synergies available within the Group which has diversified interests in businesses such as health, manufacturing, exports, leisure, engineering, construction, recruitment, education and now finance.







Lakshman Uduwara


Speaking at the launch Lakshman Uduwara, Director/Chief Executive Officer of GS Finance said, "We are now stronger by being part of the reputed George Steuart Group. With this affiliation, we now project an enhanced corporate image and stability, gives ample confidence to potential investors. The public needs to know that their money is secure whilst earning the best returns. Also, customers are attracted by a friendly, convenient atmosphere. Our valued customers are assured that they will receive total satisfaction when dealing with us. In keeping with the Group's culture and corporate values our company stands dedicated to adhere to the highest levels of good governance, transparency and integrity". Uditha Ranaweera, Executive Director and Head of Business Development commented, "With regard to business expansion, the company proposes to open more branches in strategic locations of the country this year, in addition to the currently established five branches, to service a wider spectrum of clients. The company also has plans to commence micro financing operations with a commitment to assist grass-root level businesses, especially the aspiring youth. It is the belief of the Board of Directors that all Group businesses should converge their strengths to build this Nation and power its growth to the next level." George Steuart Finance currently offers comprehensive services such as fixed deposits, leases, hire purchase, loans, short term trade finance, cheques and bills discounting, margin trading and real estate development. The company's dedicated research team looks forward to introducing many innovative financial products that will add value and uplift the lives of upwardly mobile Sri Lankan people. The company's portfolio of deposits and advances has shown an impressive growth during the last two years. The human resource capital of the company has also improved in leaps and bounds, facilitating the operational infrastructure and the offering of a superlative standard of services to customers. George Steuart Finance was initially established as Asia Commerce (Pvt) Ltd, a dedicated leasing company in 2005. Broad basing the capital structure, growing the product profile and bringing in industry professionals to strengthen the Board, in May 2011, on being granted the finance company license, to deliver a better financial product, the company moved to its modern office complex on Galle Road, Colombo 3. Today, backed by the strength of the George Steuart Group, the company stands confidently poised to support the industry growth, setting a new benchmark as a dynamic force in the corporate sector of Sri Lanka.


Dailynews

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...by i3gconsultants@ 13:09:31 on 2012-09-08

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Bourse ends week on 5-month high


Stocks extended gains for a ninth straight session on Friday, jumping 2% to a five-month high helped by blue chips and foreign buying.
The Colombo Stock Exchange’s main index gained 2%, or 107.93 points, to 5,496.85, its highest close since 4 April.“Everybody is chipping in. Everybody is participating in the run and it’s mainly a sentiment-driven market,” said a stockbroker asking not to be named.
The new Head of the Securities and Exchange Commission, Nalaka Godahewa, is expected to come up with new ideas to revive the market, which has fallen 9.51% so far this year.Turnover was Rs. 1.76 billion, more than double of this year’s daily average of Rs. 874.2 million. The Bourse saw foreign inflows of Rs. 155.1 million worth of shares, extending the net inflow so far this year to Rs. 28.66 billion.
The rupee closed at 132.30/35 against the dollar, slightly firmer than Thursday’s close of 132.38/40.


Dailyft

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...by i3gconsultants@ 13:09:09 on 2012-09-08

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SEC issues statement on investigations


The Securities and Exchange Commission of Sri Lanka (SEC) in a statement said yesterday that it was concerned about certain daily and weekly newspaper articles which appeared recently, giving an impression that a number of companies are under investigation by the SEC.“The SEC wishes to categorically mention that there are no ongoing or pending investigations at present in respect of any of the companies disclosed in the above mentioned articles. It should also be mentioned that any investigation conducted by the SEC pertaining to trades executed by any investor in the secondary market should not be construed as an investigation against the establishment whose securities are involved in such investigation," SEC said.
"This will result in creating an adverse impression and impact on such companies and their stakeholders,” the SEC statement added.


Dailyft

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...by i3gconsultants@ 12:09:34 on 2012-09-08

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‘Boom’ is back?



  • Profit taking by the minute sparks some volatility though retailers reinvesting gains

  • Past six market days volume of shares traded at 478 million almost equals whole of July’s volume of 488 million

  • Stock market gathers more strength on improved sentiments of retailers

  • Number of trades yesterday over half of last week

  • Foreigners return to net buying

The stock market is enjoying a sudden boom but it is certainly too unpredictable to be emphatic that the rebound is there to stay though investor sentiments are sure to have got a big boost of late.
Continuing from where it left on first day of the fresh week, the Colombo stock market yesterday got further strengthened with buying across the board as confirmed by at least two brokers whilst retailers remained re-energised, which is welcome.With market’s value up by Rs. 30 billion in a day, ASI gained by 76 points or 1.45% and MPI gained by 74 points or 1.51%. Turnover was Rs. 1.24 billion. MPI’s year to date negative return has been reduced to below 5% and ASI’s figure to 12% by yesterday as opposed to 20% in July with regard to the latter. Confirming the level of hyped-up activity, the market saw a staggering 178.6 million shares transacted via 24,270 trades.
During the past six market days, the combined volume of shares traded was nearly 478 million, which is almost close to the entire month of July’s (21 market days) figure of 488 million. Yesterday’s number of trades was almost half of last week’s figure. Profit taking by previously battered retailers was evident which also led to some degree of volatility in indices but analysts were heartened by the fact that most are re-investing gains back in the market. The reason being that sellers finding stock prices remaining on the up on demand thereby tempting a fresh round of buying. Blue chips have fetching a higher premium on the back of investors re-rating the market.
Analysts said after being in the doldrums for many months the market ‘coming to life’, was understandable though a closer scrutiny by regulators on exposure positions was warranted as well.
 There has been consensus that rebound in sentiments was owing to expectations of a more market-friendly and pragmatic regulatory regime in the SEC.
Foreigners who were net sellers on Monday were back to being net buyers of Rs. 69 million keeping the net year to date inflow at a record Rs. 28.6 billion.“The indices continued a six day uptrend, ending sharply higher on the back of continued buying interest across the board,” John Keells Stock Brokers said. Endorsing the latter view, SC Securities said, “The buoyant sentiment of the Colombo bourse persisted for second day running with all round investor participation seeing a sizeable rise.”
 “The market held onto positive ground after volatile trading during the early hours. Retail participation continued to dominate trading with retail active counters taking the lead throughout trading,” said Lanka Securities. It also said cash map yesterday was 62.97% which actually indicates that strong buying interest prevailed over selling pressure.
Asia Wealth Management said the bourse continued its upward trajectory, with ASI breaking the 5,300 mark, primarily driven by aggressive retail participation.“The market gaining points substantially seems to be an evidence of local investors regaining confidence, which is one of the key factors for the sustainability of the Sri Lankan equity market,” it added.
“Retail upbeat sentiment continues Indices gained significantly with the ASPI reaching the highest in four months,” noted NDB Stockbrokers.
Softlogic Stockbrokers said the bull run has now persisted for nearly nine straight trading sessions leading the broader index to advance as much as 380 points (around.7.7%). “With a considerable percentage of gains have been attributed to the penny play, the quality stocks also have built momentum at a slow, steady and quiet pace,” it added.
Given retail dominance, top contributors to turnover was Free Lanka Capital (Rs. 80 million) with over 27 million shares traded and the counter closing up 28% to Rs. 2.85 whilst renewed interest on E – Channelling following a strategic buy of 10% on Monday by Capital Trust Holdings, saw it account for Rs. 64 million.
However fundamentally sound Sampath Bank emerged second biggest contributor to turnover with Rs. 77 million with high net worth and institutional play. Up 5% to Rs. 186.40 Sampath Bankalso contributed to ASI’s movement after fellow blue chips SLT, Carsons and CTC.
Nation Lanka Finance, Peoples Leasing and Bukit Darah too contributed to the turnover.
Noteworthy gainers for the day were Free Lanka Capital up by 28.0% to close at Rs. 3.20, Seylan Merchant Bank (Non-Voting) up by 25.0% to close at Rs. 0.50 and Commercial Development up by 22.0% to close at Rs. 74.9.
NDB Stockbrokers said accumulation continued in fundamentally strong banking sector counters such as Commercial Bank and Sampath Bank.
Banking, Finance and Insurance sector became the highest contributor to the market turnover (due to Sampath Bank and People’s Leasing) and the sector index edged up 1.51%. The share price of Sampath Bank increased by Rs 9.20 (5.12%) to close at Rs 189.00 while the share price of People’s Leasing gained Rs 0.70 (6.31%) to close at Rs 11.80.
Softlogic said steady players including DFCC Bank, Expolanka Holdings, Hatton National Bank, Hayleys and Richard Pieris also grabbed considerable interest during the day’s trading.


Dailyft

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...by i3gconsultants@ 12:09:48 on 2012-09-05

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Tilak insists no overregulation


Former Securities Exchange Commission (SEC) Chief Tilak Karunaratne yesterday rebuked allegations of over regulation and ad hoc measures as having impacted the stock market during his tenure and noted that the SEC Act should be strengthened further to punish manipulators.“What some of the crony brokers and dishonest investors try to project in the media is that over regulation, ad hoc controls, sudden restrictions affected the growth of the market, which is not true,” claimed Karunaratne delivering a presentation titled ‘Current status of the Stock Market: What ails and what is the cure’ at the Annual General Meeting of the International Chamber of Commerce (ICC) Sri Lanka.
Karunaratne explained that even when the market was being regulated the market was moving upward and when the market was going down, the SEC relaxed the regulations but it did not make a difference – dispelling the myth that the market of being over regulated.
The former chief also recalled how some shares were manipulated to record abnormal price movements in his presentation. Dankotuwa Porcelain had a percentage increase in price of 226% and Blue Diamonds 270%, Asian Alliance Insurance PLC 204%, Lanka Hospitals 177% and some of these shares projected negative in the ESP.
With regard to a special case of HVA Foods, Karunaratne pointed out that there was an increase of 394% with the EPS at nine cents and with a high free float. He remarked that it’s unbelievable for a company that has no intrinsic value but only brand value to record such an increase.  
Karunaratne noted that the post-war boom in the stock market which led the ASPI index to 7800 points was mainly a result of artificial manipulation. “It is true that the euphoria after the war influenced the confidence of the investors but the major contribution came from people who used unfair means in pumping up the market which made it reach to extreme high levels.”
He also indicated that currently the market is at a healthy state with P/E of 10.59 which is only higher than Vietnam in developing nations in the Asian region and noted that the in the first eight months of the year the SEC was able to attract net foreign inflow of Rs. 27 billion. Even with such highlights Karunaratne was sceptical saying that there’s a disturbing factor emerging. “Yesterday there was net foreign outflow and I presume that the market was being manipulated where the P/E increased to 13. This makes it less appealing for the investors and it’s important that we maintain the foreign exchange well to sustain the market.”
Highlighting the reasons for the downfalls in the stock market, Karunaratne emphasised that the cause was not regulation but the manipulation of the stock market adding another major reason was the trade balance deterioration which eventually became currency depreciation stating, “The Central Bank had spent $ 4 billion in order to support the rupee.  This was done for nothing.”
Karunaratne stressed the importance of amending the SEC act which has been only amended only three time of its twenty five year existence. “The market has not been developed with the rest of the world and has been backward therefore it high time the act gets amended for better market performance.”
He also pointed out the high importance of the independence of SEC referencing to some examples in world financial markets. “The US SEC chief Mary Schapiro was appointed by Regan and she continued to serve under four different US presidents. This shows the zero political interference. Even in Malaysia with one of the most developed markets in the region the independence of the commission is maintained.”
In response to the criticism that SEC is over regulated, Karunaratne professed that the Sri Lankan stock market is one of the least regulated stock markets in the region. He claimed that not a single person has been jailed for any wrongdoing in the 25 year of SEC history this shows how relaxed the SEC has been towards the culprits during the past years. The maximum penalty that could be given is Rs 3.5 million and restrictions in holding official positions. When compared to other countries such as US where you get a long prison sentence for financial malpractice such as for Raj Rajaratnam, the SEC is extremely lenient in punishing stock market culprits. This should be changed.”


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...by i3gconsultants@ 12:09:48 on 2012-09-05

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SEC needs to be independent of the executive


With a new head being appointed to the Securities Exchange Commission (SEC), effective regulations, embodying international best practices and strict enforcements are essential features of a sustainable, vibrant and investor confidence building stock exchange, which yields commensurate returns to all market participants, Transparency International Sri Lanka (TISL) said in a statement yesterday.
Two chairpersons of the SEC resigned within a year of each other soon after influential investors and brokers got a hearing with President Mahinda Rajapaksa. Both chairpersons tried to erase rampant market offences that had made use of a stock exchange boom in 2009-2011 but they resigned on principle as it became increasingly difficult for them to carry out investigations into market offences.
"An independent and capable Securities Exchange Commission, operating without undue influence exerted by the Executive is yet another essential feature of an effective and attractive Securities market," TISL said.
"Within such an effective and attractive securities market there should be no open opportunities for insider dealings, market manipulations, pump and dump deals and other regulatory violations. The market mechanisms must ensure open, transparent, prepared to accepted standards and independently verified financial information, with specific and clear disclosure requirements of related party transactions, directors’ interests, major transactions and solvency. The listed entities should, in addition, be managed by individuals who are not deemed to be persons who fail to meet the qualifications relating to ‘fit and proper persons’.
"The independent regulator must be watchful that unacceptable and unprofessional conduct of market participants will not lead to the confidence of the investors being eroded. Whenever any non transparent transactions, violations or manipulations are observed or reported, the Commission should impartially investigate and reach an independent judgment on the action to be taken against any guilty parties. Compounding of serious violations by mere payment of insignificant to level of violation, penalties is also an unacceptable practice and may by itself promote a continuity of such actions by errant market participants.
"Former SEC Chairman Thilak Karunaratne has resigned on principle; stating that he was unable to complete high profile investigations being conducted by SEC due to pressure from both the government and the high net worth investors. He resigned from his role as Chairman of SEC rather than be subjugated by the corruption in the system. In this scenario there are questions raised by Analysts as to whether SEC will now complete the ongoing investigations with the required degree of diligence, professionally and with independence. There are further questions as to whether the process initiated by the SEC under Karunaratne to reform the regulatory framework to enhance the effectiveness binding regulations and alignment them with internationally accepted best practices, especially promoting independent equity research and rating of new issues will be continued with the same degree of commitment.
"This statement serves to highlight to the Executive and the bureaucracy, the expected due accountability with which they must act in the current circumstances, especially in giving positive market signals that institutional independence, professional and effective regulatory control will be continued by the SEC.
"The uncertainty in the market, a myriad of complex issues impacting on the Sri Lankan securities market, and attempts to stall the prosecution of white collar crime may eventually lead to a lack of confidence. In the event such an environment emerges in the short term, it will even negatively impact international risk ratings, inward investments and lead to perceptions linked to the fairness, application of the rule of law and justice systems, these being essential ingredients in the risk ratings.
"In conclusion, TISL calls upon the government to give serious consideration to take all necessary steps without undue delay to resolve the present situation in a manner that will not negatively impact on market confidence and lead to retaining the attractiveness of Sri Lanka as an investment destination. This is a priority, especially in the context of the need for annual inward investments of around 4 billion USD to finance the projected savings gap in realizing sustainable growth targets of 8-10%," TISL said.

The Island
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...by i3gconsultants@ 10:09:38 on 2012-09-04

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TISL lists requisites for SEC’s forward march


With a new Head being appointed to the Securities Exchange Commission (SEC), Transparency International Sri Lanka (TISL) yesterday in a statement reiterated that effective regulations, embodying international best practices and strict enforcements are essential features of a sustainable, vibrant and investor confidence building stock exchange, which yields commensurate returns to all market participants.
It said an independent and capable SEC, operating without undue influence exerted by the Executive is yet another essential feature of an effective and attractive Securities market.
“Within such an effective and attractive securities market there should be no open opportunities for insider dealings, market manipulations, pump and dump deals and other regulatory violations," TISL said.
"The market mechanisms must ensure open, transparent, prepared to accepted standards and independently verified financial information, with specific and clear disclosure requirements of related party transactions, directors’ interests, major transactions and solvency,” TISL added.
The listed entities should, in addition, be managed by individuals who are not deemed to be persons who fail to meet the qualifications relating to “fit and proper persons”, it added.
“The independent regulator must be watchful that unacceptable and unprofessional conduct of market participants will not lead to the confidence of the investors being eroded. Whenever any non transparent transactions, violations or manipulations are observed or reported, the Commission should impartially investigate and reach an independent judgment on the action to be taken against any guilty parties. Compounding of serious violations by mere payment of insignificant to level of violation, penalties is also an unacceptable practice and may by itself promote a continuity of such actions by errant market participants,” TISL said.
It also recalled former SEC Chairman Thilak Karunaratne had resigned on principle; stating that he was unable to complete high profile investigations being conducted by SEC due to pressure from both the government and the high net worth investors. He resigned from his role as Chairman of SEC rather than be subjugated by the corruption in the system.
“In this scenario there are questions raised by analysts as to whether SEC will now complete the ongoing investigations with the required degree of diligence, professionally and with independence. There are further questions as to whether the process initiated by the SEC under Karunaratne to reform the regulatory framework to enhance the effectiveness binding regulations and alignment them with internationally accepted best practices, especially promoting independent equity research and rating of new issues will be continued with the same degree of commitment,” TISL said in its statement.
TISL also said its statement serves to highlight to the Executive  and the bureaucracy, the expected due accountability with which they must act in the current circumstances, especially in giving positive market signals that institutional independence, professional and effective regulatory control will be continued by the SEC.
“The uncertainty in the market, a myriad of complex issues impacting on the Sri Lankan securities market, and attempts to stall the prosecution of white collar crime may eventually lead to a lack of confidence. In the event such an environment emerges in the short term, it will even negatively impact international risk ratings, inward investments and lead to perceptions linked to the fairness, application of the rule of law and justice systems, these being essential ingredients in the risk ratings,” TISL said.
TISL has called upon the Government to give serious consideration to take all necessary steps without undue delay to resolve the present situation in a manner that will not negatively impact on market confidence and lead to retaining the attractiveness of Sri Lanka as an investment destination. This is a priority, especially in the context of the need for annual inward investments of around US$ 4 billion to finance the projected savings gap in realising sustainable growth targets of 8-10%.

Dailyft
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...by i3gconsultants@ 10:09:33 on 2012-09-04

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Mudalige out; Kalinga in


The Securities and Exchange Commission (SEC) is likely to get a new Commissioner following the Government's decision to make a change as opposed to the previous move. A Finance Ministry official confirmed there has been a change but didn’t give details.Previously Pricewaterhouse-Coopers Partner and former Ex-Officio Commissioner Sujeewa Mudalige was named among new appointees but has since been dropped. He is expected to be replaced by lawyer Kalinga Indatissa.
As reported by the Daily FT last week, Mudalige was a surprise choice as he wasn’t in the original speculated list of new appointees. Indatissa was in the list but wasn’t announced.
Some market stakeholders weren’t happy with the inclusion of Mudalige, who had been perceived to be over-regulatory, too technical and rigid when he served as a Commissioner by virtue of being President of the Chartered Accountants of Sri Lanka.
However, sceptics found fault with the Government for originally naming Mudalige among new Commissioners, whilst Godahewa and Fernando too have received flak for their alleged conflicting roles and links with listed companies. However, all remain top professionals and are expected to act professionally.
Though the Information Department as well as Finance Secretary Dr. P.B. Jayasundera disclosed the three new appointees as Dr. Nalaka Godahewa (Chairman), ex-Central Bank Deputy Governor Priyantha Fernando and Sujeewa Mudalige as new Commissioners, the SEC website too has excluded Mudalige’s name among its Commissioners.
The current list of Commissioners as per the SEC website are Dr. Nalaka Godahewa – Chairman, D.K. Hettiarachchi (Registrar of Companies – Ex-Officio), Lolitha Abeysinghe (appointed member from private sector), Mohamed Zuraish Hifaz Hashim (appointed member from private sector), B.D.W.A. Silva (appointed member from Central Bank), Sujeewa Rajapakse (President, Chartered Accountants of Sri Lanka – Ex-Officio), Dr. Prathiba Mahanamahewa (appointed member from private sector), Sajith R. Attygalle (Deputy Secretary to the Treasury – Ex-Officio) and Priyantha Fernando (appointed member from the private sector).
The SEC as per its Act has 10 Commissioners and only nine have been named so far.The three vacancies arose after Tilak Karunaratne (Chairman) and Sanjay Kulatunga (both appointed members from private sector) resigned recently, whilst another appointed member, P. Jayawardena, was removed or deemed to have vacated the post after his failure to attend successive meetings of the Commissioners.


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...by i3gconsultants@ 18:09:09 on 2012-09-03

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Let’s put market back on track, Nalaka tells SEC



  • Assures he will strictly go by the SEC Act

  • Says investigations must be persisted with but with a clear timeframe

  • Being a professional marketer, says perceptions and sentiments matter; Stresses capital market development role with focus on small-timers, SMEs

  • Promises regular stakeholder consultation, impact analysis before coming up with new regulations

The newly-appointed Chairman of the Securities and Exchange Commission (SEC) Dr. Nalaka Godahewa’s key message to the Secretariat staff last week after assuming duties was: Get the stock market back on track and he along with the rest of the Commissioners will stick to the Act and give necessary leadership to both pragmatic regulation and capital market development. Third Chairperson in 27 months: Top professional Dr. Nalaka Godahewa signs a document to mark the assumption of duties as the Chairman of the Securities and Exchange Commission last week.  Among the senior staff present to witness the occasion were (from right): Acting Director General Prof. Hareendra Dissabandara, Director Investigations Dhammika Perera, Director Surveillance Chandu Epitawala, Assistant Director External Relations and Market Development Tushara Jayaratne, Director Corporate Affairs Surana Fernando, Director Legal and Enforcement Ayanthi Abeywickrama, Assistant Director Supervision Himani Weerasekera and Director Finance and Administration Ianthie Jayaratne.Upon assuming duties, Dr. Godahewa met with the Directors of the SEC for about 40 minutes for a frank discussion, after which he addressed the staff.
Having clarified that as per the SEC Act the Chairman is non-executive, Godahewa had assured: “I will strictly go by the Act.” He also had said the way forward would be implementing the Act in its broader sense and scope as opposed to only regulation. Being a professional marketer, Godahewa had said in markets, perceptions and sentiments matter as well and it was important to revive the market which plays a critical role in providing access to finance as well as returns to the investing public. In line with the Government’s vision, the importance of small-time investors as well as encouraging Small and Medium Enterprises as part of capital market development was also stressed. “A vibrant capital market is important to the country’s economy. Such a market will make the raising of fresh capital by the private sector more attractive, apart from providing the investing public with a decent return,” Godahewa had pointed out.
Largely linked to his appointment and pragmatic regulation despite criticism by others the market revived last week with its value rising by Rs. 64 billion thanks to retailers returning. Year to date dip in ASI was reduced to below 15% from 17.5% in the previous week.
Godahewa had also emphasised that investigations should be pursued with, but there must be a clear timeframe for conclusion of such investigations and inquiries for proper effectiveness, greater integrity and accountability.     
The Secretariat staff had told the new SEC Chairman said that even the most complex investigation could be concluded within three to four months.
On perceptions in the market about driving fear among investors, Godahewa had inquired how many investigations were being handled at present and the figure suggested had been around 18. Thereafter Godahewa had inquired about the veracity of 300 letters being sent to investors and the answer from the staff was that they were fact-finding letters. “If that is so, it must be communicated clearly in such letters,” the SEC Chairman had emphasised.
Godahewa has also assured the SEC Secretariat staff that even with regard to himself or any companies to which he was connected, if there were investigations, he would declare his interest and stay away from deliberations as a professional. He had cited the SEC Act, which says six of the 10 commissioners are drawn from the private sector hence there could be instances where when necessary the concerned Commissioner could flag off his interests and stay away.
The provision for private sector personnel in the Act was also cited by Godahewa to stress the point that a Commissioner whilst serving the SEC could continue to engage in other positions.
During the discussions with the Directors, a question was posed as to how frequently the SEC consulted stakeholders. The answer had been very frequent or quarterly in the past, but not very frequently of late. In that context, the new Chairman had said that it was important to engage stakeholders more often and proper consultation was critical before implementing new rules and laws. He had also said that the SEC must do an impact analysis of any new regulation before its implementation. “This way the SEC can ensure there are no ad-hoc regulations,” he had pointed out.
Prior to meeting the SEC Secretariat, Godahewa met his appointer – President and Finance Minister Mahinda Rajapaksa. Analysts said that as in the case of previous chairpersons, the message from President Rajapaksa must have been to make the capital market dynamic so as to serve its purpose, benefitting all stakeholders.


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...by i3gconsultants@ 18:09:48 on 2012-09-03

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Let's learn from Mark Mobius, the well-known investment guru


The new, professional Chairman of the SEC and his Commissioners can now make a fresh start, since the dust finally seems to have settled on the recent unsavoury SEC saga. Therefore, the time has come for serious investors to focus on the value proposition of many available investments, and benefit by the unprecedented developments that are taking place in the economy. An assessment of the earnings of the listed companies shows that the vast majority of corporates have done better, year-on-year. Many others have also made plans to benefit by the strong earnings momentum, notwithstanding the tough global outlook. In that background, serious investors would do well to take a cue from Mark Mobius, who is acknowledged globally as a maestro at picking stocks, and as a person who has displayed an uncanny ability to invest in profitable, or soon-to-be-profitable companies all over the world. That is probably why his book, "Passport to Profits" is generally considered a must-read for any investor who is formulating an investment strategy. While his book carries some excellent guidelines for investment, it is also spiced with many common-sense principles. Since Sri Lankan investors are today at a point where they are poised to re-kindle and renew their interest in the CSE, it would be sensible for them to refer to some of Mobius' Rules of Investment which have been set out in his best-selling book. Mobius' first Rule is, "Your best protection is Diversification". He explains that Templeton, one of the world's largest Funds, limits the Fund's exposure to a particular region by allocating only a pre-determined percentage of capital for investment in that region. Within such region, they also limit the exposure to any one country while setting limits for sectors as well as individual companies. Mobius strongly advises investors to adopt a similar diversification strategy in their own investment policy guidelines. Mobius cautions investors that "High volatility is characteristic of all markets, even most mature ones", and advises investors to "Factor emotion out of the equation and base their strategies on long term fundamentals so that they could win when markets fall, as well as when markets rise". Sound advice, which Sri Lankan investors would do well to keep in mind. One of Mobius' most interesting rules is his advice to "Wait five years and call me in the morning!" In this regard, he goes on to explain that the most important question an investor must ask himself is, as to where he believes the investee company would be, in five years' time. If the investor is convinced that the company would do well over the long term, then, he could move into the investment process. That is obviously sound advice that investors are likely to take seriously. Mobius also suggests that "bad times can be good times", which statement he elaborates by explaining that temporary setbacks could be useful opportunities for long term investors to pick up good stocks. That advice is further clarified by his claim that, "times that people think are bad, are often good" and also by the rather provocative suggestion that "stocks, people think are bad, are often good". In his book, Mobius insists that the "quality of management is paramount". In this regard, he advises investors to make company visits whenever possible so that they can get to know the top people, assess their goals and aspirations, and understand whether they have developed responses to deal with emerging problems and challenges. At the same time, Mobius advises that "Patience is more than its own just reward" and warns that if someone tells him, 'I want to make a killing in an emerging market in two years', he will tell him to take his money elsewhere! He advises that the way to be consistently ahead of the game, is to adopt a long-term view and in certain instances to do so, with a strong contrarian spin; i.e., doing the opposite of what everyone else is doing. His wise counsel includes the contention that the "Time of maximum pessimism is the best time to buy" and that the "Time of maximum optimism is the best time to sell". Interestingly, Mobius also suggests, "If you can see the light at the end of the tunnel, it is too late to buy or sell". A Mobius rule which seems to be very appropriate and timely for investors in the Sri Lankan market is that, "If a market is down 20 percent or more from a recent peak and the value can be seen, start loading up". The recent bullish tendency displayed by foreign investors in CSE, perhaps indicates that they are adhering to Mobius rule seriously. Prior to 2012, the highest annual net foreign inflow into CSE was in the year 2008,when Rs. 14 billion (approximately US$ 128 million) flowed into the country. In comparison, in just the first eight months of this year, there has been a massive inflow of over Rs. 28 billion (approximately US$2 25 million). This shows that foreign investors have seen and understood the potential in the CSE and are strategically positioning themselves to benefit by the expected upswing of the market which obviously contains value. Unfortunately, the Sri Lankans, have not yet begun to appreciate this potential, possibly as a result of the negative publicity that is pumped into their veins on a daily basis by Opposition politicians and some sections of the media. In their own interest as well as from a national point of view, it is time that local investors begin to understand the basic, globally accepted investment principles as enunciated by global investment experts, including Mark Mobius, and return to the bourse so that they could benefit by the excellent opportunities that are available. If they do so, they would undoubtedly be successful, as investors such as Mark Mobius who have done exceedingly well in emerging markets, have repeatedly showed.


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...by i3gconsultants@ 14:09:36 on 2012-09-02

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SEC chief to proceed with investigations


Dr. Nalaka Godahewa who assumed duties as the new chief of the Securities and Exchange Commission of Sri Lanka vowed to continue investigations on controversial transactions by some investors of the Colombo Stock Exchange.When contacted for comments on his new role and plans of the regulatory body, he said that he needs time to study the situation before he speaks to the media. Dr.Nalaka Godahewa, was formerly the head of Sri Lanka Tourism. Priyantha Fernando, Sujeewa Mudalige, S R Attygalle (from the Treasury), and Ananda Silva (Central Bank) are the other commission members. Godahewa resigned from George Steuart Finance (formerly Divasa Finance), a firm connected to investor Dilith Jayaweera, who has received letters from the SEC asking for explanations regarding several deals made by his investment firm. Tilak Karunaratne, the former SEC chief resigned following pressure from investors whose transactions were being probed. Probes into 17 cases were drawing to a close when he was forced to quit. Influential investors who helped create a stock market bubble with margin loans have blamed the SEC for a subsequent market fall after the credit bubble collapsed taking Sri Lanka's balance of payments and the exchange rate with it.


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...by i3gconsultants@ 13:09:08 on 2012-09-02

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SEC Chairman emphasizes to implement Section 12 of Act


Newly elected Chairman Dr Nalaka Godahewa has specifically emphasized to implement Section 12 of the Security and Exchange Commission Act of No 35 of 1987, Acting Director General - Securities and Exchange Commission (SEC) Prof. Harindra Dissa Bandara said.
“Under Section 12 of the Act, it has spelled out certain objectives ie creation and maintaining market in which securities can be issued traded in orderly and fair manner, protection of interest investors, operation and compensation of funds and regulation of security market to ensure that professionalism and standards are maintained,” Prof Dissa Bandara said.
They would also initiate investigations into suspicious activities and share transactions of nearly two dozen companies listed in the stock exchange, which would be handled in an independent manner, he said.
According to SEC sources, inquiries by SEC Surveillance Division on 12 companies are pending “The SEC has issued warnings to some establishments and imposed fines on several others following the findings of its Surveillance Division,” the source added.
For instance a payment of Rs.3.3 million has been imposed on an investment advisor following charges of market manipulation of share prices. The SEC has issued notice on all the corporate establishments under scrutiny of the Surveillance Division and issued warning letters.
Two directors of Environment Resources Investments have been issued warning letters and a payment of Rs.3.3 million collected.

Dailynews
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...by i3gconsultants@ 16:08:14 on 2012-08-31

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Stock market rebound gathers momentum


The rebound in the Colombo stock market gathered further momentum yesterday, with retailers remaining and those with improved sentiments reinvesting gains from mid-day profit taking.
The latter was evident as the market originally rose sharply with ASI up 0.8% and MPI by 1.1% and thereafter slowed down before gaining upwards once again. Throughout the day, both indices remained in positive territory before the ASI closed up 0.5% and the MPI by closed up 0.6%.A fresh transfer of a 5% stake, amounting to 23 million shares of Aitken Spence from Distilleries to Melstacorp at Rs. 110, in a deal worth Rs. 2.54 billion, boosted turnover to Rs. 3.07 billion.
With yesterday’s transfer Melstacorp has acquired almost the entirety of Spence stake from its parent Distilleries, whilst only a further 0.8 million shares remain.
The high volume of 60.4 million shares done via 13,211 trades reflects the level of activity yesterday largely dominated by retailers. Both were new highs whilst on Monday volumes were 33 million shares done via 10,000 plus trades. Though less active, foreigners remain net buyers collecting top stocks.Premier blue chip JKH too was inactive with Captains and foreigners focused elsewhere. Captains were seen collecting Sampath Bank whilst ETF was picking up DFCC, Distilleries and ACL Cables. EPF was absent.
“The broader market started the day in the green but saw the MPI dip into negative territory due to a drop in John Keells Holdings. However, positive sentiment across the board resulted in the indices soon recovering,” NDB Stockbrokers said.“Improving activity levels is now signalling a regain in investor confidence as all three indices consolidated their stay in the green,” said Softlogic Stockbrokers.Asia Wealth Management added: “The Bourse enjoyed active trading and extended its stay in green” and said retailers making a strong comeback was noteworthy and this was evident through their active participation in retail favourite counters.
Lanka Securities too said retail interest continued with poultry companies also getting into the act and added that many counters with lower absolute values gained ground on the hope of better times ahead. “However, the worrying factor remains to be the rising rate of interest. Yields on all three maturing treasury bills edged higher in auction,” it added.
Analysts said retailers were revitalised in anticipation of a more pragmatic capital market regulation by the incoming SEC chairman, whilst others noted the fresh round of buying was akin to return of bargain hunters given the original 20% fall in ASI last month and attractive price earnings ratio.
However, the year-to-date negative return has been reduced to 16% by yesterday, thanks to the recent revival. The market’s value rose by Rs. 35 billion yesterday, bringing the total to Rs. 106 billion since the 20 July meeting between President and Finance Minister Mahinda Rajapaksa and capital market stakeholders.
Whilst Spence boosted turnover levels NDB Stockbrokers said interest was seen in Distilleries and DFCC Bank. Meanwhile, Colombo Land and Citrus Leisure saw considerable retail activity.
The Banking, Finance and Insurance sector emerged as the second highest contributor to the market turnover (due to DFCC Bank) and the sector index moved up by 0.29%. The share price of DFCC Bank appreciated by Rs. 3.90 (3.39%) to close at Rs. 119.00.
Colombo Land, Citrus Leisure and Distilleries were also seen among the top contributors for the day. The share price of Colombo Land gained Rs. 2.30 (6.55%) to close at Rs. 37.40 while Citrus Leisure saw its share price sliding Rs. 1 (3.14%) to close at Rs. 30.80. The share price of Distilleries jumped Rs. 4 (3.36%) to close at Rs. 123.
Softlogic Stockbrokers said JKH sustained its pose as a key contributor for the day as it surged 0.8% at its highest to close at Rs. 198.40 (+0.3%) along with Sri Lanka Telecom, which secured a gain of 3.93% at its close of Rs. 39.30.“Retail participation encompassed the momentum with main focus surrounding Colombo Land and Development, HVA Foods, Lanka Hospitals, Citrus Leisure and its Citrus Leisure [Warrants 0019]. Further, several large on-board transactions were witnessed in a number of penny stocks; Beruwala Resorts, Panasian Power, Free Lanka Capital and Hydro Power Free Lanka,” Softlgic added.
DNH Financial said it sees no credible reason for medium to longer term investors to shy away from the domestic Bourse given the prospect of a gradual re-rating over the next few months underpinned by macroeconomic and corporate EPS growth.
“However, for those seeking speculative gains, the Bourse is clearly likely to disappoint as the opportunity to realise short term gains is likely to prove more and more difficult,” it added.
“While investors may perceive high interest rates as stealing the appeal for equities, we do not expect this to happen in the short term given the relative asset allocation disconnect between equities and interest rates. Accordingly, we believe that the next few months will offer an attractive opportunity for risk-savvy domestic investors to be able to proactively position themselves to capitalise on a positive movement in the market. We also believe that for international fund managers squaring off their books or increasing their emerging markets equity allocation, Sri Lanka offers an attractive investment opportunity against a nervous global markets backdrop,” DNH Financial said.


Reported in Dailyft

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...by i3gconsultants@ 12:08:38 on 2012-08-29

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Investors not interested in who’s SEC Chief - Cabraal


Central Bank Governor Ajith Nivard Cabraal said investors were not interested as to who was the Securities and Exchange Commission Chairman when they invest in the stock market.
“There is an influx of Rs.29 billion in foreign exchange in the Colombo Stock Exchange (CSE) from foreign investors,” he said. “Sale of the shares is one of the several functions of the stock market.The shares available in our stock market are reliable and investors are aware of this. That is why they are investing in a large scale. They are not concerned about the individuals holding office in the SEC.”
Mr. Cabraal said some took minor issues seriously because shortcomings could be corrected if we looked at these issues with an open mind.


Reported in Dailymirror

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...by i3gconsultants@ 12:08:01 on 2012-08-29

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Sri Lanka SEC new chairman appointed


Nalaka Godahewa, former chairman of Sri Lanka's tourism development agency has been appointed as the chairman of the Securities and Exchange Commission, a state official said.Priyantha Fernando, Sujeewa Mudalige, S R Attygalle (from the Treasury), Ananda Silva (Central Bank) are the other commission members. Godahewa this week resigned from George Steuart Finance (formerly Divasa Finance) a firm connected to investor Dilith Jayaweera, who has received letters from the SEC regarding several deals made by his investment firm. Tilak Karunaratne, the former SEC chief resigned allegedly following pressure from Sri Lanka's so-called stock market mafia, which has engaged in securities fraud. He said probes in to 17 cases securities fraud were drawing to a close when he was forced to quit. Influential investors who helped create a stock market bubble with margin loans has blamed the SEC for a subsequent market fall after a credit bubble collapsed taking Sri Lanka's balance of payments and the exchange rate with it. Shortly before his ouster, stock brokers and selected investors met Sri Lanka's president. The SEC chairman before Karunarantne, Indrani Sugathadasa, a retired senior public servant also resigned saying she was upholding her principles. Sri Lanka has had ever worsening problems with rule of law and justice since a civil service commission was abolished and the institution of 'permanent secretaries' was broken by two constitutions in 1972 and 1978.

Reported in LBO

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...by i3gconsultants@ 11:08:52 on 2012-08-29

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Insulted by Dilith’s comments...Former SEC head says...


Former Chairperson of the Securities and Exchange Commission of Sri Lanka (SEC) Ms. Indrani Sugathadasa says she wasn’t a gullible child so as to be misled by officials of the SEC.She made this comment in response to allegations levelled by controversial investor Dilith Jayaweera at a recent meeting with the media that both Ms. Sugathadasa and her successor Thilak Karunaratne, while being honest and competent, were misled by officials of the SEC.Ms. article_image
Sugathadasa said there was no truth to this and that she felt insulted by Jayaweera’s comments.A respected senior official in the public service with over thirty years of experience, she said she placed a signature on official SEC documents and letters only after verifying all the details herself, and that there was no room for anyone to mislead her."If anyone suggests otherwise, I consider it to be a grave insult to my person," Ms. Sugathadasa said speaking Shyam Nuwan Ganewatte of our sister paper the ‘Divaina’.Both Ms. Sugathadasa and Karunaratne resigned within a year of each other as their attempts to clean up the country’s stock exchange met with stiff resistance by a group of influential investors and their crony stockbrokers.Karunaratne speaking to The Island Financial Review last week rubbished Jayaweera’s allegation as well.


Reported in The Island

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...by i3gconsultants@ 12:08:00 on 2012-08-28

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Economic policy downs bourse


The country’s bourse suffers from Central Bank inaction last year to contain a balance of payments problem, as anti-SEC group fails to show how economic fundamental effected the bourse A belated response to a balance of payments crisis has seen interest rates shoot up and liquidity dry up in the country’s financial system which has affected the country’s stock exchange, analysts point out, and the relaxation of certain restrictions imposed by the Securities and Exchange Commission of Sri Lanka has failed to lift the bourse which is going through a correction after a credit bubble burst earlier this year.Both the Central Bank and the Treasury in their annual reports for 2011 said the Colombo Stock Exchange fell 8.5 percent last year, on the back of 125 percent and 96 percent growth the previous two years, mainly due to a market correction. Year-to-date, the bourse had fallen 17.5 percent as at last Friday (24). However, a group of shady investors and their crony brokers suggest the bourse’s fall was due to ad-hoc policy measures taken by the regulator.Since June last year, economists and analysts have engaged in a public debate that the country was heading for a balance of payments crisis, with the Central Bank consistently denying these claims, squashing these arguments as anti-government propaganda. However, by February this year, the Central Bank’s bluff was exposed and it, along with the government, were forced to adopt a slew of measures to contain the problem, which saw interest rates shoot up, rupee liquidity dry up and the value of the country’s currency fall (as extensively highlighted in these pages), and people having to suffer more for the delay.Stock market analysts point to the positive sentiments and loose monetary policy stance of the Central Bank since late 2009 for the meteoric rise of the country’s stock exchange."The rising tide lifts all boats. So it is with liquidity in the financial markets. When liquidity is high it raises the market, when its low it brings the market down. The way in which we saw rupee liquidity grow during the first few years after the conflict ended in May, and how the stock exchange rose, it was clear that it was the beginnings of a classic bubble," J. B. Securities Pvt. Ltd. Murtaza Jafferjee told The Island Financial Review.The country’s relatively small stock exchange with a small free float of shares available for trading made it more susceptible to these changes in liquidity.Brokers were extending credit to their clients and share prices increased substantially. "Pricing was based on sky-high expectations and not on rational valuations, and with unlimited broker credit there was a crazy party in the stock exchange," Jafferjee said.The Securities and Exchange Commission soon stepped into cool off an overheated market and contain systemic risk arising out of uncontrolled broker credit, but despite these measures, the stock exchange still grew. (See graph)According to CSE data, from January to August 4, 2010 when the price bands were introduced after ‘junk’ stocks saw prices surge, the daily average at the bourse was Rs. 2.53 billion, average trades amounted to 12,970, average number of shares traded was 71.1 million and the All Share Price Index (ASPI) grew 51 percent.After the price band was introduced in August 4, 2010, up to December 31, 2012, daily average turnover increased to Rs. 2.9 billion, average trades increased to 15,899, average number of shares trades increased to 88.2 million and the ASPI grew 96 percent.A day prior to the introduction of the price band, the ASPI was at 5,5214.8 points, but six months into the price band regime, the ASPI recorded a high 7,811.8 points on February 14, 2011.When credit restrictions were placed, the ASPI was 6,175.1 points on September 14, 2010 and five months on, the ASPI reached 7,811.8 points.Jafferjee said, foreign investment funds needed to justify the rise of share prices to their clients, and that the meteoric rise of ‘penny stocks’ was difficult to explain in accepted valuation terms.An influential group of investors and their brokers have been campaigning to rein-in the regulator, but Jafferjee maintains the market was never over regulated. He points out that the market took a dive after these influential groups ensured that the regulator became regulated, exposing a problem of governance in this country.In less than one year, two chairpersons of the SEC had resigned, and a Director General removed from office proving that the stock market ‘mafia’, as referred to by the COPE Chairman DEW Gunesekera, was indeed influential.Despite these pressures on the SEC and the relaxation of restrictions, the market still continued to fall.As Jafferjee, and other broker firms have pointed out in recent weeks, the stock exchange’s performance this year is largely driven by the liquidity constraints in the economy and in the slowdown of corporate earnings due to the macroeconomic environment prevailing in the country."The stock exchange may not be able to recover in the short term, given the liquidity situation in the economy. But this country has the potential to become a breakout nation; the best years lie ahead," Jafferjee said.The stock exchange has had periods of boom and busts before, but what makes this period stand out is that the regulator has been hounded for investigating market offences. With each and every transaction on record, the regulator could find out who sold what to whom and at what price and when. This could implicate certain high net worth and/or influential investors and their crony brokers for insider dealing, market manipulations and pumping and dumping.As to the SEC driving down the market, as former SEC Chairman Thilak Karunaratne pointed out, it is far from it, with those accusing the regulator of doing so failing and/or unwilling to look at the macroeconomic impact on the bourse, analysts point out.


Reported in The Island

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...by i3gconsultants@ 12:08:35 on 2012-08-27

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Macro shocks pressure profits


The combined profits of a sample of 88 firms analysed by NDB Stockbrokers reveal a decline of 13% year-on-year to Rs. 38.5 billion in June, though when non-recurring items are excluded, the results show a 10% increase.




NDBS said the 88 companies picked contribute 69% of the total market capitalisation of the Colombo stock market. The results analysed include 27 companies reporting profits for the six months ended 30 June and other reporting profits for three months.
The broking firm said excluding Carsons Group companies, Carsons, Bukit Darah and Ceylon Guardian, the combined profits of the sample companies grew by 8%.
NDBS said the Plantations sector saw significant growth in profits with a growth of 410%, reversing losses of last year (24% adjusted to non-recurring items). The Hotels and Leisure sector also performed well during the period with all the companies in the coverage universe reporting improved bottom lines and the sector profits improving 60%.
Bank, Finance and Insurance sector (49.7%) was the highest contributor to the earnings in absolute terms, while Food, Beverage and Tobacco (16.0%), Diversified (9.1%) and Manufacturing (7.1%) sectors came in next.


Companies with significant US$ borrowing (especially telecommunication sector companies) saw profits plunge due to the depreciating rupee, while some banking and finance sector companies saw gains in foreign exchange segment.
NDBS said in addition to recording a robust growth in profits, the Banking sector valuations look relatively cheap. Despite the slightly expensive valuations, the Food and Beverage and Hotels sectors have recorded high growth in profits. Although the profit growth in the Manufacturing sector is subdued in the short-term, the valuations are attractive considering the medium-term growth prospects.
Given the performance by end June, NDBS has reduced its profit growth expectation for FY12/13 to 5% from the previous estimate of 10%.


Reported in Dailyft

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...by i3gconsultants@ 17:08:21 on 2012-08-26

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Formation of Association of Independent Shareholders gathers pace


Over the past months, there have been efforts by a group of dedicated individuals who are Independent Minority Shareholders (IMS) of public listed companies (PLCs) to form an association to represent their interests the interests of IMS, irrespective of whether they are members or not.  The need for an effective, ethical and professionally-run association that would represent investors of this category has been a long-felt need ever since the 1980s when the stock market began growing and expanding in a free market society.The urgency for such a body intensified recently in the context of developments in the market in the past eight months which has seen the resignations of two honourable/respected and upright individuals, Indrani Sugathadasa and Dr. Thilak Karunaratne, as chairperson of the SEC in their efforts to ensure fairness, equity and a level-playing field for all investors.
In June 2012, around 45 investors met at the auditorium of the Organisation of Professional Association (OPA) and after a discussion, a core group amongst them was selected to prepare the structure of the association, its formation and the way forward, with the convenor/moderator being given the discretion to make adjustments based on complains, objections and/or needs of IMS.The core group met on several occasions and has worked hard to develop an organisational structure, membership form with criteria for membership, and other details. Investors desiring to be members of this association will be admitted based on the listed criteria.
At the second meeting of the proposed association held on 20 August at the OPA auditorium which drew a large appreciative and focused set of investors, details of structure and its formation was explained.
It was also explained that the Association is aimed at meeting the long-term needs of its members in all aspects including creating awareness on how to invest and a clear understanding of all aspects of the stock market. For details contact K.C. Vignarajah at No. 9/10, Cambridge Place, Colombo 7, or phone 2677533, 0712722133, 0777489998 or email: vignaaims@sltnet.lk


Reported in Dailyft

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...by i3gconsultants@ 15:08:01 on 2012-08-25

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Vignarajah writes to President to retain SEC Chief Tilak K


Minority shareholder activist K.C. Vignarajah has written a letter to President Mahinda Rajapaksa appealing him to retain Securities and Exchange Commission (SEC) Chairman Tilak Karunaratne who has announced his resignation by Friday. Here is the full text of the letter:



16.08.2012
H.E Mahinda Rajapaksa
The President of the Republic of Sri Lanka,
Temple Trees,
Colombo 3.
Your Excellency,


Expected resignation of Chairman SEC, under pressure
Please permit me the honour to draw your kind and urgent attention, once again, to a matter of grave importance to the good name of our country and its capital market.
My letter to you dated 20th ultimo, handed over immediately after, the market stakeholders’ meeting with you, concluded thus:
“Your Excellency’s ambition to fly the flag of our country high is being undermined by many extremely selfish persons. You have great potential to do good by defending the actions of the regulators to do their duty of protecting the investors, create a level playing field and ensure fair play.”    
At that meeting I heard (not saw) some desperate wrongdoer interjecting that I was “anti-Government and anti- Lanka”. I was amused at this desperado’s attempt to divert your keen attention away from my speech. His absolute falsity was countered thus: By training and culture, I have always been non-political, and truthful in all my public interest, good governance and investors’ interest activities.
To contribute, for the betterment of humanity, the country and the average decent citizens, have always been foremost in my upbringing. I have always been extremely proud of my parents, the extended family, teachers at college and lifelong friends; none of them touched anyone else’s money or property!
In the above context only, I drew attention to my role as Chairman, Pramuka Bank Restructuring Committee meeting with Your Excellency on few occasions, to obtain relief, which bore fruits for the poor depositors. I was neither a depositor nor a shareholder, but acted in the public interest. I did not charge any fees nor claim any expenses. I worked tirelessly with the poor depositors, paying respects to all religious, political and social dignitaries in the process. UPFA, UNP, TNA, JHU, JVP figures were all there. I have never sought any personal favours.
“It was also the Depositors’ action to take the matter before the Appeal Court which ruled in their favour to reopen Pramuka Bank. The Supreme Court, dismissing the appeal by CBSL, directed them to consult, K.C. Vignarajah the depositors’ representative in the restructuring process of the bank”. (Sunday Observer 11 July 2004)
I understand that Thilak Karunaratne also sought no fees or expenses, did an honorary job at SEC. Remarkable person, truly patriotic.  My admiration for those who do their duty by the people is tremendous. If he is moved out, or resigns, it will be a great tragedy for our country and the investing public.
In 1978, the M.D. Gunasena controlled ‘Sun’ newspaper carried the following front page banner headline: Quote- An angry young man states: “The quota we won in Washington was lost in Sri Lanka!”
On returning from a successful trip as advisor to the first quota negotiating team to USA led by Minister Lalith Athulathmudali, I stoutly opposed the JRJ diktat on distribution of 50% of the hard won quota, to multinationals in the FTZ who were not entitled to any! We finally won for the small and medium indigenous industry, and retrieved nearly all the key quotas from the multinationals in the FTZ.
Thilak Karunaratne’s remarks that he would not allow “Robber barons” to exploit our innocent investors, reverberates the very same spirit as mine, about 34 years ago in defending the country’s industrial interests!
President Premadasa had the concept of 3Cs ‘Consultation, Compromise and Consensus’. There was at that time, some “crony capitalists” feeding off a lopsided “free market”. I was always for a competitive free market economy with basic safeguards.
As a counter to the revolutions that have been caused by exploitative hierarchies, I was espousing the creation of more manufacture and exports of added value products and services; also stressing the necessity of 4Cs “Creative, Competitive Caring Capitalism” which shares the fruits of the enterprise society in an equitable and fair manner to enlarge a shareholding democracy.
President Premadasa responded beautifully, (even though a very close caring friend cautioned me) after watching a detailed 12 minute presentation of all the faults, and (with other chamber heads giving me their time) seeking a level playing field, revamped policies, removing unethical practices, competition and corruption.
Your Excellency, it will be a severe blow to our country’s image, if persons of very high calibre resign from the chair of SEC. (Mr. Thilak Karunaratne now, and only eight months after Mrs. Indrani Sugathadasa.) There has been an unmistakable chorus of good advice, from the COPE to all good editors, journalist, and all eminent persons of goodwill.
Thanking you for your urgent attention, to retain the honest chairman of SEC, and the acting Director General Prof. Dr Dissa Bandara, while rejecting the advice of High Net Work Crooks (HNWC) and wrongdoers.
Yours truly,
K.C. Vignarajah (acting in the interest of IMS and the investing public)


Reported in Dailyft

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...by i3gconsultants@ 15:08:23 on 2012-08-25

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Serious decline of the stock market under the present SEC


By a market participant
The investors were compelled to wait nearly 17 years to reap the benefit of a real bull run in 2009 after the elimination of the LTTE terrorism and how the SEC destroyed it within a one-and-a-half year period due to ill conceived, irresponsible decisions is well known and documented and need no further clarification. The forces who were keen to destroy the market and their motives and strategy is briefly set out below.


1. Nearly two million directly and indirectly benefited from the bull run and if this was permitted to expand it would have strengthened the economy and the Government’s image and made the Government more popular. It is apparent that the main opposition party in its desperation to prove the economic failures of the government had to stop the stock market from developing further.


2. It has been alleged that the majority of top officials and Commissioner/Directors of SEC and CSE had very close link with the opposition. These directors pushed through a series of dangerous decisions approved by the SEC while the Government was misled to believe that it was in the best interest of the CSE. The comments made by the President at the recent meeting that only one senior official at SEC was really managing the Government policies confirms that now the Government is fully aware of the situation. It was hoped that with the departure of the Chairperson and the Director General, suitable persons with faith in the Government policies and small investor friendly would be appointed as replacement. However, in reality the new Chairman joined the bandwagon of opposition and directors who managed to stay on. He damaged the market further with his negative attitude and serious statements made which were extremely detrimental to the stock market and the government policies.
    The following statements which were made by the present SEC Chairman to media are some which are very dangerous and that would ensure the stock market went into a further collapse without any revival and encourage both local foreign investors to flee.


(A) “Upward movement of the market in 2009 and 2010 is mainly due to pump and dump policies.”
It is an undisputed fact that the movement was due to elimination of terrorism with prospect of peace and economic growth which subsequently proved correct. In this rally all the shares irrespective of speculative, small and high capped shares recorded gains based on forecasted future developments based economic logic.  Accordingly the Chairman’s remark was highly irresponsible and damaged the market immensely. Either he is ignorant of economic factors or he is attempting to give a boost to the opposition to justify their action in destroying the market.
On the contrary the CSE in its Annual Report of 2009 says: “This was the year that saw us shattering virtually every record previously set creating positive investor sentiment around the globe and bringing Sri Lanka and the CSE under the spotlight of international attention” and comments that it is a fine achievement (please refer the annual report 2009/2010 of the CSE). The Chairperson is calling the annual report a lie by saying that pump and dump was the reason that the market performed well. This confirms how irresponsible and ignorant the new SEC Chairman is regarding stock markets because he is contradicting the CSE report itself.


(B) “You need to get in at least 10 to 15 billion rupees initially and add Rs. 100 billion within a year so to get the market up”
We do not understand on what basis the Chairman gives figures. On one hand if we are unable to attract above foreign funds his thinking is that the market cannot be revived. In fact central bank expects only US$ 500 m to be received this year 2012 and out of this the balance to be received is only US$ 300 (Rs. 39 billion) if we account for the investments already received.
If the Chairman’s theory is correct then since the Central Bank expectation is insufficient to stimulate the stock market, the CSE cannot be revived in the near future. Rather than making flippant comments and giving baseless figures the Chairman should gracefully resign and allow a person who could stimulate the market take over without wasting the time of the Government.


(C) “Last year 42 billion came out of the market by way of IPOs and some dumped in ventures such as hotels and where are we going to get this money?”
It is sad that the Chairman does not know these IPOs have been approved by the SEC and CSE despite investor outcry. Approval of many IPOs at short time spans were detrimental to the market and should have been considered on a staggered basis considering the liquidity of the market. Also the approval was given to IPOs for which private placements had been done at substantially lower prices prior to the IPO.
What is interesting is in most of the cases where the underpriced private placements were done, the brokers who benefitted from the said transactions were the so called independent stock brokers who keep commending the SEC for an excellent job done. So much for the competence and transparency of the SEC and the CSE officials who played out the small time investors through these shady private placements.  As for the IPO issuing companies investing in hotels, the Chairman is not aware that the Tourism Sector is a government priority area for development (which is rapidly developing as shown by improved tourism figure) and that IPOs are made to expand the businesses not to reinvest in the stock market.


(D) “Relaxation of credit restriction has not improved the market since – it was not the reason for the downfall”
This is another attempt to hoodwink the investor public and the Government. It should be noted originally that the brokers were in a position to give 10 times net capital without any conditions and the SEC suddenly decided to stop any credit within three months. This created market chaos.  If the market was overheating the sensible thing should have been to reduce the credit up to three times net capital and watch the developments. Certain commissioners and officials had secret political motives to completely stop credit which would bring the prices down and crash the market thus achieving the political objectives of the opposition. Ignorance and inexperience of the former chairperson was very useful for this decision to be pushed through by the directors with vested interests.
During the latter part of last year due to SEC pressure zero times net capital was permitted which significantly reduced the capacity of the brokers. Due to the intervention of the President, three times net capital was permitted only after two-and-a-half months. However, in order to sabotage the President’s effort an adverse formula (which several financial analysts also have pointed out to be incorrect) was introduced with which the end result was that the brokers were not permitted to give even zero times net capital. The fact remains even as at 30 July 2012 there has been no complete relaxation of credit restriction, and we request the Chairman to be honest in his statements.


(E) “But if EPF is investing wisely and prudently and in a calculated manner, they should come into the Bourse”
The Chairman too is aligning with the opposition and it is apparent he too is attacking the Government on previous investments made by EPF. While the opposition is trying to make the EPF a political talk point in the forthcoming elections, the SEC Chairman is implying that the EPF had been unwise and not prudent in investing in the past and now is the best time for them to come into market.


(F) “Creation of negative sentiment in the market”
The Chairman states our PE is 13 compared to PE of 5 and 6 for Vietnam and China respectively. In the first place he should explain the sources for such data. According to Bloomberg PE for China and Vietnam is 11.6 and 10.6 respectively. The chairman should maintain highest standard of integrity without giving false information to achieve his ulterior motives. Secondly, he has not been appointed to give these data even if it is correct because it is bound to create a negative sentiment. Further he is quoting Arjuna Mahendra, a staunch supporter of UNP removed from BOI Chairman’s post in 2005, that PE should drop to 8 for investment to happen in the country. In effect he attempts to bring down the market drastically in line with UNP expectation. This is tragic. The PE figures mentioned is incorrect and further there are nearly 30 countries in Asia with higher PEs than Sri Lanka and the chairman deliberately has not commented on them.


(G) “Criticism against Government policies”
He states that weak economic parameters, volatility of the rupee also contributed to the downfall of the market. This is open criticism of Government policies by a person appointed by the Government and as such this would create fear among the foreigners and local investors. How can the brokers market investments in the country when the SEC is commenting about weak economic parameters and instability of the rupee?
Further the Chairman’s comments are in direct contrast to what the Secretary to the Treasury has quoted to even international media. The President in the capacity of the Minister of Finance should seriously look into the actions of these types of officials who sabotage the efforts put in by the Government. The Chairman’s actions should be questioned further since the said article that appeared in the newspaper and carried all the points discussed above was circulated using the official e-mail address of sajeevani@sec.gov.lk. Shouldn’t action be taken against such employees and the officials who are responsible?
Today over two million people numbering 10% of the population have suffered immense financial difficulties and some are virtual beggars due to the commission and omission of SEC and to a lesser extent by CSE. The Chairman says what has gone up should come down without realising many shares favoured by small investors have come down by 85% to 90% and the comment reflects the attitude of capitalists who have no feeling for affected small investors.
The Chairman devotes 100% of his comments on manipulation, and insider trading and is very silent on commission and omission of SEC, which contributed 90% for the downfall of the market and the losses suffered by the investors as follows:


1. Sudden unprecedented suspension of seven securities in August 2010


2. Permitting IPOs to made for prices very much above the price of private placements


3. Sell down of directors’ shares


4. Credit restrictions not relaxed even 1% up to 30 July 2012 despite intervention of the President. (It would appear SEC and CSE mafia is more powerful than the President.)


It is an open secret that the rich class belonging to the opposition and those connected to SEC and CSE under nominees had earned billions of rupees from the above at the expense of the small investors.
There are still many senior officials/commissioner/directors directly linked to above decisions still in power and it is very necessary to completely replace such persons including the Chairman in a major overhaul in order to make the stock market vibrant.


Summary
(1) Never in the history of SEC and to a lesser extent CSE has the public image, credibility and acceptance dropped to such a low level. The majority of commissioners and senior officials for the past three years with secret agenda had fully contributed to this situation.


(2) It is an open secret large scale leakage of confidential information of SEC and CSE to opposition parties is taking place. During the recent meeting with President it transpired that there are many moles already identified.


(3) Attempt by the SEC to portray that due to handful of high net worth investors the market collapsed is a ridiculous argument to divert attention from serious commissions and omissions of this institution in the past. It is observed at the highest of the bull run market turnover averaged Rs. 3,000 m daily and no way they could even play a significant part. In order to cover up their own actions the Directors of SEC have hidden behind the investigation regulations and launched a campaign to target individuals who speak out and point the blunders made by the SEC. Therefore it is threats and intimidation tactics used by the SEC that prevents the small investors from opening their mouths but they may surely open their vote against the Government
It is the SEC mafia that should be eliminated by weeding out anti-Government elements from SEC and CSE who have caused a huge embarrassment to the Government.


Reported in Dailyft

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...by i3gconsultants@ 14:08:20 on 2012-08-25

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Understanding stock markets


I read with interest that Facebook stocks had reduced to US$ 21 per share by end of last month.  That means it has had a dip of US$ 14 from its offer price of US$ 35 per share in May 2012.At that time, Facebook Inc. had a market cap of US$ 104 billion, approximately five times the total market cap of all Sri Lankan companies.  However, at US$ 21, the market cap has reduced to US$ 62 million, which means the company has lost US$ 42 billion in market cap or about twice the total market cap for all Sri Lankan companies! Even so, I have not seen anyone in the US calling Facebook a bankrupt company or indulging in insider trading, market manipulation, etc. The difference is, in the US, they understand stock markets, but in Sri Lanka, we don’t.  P. Somasunderam


Reported in Dailyft

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...by i3gconsultants@ 14:08:14 on 2012-08-25

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Matara Investors Association on ‘Who is responsible for bringing the stock market down?’


Following is a statement issued by an entity styling itself as Matara Investors Association on the current state of the Colombo stock market:
Even after the meeting with Dr. P.B. Jayasundera, where it was assured that the SEC would not be giving information/articles to the media, articles scaring the public are still appearing.Hence, we investors have decided to write to the print media to create awareness.
The SEC and CSE are taking the moral high ground writing articles after articles and inserting in the media stating that it is catching wrongdoers, although there is no evidence to charge anyone as they cannot be defended in court. Actually what they are doing is trying to defend themselves for wiping out Rs. 300 billion from the stock market by issuing 14 anti-investor Directives and sending thousands of letters to investors while attacking investors by putting mud on them continuously.
The SEC Commission members are divided due to the way in which activities of the SEC Secretariat and SEC Commission have been handled in the last two years. All were silent in the past but will not be so in the future.
Dr. Dissa Bandara has an invalid post – ‘Acting Director General SEC’. According to the Attorney General’s Department, there cannot be an Acting Director General when there is no Director General. However, over 1,000 letters have been sent by the Acting Director General to investors who have bought five stocks nearly one year ago, whereby a fear psychosis has been created in the minds of investors who were making the market lively. Simply, the investors do not have to reply these letters as the letters are null and void. All this damage to the net worth of investors and the economy has been inflicted as influenced by a handful of anti-Government financial activists.
The Chairman and the Secretariat have been continuously making statements officially and unofficially as ‘SEC source’ in the last two years to four newspapers about manipulators, insider traders, fundamentally weak, and mafia traders, thereby making it impossible for new investors to get convinced to enter the market and old investors to re-enter the market.
If a prospective foreign fund manager surfs the web, he would get hundreds of fearful articles that have originated from the SEC, and therefore almost no new fund manager would enter the Colombo Bourse. The Chairman of the SEC has conveniently said market promotion is not the task of the SEC, as it is probably the only SEC in the world which actively works to bring down the market.When the CSE should create the rules with the stock brokers, the SEC has also taken over this function and gone further to almost daily inserting articles against investing in at least four newspapers.


Reported in Dailyft

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...by i3gconsultants@ 14:08:18 on 2012-08-25

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Tilak’s resignation accepted


Finance Ministry has acepted the resignation of SEC Chairman Tilak Karunaratne and a suitable appointment will be made soon, Ministry Secretary Dr. P.B. Jayasundera told the Daily FT.


Reported in Dailyft

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...by i3gconsultants@ 14:08:33 on 2012-08-25

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Manipulation in the Sri Lankan stock market


A stock market is expected to present a level playing field to all investors. However, stock holders trading in the Colombo Stock Exchange (CSE) have encountered hurdles to trading, coming from both major private investors and errant government elements.
These hurdles refer to various methods of market manipulation, such as insider trading and ‘pump-and-dump’ tactics that artificially jostle share prices towards the benefit of a handful of individuals. The distortion of the structure of the market through these market manipulations seem to go unpunished as investigations are halted or fade away from public interest rapidly, ensuring that the perpetrators of these white-collar crimes go unpunished. This Position Paper will examine the definitions and consequences of market manipulation and recent scandals that have shocked traders at the CSE. It will also investigate possible methods to prevent and diminish the occurrence of market manipulations at the CSE.
The responsibility for maintaining a level playing field falls on the Securities and Exchange Commission (SEC) and the investors themselves. Directors, stockbrokers and capitalists no longer play within the rules of the game and while ‘greed is good’ in investing, it should be exercised within parameters applicable equally to all market players.
It falls upon civil society organisations (CSOs) to educate the public on the rules of the game and raise public awareness on the consequences of a corrupt stock exchange. It falls upon the SEC to resist politically-motivated impediments to investigation and efficiently regulate the market while prosecuting the perpetrators of white-collar crimes.
Additionally, it falls upon the SEC to educate the government on the purpose and effects of regulation, as it is currently seen as a negative influence in market economics. It falls upon the media to pursue alleged white-collar criminals and expose their misdeeds in the public light and to also raise public knowledge on the workings of the CSE and the links between good governance and good corporate practices.
What is market manipulation?
This refers to the deliberate interference in the free and fair operations of a financial market. The aim of manipulation is to paint a false picture of the market, misleading investors and analysts. The CSE has been plagued by a barrage of market manipulations in the recent past.
In 2011, the Employees’ Provident Fund (EPF) bought an 8% stake in Laugfs Gas PLC for Rs.1.6 billion, pushing share prices up to between Rs.38-41 per share. However, through this inflation of share prices, the stock was sold at Rs.51 per share before coming down to Rs.40 that same day.
As at July 4, 2012, the share price of Laugfs Gas PLC is Rs.19, amounting to a loss of Rs.1,389 million to the EPF. It is clear that the brokers involved made a massive profit by artificially inflating share prices. This example highlights another problem which is misuse of the public funds.
The manipulation described above is but one example of a myriad of ‘pump-and-dump’ rackets witnessed on the trading floor. It involves the overvaluing of shares so that stockholders are able to sell their shares at an artificially inflated price. However, this comes at the expense of another party, in the example above the ‘loser’ is the pool of EPF funds.
Another example of public funds being used in a pump-and-dump transaction is that of the EPF purchasing stock in Galadari Hotels (Lanka) PVT Ltd. in 2010. The EPF purchased 23.7 million shares in the company, at Rs.32.50 a share. The value of these shares, as at July 2012, is at Rs.11 per share, which amounts to a loss of Rs.500 million.
The previous owners of the share, Nawaloka Hospitals was reported to have been “relieved” to have gotten rid of the “burden” of the loss-making Galadari Hotels (Lanka) PVT Ltd. It is convenient that a loss-making company was transferred from private stockholders to an institution that deals with public funds. The total value of losses incurred by the EPF in the stock market is placed at over Rs.4 billion, according to Economist Dr. Harsha De Silva MP. But the Central Bank of Sri Lanka has rebuffed any allegations of fraud in its dealings in the stock market, saying that there is “a long-term focus to generate profits and enhance the fund’s capital base”.
However, investments made in 2010 seem to have generated massive losses all the way up to 2012, so the fruits of these “long term” investments are yet to be realized. Insider trading is another form of market manipulation. It is the “unfair use of trading by those within privileged access (‘insiders’) to information that has not been disclosed by a company to the public (‘undisclosed information’) and which information would, if made public, have an impact on price of securities of that company.”
The EPF also made clear its adherence to accounting standards and credibility of internal auditing procedures, rebuffing Dr. Harsha De Silva’s claims of market manipulation by alleging he had a political agenda behind his analysis. However, once we move past the jaded political rhetoric of our Sri Lankan institutions and politicians, we find it hard to disregard the evidence of massive loss-making investments made by a company that deals with public funds. Laugfs Gas PLC, Ceylon Grain Elevators, Brown and Company, Galadari Hotels and The Finance Company all appear to be unsound investments, incurring huge losses to the EPF’s pool of public funds.
An article titled ‘Insider Trading Unavoidable?’ published in 2011 sheds light on a peculiar detail of Sri Lanka’s investor community; the geographical distribution of stock market players aids in the speedy transference of material information. Nimal Perera, an investor at the CSE, mentioned that “we are all insiders, including the regulators, as we are a close-knit society.”
These controversial remarks highlight not only the ease with which material information may pass through investor circles, but also the callousness with which perpetrators may publicly claim their nefariousness. The article goes on to describe the two types of insider traders -Primary insiders, who have access to material information and Secondary insiders, those who obtain material information from primary insiders. Although conflicts of interest might not be a form of market manipulation, it is worth exploring the role they play in the erosion of fairness and transparency on the trading floor. 
A scandal in the recent past is that of the National Savings Bank (NSB) purchase of The Finance Company (TFC). In a nutshell, this scandal is concerned with the purchase of 13% of TFC by NSB for Rs.49.74 a share, whereas typical share prices were at Rs.30. Following public disclosure of this deal, President Mahinda Rajapaksa halted payment and ordered Secretary to the Treasury, Dr. P.B. Jayasundera to initiate an investigation into the deal.  The 13% of TFC shares were to be purchased from two of the company’s Directors, Dinal Wijemanne, CEO of Taprobane Securities and Raynor De Silva, ABC Radio Managing Director. It came to light that there is a conflict of interest at hand; Taprobane Securities was the firm that authorized the purchase of these shares and the director of the company was the individual selling these shares. The SEC has stated that they are investigating Taprobane Securities for insider dealing, front running and conflict of interest violations even though an internal investigation into the incident is yet to be undertaken. It is hard to pinpoint the exact cause of market manipulation; it could be greed in the mind of the controlling interest or senior ranking director or it could very well be poor corporate governance. 
As Warren Buffet once said, “Earnings can be pliable as putty when a charlatan heads the company reporting them.” A Sri Lankan example of this is the case of Watawala Plantations. Recently, the directors stripped the company of its marketing division with no prior consultation with the shareholders. Arbitrary decisions made without the consultation and consent of the stock owners points towards serious concerns over the transparency and good corporate practices of the directors.
This section was sold for Rs.741 million when the company’s true value stood between Rs.2.5-3 billion. In this case, it is hard to see who gains from manipulating the market, yet it is easy to see how poor corporate governance leads to slights on the trading floor. 
The question of who is involved with market manipulation is somewhat complex in its dimensions. As we can see from the examples cited in this document, the perpetrators are high ranking executives and stockbrokers. The misuse of public funds seems to allude to the fact that there could be rouge political elements at play.
Effects of market manipulation
It is a common misconception that white-collar crime involves the rich stealing from the rich. However, in Sri Lanka this is not the case. As seen in the NSB scandal, the savings of the Sri Lankan people were plundered in order to artificially inflate stock prices. This callous use of public finance has obvious repercussions; a poor investment, merely set in motion to paint false picture of a company’s value, yields a poor return in the long run, hemorrhaging money rather than appreciating the value of the initial investment. This erosion of value will put the NSB in hot water as bank patrons realize their money has been squandered in this investment process. 
Another consequence of market manipulation is shareholder fatigue. This is a phenomenon that occurs when minority shareholders do not receive dividends on their preferred stock. As company directors become tied up in the profit reaping on their manipulations, their companies usually suffer under long-term over valuation of stock. 
As in the case of Watawala Plantations, ordinary shareholders are denied the right to exercise control over their company. Market economics dictate a divorce between company ownership and control, yet ordinary shareholders are presented with voting rights (whereas preferred stockholders typically do not receive voting rights) to steer the direction of their company.
Market manipulation allegations, whether proven or false, deter investors from entering the trading floor and impede foreign direct investment in the country. When the Sri Lankan civil war ended in 2009, the country seemed to have a bright economic future, with great foreign interest in investment opportunities. 
In the previous year, Sri Lanka had witnessed massive investment from Malaysia and India, giving analysts the ability to predict good tidings for the Sri Lankan economy. However, the Central Bank of Sri Lankan (CBSL) mentioned in a 2009 report that foreign direct investment in Sri Lanka was inadequate. Yet, by 2011, it seemed that Sri Lanka was far from the tiger economy status it had been bestowed in 2009. The bubble burst in 2011, with the All Share Price Index reporting an all-time low of 3.5% negative earnings and a total loss of Rs.141 billion in October 2011. 
A bubble occurs when share prices are inflated to levels higher than their real value, usually through dissemination of false performance rumors by brokers and a myriad of other market manipulations and investor speculation. The article cited for this claim also goes on to mention how brokers have a heavy hand to play in the creation of a bubble, as they gain on the commission received from brokering stock transactions. 
It also mentions a group of high net worth individuals prop up the market through the purchase of illiquid stock (also known as penny stocks). The stock market crash of 2011 persists today, with a year-to-debt ratio of 20% reported in May 2012, which amounts to a loss of Rs.40 billion. We can now clearly see how brokers and investors play a crucial role in preventing a bubble from forming. Yet, in the Sri Lankan context, this responsibility is rarely carried out. We also see how one market manipulation can lead to a variety of unintended negative effects, i.e. over-valuation of stocks leading to a stock market bubble and subsequently, a crash.
In addition to the effects pointed out above, it is critical that we understand the erosion of confidence in the CSE, the irreparable damage done to once credible institutions such as the NSB and ultimately, the unfortunate deterrence of investment in the Sri Lankan economy. 
Currently, the CSE is a vulnerable institution, illiquid and exposed to the whims of a few high value investors. The once bright outlook presented to investors in mid-2009 has now turned to a market rife with scandal and corruption.
Alleviating market manipulation
The Securities and Exchange Commission (SEC) was established in order to “promote, develop and maintain a capital market that is fair, efficient, orderly and transparent.” It is expected to advise the government on the development of the securities market and to regulate the listing and issue of securities in the licensed stock exchange.
This institution subscribes to these lofty principles, but has been unable to curb market manipulation. The SEC has also undergone leadership changes that seem to allude to a corrupt stock market.
In December 2011, Chairperson of the SEC, Indrani Sugathadasa, resigned in order to “uphold her principles”. Her resignation could be chalked up to attempts to regulate more efficiently being shot down by the Brokers Association of the Colombo Stock Exchange. 
The Association met with President Rajapaksa in order to convey their concerns over regulation in the credit market. We see here that the brokers are able to sway the highest political order in the land in order to get their way. While regulation is not a method in which market manipulation can be “cured”, it “merely provides a basic framework of facilitating operation of markets.” There seems to be a Sri Lankan misconception that regulation inhibits the workings of a stock market, creating constraints to brokers. This conception might be true, if brokers would rather be free to carry out nefarious activities than be subject to a system of checks and balances!
The point of regulation is to create barriers to those who would subvert the level playing field and prosecute those who “are foolish to flaunt it and get caught”. However, the SEC seems to be unable to carry out its duties, let alone prosecute the perpetrators. 
As we can see from the NSB-TFC deal, the SEC was sadly absent when the transaction was made. The SEC has assured traders that an investigation will be conducted. Knowing that public funds were being used, the SEC should have intervened to halt the transaction, even when a clear conflict of interest existed in the brokerage house. 
The culture of regulation has become “lawless, due to a lack of regulation – giving rise to a class of criminals.” In order to alleviate this issue, the government should be enlightened as to the beneficial effects of good and fair regulation, that it is not an impediment to success in the stock market and that it merely provides a framework for a level playing field. If we understand regulation to be simply that, then perhaps those who push for less market regulation are only attempting to cover up their tracks.
It is thus clear that the SEC ought to pipe up and do more than sit complacent with entities such as the Brokers’ Association undermining their regulatory capacity. A more hands-on approach is required, one that investigates and fully prosecutes individuals accused of white-collar crimes. 
The SEC Act is sufficient to regulate the market; however, the resources and infrastructure to prosecute perpetrators and regulate the market need to be built up to the point where the issue of white-collar crime becomes something that is severely looked down upon in the public sphere. 
In addition, the SEC Act should incorporate sections relating to ‘push-and-dump’ transactions, providing a definition and definitive legal sanctions against perpetrators of these transactions. As such, perceptions of white-collar crime have to be changed; it is no longer a case where the rich are stealing from the rich, it is quite evident that the rich are stealing from society as a whole. 
Public awareness is essential in changing perceptions; the “rules of the game” must be disclosed to the public, in forums or educational programmes, any medium that allows society to gain understanding of the workings of financial markets.
The fourth estate too plays a part in this as they are in charge of the dissemination of information to the public. It was made clear that certain “rotten” journalists aid the cause of errant traders, reporting facts that cause minority investors to hastily purchase a share, in order to send the price sky rocketing, while the controlling interests sell off their stock, making massive profits. It must also be made clear to the investors that regulation is not aimed at people, it is supposed to be fair and transparent, giving investors rules to be followed by all involved on the trading floor. It should be free from political interference and should not be undermined by errant financiers. 
In addition to this, the judiciary must be armed with the legal tools required to prosecute white-collar criminals. As of July 17, no code of conduct or ethics statement exists on the SEC website, indicating that this is an appropriate place to start making a difference; a code of conduct will ensure high standards of practice and a solid document that gives regulators some sort of “backbone”. In the past, regulators have had too cozy a relationship with company directors. This too will be addressed in an effective code of conduct. In addition, CSOs have a large part to play in public awareness of white-collar crimes. It is clear that the Sri Lankan public has very little understanding of how financial markets work. Given this gap in the knowledge base, those who do know the rules are able to manipulate them to gain personal advantage, or to even work in tandem with others in order to fix the market in their favour. In the case of the EPF, it seems that the public were unaware of the implications of public finance being used to play in the stock market.
Recommendations
The SEC must also raise awareness on the ability of the SEC Act, that it is a legal document to be followed by investors that provides a level playing field. In this same vein, awareness of the various possible avenues of market manipulation must be made. This public awareness will instill a sense of what is acceptable and what is not on the trading floor.
    The government should reinvigorate its faith in the SEC as an efficient regulatory body and gain a deep insight into the beneficial effects of effective regulation in the stock market. The government should not cave into the demands of high net worth investors and must understand the highly illiquid nature of the stock market as it stands right now.
    The SEC must develop a strong stance on white-collar crime, resisting both political interference and independent interference (from bodies such as the Brokers’ Association). Through the CSE’s education wing, public awareness must be raised on the overstepping of major investors and the effects of market manipulation.
    CSOs must conduct public awareness campaigns on the misuse of public funds in the stock exchange, how the stock market works in an elementary form and how white-collar crime affects more than just “rich people”. The need for a change in perception is stronger now more than ever. As mentioned earlier, public perception on white-collar crime must be changed; the public must understand that the implications and consequences of market manipulation effect the overall wellbeing of the economy and thus the public themselves suffer.

(This is a report prepared by Transparency International Sri Lanka)

Reported in Dailymirror
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...by i3gconsultants@ 11:08:33 on 2012-08-02

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Message clear: Market must move up


  • At Tuesday’s meeting Finance Ministry Secy. reiterates united effort by all to revive Colombo Bourse
  • To appoint all stakeholders-comprised Consultative Committee for regular dialogue and consensus

  • Credit rule to be revised to boost retail participation; fresh support to brokers in the offing, among other measures
  • Meeting with top listed blue chips to be convened next week to enlist their support and ideas
  • SEC told to be professional over its regulation and investigations like the Central Bank rather than sensationalising via media or driving fear
  • Record Rs. 25 billion net foreign inflow so far in 2012 to be further consolidated

By Nisthar Cassim
The message to stakeholders of the Colombo Bourse was loud and clear as it was repeated on Tuesday by Finance Ministry Secretary Dr. P.B. Jayasundera that the depressed market must be revived and on its part the Government has committed to spearhead this much-needed thrust.
Dr. Jayasundera told the Daily FT yesterday that the capital market stakeholder meeting on Tuesday was “positive and productive”.
This was as a follow-up to the 19 July forum chaired by President and Finance Minister Mahinda Rajapaksa, at which engagement too, the message from the country’s Chief Executive was that the “market must be revived”.
For Tuesday’s meeting, Dr. Jayasundera invited almost the same parties who attended the President’s Forum. They included Securities and Exchange Commission (SEC) Chairman Tilak Karunaratne, who was accompanied by Acting Director General H. Dissabandara, two Directors Chandu Epitawala and Vajira Wijegunawardane, Colombo Stock Exchange Chairman Krishan Balendra, Director Maxi Prelis and CEO Surekha Sellahewa, Colombo Stock Brokers Association President Sriyan Gurusinghe and his members as well as non-member brokers as well as investors Harry Jayawardena, Nimal Perera, K.C. Vignarajah and C.P. de Silva.
Tuesday’s engagement was after Dr. Jayasundera separately met with SEC Commissioners and CSE Directors last week.
“The market needs to be revived via a partnership by all stakeholders as opposed to them going in different directions. Such a collective effort will bring back confidence to the market and improve sentiments. This was communicated to all stakeholders present,” Dr. Jayasundera said.
Year-to-date the market is down by 19% with over Rs. 300 billion in value lost, whilst last year it was down by 8.5% after two years of a bull run, which made Colombo the world’s most consistent best performer. This achievement was linked to revival in investor sentiments and economic outlook following the end of the 30-year conflict.
To ensure a regular dialogue and to find consensus over short, medium and long term measures required to revitalise the capital market, a consultative committee under the chairmanship of Dr. Jayasundera will be set up shortly. Recommendations from the Committee will be considered for the upcoming 2013 Budget as well.
Dr. Jayasundera will also convene a meeting of top listed blue chips next week to get their views in terms of developing the capital market and get an update on their future investment profile.
He dismissed criticism from some quarters that the Finance Ministry shouldn’t get directly involved in revitalising the market but leave the responsibilities to different agencies such as the SEC, which also has a mandate to develop the capital market apart from regulating it, the CSE and the CSBA.
“The overall policy of the development of the capital market comes under the Finance Ministry and this initiative of bringing together all stakeholders is spearheaded in that spirit. The SEC and CSE can continue with their statutory functions such as regulatory and operational roles as well as address fundamental issues, all aimed at creating an enabling environment for a vibrant capital market,” Dr. Jayasundera pointed out, in addition to stressing that there was no political interference as well.
He said that the importance of reviving the market was acknowledged by all stakeholders at the meeting and the required policy support as well as incentives if required would be extended by the Government.
“We need to clear the mistrust if any among stakeholders and pursue a joint effort to revive the market and not destroy it and this was emphasised at the meeting. We also ironed out some of these issues and the Consultative Committee will take up any residual and future matters,” the Finance Secretary said, adding, “Positive sentiments must start from the very stakeholders before expecting it from investors.”
The SEC had been told to be more professional in its regulatory role, including the process of investigations. “The SEC can continue with its investigations, but as in the case of the Central Bank, greater professionalism along with directly dealing with the parties concerned with a level of discreetness was recommended rather than doing it via the media,” Dr. Jayasundera said.
The SEC and CSE also can proceed with their efforts to improve governance as well as simplify procedures aimed at creating a vibrant market.  The need for pragmatic approach and a right balance with regard to regulation was also reiterated at Tuesday’s meeting.
Dr. Jayasundera told the Daily FT that broker credit rules would be revisited to make it more transparent and simplified with an emphasis on supporting more retailers to participate in the capital market.
“The Government will also look at incentivising the brokers to improve their capacities, risk management and market development,” Treasury Secretary said.
Tuesday’s stakeholder meeting was also told that it was important to take strength from the record net foreign inflow of over Rs. 25 billion so far this year, apart from further consolidating foreign interest.
Last year’s net outflow was Rs. 19 billion whilst in 2010 it was Rs. 26.3 billion.
Dr. Jayasundera said the high net inflow in 2012 was a clear testimony of the level of foreign investor confidence in the prospects of post-war Sri Lanka as well as the macro-policy framework of the Government.
At the meeting all stakeholders present were also told not to convey conflicting or wrong messages with regard to the outcome of Tuesday’s meeting. This was because the President’s Forum as well as Dr. Jayasundera’s meeting with the SEC and CSE saw conflicting reportage by the media.
Whilst there was a suggestion to have a joint press conference, it was later agreed that the Finance Ministry would be the spokesperson for Tuesday’s meeting.

Reported in Dailyft

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...by i3gconsultants@ 11:08:15 on 2012-08-02

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Most brokers’ market reports silent on Friday meeting with President


Perhaps after having spoken much, most of the brokers’ market reports yesterday were silent on Friday’s meeting with President Mahinda Rajapaksa.
Only Asia Wealth referred to it whilst several others purely commented on the happenings in the market.
“The Colombo Bourse didn’t see any turn around today followed by the much-awaited presidential meeting that was held last Friday. Even though the contentious issues for the prolonged bearish market were discussed at the forum, the deliberations or the outcome have not been clearly stated yet,” Asia Wealth said in its daily report. “Further, positive news such as country receiving the IMF final tranche of US$ 415 m coupled with the oversubscription of US$ 1 b sovereign bond, have not made any changes in the investors’ mind as they continue to be on a sideline,” it added.
Reports of other brokers such as NDB Stockbrokers, DNH Financial, SC Securities, and Softlogic Stockbrokers were silent or didn’t express an opinion on whether Friday’s meeting had any bearing on the market for better or worse.
DNH Financial said investors continued to shy away from the market as it opened a fresh week on a negative note, whilst Softlogic said the Bourse returned to its negative mode with activity levels struggling to keep the market alive.  
However, it said the approval of the final tranche of the IMF loan was a positive sign for the economy. Coupled with it, the US$ 1 billion sovereign bond and extended IMF program under discussion are likely to improve investor sentiment and create stability in the economy.
“However, the prevailing high interest rates are likely to be the biggest barrier at the moment. Therefore we reiterate to our valued clients that though the market is at an attractive level, accumulation should be done on a cautious note, identifying value counters,” Softlogic Stockbrokers said.

Reported in Dailyft
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...by i3gconsultants@ 18:07:38 on 2012-07-25

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Pricing based on fundamentals make a comeback at CSE


Colombo Stock Exchange (CSE) Chairman Krishan Balendra believes the Colombo Stock Market has reached a point where stocks were priced attractively based on fundamentals and investors were positioned to benefit from this.
The CSE surged 125.3 percent in 2009 and 96 percent in 2010 before the Securities and Exchange Commission stepped in to cool-off the overheated exchange and began investigations into rampant market malpractices. The CSE underwent a correction and slumped to 8.5 percent last year. Year-to-date, the bourse has fallen near 20 percent.
"I feel the market has now reached a point where some stocks are attractively valued based on fundamentals. The economic outlook for Sri Lanka over the medium term is positive and the corporate sector is well positioned to benefit from this," Balendra told The Island Financial Review yesterday.
Substantiating on this claim, he said: "This is reflected in the increase in foreign interest in the stock market that we have seen in 2012 - foreigners are net buyers in 2012 to the value of  Rs.24 billion. In 2010 and 2011 foreign investors were net sellers in the market."
He said: "This year we have also seen the entry of a high profile sovereign wealth fund into the market (Khazanah of Malaysia) who have invested in excess of US$ 120 million. Apart from the foreign investors it is critical that we increase the local institutional, high net worth and retail participation. The CSE is continuing with its market development activities with a focus on educating potential investors outside Colombo. I am confident that the market will recover given the attractive valuations and the growth potential of the country and the corporate sector."
Explaining the present backdrop, he said: "The stock market is down about 20% this year.  Markets have ups and downs - after the big surge that we saw following the end of the war, it is only natural that the market should correct to some extent."
"Furthermore, at the tail end of the bull market that we had in 2010, there was excessive speculation in the market - after such periods of speculative activity, markets generally see a steep and lengthy downturn. This has been the experience in markets worldwide, including in developed markets. There are various other reasons for the downturn; interest rates have increased which has made equities less attractive, the global economic climate is weak and there has been uncertainty over the currency".

Reported in The Island
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...by i3gconsultants@ 18:07:26 on 2012-07-25

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Large trades dominate as bourse continues to slide


Large trades dominated the Colombo bourse yesterday where all three indices moved down marginally on a turnover of Rs.519.9 million, up from the previous day’s Rs.321.8 million, with 116 losers ahead of 81 gainers and 106 counters closing flat.
The All Share Price Index moved down 7.4 points (0.15%), the Milanka was down 4.07 points (0.09%) and S&P down 0.98 points (0.04%).
Brokers said that there were a number of block trades with Dankotuwa Porcelain where nearly 4.4 million shares changed hands in two crossings at the previous closing price of Rs.12.20 leading the pack. Commercial Bank (non-voting) where over a million shares were crossed at Rs.75, HNB X where 298,103 crossed at Rs.91.50 and Distilleries where 325,000 shares were crossed at Rs.122 – all at the previous closing prices.
Apart from these a further 0.4 million HNB (non-voting) traded between Rs.91 and Rs.91.50 closing 50 cents up at Rs.91.50, Guardian was down Rs.1.90 to close at Rs.15 on 152,400 shares traded between Rs.151.20 and Rs.155.10 and Commercial Bank (non-voting) up 30 cents to close at Rs.76.30 on slightly over 0.3 million shares done between Rs.75 and Rs.76.50 closing 30 cents up at Rs.76.30.There were some large parcels among these trades, brokers said.
Carsons continued to be among the most traded stocks closing 90 cents down at Rs.460 on 46,051 shares traded between Rs.459.50 and Rs.469. Brokers said that this counter has for the last several days been among the most traded shares with the EPF being a buyer.
Ascot Holdings was one of the day’s biggest gainers closing Rs.13.30 up at Rs.200 on 0.1 million shares done between Rs.197 and Rs.200.
Nestle closed 10 cents up ate Rs.1,200 on 16,330 shares while Pan Asia Bank closed flat at Rs.17 on a big block of slightly over a million shares.
Among the most traded blue chips, Commercial Bank (voting) closed 10 cents up at Rs.97 on nearly 0.2 million shares, CTC was down 50 cents to Rs.670 on 24,356 and John Keells Holdings down 10 cents to close at Rs.179 on 90,722 shares. Bukit Darah lost a rupee to close at Rs.749 on 18,050 shares.
Brokers said that retail activity was subdued.

Reported in The Island
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...by i3gconsultants@ 18:07:57 on 2012-07-25

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Stock market zeroes in on President’s meeting today


Impending discussion bolsters investor sentiment as Bourse value gains by Rs. 27 b; some link it to sovereign bond success
The Colombo Bourse yesterday staged a mini rally sentiment wise in anticipation of a positive meeting between President and Finance Minister Mahinda Rajapaksa and capital market stakeholders today.
The market’s value rose by Rs. 27 billion as both the ASI and MPI saw a 1.5% rise after being depressed for several weeks.
Turnover improved to Rs. 663 million with blue chips Sampath Bank, JKH and DFCC Bank dominating.
The percentage wise gainers list was dominated by speculative stocks, which saw their prices move up between 10 and 20%. However top three blue chips accounted for over 50% of the turnover.
Heavyweights John Keells Holdings (+1.69%), Asian Hotels & Properties (+5.4%), Nestlé Lanka (+2.74%) and Ceylon Tobacco (+1.06%) weighed positively on the indices with speculative players also joining in the rally. The S&P SL20 index managed to secure its highest gain since introduction closing with a 27.5 point gain at 2,760.2 points, Softlogic Stockbrokers said.
Several other brokers and analysts linked the rebound to the impending Presidential forum whilst others pinned it to the 10.5 times oversubscription of the $ 1 billion sovereign bond though the latter news was with the market on Wednesday. Some in the market remain wary about Presidential meeting as well.
Nevertheless Reuters said Bourse jumped on hopes that the Government may be considering measures to boost the share market.
Stock…
“Any positive comments on the country’s macro-economic stability could boost investor confidence,” a stockbroker said on condition of anonymity to Reuters, which quoted President Rajapaksa’s Spokesman Bandula Jayasekara as saying the meeting is not “an intervention” but a discussion.
NDB Stockbrokers said the double digit increase in indices was mainly owing to the “positive sentiments created on the back of the sovereign bond, trading relaxations introduced by the SEC” and the upcoming President’s forum.
Asia Wealth partly attributed the rebound to investors expecting a positive outcome of the brokers meeting with the President whilst Lanka Securities said the market saw “renewed interest on popular retail investor counters amidst a meeting scheduled with the President and industry professionals in order to address issues pertaining to the faltering stock market”.
Softlogic Stockbrokers viewed the rebound as part of Bourse welcoming the conclusion of the country’s most successful bond issue to date coupled with the signs of easing up interest rates.
When the President met brokers last year on 27 November, investors cheered the move even before its outcome. Whilst the meeting only started at 2 p.m. or 30 minutes before the market’s close, the ASI shot up by 4% to a two-year high with market value rising by Rs. 79 billion.
It will be interesting to see how the market behaves today, with the Presidential forum scheduled for 11 a.m.
As locals returned to the Bourse (the number of trades doubled between yesterday and Wednesday), foreign selling came in, resulting in a net outflow of Rs. 216 million though the year-to-date figure at Rs. 24 billion remains a record in recent years.

Reported in Dailyft
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...by i3gconsultants@ 12:07:46 on 2012-07-21

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Investor base doubled since 2004, much at stake for individuals


The outcome of today’s meeting between President Mahinda Rajapaksa and capital market stakeholders is not necessarily to have an impact on a few individuals but half a million people, which is equivalent to 10% of the families in the country as per some analysts.

As at end June, there were 506,471 local individuals' accounts within the CDS and this figure is excluding number of multiple registrations sought by the same client through different participants). In comparison to 2004’s figure of 290,340, the individual investor base has almost doubled in six and half years. Within this base is a large number of small investors, which understandably is of concern to both regulators and brokers alike. Interestingly the gender balance (female:male) ratio was in favour of women on the basis of 58:42 in 2010 though it has reversed to 45:55 last year.
The number of local companies investing in the market too has also doubled from 3,720 in 2004 to 7,615. The base of foreign individuals too has doubled from 2,044 to 4,017 by end June whilst foreign companies numbered 4,213, up from 3,047, rounding up the total operational CDS accounts to 685,728.
Experts have pointed out that though the investor base has crossed the half a million mark, the number of active investors are not high whilst some hadn’t traded for years.
The Colombo Stock Brokers Association has maintained that the CSE and SEC should work closely with the broking industry to make the market popular among the masses given the Government’s efforts to steer the economy to double digit growth and doubling of per capita income harnessing the unprecedented opportunity following the end of the war three years ago.
After two bull runs in 2009 and 2010 rocketing Colombo as world’s best performing market, CSE dipped by 8.5% last year and so far by 20% in 2012, evoking mixed emotions and reactions as to the merits and demerits as well as the causes for the current state of affairs of capital market.
There is consensus that an inclusive and a united approach by all stakeholders is key to make capital market vibrant on a sustainable basis devoid of extreme actions both on the part of some investors and regulators.

Reported in Dailyft

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...by i3gconsultants@ 12:07:59 on 2012-07-21

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Shouldn’t SEC remove haircuts on debtors’ receivables with relaxation of credit rule?


By R.M.B. Senanayake
The SEC has relaxed the credit restrictions on broker firms by extending its tenure for six months. Earlier the SEC, in order to check the dangerously escalating bubble fuelled by reckless broker credit, imposed a limit on broker credit extended to clients by the broker firms. This rationale no longer holds and the SEC decision is to be welcomed.Margin credit extended by the banks or the broker firms is a form of overdraft subject to the 50% limit on the value of the portfolio. As long as the limit is not exceeded, there is no time limit for such credit. Of course the bank or the broker firm should charge interest on the outstanding balance. Several broker firms don’t seem to have done so and instead given free credit.If the portfolio value falls owing to a decline in market prices, the bank or the broker requires the client to make good the difference and will force-sell the shares in the portfolio to bring up the balance within the reduced portfolio value. This is how the margin trading facility operates and there is no limit on the period of credit as far as I am aware.In any case this gesture will not help the market unless the CSE and the SEC change the time periods for the haircuts imposed to enforce the rule. Where the tenure of the debt is 14-30 days, the CSE imposes a 50% haircut on the value when it computes the adjusted net capital. Where the tenure of the debt exceeds 30 days, there is a 100% haircut and the debt is treated as a broker liability rather than an asset in the calculation of the net adjusted capital by the CSE. Won’t these periods now require to be extended to say three to six months for the 50% haircut and over six months for the 100% haircut?
Unless these concessions are also made, the SEC relaxation is of no value to the trade. Actually, it is better to remove the haircuts for those debtors who have signed a margin trading agreement with the broker firm.
If at the end of the six months there is an excess of credit over the 50% limit, the debt should be treated as a bad debt and the excess written off. In fact this exercise may be done even before, say after 14 days. What is required is perhaps to enforce the normal margin trading rules with a margin trading agreement in force for those who borrow.


Reported in Dailyft

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...by i3gconsultants@ 12:07:42 on 2012-07-18

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Bourse’s negative return back to 20% as SEC move fails to spark



  • YTD net foreign inflow of Rs. 24 b only silver lining

The granting of greater flexibility on broker credit to clients failed to bolster a credible rebound in the Colombo Bourse as it got back to over 20% mark in year to date negative return mark.
The benchmark ASI lost 27.07 points to close at 4,853.03 points (-0.6%) whilst the Milanka Price Index shed 23.19 points to close at 4,285.62 points (-0.54%) after gaining in early morning trade.



Some expected the market to rebound after the SEC relaxed some previous rules on broker credit but as feared by others, minor tinkering failed to spur an overall rebound.
There was some confusion within brokers with some alleging the extension of credit for 120 days wasn’t what the industry requested whereas the recommendation has been overall removal of time bound limits with brokers providing for their respective exposures.
The ASI is around 116 points from hitting the 2012’s lowest level as the index moved back to over 20% negative return threshold. MPI topped the 18% mark. Value wise, the market has lost over 16% or over Rs. 300 billion year-to-date.
The only silver lining remains the net foreign inflow crossing the Rs. 24 billion mark by yesterday, a record given the massive outflows since 2009.
NDB Stockbrokers said market commenced the day witnessing retail activity and interest being continued in both LAUGFS Gas voting and non-voting. Accumulation continued in Carsons and Commercial Bank non-voting whilst Asian Hotels and Properties saw renewed interest.
Heavyweight John Keells Holdings continued to lose ground making the indices slide further. Turnover levels remain low due to absence of institutional and high net worth participation, it added.
Softlogic Stockbrokers said indices marked its stay in the red on the back of low investor sentiment continuing its trend of low trade volumes. Retail activity prevailed to spearhead the bourse while fundamentally sound blue chips dominated the turnover suggesting silent accumulation amidst the downturn.
It said one dipped for every counter that gained with the move towards the negative territory being mainly driven by Aitken Spence (-3.31%), Sri Lanka Telecom (-2.06%) and John Keells Holdings (-0.78%). The S&P SL20 took a downturn with CT Holdings (-3.57%), Aitken Spence (-3.31%) and Hayleys (-3.17%) being the top losers for the day.
Investors continued to sought after the high dividend yielding counter LAUGFS Gas which reached an intra-day high of Rs. 17.40 (+8%) before closing at Rs. 16.30, followed closely by its voting share persisting to be a top performer for the day dipping -1.30% to close at Rs. 22.80.
High market caliber counter Sampath Bank attracted investor attention as c55k shares were picked on board at Rs. 150 during the initial trading hours leading way to spearhead the day’s turnover. It trades at a PER of 5.2 on 2012E earnings. Another banking sector counter Seylan Bank touched a 52 week low of Rs. 49 whilst it traded at an intra-day high of Rs. 53.00 (2.9%) to close at Rs. 51.
Liquid counter Free Lanka Capital Holdings witnessed 550k shares being picked on board at Rs. 1.80 while 288,000 shares of Piramal Glass changed hands at Rs. 5.10. Vidullanka (Rights) saw large blocks amounting to 1.18 million shares dealt on board at 10 cents each.


Reported in Dailyft

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...by i3gconsultants@ 12:07:16 on 2012-07-18

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SEC gives more flexibility on broker credit


The Securities and Exchange Commission (SEC) yesterday announced greater flexibility on broker credit, following recommendations for same from the capital markets.
The move follows discussions between SEC and the Colombo Stock Exchange on 12 July where many issues pertaining to capital market figured including management of credit by brokers to their clients.



“After much deliberation, the Commission decided to allow brokers more flexibility in managing their credit. Further it was noted that the CSE should create awareness amongst the brokers on the risks involved in such flexibility,” the SEC said in a statement.
Having considered recommendations from the CSE, the SEC issued the following directive as an “interim measure”.
a) Debtors between T+3 -T+30 calendar days to be deducted if cost less provisions made for the period is greater than market value;
b) Debtors over T+30 calendar days to be deducted at 50% of the cost less provisions made
c) Debtors over T+120 calendar days to be deducted at 100% of cost less provisions made.
SEC also said that all licensed stockbrokers will be required to strictly ensure the accuracy of the details of debtors represented in the net capital computation to the SEC and CSE and the maintenance of the minimum net capital requirement as stipulated in the stockbroker rules.
“Any failure by stockbroker companies to strictly comply” with the new directive will result in action being taken against such broker.
The latest support to brokers and their clients is likely to be welcomed though it comes when the year to date negative return at Colombo Bourse is at near 20% in terms of ASI and over 17% as per the MPI. The market’s value has lost near 16% year to date as well.
Yesterday the market opened the week on a positive note but the lacklustre performance of the Bourse continued. The benchmark ASI ended the day gaining 0.26% (12.58 points) over last Friday’s close whilst the MPI closed in the opposite direction losing a marginal 0.08% (2.21 points). Turnover was Rs. 196.9 million with LAUGFS Gas nonvoting, NDB and PC House Holdings being the top turnover generators of the day.


Reported in Dailyft

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...by i3gconsultants@ 11:07:29 on 2012-07-17

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Dividends or capital appreciation; or both?


The share market has seen a steady decline over the last nine months or so. There are many reasons for this. Among them is the perception that the market is being manipulated and that insider dealing is rife. The Securities & Exchange Commission (SEC) is doing little to stop it; or it is not publicizing what it is doing. One thing is incontrovertible: no offender has yet been sent to jail. This is a far cry from what prevails in America, our favourite target these days for criticism. Nobody is too big in that country to escape jail sentences of up to 20 years.
Another reason for the decline in the share market is that boards still do not declare sufficient dividends. This is something I have been railing about since 1978 when I was Chairman of the Chamber of Commerce. I am constantly being assured by directors of boards that shareholders are not interested in dividends; their interest is in capital appreciation. To me this is a fallacy based on the false assumption that dividends and capital appreciation are mutually exclusive alternatives; that you can have one or the other, but not both. This is totally false because shares that yield high dividends inevitably enjoy capital appreciation. That this is manifestly true and demonstrated by John Keells, Ceylon Tobacco and Nestle’s to mention just a few. Focussing on capital appreciation alone has resulted in the greedy pursuit of quick and substantial profits which is the motivation for criminal offences such as insider dealing, price manipulation and the other crimes that have resulted in the decline in the reputation of our share market.
Minister Sarath Amunugama understood this and attempted to induce an increase in the level of dividends by extending the coverage of the Deemed Dividend Tax from ‘closely held’ companies to all companies some years ago. At that time the President announced in his Budget Speech that good companies declare at least 50 per cent of their distributable profits as dividends. While that was undoubtedly true of companies such as John Keells, ‘vested interests’ (an euphemism for many bad elements including the criminally inclined) managed to persuade the Government to downplay the Deemed Dividend Tax. The end result of the lethargy of the SEC and the Government is that our share market is in the doldrums.
I cannot see a recovery of its old lustre unless the SEC prosecutes some big players and puts them behind bars. In the present climate of brazen criminality I cannot see this happening. It will need a new breed of very strong and upright people to reverse the present trend.
(The writer is a former Chairman of Aitken Spence)

Reported in Sundaytimes
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...by i3gconsultants@ 02:07:47 on 2012-07-16

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There was a good Article on deemed dividend tax after the budeget proposal....by By Charitha P de Si...

.......by i3gconsultants @ 16:07:37 on 2012-07-16


SEC’s directive on related party disclosures helps SL climb business index


The directive by the Securities and Exchange Commission (SEC) in 2010 on related party disclosures has helped Sri Lanka climb the index of ‘Ease of doing business’ in the World Bank Doing Business Report, a Central Bank (CB) official said.“We came up to 89 from 98,” Kumudhini Saravanamuttu, Director Statistics CB told a forum of top corporates on Thursday at the Sri Lanka Economic Summit 2012 organised by the Ceylon Chamber of Commerce. She added that the country’s rank in the report improved over the last two years and that from 183 countries, Sri Lanka’s rank moved from 110 to 98 in 2011 and to 89 in 2012.
‘SEC took us ’9′ notches’
The SEC’s directive sets out certain guidelines for public firms pertaining to related party transactions where disclosures were to be made in their annual reports setting out details of investments of each related party transaction if it exceed 10% of audited equity or 5% of the audited total assets, whichever is lower and called for an immediate disclosure if there are any investments with related parties exceeding 10% of latest equity or 5% of the latest audited total assets whichever is lower. Ms. Saravanamuttu told the Business Times on the sidelines of the plenary session, ‘Ease of doing business – Sri Lanka ranked 89 – Fact or Fiction?’ that protecting investors was the major reason that took Sri Lanka nine notches up.
The World Bank focuses on three areas when measuring ease of doing business – namely the number of procedures, the time taken to complete them, and the costs involved. Ms. Saravanamuttu added that while there’s no ranking system that is perfect, what is more important is the progress in reforms in a bid to have material improvements in the regulatory framework and systems to ease business processes.
“In the area of protecting investors, we have done some work on this but we need to improve. In fact, we need to improve in all areas, even in those areas in which we score fairly high because if we stand still, we will be overtaken by another country,” she pointed out. She added that Sri Lanka is doing quite badly when it comes to enforcing contracts – the procedure takes 1,318 days, which is more than four years. “With commercial courts coming in, there could be some reduction in that area and that is going to be one of our focuses in the future as it is important.”
Improving efficiency
She added that as measures in the future, the Government institutions should improve the efficiency of services provided to the general public, simplify their processes (less procedures, less time taken and less cost of services), and should have their own website with details of services.
“All applications should be available in the website for download, check lists/guidelines should be available, there has to be a method to inform the status of the applications, the institutions need to monitor own performances regularly and there has to be a One-Stop-Shop approach.”
Joining in the panel discussion, Ajith Gunawardena, Deputy Chairman John Keells Holdings said that there are many ‘one-stop shops’, but none seems to be open. “Essentially we are talking about being attractive and globally competitive. We can distill this down to two key areas – being efficient and being highly productive. Focusing on what that means, I think we should focus on three core areas – development of human capital, quality infrastructure and a free and transparent business climate,” he said, adding that as a country we should set ourselves certain goals.
He noted that our literacy is high but that does not give ‘us’ good human capital. “We need to progress to the next level, from secondary to tertiary and vocational education. In terms of our demographics we need to go into providing skills to our labour,” he added, highlighting that capital investment needs to be done in a focused manner. He said that what is needed is not so much labour reforms as it’s not a priority, but that judicial, land and education reforms are needed. “It is important to monitor the indices but it is merely a mechanism to help us focus on priorities. If we set ourselves goals, a lot of action will follow in terms of competiveness and efficiency,” he added.
The panel discussants also said that with the present holiday regime, the country will not be productive.
Highlighting the importance of efficiency and productivity, Roshan Devapura CEO, ICTA said that indices are all relative but if all the other countries (which are below) have done more work, you are still lagging behind. “At the end of the day indexes are good but that is not the end goal. We have to create a more conducive environment so that it is easier for people to do businesses and for the Government to be more efficient.”
Sumal Perera, Chairman Access Group noted that Sri Lankan should have brand based skills. “We need to concentrate on core competencies and not do all things at once. “As a country we are all over with policies,” he said.

Reported in Sundaytimes
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...by i3gconsultants@ 02:07:29 on 2012-07-16

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Stock market manipulators need to be weeded out :Top company official


Manipulation is so rampant in the Colombo stock market that it is very necessary to weed out the perpetrators, a top company official says. “The Securities and Exchange Commission (SEC) is aware of those who are manipulating the stock market, but so far no one has been taken to task. Unless something is being done to curb this, serious investors won’t come to Sri Lanka,” Suren Madanayake, Managing Director ACL Cables PLC told the Business Times.
Highlighting the importance in weeding the manipulators, he said that this way confidence will be built in the stock market. Commenting on the ACL share Mr. Madanayake said that it hasn’t (fortunately) been in the manipulators’ radar. “Our investors are long term and not fly-by night,” he added.
He said that ACL Cables, which is celebrating its 50th anniversary this year, is eyeing diversifying into non-related areas. “We’re looking at getting into more power-related areas,” Mr. Madanayake said, noting that tourism will ‘not’ be a potential area for them as many have already invested in it.
ACL Cables PLC recorded a turnover of Rs. 5.18 billion in 2010/11 as compared to Rs. 3.49 billion in 2009/10. The company’s profits before tax recorded Rs. 33.9 million in 2010/11 after registering a loss of Rs. 146.9 million in the previous year. Meanwhile, ACL Cables Group’s profits before tax moved significantly upwards from Rs. 196 million previously to Rs. 449.7 million in the period under review.
Mr. Madanayake said that one of the most favourable developments during the year to have directly contributed to ACL’s performance has been the expansion of rural electrification efforts by the Ceylon Electricity Board (CEB). “As one of our main clients, this increase constituted an upsurge in demand for our products, thereby contributing to our improved turnover.
Accelerated infrastructural and economic development in the north and east will boost the economy further and in turn benefit ACL,” he said, adding that most of these newly developed regions will witness enhanced CEB activity and have a trickle-down effect on ACL’s operations in the future.
He added that while ACL is optimistic about future prospects for the economy, there are certain macro economic challenges that could impact the industry adversely. “The future course of government policies, taxes, legislation, etc., could impact the business in the months and years ahead. The government policy regarding the granting of duty-free facilities to the CEB for import of cables for foreign contractors has the potential to become a serious threat to the local industry, as this deters our competitiveness as foreign contractors offer lower prices,” he said, noting that this policy is skewing the level playing field unfavourably. “We sincerely hope that authorities take note of this status quo.”
The government should instead support the local industry in terms of including local materials and labour on contract projects, he explained, adding that in this manner, even if contracts are awarded to foreign contractors, conditions should be such that a certain percentage of material and labour should be sourced from within the local industry.
ACL’s copper rod manufacturing plant becoming operational during the last financial year heightens the possibility of improved future operational margins. “This backward integration will ensure that quality is controlled along the supply chain at ACL,” M. Madanayake said.
Further, the reduction in corporate tax rates by 7% to 28%, he added is a positive move by the government and will serve to enhance ACL’s growth potential in the near future. “We have our sights trained on new export markets, with plans to penetrate markets in which we already have a presence, which are Australia, New Zealand and East Africa.”
The government’s renewed commitment to infrastructure development will have positive repercussions for ACL’s business, he said, explaining that the company possesses the capacity to supply large volumes of wiring for road lighting, etc.

Reported in Sundaytimes
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...by i3gconsultants@ 02:07:50 on 2012-07-16

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Proposed Investors Association taking root


The formation of a proposed Investors Association representing small and minority investors to ensure a ‘level playing field’ in the Colombo stock market is taking root, organisers said. It has also triggered ‘concerns’ among influential business groups and brokers dominant in the market, as to the watchdog role this group hopes to play to ensure justice, fair-play and governance in the marketplace.
A core group, appointed from an earlier meeting of investors, met last week to discuss the structure and formation of the association which has the support of the Securities & Exchange Commission (SEC). Among the issues discussed were for the association to be a national voice for investors in the stock market and a catalyst for enhancing the rights of shareholders, promote corporate governance through shareholder activism, protect the rights of minority shareholders, independence of auditors and role of an independent director.
Investor/shareholders who were not present at the first meeting held on June 20 held in Colombo, and are interested in joining this association, can write to the Business Editor (email: bt@sundaytimes.wnl.lk) for further details or by post: Business Editor, Sunday Times, No 8, Hunupitiya Cross Road, Colombo 2 for further details.

Reported in Sundaytimes
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...by i3gconsultants@ 02:07:59 on 2012-07-16

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Broken promise by Harry J


Harry Jayawardena’s Melstacorp Ltd on Friday as promised withdrew its case in the Appeal Court against the Securities and Exchange Commission (SEC) over a mandatory offer issue but broke another promise – an assurance that it would abide by a March 5 ruling. Earlier Melstacorp by its letter dated June 28th had made an application to the SEC seeking a settlement agreeing to unconditionally follow the determinations of the SEC dated March 5 and to withdraw the writ application filed by them against the SEC, if the SEC would consider withdrawing the action filed in the Colombo Magistrate’s Court against the company and its Board of Directors.
A week after the Magistrate’s Court case and Melstacorp’s assurance made in court, the company has written to the SEC saying according to fresh legal advice they have no obligation to fulfill the March 5 SEC ruling. “After making all these promises (to court), Harry Jayawardena comes up with a new tactic,” one SEC source said. Informed sources said the SEC has also been under pressure from ‘higher authorities’ for pursuing with the Magistrate’s Court case. The SEC had charged Melstacorp together with Milford Exports (Ceylon) Ltd and Distilleries Co. for failing to declare a mandatory offer after they purchased 36.27 per cent of voting rights of LMF on or around September 13, 2011, thus violating the SEC Takeovers and Mergers Code.
Melstacorp was also charged with buying another parcel of LMF shares without having made a mandatory offer. The company challenged the SEC ruling through the Appeal Court but later, during the Magistrate’s Court hearing, agreed to abide by the SEC decision. It was then decided that Melstacorp will withdraw the Appeal Court case and make the mandatory offer under stipulated conditions. The SEC on its part agreed to withdraw the Magistrate’s Court complaint based on that assurance. However while withdrawing the case on Friday, the issue still remains uncertain as Melstacorp is not about to follow the SEC ruling, which would mean the Magistrate’s Court case would continue. Last week, Mr Jayawardena and five other directors were released on Rs 2 million personal bail each by the lower court. Meanwhile pressure is mounting at the SEC over its probes and investigations into various stock market deals. “Morale is also low because of the uncertainty,” the source said. There were also unconfirmed reports of attempts to remove acting Director General Hareendra Disa Bandara and replace him with SEC Investigations Director Dhammika Perera.

Reported in Sundaytimes
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...by i3gconsultants@ 02:07:10 on 2012-07-16

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Regulator plans capital market hub


Sri Lanka’s Securities and Exchange Commission (SEC) is planning to shift its office to a new location, as the regulator is planning to set up a capital market hub with the support of the other capital market stakeholders. According to sources, the SEC is in search of a suitable land of the size of 50 perches in Colombo 1, 2, 3, 4 or 7 for outright purchase to construct a new building that will accommodate the SEC and the other market stakeholders, who have been already invited to move in.
It is learnt that the SEC has already been offered land by several government institutions for the purpose. But according to sources, the SEC wants to keep all the options open and plans to acquire the best land available at the best price.
At present, the SEC is occupying two floors of the World Trade Center (28 and 29), for which the regulator pays a very high rent on a monthly basis. The two floors occupy approximately 80 SEC employees.
In October 2011 too, the SEC advertised seeking land for office space though it couldn’t find a suitable land for the purpose, ultimately temporarily dropping the idea of shifting. “If the SEC is shifting, it will be important that the other market stakeholders such as the Colombo Stock Exchange (CSE) to move with them,” a market analyst commented on the development.
Another state-controlled entity, the Board of Investment (BoI), through a restructuring move tried to shift its office premises from the World Trade Center to some other relatively cheap location last year.
However, unfortunately, the move was met with resistance from the BoI employees and was subsequently abandoned.

Reported in Dailymirror
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...by i3gconsultants@ 03:07:12 on 2012-07-12

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Bourse at 3-week low, Rupee falls


Reuters: Sri Lanka’s stock market fell on Monday to its lowest in more than three weeks as concerns over interest rates and the volatile rupee currency kept investors on the sidelines.
The Colombo Stock Exchange’s main index edged down 0.07 per cent or 3.58 points to 4,925.06, its lowest since 13 June.
“Many investors were waiting for direction on interest rates and the rupee with a gloomy economic outlook,” said one stockbroker.
Analysts said investor uncertainty over further depreciation of the rupee currency, and the risk of an increase in interest rates, have hit the bourse, which has fallen 18.9 per cent since the start of the year, while the rupee has lost 14 per cent.
The day’s turnover was Rs. 125.1 million ($937,400), its lowest since 2 July, and well below this year’s daily average turnover of Rs. 952.8 million.
Foreign investors were net sellers of 8.46 million rupees worth of shares on Monday, but have been net buyers of Rs. 23.5 billion worth shares so far this year.
The rupee meanwhile closed weaker at 133.50/60 from Friday’s close of 133.30/50, on light importer dollar demand.
Dealers said heavy oil bills may threaten the stability of the rupee, though it could appreciate in the near future due to exporter demand.
Sri Lanka’s central bank has taken several stringent policy measures this year aimed at cutting imports, including raising policy rates and restricting credit growth, though a prolonged drought has increased oil imports for thermal power.

Reported in Dailyft
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...by i3gconsultants@ 07:07:38 on 2012-07-10

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Stock market full of crooks? What do SEC and CSE statistics show?


Contrary to popular perceptions that the Colombo stock market is infested with insider dealing, manipulation and other malpractices, statistics from the very regulator convey a different picture altogether.
Statistics show that though overall investigations and suspected cases of market/price manipulations have doubled in number, if one compares this with the total number of trades that the Colombo Stock Exchange does for a year, the incidents as a ratio are negligible.
It is from a trade that SEC or CSE detects any suspicion. In that context, consider this analysis. Possible malpractices in 2011 were only 1:138,484 trades and in 2010 it was 1:116,666 trades. The ratio has in fact dropped last year. A scrutiny of the number of investigations in comparison to the number of trades is also negligible. Last year the number of investigations conducted by the SEC was 18, down marginally from 20 in 2010 but high as against 10 in 2009.
Overall, these numbers imply several take-homes. Comparison vis-à-vis explosion in number of trades between 2009 and 2011 reveal malpractices are negligible hence regulations are an overkill. On the other hand if market is infested with malpractices, then the SEC has not been able to keep pace with the velocity of such malpractices in terms of detecting or it is not free to enforce laws hence a more independent SEC, greater surveillance and action is required.
See full analysis on
http://www.ft.lk/category/sectors/special-report/ 
Reported in Dailyft
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...by i3gconsultants@ 07:07:59 on 2012-07-09

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Harry J released on personal bail


Business tycoon Harry Jayawardena and five other Directors of Melstacorp Limited were released on a personal bail of 2 million rupees each for violation of Section 51 (2) of the Securities and Exchange Commissions act
At a previous occasion, Magistrate Kanishka Wijeratne had directed the Court Registrar to issue summons on nine directors of Melstacorp Limited to appear in Court on charges of having violated Section 52 (1) (2) (3) of the SEC Act.
However, when the case came up before the Court yesterday, only six directors of Melstacorp Limited including Harry Jayawardena appeared in Court and they were ordered to be released on a personal bail of Rs.2 million, each.
The Securities and Exchange Commission (SEC) had filed a case before the Colombo Fort Magistrate against ten defendants including Melstacorp Limited over non-compliance in connection with the transfer of shares in Lanka Milk Foods PLC (LMF) to Melstacorp.    
The SEC alleged the defendant company together with Milford Exports (Ceylon) Limited and Distilleries Company of Sri Lanka PLC failed to declare a mandatory offer after they had purchased 36.27 percent of voting rights of Lanka Milk Foods Company PLC (LMF) on or around September 13, 2011, violating the SEC Takeovers and Mergers Code.
The SEC further alleged that Melstacorp bought another parcel of voting shares of LMF, each share at Rs.99, without having made a mandatory offer at Rs.105 per share to the remaining shareholders of the LMF within 35 days of having triggered the Code in September, 2011.
Senior Counsel S.L. Gunasekara appearing on behalf of the defendants informed the Court that the defendant company would come for a settlement.
Meanwhile, Senior State Counsel Damith Thotawatta appearing for the SEC informed the Court that defendants had made an application for settlement to the SEC and the said matter was under consideration by the SEC. Having considered the submissions, the Magistrate fixed the case for inquiry or settlement on September 21.  
According to a public notice issued by the SEC yesterday evening, Melstacorp through a letter dated June 28, had made an application to the SEC seeking settlement agreeing to unconditionally follow the determinations of the SEC dated March 5, 2012 and to withdraw Writ application filed by them in the Court of Appeal against the SEC, if the SEC would consider withdrawing the action filed in the Magistrate Court against Melstacorp and its directors.
In its letter dated March 5, 2012, the SEC ordered Melstacorp and parties acting in concert to make a mandatory offer at Rs.105 per share and to pay the balance to any LMF shareholder who had disposed his/her shares during the period from September 13, 2011 to February 15, 2012, at prices below that of Rs.105.
However, in response, Melstacorp filed a Writ of Certiorari to quash the determination by the SEC before the Court of Appeal.
According to yesterday’s public notice by the SEC, the Commission Members of the Securities and Exchange Commission (SEC) now have agreed to withdraw the case against business tycoon Harry Jayawardena, his company Melstacorp Limited and its directors for violating the SEC’s Mergers and Acquisitions Code subject to the unconditional withdrawal of the Writ application Melstacorp filed against the SEC at the Appeal Court and implementation of the determinations by the SEC, dated March 5, 2012.
In this case, Melstacorp Limited had been named as the first defendant. The other defendants were, Don Harold Stassen Jayawardena, Rajpal Kumar Obayasekara, Cedric R. Jansz, Krishantha Francis Fernando, Adriyan Naoyomal Balasuriya, Kolitha Jagath, Niranjan Silva, Wijeyanthimala Jayatilleke (alternative director), Lintotage Udaya Damien Fernando.

Reported in Dailymirror
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...by i3gconsultants@ 01:07:02 on 2012-07-05

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Beruwala Resorts debuts today on CSE


Beruwala Resorts Ltd., will debut today on the Diri Savi Board of the Colombo Stock Exchange.
This is following the CSE approving the listing of 600 million ordinary voting shares via an introduction.
The reference price for listing is Rs. 4 based on the last reported audited earnings for equity holders, fixed at a price to earnings ratio of 13.5 times.
Further the private share transfers carried out during March 2012 were also done at Rs. 4. It will be the 285th listed entity on the CSE
The Company operates the four-star resort The Palms at Moragolla, Beruwala, on a 10- acre land. It has 106 rooms whilst there are plans to add a further 30 new rooms.
Owned 65% by Colombo Fort Hotels Ltd. and a further 14% by related party Sigiriya Village Hotels, Beruwala Resorts has also acquired 100% stake in BOT Hotel Services Ltd., (Bay Beach Hotel, Weligama) to fast track the aggressive growth plans. They include refurbishing the existing 60 rooms at Bay Beach Hotel and addition of 40 more rooms thereby bringing it to a four star resort.
Beruwala Resorts in FY2011 had made an after-tax profit of Rs. 175.6 million, up from Rs. 5.7 million a year earlier. Previous three years it had losses though turnover had grown to Rs. 190 million in FY11 from Rs. 39 million in FY07.
Board of Directors of Beruwala Resorts comprises A. Rajaratnam (Chairman), S.D.R. Arudpragasam, M. Thambiah, T. Theyagamurti, A.R. Peiris, Prema Cooray, S. Rajaratnam, Chrisantha Perera and Amrit Rajaratnam

Reported in Dailyft
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...by i3gconsultants@ 09:07:48 on 2012-07-04

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Stock market turnover dips to over 3 year low


The Colombo stock market saw very low activity yesterday oday with a turnover of Rs. 91 million being the lowest in more than three years, according to Lanka Securities.“This might be attributable to the fact that most investors would have taken a day off as tomorrow is a Poya holiday,” it said.The ASI lost 9.21(-0.26%) points to close at 4,952.93 and the MPI gained 18.67 (0.48%) points to end at 4,404.16 points. S&P index lost 6 points to close at 2,810.37.Highest contributor to turnover was Aitken Spence with Rs. 20 million to close Rs. 4 higher at 114.90. Next in line was National Development Bank with Rs. 11 million which ended the day flat at Rs. 100. Tokyo cement brought in Rs. 3 million to close flat at Rs. 30.Swisstech was up 6.6% to close at Rs. 16, Panasian Power rose 4.35% to close at Rs. 2.40 and Browns Investments was up by 3.70% to end at Rs. 2.80.HDFC lost around 8% to close at Rs. 55.10, Peoples Leasing lost 7% to close at Rs. 10.90 and Regnis lost 5% to close at Rs. 90.Most active counters for the day were HDFC, HVA Foods and CIC Holdings non-voting.
Foreign participation stood at 22% with a net foreign inflow of Rs. 31 million. It can be assumed that most of these foreign inflows went into either Aitken Spence and/or National Development Bank.


Reported in Dailyft

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...by i3gconsultants@ 12:07:57 on 2012-07-03

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Are you an investor? Think about these points


Before an investor buys or sells shares, he needs to contact a stockbroker, licensed with the Securities and Exchange Commission of Sri Lanka (SEC) to carry out the transactions on the Colombo Stock Exchange (CSE).
Clients enter into a written agreement with the broker prior to obtaining services from them, for the purpose of engaging that broker to execute trades on behalf of them. The type of client agreement may vary depending on the services provided by the broker. This agreement contains clauses defining the rights and responsibilities of the client vis-à-vis broker.
Stockbroker firms are required to provide a copy of the client agreement to the client and draw the client’s attention to the risks that are described in the appropriate risk disclosure statements. The client agreement includes a written ‘risk acknowledgement statement’ which the client is expected to acknowledge by placing his signature and date confirming that he is aware of the basic risks involved in trading in securities.
Confirmation of trades
Confirmation of trades is also referred to as bought/sold notes. When a client trades through his brokerage account, he receives a trade confirmation mailed/emailed to him indicating a buy or sell order by the end of the trade day. Prior to issuing a bought note/sold note to the client in electronic form, the broker needs to obtain the client’s consent and the broker needs to retain evidence of such consent. The bought note/sold note also indicates that the purchase/sale is subject to the CSE and Central Depository Systems (Pvt.) Ltd. (CDS) rules.
A trade confirmation is extremely important because it is the client’s way of verifying that the broker has filled an order according to his instructions. It also helps provide documentation for taxes and enables clients to keep track of their gains and losses. Furthermore, it is important to keep copies of all trade confirmations to detect possible errors. In case an error is detected, the client must contact the broker and attempt to get it corrected immediately.
 A bought note/sold note should not be amended by a stockbroker unless there is a valid reason for the amendment. The chief executive officer/the compliance officer is permitted to amend such notes and they are required to approve such amendments.
CDS account statements
CDS shall send account holders a CDS account statement which includes all listed securities held in the account and the quantity of such shares.
The CDS account statement is forwarded to the account holder directly by CDS and if the client’s account is maintained through a custodian bank, the statement is forwarded to the account holder through the relevant custodian bank. The CDS statement is forwarded in the electronic form if the account holder makes a request in writing.
The CDS account statements are forwarded in the following manner:
a. A statement is forwarded to the account holder on a monthly basis if such account was active during a particular month.
b. A statement is forwarded to the account holder on a quarterly basis if such account was active during the preceding three months.
c. A statement is forwarded annually as at March 31 to inactive account holders (accounts with no transactions for a period of 12 months).
Statement of accounts to clients
A statement of accounts is sent to all clients who are debtors beyond Trade Day + 3 (T+3) by the stockbroking firm on a monthly basis by the seventh day of the following month. This should apply to all debtors over T+3 who have had transactions during the month and the ‘interest charged on delayed payment’ should also be considered a transaction for this purpose.
A statement of accounts should specify the transactions in the account including receipts and payments during the month under reference. Prior to issuing a statement of accounts in electronic form, a stockbroker should obtain the consent of the client.
Payment by buyer
The buyer shall ensure that ‘Cleared Funds’ i.e. funds that are realized and available for drawing in the payee’s bank account, are made available to the buying broker by 09.00 hours on the settlement date, which is T+3, for the purchase of securities. When a sale and purchase settlement falls on the same settlement date or when the client gives written instructions to hold sales proceeds to meet the settlement of future purchases.
Buyer in default
Where the buyer fails to make payment by 09.00 hours on the settlement date, which is T+3;
The buying stockbroker firm may pledge subject to the applicable CDS rules, the securities in which the payment is in default to a commercial bank, licensed under the Banking Act No. 30 of 1988 (as amended), as collateral, for the purpose of obtaining an immediate credit facility from the bank in order to meet the settlement obligations of the buying stockbroker firm on the settlement date. 
The buying stockbroker firm may, at its absolute discretion, recover interest commencing from the day after the settlement date up to the date of final settlement. If interest is charged it shall not exceed 0.1% per day. 
The buyer shall be liable for all losses and damages sustained or incurred by the buying stockbroker firm 
The buying stockbroker firm may set off any amount due from the buyer, against sales proceeds due to the buyer.
Any surplus arising on the sale of securities in respect of which the payment is in default shall accrue to the buying stockbroker firm, unless such surplus arises from the sale of other securities deposited by the buyer as collateral with the buying stockbroker firm, in which event the surplus shall be remitted to the buyer after settlement date of the relevant sale(s).
Payment to seller
Settlement to the seller could be made either by cheques or electronic fund transfers to the seller’s bank account. If payment is made to sellers by way of cheques, such cheques shall be duly crossed as ‘Account Payee’. If the client requests that the crossing to be cancelled, the request shall be made in writing by the client and authorized, in writing, by the chief executive officer of the stockbroker firm. 
The selling broker firm shall ensure that ‘Cleared Funds’ are made available to the seller on the settlement date, which is T+3 unless expressly permitted by the seller in writing to do otherwise. If for any reason, payment has not been made by the stockbroker firm to the seller on the settlement date without a written request of the client in terms of the stockbroker rule, the seller shall be entitled to interest from the day after the settlement date on the outstanding amount at 0.1% per day.No cash cheques shall be issued to clients. 
Extending credit limit
In the event the client fails to meet the shortfall on the next market day, the stockbroker firm shall immediately sell the securities which have been pledged by the client, in order to ensure compliance with the stockbroker rules of the CSE 
The credit extended to a client shall not exceed 50% of the market value of the securities i.e. value of the securities pledged by the client marked to market at the end of each market day, which are pledged by the client, to secure the credit. 
This agreement needs to clearly set out the terms and conditions entered into between the client and the stockbroker firm. Amendments to the agreement will be in writing. 
A stockbroker firm may extend credit to its clients for the sole purpose of purchasing securities traded on the CSE, provided that the total value of the credit extended shall not exceed three times of the ‘Adjusted Net Capital ’ of the stockbroker firm. Stockbroker firms are required to enter into a written agreement with each client when credit is extended. 
The credit extended to a client of the stockbroker firm shall be secured by collateral obtained from such client, which shall comprise of securities held in the client’s CDS account. 
When the market value of the securities pledged by the client falls by 25%, the stockbroker firm is required to inform the client to meet the shortfall by the next market day. 
A stockbroker firm shall ensure that the credit extendable to a ‘Single Client’ does not exceed 15% of the total value of credit extendable by the stockbroker firm.
(Sources: Securities and Exchange Commission of Sri Lanka/Central Depository Systems (Pvt.) Ltd. /Rules (December 2010) Stock broker Rules (effective from February 14, 2012)

Reported in Dailymirror
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...by i3gconsultants@ 10:07:03 on 2012-07-02

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Colombo Stock Exchange transforms website


The Colombo Stock Exchange (CSE) has transformed its website, changing the ‘look’ and ‘feel’ in a bid to enhance its visibility, officials said.
“This is the first step towards going trilingual and the www.cse.lk will have Sinhala and Tamil translations from Saturday,” Surekha Sellahewa, CEO CSE told the Business Times on Friday.
She added that the new site is more user friendly as well.

Reported in Sundaytimes
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...by i3gconsultants@ 09:07:02 on 2012-07-01

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Sri Lanka SEC moots IPO grading, independent research


Sri Lanka's Securities and Exchange Commission has sought views on plans to grade initial public offers through a rating agency and fund independent research, following best practices in other markets.
"The purpose of rating/grading equities is equities is to provide the potential retail or institutional investor with an independent view on the fundamentals and prospects of the company seeking a listing…," the SEC said in a consultation paper."The IPO grade represents a relative assessment of the fundamentals of that issue in relation to other listed equities.
"It is generally assigned on a five-point scale with a higher score indicating fundamentals and vice versa."
IPO grade 01 would have poor fundamentals; IPO grade two would have below average fundaments, moving up to average fundamentals, above average fundamentals and at IPO grade 05, strong fundamentals.
Sri Lanka has a disclosure based regulatory framework and the regulators which approve issues for listing do not comment on the merits of companies.
The SEC said it was also mooting an independent equity research schemes aimed at providing "unbiased research reports, with in-depth analysis of the fundamentals and valuations of listed companies to encourage informed investment decision maiing."
SEC said such schemes are usually paid for through the stock exchange or a market development funds and are found in India, Singapore, Malaysia, Indonesia, Australia and the United States.

Reported in LBO
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...by i3gconsultants@ 12:06:12 on 2012-06-29

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Chaos as CB requests banks to stop quoting rupee spot rate


The Sri Lankan rupee market came to a standstill on Tuesday as banks stopped quoting spot prices against the US dollar, after what dealers said was a request from the central to stop trading the ailing currency beyond the 133 level. “The whole market is distorted as central bank does not like to see the spot trading above 133.00. So nobody is quoting spot and everybody quotes spot-next,” a dealer said on condition of anonymity, referring to the possible spot rate a day later. Four other currency dealers confirmed the move and said there were no deals done in the market during the first two hours of the day.
The rupee’s spot-next was traded at 133.70/134.20 by 0500 GMT per dollar and closed at 133.60/80, dealers said. Though many banks stopped quoting spot prices in early trade on Monday, the state bank dollar sale at 132.90 provided direction to the market and some banks traded spot at that rate.Banks stopped quoting spot rates on Monday after the monetary authority had told the dealers not to trade above 133.00. Central Bank Governor Ajith Nivard Cabraal declined to comment. The rupee hit a record low of 133.60 on 12 June. It has lost some 17 per cent of its value since last November.
The Colombo Stock Exchange’s main index edged down 0.44 points to 4,989.99, its lowest since 14 June.
Turnover was Rs. 8.08 billion ($60.52 million), more than eight times higher than this year’s daily average turnover of Rs. 990.1 million, boosted by several block deals in conglomerate Aitken Spence.
Spence, which accounted for 87% of the total day’s turnover, closed steady at Rs. 111.
Foreign investors were net buyers of Rs. 685.9 million worth of shares on Tuesday, extending the net foreign inflow so far this year to Rs. 23.32 billion.


Reported in Dailyft

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...by i3gconsultants@ 12:06:55 on 2012-06-27

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S&P Indices & CSE Launch S&P Sri Lanka 20


S&P Indices annouonces today the launch of the S&P Sri Lanka 20, which has been jointly developed with the Colombo Stock Exchange (CSE). The Index is designed to be representative of the Sri Lankan equity market, yet also be efficient to replicate, with possible application for index funds and ETFs.


The Index includes the largest 20 stocks, by total market capitalization, listed on the CSE that meet minimum size, liquidity and financial viability thresholds. The constituents are weigheted by float-adjusted market capitalization, subject to a single stock cap of 15%, which is employed to enhance portfolio diversification.


As reported in the CSE press release.


Full press release found in following link in http://www.jbs.lk/pub/S_P_SL20_Index.pdf


 

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...by i3gconsultants@ 12:06:52 on 2012-06-27

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SEC enhances investor protection


Regulations have a increasingly difficult role in today’s context in balancing needs of creating efficient markets, preventing systematic risk and ensuring effective oversight. The Securities and Exchange Commission Sri Lanka (SEC) made considerable progress in the year under review in ensuring appropriate safeguards for investors as well as provide regulation which allows enough impetus for capital market development, SEC Acting Director General Porf. Harendra Dissabandara said. The evolving securities industry has also necessitated the SEC to deliver responsive regulation and enhance investor protection. The decisions taken by the SEC during the last year were taken keeping these challenges in mind, he said in the SEC Annual Report 2011. “During the year we took many progressive steps to ensure that we support and complement Sri Lanka’s economic drive. The SEC is committed to strengthening the laws, rules and regulations. We review them to ensure that they are bought in line with international standards, he said. The SEC has finalized the amendments to the takeover and Mergers Code and Unit Trust Code and obtained the assistance of the World Bank to amend the Sec Act.


Reported in Dailynews

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...by i3gconsultants@ 12:06:09 on 2012-06-25

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Mahinda minds stock market woes


The lingering woes of the Colombo stock market, which until last month had lost Rs. 400 billion in value, have drawn the concern of the country’s Chief Executive, the Daily FT learns.Prior to taking off to Cuba and Brazil, the current situation of the Colombo Bourse, the world’s best performer not so long ago but reeling with continuous negative return since 2010, had been discussed at a top level meeting. This discussion included the Securities and Exchange Commission (SEC) Chairman Tilak Karunaratne, Treasury Secretary Dr. P.B. Jayasundera, Central Bank Governor Nivard Cabraal and former Attorney General Mohan Peiris.
Some officials refused to divulge specifics saying it was a private meeting where many issues were discussed. Others said stock market figured very much during the discussion.

Reported in Dailyft
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...by i3gconsultants@ 13:06:13 on 2012-06-22

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Retail play on punting stock helps sustains upturn,Both indices up, turnover Rs. 533 mn


The Colombo bourse yesterday continued its upward movement for the fourth day running with the All Share Price Index gaining a hefty 61.19 points (1.22%) while the Milanka was up 43.11 points (0.97%) on a turnover of Rs.533.6 million, up from the previous day’s Rs.295.4 million, with 185 gainers strongly outpacing 47 losers. Brokers said that many speculative stocks like HVA Foods, PC House and PC Pharma as well as Ramboda Falls which opened trading a few days ago saw heavy play with retailers active. Some high net worth traders were also active, they said. The All Share Price Index has now cleared the sensitive 5,000 point barrier through which it plunged as the market plummeted. Some of the blue chips like Carsons, Commercial Bank, Aitken Spence and JKH that were among the day’s most traded did not see sharp price movement, either edging up or down slightly or closing flat, brokers said. The day’s biggest business generator was HVA with nearly 4.9 million shares traded between Rs.11.40 and Rs.13.40 closing Rs.2.10 up at Rs.12.80 and generating the day’s top turnover of Rs.50.7 million. PC House saw over 3.2 million shares traded gaining 90 cents to close at Rs.7.10 on a trading range of Rs.6.10 to Rs.7.20 contributing Rs.21.8 million to turnover while PC Pharma closed flat at Rs.15 on nearly 1.4 million shares done between Rs.14.40 and Rs.15.40 generating Rs.20.7 million business volume. There was one block crossing of 98,600 Hayleys at Rs. 330 in a deal worth Rs. 32.5 million. Carsons edged down 10 cents to close at Rs.466.80 on 50,021 shares done between Rs.466 and Rs.467 generating a turnover of Rs.23.4 million. Ramboda Falls, introduced with a reference price of Rs.10 which began trading at Rs.15, gained Rs.8.80 to close at Rs.32.90 on 0.5 million shares traded between Rs.24.90 and Rs.34.10 generating a turnover of Rs.15.5 million. Among the blue chips, Commercial Bank closed flat at Rs.101 on nearly 0.1 million shares done between Rs.100.80 and Rs.101.90, JKH was up 20 cents to close at Rs.190 on 74,000 shares traded between Rs.189 and Rs.191.90 and Aitken Spence down 40 cents to close at Rs.109.90 on over 0.1 million shares traded between Rs.109 and Rs.111.50. Keells Hotels was up 20 cents to close at Rs.12.20 on over a million shares and Kahawatte up Rs.1.90 to close at Rs.31.90 on nearly 0.4 million shares.


Reported in The Island

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...by i3gconsultants@ 12:06:47 on 2012-06-20

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Ramboda Falls’ splash persists


Debutant Ramboda Falls Ltd. (RFL) continued to gain for the second consecutive day, closing yesterday up 228% from its opening reference price. On its maiden trading on Monday, RFL rose to a high of Rs. 35 before closing at Rs. 24.10 with 0.7 million shares changing hands. Yesterday half a million shares traded between a high of Rs. 34.10 and a low of Rs. 24.90, before closing at Rs. 32.80, up by Rs. 8.70. The company runs a 20-deluxe room resort scenically located next to the cascading Ramboda Falls in the Nuwara Eliya District.
RFL was the 284th company to be listed on the CSE and is among the final batch of companies taking the listing via introduction route. It was also the third from the hotels and travel sector to list since the end of the war in May 2009, with the other two being Citrus Kalpitiya and Citrus Waskaduwa.


Reported in Dailyft

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...by i3gconsultants@ 12:06:51 on 2012-06-20

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PCH Holdings to list via introduction


The Colombo Stock Exchange (CSE) said yesterday it has approved, in principal an application by PCH Holdings Ltd., to list 252 million ordinary voting shares on the Diri Savi Board by way of an Introduction.PC House Plc., a related party to PCH Holdings, is already listed on the CSE following its successful IPO in late 2010.Young business leader Chairman S.H.M. Rishan owns 56% stake in PC House Plc., whilst PCH Holdings., is the controlling shareholder in two other listed entities Orient Garments Plc  (51%) and PC Pharma (62.5% and via Chairman Rishan a further 16%).


Reported in Dailyft

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...by i3gconsultants@ 13:06:36 on 2012-06-19

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Top Govt. politico among investors summoned by SEC via ‘fiery’ notice


A top Government politician is among scores of investors who have received notice of summons by the Securities and Exchange Commission (SEC) as part of regulator’s move to punish manipulative trading.The Daily FT learns the SEC has fired letters to concerned investors based on material and information it has in possession following investigations in to alleged malpractices in trades conducted in the recent past.
Whilst summoning is part of core function of the SEC, those who are in the know have been put off by the harshness of SEC’s notice.  Analysts said the notice of summons is to record information from the persons concerned as part of normal investigations hence the wording of the letters has created a fear psychosis.“Since SEC is acting on alleged abuses and the recording of statements signifies early stage of investigation, the tone is harsh and driving fear. This is very detrimental to those who are yet to be found guilty by a legal process,” analysts opined.  
Some of those who had previously received summons and proved innocent later on claimed that the fresh notice was demoralising. Others said it was the standard format.Summons issued by SEC’s Acting Director General Prof. Hareendra Dissabandara concludes by warning those under investigation that “failure to appear before the Commission, refusal to answer any question, refusal to produce any book or document in possession or control when required or knowingly giving false answer shall render” the person to being found “guilty of an offence in terms of Section 46A (4) of the SEC Act and shall on conviction after summary trial before a Magistrate render liable to a term of imprisonment of either description not exceeding five years or to a fine not exceeding one million rupees or both such imprisonment and fine.”
Tough action by the SEC is likely to be cheered by good governance activists and those who trade fair but some brokers and investors pointed out that unnecessary harassment or instilling fear will drive more investors away from the market.  Some alleged the market’s downfall from the peak of Rs. 2,213 billion market capitalization to Rs. 1,807 billion last month (improved to Rs. 1.9 trillion yesterday), was owing to excessive regulations and other market deterrents whilst some however pinned it to loss of overall confidence in the market (due to manipulation) as well as better returns in fixed deposits, and economic downturn and volatility in exchange rate.
Chairman Tilak Karunaratne in his review in the SEC’s 2011 Annual Report said that while fostering the development of the economy, the capital markets also play an important equalizing role. Viz – it attracts the participation of a large number of people in the economy by investing in securities and other derivatives. “Therefore the role of the regulator becomes even more important as there is a large number of stakeholders involved. It follows that a well regulated market will encourage more people to come in as investors and contribute to the development of the economy.”
“We continued to remain vigilant and maintain robust surveillance of the trading activities to ensure that the market operates in a fair and orderly manner and promote efficient price discovery. The SEC is able to monitor trading activities on a real time basis to detect a wide range of possible market misconduct. This enabled us to act promptly to curb potential market misconduct and enhance investor protection,” he added.
Last year it was midst or in the aftermath of apparent investigations in to some trades by high profile investors that triggered the exit of SEC’s Director General Malik Cader as well as Chairperson Indrani Sugathadasa. However when the duo left the SEC, the market was relatively active judging by Rs. 2.2 trillion market capitalization as opposed to its slump to Rs. 1.9 trillion at present. Colombo Bourse remains Asia’s worst performer with a negative return of over 17% year to date whilst during past three market days there has been return of bargain hunters.


Reported in Dailyft

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...by i3gconsultants@ 13:06:47 on 2012-06-19

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Investment wisdom and intelligent investor


There is no doubt that some people simply are better at playing the role of a stock market investor than others. When talking about somebody who has successfully worked his way through investing in the stock market, it is never a matter of luck but rather certain personal characteristics that decide how successful they are. While the best investors seem born with all the right characteristics, it is possible to discover and implement them yourself. Believe it or not, much of what you need to know is just stock market investing basics.
These timeless bits of investment wisdom are as true today as they were 100 or 1000 years ago and we think they will still be true 100 years from now. People who follow these simple common sense ideas will be far ahead of those who do not. Most people who get into trouble financially have broken one or more of these rules. It is amazing how often smart people continue to make the same financial mistakes.

  • Don’t buy anything you don’t understand. Keep it simple. Be wary of expensive, illiquid, non-transparent and complicated investments. Complex investments are almost certainly designed in favour of the seller, not the investor

A big part of the success of your investment depends on you knowing exactly what you’re investing in. It sounds obvious, but many people make the mistake of investing in something they don’t understand



  •     Minimize your investment costs and taxes.

  •     You should never invest in a company without knowing where it’s coming from, where it’s going, how their products stack up against competitors. It is also important to know how that particular market is doing in general. Ultimately, you are putting your faith in a company that will make you money over some period of time, but it does not have to be based on complete blind faith. Do your research and make an informed investment.

  •     If it sounds too good to be true, it probably isn’t true.

  •     Invest for the long-term, and keep your portfolio turnover low. Those who get greedy and try to “get rich quick” usually “get poor quick.” Investing isn’t supposed to be exciting. The stock market is not a place to get rich quickly. Sometimes, it’s a “three steps forward, two steps back” kind of environment.
In the long-term, the best value investments show the most promising returns. Essentially, Warren Buffet-style deep-value investing does very well over the course of years and perhaps decades. However, in the short-term, the market is highly emotional and psychological. The price of a share of stock is just as influenced by how popular the stock is among traders, margin calls and the like.
You don’t want to be too overleveraged and find yourself whipped out because the market becomes irrational for a week. This all goes back to managing risk. You have to remember that the price of a given stock on any given day can be influenced by just about anything, so you don’t want to hurt yourself due to the short-term irrationality of others.

  • The key is to always have a plan when you invest. Before you do anything, you need to know when you will purchase stock and when you want to sell. Equally important is knowing what you will do should things go wrong. And most importantly, you always need to know what your ultimate goals are and be sure that all your investment roads lead to that end.

  • Pay as much attention to risk as you do to potential return. Be sure you can handle the risk of your portfolio in a downturn.

A major part of investing is managing risk. In general, more risk equals more return, but more risk also means more variance. Understanding how much risk you are taking when you invest and understanding your own personal risk tolerance are very important. First, you need to understand how much risk you are taking. If you are buying stocks on margin, you need to understand that you are significantly taking on considerable risk. This may or may not be for you, depending on your risk profile. In general, the younger you are, the more risk tolerant you should be.



  •     If you don’t know what the market is doing right now, you have no business investing in it. Everybody pretty much has the same information, but everybody interprets that information a little different, which is where some investors succeed where others fail. The key is to find information that is as unbiased as possible and milk it for everything it is worth.

  •     Save more, spend less. Save at least 10%-15% of your income each year. Live below your means. Build a financial safety cushion.

  •     Own a diversified portfolio with many different asset classes and investments.
    Diversification is often touted as the only “free lunch” in stock investing. This is because you can mitigate sector risks by investing in a variety of companies. You don’t have to worry about a collapse of one sector because your portfolio is diversified among a few sectors.
    Proper diversification is important for most individual investors. But there is such a thing as becoming too diversified. There is no need to invest in all 20 Business Sectors for example.

  •     Invest with people you know and trust. Look for independent, objective, experienced advice.

  •     Avoid the most popular investments, as they are likely fully priced. Past performance is not a guarantee of future investment returns. Don’t simply buy the investments that have done the best recently. Invest where no one else is waiting in line to buy.

  •    Don’t invest money you will need in 3-5 years or less in volatile investments.

  •     Don’t let your emotions affect your portfolio. With investing your worst enemy is likely to be you and your emotions. Studies have shown that the average investor earns about half the returns of the overall market over time due to poorly timed trading. Have an investment strategy and plan and stick to it.

  •     Don’t try to “time the market.” It’s “time in the market” that counts.

  •     Rebalance your portfolio by buying low and selling high. This is easy to say, but very difficult for most people to do in real life. Most investors actually do the opposite.

  •     Avoid debt and leverage.

  •     Using unbiased information is useless unless you are going to be equally unbiased. Do not allow past exploits and failures get you down or hold you back. And, you cannot allow success to sway you either. Just because you made a decent bank on a particular investment from ten years ago, is no reason to continue putting up your money for them. It is also no reason to be getting headstrong and overly confident about your investment practices.

  •     You must also be realistic. No investor is going to strike it rich right away and no investor is going to have a perfectly flawless track record. Understand that sooner or later, you’re going to lose a little money. But if you follow the first four steps of this guide, combined with a little common sense, you can minimize how much that loss is and go on to reap greater rewards.
A good investor

  •     A good investor takes (and is able to take) advantage of the hidden opportunities for portfolio growth uniquely available in a difficult/down/risk-off market.

  •     A good investor makes investment decisions that are aligned with the methodical, objective and long-term strategic plan designed specifically for the investor’s unique goals and expectations — regardless of any intermittent or unexpected external forces introduced into the market equation.

  •    A good investor takes the time to identify financial objectives, risk tolerance and time horizon factors in order to devise a comprehensive investment plan. This information, along with academically validated principles and diversified asset class weightings, is integrated into a well-designed, thoughtfully engineered long-term portfolio strategy.

  •     A good investor is able to maintain investment discipline in the face of difficult times and worrisome short-term performance returns. The good investor does not allow emotion to override reason as that could prompt reactions that are counter-intuitive to long-term investment success.

  •     A good investor understands and accepts that realizing measurable return over time requires investing in the stock market. And that part and parcel with the stock market come volatility and risk. The good investor is also cognizant of the fact that, while stock market performance will wax and wane periodically, its overall historical performance has continued to progress ever upward.

  •     A good investor reaches established long-term financial goals through a solid understanding of how the market works, the role that calculated risk plays in incremental return, the reasons for maintaining a long-term buy-and-hold investment strategy and the life-long importance of ‘planning the work and then working the plan.

Reported in Dailymirror

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...by i3gconsultants@ 11:06:23 on 2012-06-18

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Ramboda Falls to debut on CSE today


Ramboda Falls Ltd. will debut on the Diri Savi Board of the Colombo Stock Exchange (CSE) today.
Classified under the Hotels and Travel Sector, 20 million ordinary voting shares of Ramboda Falls with security code RFL-N-0000 will be listed.
RFL will be the 284th company to be listed on the CSE and is among the final batch of companies taking the listing via introduction route. It is also the third from the hotels and travel sector to list since the end of the war in May 2009. The other two being Citrus Kalpitiya and Citrus Waskaduwa.
The reference price of the voting share of RFL is Rs. 10, being the last transacted price, whereby the shares of RFL were transferred from Managing Director L.S. Sigera and Director I.J.A. Karunarathna to the other shareholders of RFL to meet the 10% public shareholding. RFL also said the reference price is in line with the book value per share of the company.
As at the date of the Introductory Document, the public shareholding of the company is 27.07%. The public float comprises of 5,413,600 shares, all of which are freely tradable, and held by 125 ‘public’ shareholders.
The Board of Directors of RFL comprises Takashi Igarashi (Chairman), Sasanka Sigera (Managing Director), Ananda Karunarathne, Namal Gomes, Saman Karunarathna and  Ono Teruaki.
Ramboda Falls Limited (RFL) was established in 1996, as a privately owned luxury tourist hotel, which caters to both local and foreign clientele, by the two major shareholders of the company. RFL was subsequently converted to a public limited liability company on 5 September, 2011.
The Executive Directors (who are the two major shareholders of RFL), along with the Senior Management, carry out the management of the hotel. Both the hotel and land is owned by the company.
The hotel was initiated with the intention of providing a ‘rest-stop’ for travellers wanting to grab a quick meal on their way to Nuwara Eliya. The hotel is situated along the Nuwara Eliya-Kandy road, scenically located next to the cascading Ramboda Falls.
The founders wishing to create a differentiated experience for visitors determined the location was ideal to build a hotel, capitalising on the geological positioning en-route to Nuwara Eliya, the abundant natural resources available, personalised service and unique view of Ramboda Falls.
The operation of the hotel commenced with five bedrooms, a bar and restaurant with a seating capacity of 125 pax, catering to local clients.
In 1998, the Company obtained the Tourist Board License to operate as an “A Grade” restaurant. Subsequently, additional rooms were added gradually over the years to bring the room count to 20 deluxe rooms. Expansions and modifications to the hotel were funded through bank loans and cash infused by the two founders.
Further, an additional wing has been added to the restaurant, to increase the available seating capacity to 350 pax, in expectations of catering to a greater demand in time to come. The long term goal of the hotel is to create an environment of pampered luxury that surpasses all competition throughout the hill country.
The company has entered into contracts with travel agents to accommodate local and foreign clientele. At present, the company has contracts with 22 travel agents. These include leading travel agents such as Aitken Spence Travels, Jetwing Travels, Walkers Tours and Connaissance Travels and Tours to name a few.
RFL has another hotel – Peacock Solitude – situated in Higurakgoda, Minneriya. Peacock Solitude is located in the cultural triangle of Sri Lanka, only 196 km from Colombo, 20 minutes to Minneriya Wildlife Park and Polonnaruwa ancient city and five minutes to Kadulla National Park, Giritale Tank and Minneriya Tank.
Peacock Solitude has a total land extent of two acres and 21 perches, which is owned by Ramboda Falls Limited. The hotel has 10 rooms with air conditioning, hot water and television facilities. The hotel is ideal for adventure seekers, as it lies in close proximity to the wildlife parks. The hotel has also developed new activities to cater to the growing interest in adventure and eco-tourism.
RFL has leased out the hotel to a third party E.G.D.S. Desapriya with effect from 20 November 2011 and currently the only income generated by RFL from Peacock Solitude is a lease rental. RFL is no longer involved in the operations of the hotel as it is solely managed by the party which has leased the hotel, as such all profits and losses are accrued to the lessee. The initial capital for Peacock Solitude was infused by RFL, as it was owned and managed by RFL, but any additional capital infused to the hotel will be funded by the lessee.
RFL has plans to enhance and sustain growth in the company. Among those under discussion and listed in the introductory document are addition of 20 luxury rooms. The company intends to build an extension to the existing building to add more rooms thereby increasing the total capacity to 40 rooms.
The estimated cost for the additional rooms is Rs. 50 million (i.e. Rs. 2.5 million per room). The cost will be funded 70% through equity raised through a further issue of shares to shareholders at a latter period of time and balance through debt. The estimated time period with which to complete the additional rooms is three to four years; but this may vary depending on the demand for the rooms.
Others include construction of a gym and snooker room. The total estimated cost for the gym is Rs. 6 million and Rs. 1.5 million for the snooker room. These will be funded through 70% equity and 30% debt. The estimated time period for completion for both is between three to four years.
The estimated cost for the construction of a hot water swimming pool is Rs. 7 million. The cost will be funded 70% through equity and balance through debt and will be completed within two to three years. The cost of construction will be higher than normal due to the location of the hotel.
Planting tea in the remaining six acres of the hotel and expansion of market share through online marketing and broker/tour guide based promotions as well as resume marketing campaigns through print media as well as other promotional activities to reach the targeted 70% occupancy rate throughout the year.
Given the strong performance in the tourism sector in the country since the end of the war, the company expects its business to achieve significant growth in the future and expect to attract different segment of clients.
Total assets of the company as at 31 December 2011 was Rs. 292 million whilst total equity was Rs. 207.6 million comprising Rs. 100 million as stated capital and Rs. 114 million as revaluation Reserves. It has retained loss of Rs. 6 million. Liabilities amounted to Rs. 84.5 million, of which Rs. 54.5 million is long term in nature.
For the nine months ended 31 December 2011, RFL’s revenue was Rs. 45.5 million, up from Rs. 22.5 million a year earlier. Pre-tax profit was Rs. 1.46 million, down from Rs. 4 million and after tax profit was Rs. 0.16 million, lower in comparison to Rs. 4 million in the first nine months of 2010/11 financial year.

Reported in Dailyft
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...by i3gconsultants@ 09:06:51 on 2012-06-18

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Conflict of interests Sri Lankan-style


Some years ago, when the head of an Indian state agency involved in nuclear energy retired, he was quickly offered a highly-paid position with a non-governmental organization (NGO) that has been campaigning against such policies.
The head of agency was also in repeated confrontation with the NGO concerned. All that changed however when he accepted the new, post-retirement job and became a convert! In Sri Lanka, some years back the powerful head of a state agency continued to be a dominant player in the stock market, through a multitude of companies that he either owned or controlled. Some of the decisions in the stock market must surely have been based on confidential information that he was privy to.
The latest case of conflict of interests is in the controversial National Savings Bank (NSB)--The Finance Co (TFC) stock market deal which turned sour. While both the buying and selling broker was Taprobane Securities which is permitted by regulation, the issue at stake is that the broking company CEO Dinal Wijemanne was himself the main seller of TFC stock and, did this conflict of interest violate any rules?Then there are a number of recent cases where senior Central Bank officials retired and immediately joined banks, some as chairpersons or deputy chairpersons – armed with a lot of knowledge and ‘secrets’ about banks in general! In some countries, retiring central bankers are permitted to join other organisations after what is called a ‘cooling’ period of 2-3 years which is considered adequate to ensure that such ‘secrets’ or confidential information is no longer considered material information.
On the positive side, there are those who are honest enough to decline positions or entry into organisations where they have a perceived conflict of interest. Last week, the Business Times which is guiding the formation of a forum for independent, minority investors in the stock market, received a letter from one investor who was keen to join but said this would come into conflict with his involvement as a non-executive director in many listed companies. Declining the invitation to be a member for this reason, he wished the forum well and agreed the need for a grouping to protect the ‘sprats’ from the ‘sharks’.
It is in this context that reports from India (see story on this page) on the presentation of a Conflict of Interest Bill India's upper house of parliament, is a very interesting and positive development. One that Sri Lanka can learn from (or are we asking too much from our ‘legislators’ and high society?).
The report said that, “among the many things that have proliferated in the economic boom of the brash new India is conflict of interest. So widespread, comprehensive and many-tentacled has this feature become that it is often no longer even recognised to exist, much less to be a problem. The practice is now so common that it is even hard to single out just a few cases or to get more outraged about some compared with the overall pattern of behaviour.”
This is a similar case scenario in Sri Lanka where it is an often ‘kill the messenger’ response rather than tackling the issue head-on. And just like in India, conflict of interest has seeped into every corner of Sri Lankan society. But when it happens at the highest levels in the public and private sectors, it becomes a much more serious issue with severe negative impact on the people.
More than two decades ago, the then deputy treasury secretary was also serving as acting chairman of a top state corporation. This was perfectly okay until he wrote a letter as corporation chairman to the Treasury asking for a tax concession. Then wearing his treasury hat, the letter came to him for approval, and he promptly refused the request.
A similar case is emerging in the case of Treasury Secretary P.B. Jayasundera who is also Secretary to the Ministry of Economic Development. There are many conflicts here, for that matter when a treasury secretary serves as a head of any ministry.
The common grouse in state tourism circles is that Dr Jayasundera is unapproachable (in the context of listening to another official’s point of view rather than making decisions on only his - Jayasundera’s - view). However another problem that may have arisen (or probably would in the future) is that when tourism officials present a budget say for instance promotion and marketing, to the economic development ministry secretary, he immediately puts on his ‘treasury’ secretary and looks at it, in that perspective. Thus if the government is tight for funds, projects are prioritized and funding for such a promotion budget would be considered non-priority from a treasury viewpoint. Whereas if Jayasundera was only holding one portfolio (economic development), his decision would be based on the tourism viewpoint and need.
There are many, many cases of conflict of interest in the public and private sectors which has impacted on the economy and raised serious issues of governance, transparency and ethics. One immediate case that comes to mind is Sri Lanka Cricket Board Secrtary Nishantha Ranatunga also serving as CEO of Carlton Sports Network (CSN). The rules bar any individual involved in the print media from serving in the committee which Thilanga Sumathipala was confronted with when he was cricket board chief. However whether its print or electronic, media is media and Ranatunga’s position is a clear conflict of interest.
Often these issues are swept under the carpet and inevitability results in the messenger being at the receiving end of some harsh treatment. A Right to Information Act, which campaigners are struggling to enact, will go a long way in reducing such conflicts in society. India has shown the way with a ground-breaking Conflict of Interest Bill which is in Sri Lanka’s own interests to follow with its own version.

Reported in Sundaytimes
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...by i3gconsultants@ 10:06:37 on 2012-06-17

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Stock market 'mafia' controls the market: Vignarajah


Good governance activist K.C. Vignarajah, now a valiant crusader to save the country's share market from the grips of manipulators, says the Colombo bourse has a long way to go in getting rid of the 'Insider Dealings Mafia' and ensuring a properly-regulated market.
In an interview with the Business Times (BT) where he elaborated on issues confronting the market, he said when bad practices go undetected and the wrong-doers are not punished, investor confidence and the faith in the market fades away. Proper governance of the public listed companies and the market as a whole would enhance investor confidence and do justice to the minority shareholders.
"Rampant insider trading or 'front running', market manipulation, suppression and often misleading information, unavailability of material information in a timely manner are some of the factors that have led to the loss of investor confidence," he said, adding that insider dealings of company directors, public brokers and others with inside knowledge constitute a substantial portion of wrong-doing.
Conflicts of interest are some of the matters in many areas which again erode confidence of investors. 
He said deals like NSB-TFC and Watawala Plantations, and EPF-ETF investments are being questioned by eminent analysts and knowledgeable law makers. Mr Vignarajah acknowledged that there are many people who are supportive of his cause to ensure equal opportunities for all in the market, but unfortunately they are reluctant to come to the public arena or make public these concerns.
He said that there are many who are knowledgeable and interested in the health and sustainability of the Colombo Stock Exchange (CSE) and are also aware of the rampant insider trading in CSE. Among them are genuine investors, senior editors, journalists, analysts, stockbrokers, parliamentarians and economists. Lack of effective action to curb errant Controlling Interest shareholders (CI) and creating 'Shareholder Fatigue' by stealthily acquiring more shares through related parties (Insider Trading); denial/suppression of real and intangible assets and fair value thereof, are other issues confronting the market.

Reported in Sundaytimes
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...by i3gconsultants@ 10:06:56 on 2012-06-17

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CSE detects 20 suspected malpractices; resolves 44 investor complaints in 2011


A total of 20 cases of suspected market malpractices which included two insider dealing, two front-running, one circular trading and 15 price manipulations were referred to the Securities and Exchange Commission for further investigations and necessary action last year, according to the Colombo Stock Exchange (CSE) annual report for 2011 says.
The CSE's Regulatory Affairs Division resolved 44 investor complaints during last year. "These included mainly purchasing and selling shares without client consent and churning which is excessive trading in client accounts and credit extension in client accounts without their approval," Surekha Sellahewa, CEO CSE told the Business Times.
She noted that, enhancing size and liquidity have always been concerns and that fundamental transformation with emphasis on engaging both the state and private sectors in the capital market is necessary in order to strengthen CSE's position as an attractive venue for investment and raising capital. Some 112,473 new accounts were opened during the year and Ms. Sellahewa said that this growth in deposits and accounts was due to the mandating of dematerialization by the SEC for new listings of securities with effect from 1st January 2011.
The relevant SEC directive also mandated that all shares of listed entities be dematerialized by 1st January 2012 with a further extension granted to 30th June 2012. Explaining CSE's transformational plans, Krishan Balendra, Chairman CSE in his statement has said that laying in place a cohesive risk infrastructure, implementing state of the art technologies, enhancing CSE's products, optimizing attractiveness as a vehicle that meets domestic demand for investment and capital raising, enhancing Sri Lanka's position as an attractive destination for foreign investment, restructuring CSE's processes and improving governance stand as priority.
He has highlighted that CSE has already earmarked better risk management as a critical and urgent need. "The implementation of the Risk Management System (RMS) was commenced in November 2011. Having completed system development and back testing activities with the assistance of the National Stock Exchange of India, this margin based RMS has been deployed at the CSE," he has said in his statement. Ms. Sellahewa added that the deployment of the RMS at the CSE for testing by internal users has been completed and that all the broker firms have access to their exposure and margin figures through this system.
"Our debt platform remains an area which needs pressing reform and where the engagement of the state and private sector is paramount. In 2011 at Rs. 2.7 billion, the corporate debt market reported an improvement in total turnover supported by growth in corporate debt from a low base of Rs. 72.3 million in the previous year," Ms Sellahewa has said, separately, in her report, adding that last year's Urban Development Authority (UDA) debenture accounted for 99% of corporate debt market turnover and was the only instrument available for foreign trading. In 2011, equity turnover remained over the Rs. 500 billion mark first reached in 2010, sustained mainly by domestic trading. "Contribution to turnover through domestic trading increased to 90% of the total from 81% recorded in the previous year. We have prioritized the implementation of certain structural changes to attract portfolio investment flows as this skewed investor mix is not optimal for the long term development of the exchange," she has said. Last year the benchmark All Share Price Index (ASPI) closed the year down 8.5% whilst the Milanka Price Index (MPI) fell 25.9% year on year and the market capitalization was preserved at just above Rs. 2.2 trillion reflecting minimal change from the previous year.
The market was dominated by domestic investors during 2011 according to the CSE report which also said that foreign investors remained net sellers during the year, recording net outflows of Rs. 19,039.2 million. Domestic participation sustained the turnover for the year at Rs. 546.3 billion where total turnover for the year reflected a drop of 4.2% from 2010. The report also said that the market capitalization remained steady at Rs. 2.21 billion as at year end as against Rs. 2, 2105 billion in 2010. However, in US dollar terms, the CSE's market capitalization recorded a decrease of 2.4% Ms. Sellahewa has said that 13 new companies listed through Initial Public Offerings (IPO) during 2011 raising Rs.19.2 billion in initial capital in comparison to Rs. 4.3 billion raised in 2010.
"In total, 16 companies listed equity by way of introduction during the year, collectively, the 29 equity listing added 13.9 billion shares to the quantity indexed," she added, noting that 2011 marked a five year record in initial listings on the CSE. She has also said that through the debt market Rs. 1 billion was raised through one IPO whilst four debt issuers were listed through introduction.

Reported in Sundaytimes
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...by i3gconsultants@ 10:06:08 on 2012-06-17

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Rajat Gupta convicted for insider trading


NEW YORK (Reuters): Former Goldman Sachs Group Inc board member Rajat Gupta was convicted on Friday on criminal charges of illegally tipping his hedge fund manager friend Raj Rajaratnam with corporate secrets.A federal court jury in Manhattan found Gupta guilty of three counts of securities fraud and one count of conspiracy, ending the four-week-long trial. He was found not guilty on two other securities fraud charges.
The jury delivered the verdict on the second day of its deliberations.


Reported in Dailyft

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...by i3gconsultants@ 13:06:20 on 2012-06-16

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Euro crisis may bring long-term positives for SL - Economic Advisor


Instability in the eurozone is leading to rising risk aversion and global volatility. However, after an adjustment period, the capital flows may yield benefits to the Sri Lankan equities market, according to a top official at Ceylon Asset Management.Michael Preiss, Director/Economic Advisor, Ceylon Asset Management stated that there will be difficulties in the short-term as the ripple effects of the eurozone problems start to hit but over the long-term he thinks it will be positive for Sri Lanka.“Since investors who have traditionally focused only on Europe and the West are starting to see that there are better opportunities in Asian markets things will start to get positive for the country,” he said.
Preiss took the position that as the euro crisis deepens, countries in the EU will eventually be forced to inject liquidity into the system, as evidenced by the proposed 100 billion Spanish bailout.
“For a while, we will see European countries reduce overseas lending as austerity measures take hold but whether they like it or not, these countries will be forced to print more money.”
Consequently, Preiss stated that Sri Lankan investors ought to be prepared to invest in Sri Lankan equities from the third or fourth quarter if they are to capitalize on what could be a significant upswing in the Colombo Stock Exchange (CSE).
Preiss observed that the CSE was currently following a ‘J-curve’ which occurred on the back of a major boom over the last two years.
“If you speak to most people today about the stock market’s performance, they will say that it is doing badly and that is what is known as a contrarian’s indicator.This means that it will soon be a good time to get into the market but remember it could get worse before it gets better both in the euro and the CSE,” he further stated.
“At present, Ceylon Asset Management is advising our clients to maintain 100 percent of their investments in the Ceylon Gilt Edged Fund, the Treasury bill fund since they offer risk free returns of 12 percent,” Preiss said. However, as the market begins to bottom out, the company recommends a 25 percent exposure to equities for their moderate risk investors. In that context, Preiss stated that officials will have only a small window within which they can successfully remedy regulatory issues and create a more transparent and investmentfriendly market.
“At the moment, the general perception of manipulation is a major problem. Sri Lanka can’t talk about competing on a global scale if these issues aren’t sorted out as soon as possible. You have to get the basics right,” the Director stated.
Aside from regulatory issues, Preiss stated that a lack of investment culture in Sri Lanka would also pose a challenge.
“There is a lack of awareness about investing and by this we mean long-term investment. We have been holding seminars in association with the SEC where we share thoughts on how to invest but there is more that needs to be done,” he pointed out. Preiss went on to state that one of the reasons why the United States has been so successful is that there is a prominent investing culture there and that is what Sri Lanka too must develop.
Further, despite the local and global challenges involved, Preiss stated that he was confident of Sri Lanka’s investment potential going forward. He pointed to developments such as the Central Bank’s decision to allow the rupee to float, in addition to signs of improvement in the trade deficit is good for the currency and the relatively healthy debt to GDP ratio of 80 percent are positive developments in this regard. “Overall, we see there are more positives than negatives. We have been hearing a lot from investors interested in Sri Lanka lately, from the Middle-East and Asia including Qatar and Japan,” he noted.
Certainly the Middle East, India and China still have a lot of capital to invest and they’re looking for attractive investment opportunities like Sri Lanka,” Preiss further said.

Reported in Dailymirror
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...by i3gconsultants@ 00:06:36 on 2012-06-16

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Bourse to get globally recognized index


Colombo Stock Exchange (CSE) is currently in negotiation with Standard & Poor’s Financial Services LLC to come up with a globally accepted equity market index, top CSE officials said.
“We have already initiated decisive discussions, and will be entering into formal agreement shortly, placing Standard & Poor’s Financial Services LLC as a partner in progress, to establish a recognize index at the CSE,” CSE Chief Executive Surekha Sellahewa said.
She also added that a transparent and globally accepted index will play an important role in improving the visibility of the exchange and listed securities enabling to develop new products.
Currently the CSE has two indices; the benchmark All Share Price Index (ASI) and Milanka Price Index (MPI), which consists of shares of more liquid 25 companies.According to CSE Chairman Krishan Balendra, a credible and transparent index would positively impact the market, providing visibility and better pricing and will serve the market well in attracting foreign investors.He also emphasized that a credible index also forms the foundation for exploring the previously un chartered territory of index lined products as well as cross exchange alliances.
“These are elements which would in the future help us establish revenue- raising avenues in the context of the exchange’s business model, particularly relevant for a profit-oriented setting,” Balendra said.
Meanwhile, Balendra also said that CSE has already earmarked better risk management as a critical and urgent need and therefore will review the manner in which a Delivery Versus Payment (DVP) mechanism can best be introduced to the market.“The ultimate goal is to introduce Central Counter Party (CCP)-based post trade services,” he said.
Balendra further said, as reinforcing investor confidence is paramount, the CSE will work in close contact with the Securities and Exchange Commission (SEC) to ensure the market is fair and transparent with balanced regulations being pragmatic standard, rather than the imposition of regulatory burden.During 2011, benchmark ASI closed 8.5 percent Year-on-Year (YoY) down while MPI fell 25.9 percent YoY. Market capitalization was preserved at just above Rs.2.2 trillion reflecting minimal change from the previous year.And also, 13 companies listed though Initial Public Offerings (IPOs) during 2011 raised Rs.19.2 billion initial capital in comparison to Rs.4.3 billion raised in 2010, while 16 companies listed equity by way of share Introductions.


Reported in Dailymirror

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...by i3gconsultants@ 12:06:15 on 2012-06-09

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Bourse improves; Rupee weakens


The Colombo stock market saw improved investor sentiments by remaining in the positive territory throughout the day whilst the Rupee weakened.
The All Share Index gained 0.43%, or 20.23 points, to 4,757.98, from its lowest close since 19 July 2010.Turnover was Rs. 499.5 million, well below the daily average of Rs. 975.1 million this year NDB Stockbrokers said heavy interest was seen in John Keells Holdings (JKH) making the counter the top contributor for the day with a gain of 1.2%.
It said positive movement was further supported by blocks which changed hands in Aitken Spence and DFCC Bank while other banking and finance counters such as Commercial Bank, Lanka Orix Leasing Company and Singer Finance also witnessed further accumulation.
Diversified sector emerged as the top contributor to the market turnover (due to JKH, Vallibel One and Aitken Spence) and the sector index gained by 0.22%. The share price of JKH gained by Rs 2.10 (1.18%) to close at Rs 179.40 and the share price of Vallibel One surged by Rs. 1.40 (10.53%) to close at Rs 14.70 while Aitken Spence’s share price edged up by Rs 0.80 (0.73%) to close at Rs 109.80.
Banking Finance and Insurance sector became the second highest contributor to the market turnover (due to DFCC Bank and NDB) and the sector index increased by 1.08%. The share price of DFCC Bank lost by Rs 2.50 (2.31%) to close at Rs 105.50 while NDB share price gained Rs 0.10 (0.10%) to close at Rs 100.00.
Foreign investors, however, were net sellers of Rs. 20.6 million ($ 158,300) worth of shares on Thursday, but they are net buyers of Rs. 22.6 billion worth so far this year. Meanwhile the Rupee ended weaker at Rs. 130.35/45 against the dollar from Wednesday’s close of Rs. 130.00/35 on importer dollar demand in absence of intervention by State banks, dealers said.
The Central Bank said last week it believed the rupee would stabilise at levels stronger than Rs. 125 to the dollar.

Reported in Dailyft
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...by i3gconsultants@ 12:06:52 on 2012-06-08

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Controversial Bourse deals: Govt. admits Monetary Board amended EPF investment policy in 2009


The Government has dropped a bombshell admitting that the EPF’s Investment Policy was amended in 2009 enabling the biggest fund to take up equity stakes in commercial banks.
 “The investment policy statement and standards of professional conduct of EPF issued in 2002, which stated that the EPF could not invest in stocks of the banking and financial sectors, is now updated and the EPF has invested in the banking sector since 2009, following the decision taken by the monetary board,” Deputy Finance Minister Geethanjana Gunawardena told Parliament in response to the recent barrage of questions from UNP over EPF investments in banks and controversial companies .
UNP MP Dr. Harsha De Silva responded saying “this is unbelievable” as it was the first time the Government or the Central Bank admitting EPF could not invest in banks and that policy was changed in 2009.
He asked why the deafening silence for three years and why the Central Bank did not issue an immediate media release when they are used to issuing statements against opposition mps every other day.
“More importantly how did the legal issues including ‘conflicts of interest’ on insider information suddenly disappear??,” asked Dr. De Silva who noted that when IMF’s Chief of Mission Brian Aitkin made a statement on 13 June 2011 that “investing EPF funds in banking and stocks could be misconstrued and raises the potential for negative perceptions” Why did the CBSL not divulge they Could do so with no problem!!??.
UNP MP also asked why didn’t the Central Bank inform the changes to the SEC and to the market as part of best practices that all issues that made the Monetary Board to direct that EPF to not to invest funds in banks and financial institutions were no longer valid.
“What is more shocking is that instead of an official EPF statement it was hidden inside a statement of the deputy minister,” Dr. De Silva said.
UNP in Parliament yesterday also asked for the immediate release of the minutes of the Monetary Board along with the justification for the change in policy with respect to EPF investments in banks and non blue chip companies.

Reported in Dailyft
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...by i3gconsultants@ 12:06:53 on 2012-06-08

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Strategic plan, transformational map to bolster Colombo Bourse: CSE Chief


Colombo Stock Exchange (CSE) Chairman Krishan Balendra is confident that a new strategic plan and a transformational map underway along with a host of ongoing initiatives will bolster the Colombo Bourse.
“The CSE began the formulation of a new medium-term strategic plan in 4Q2011, with the aim of strengthening core capabilities and infrastructure. We are on track to launch our transformational map in early 2012. The pursuit of these initiatives will enhance the functions of our Exchange and position the CSE as an attractive and user-oriented market,” Balendra said in the Chairman’s Review of the CSE’s 2011 Annual Report released ahead of the Annual General Meeting scheduled for 28 June.
According to Balendra, laying in place a cohesive risk infrastructure, implementing state-of-the-art technologies, enhancing products, optimising attractiveness as a vehicle that meets domestic demand for investment and capital raising, enhancing Sri Lanka’s position as an attractive destination for foreign investment, restructuring organisation and processes and improving governance are all aspects that have been considered in CSE’s transformational plans.
He also said that in the new post-war environment of growth, the CSE is working towards operational improvements with a focus on a development agenda which benefits all its stakeholders.
The CSE 2011 Annual Report has revealed negotiations initiated by the Exchange and Standard & Poor’s Financial Services LLC in launching a co-branded index.
“A credible and transparent index would positively impact the market by providing visibility and better pricing and serve us well in attracting the foreign investor. A credible index also forms the foundation for exploring the previously unchartered territory of index linked products as well as cross exchange alliances. These are elements which would in the future help us establish revenue-raising avenues in the context of the Exchange’s business model, particularly relevant for a profit-oriented setting,” Chairman Balendra said.
The CSE Chief also said better risk management as a critical and urgent need has been identified. “The implementation of the Risk Management System (RMS) was commenced in November 2011. Having completed system development and backtesting activities with the assistance of the National Stock Exchange of India, this margin based RMS has been deployed at the Exchange as at date for training and familiarisation by internal users prior to participant engagement.”
“In the backdrop of this new RMS, we will also review the manner in which the Delivery Versus Payment (DVP) mechanism can best be introduced to the market. The ultimate goal is to introduce Central Counter Party (CCP) based post trade services,” the CSE Chief added.
In his review, Chairman Balendra also noted that during these difficult economic and market climes worldwide, reinforcing investor confidence was of great importance to the CSE.
“We will in this endeavour continue to work in close contact with the Securities and Exchange Commission of Sri Lanka (SEC) to ensure that our market is fair and transparent with balanced regulation being the pragmatic standard, rather than the imposition of regulatory burden,” CSE Chief added.
The All Share Index of the Colombo Stock Exchange (CSE) in 2010 dipped by 8.5%, the first negative return in three years after 2009 and 2010 produced Asia’s best performance. So far this year, the ASI is down by 22%. However in terms of funds raised via the Bourse, 2011 was a record year with Rs. 60.5 billion as against Rs. 44.5 billion in 2010.

Reported in Dailyft
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...by i3gconsultants@ 12:06:15 on 2012-06-08

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Orient Financial Services Corporation shares debut at the CSE


The ordinary shares of Orient Financial Services Corporation Limited (OFSCL) will start trading on the  Diri Savi Board of the Colombo Stock Exchange today (7). The company will list 115,625,000 Ordinary Voting Shares. OFSCL is licensed by the Central Bank of Sri Lanka under the Finance Leasing Act No.56 of 2000 as a Leasing establishment.
"In 2011 the company posted its best performance since its  inception, achieving Rs. 82.8 million profit after tax for the year ended 31.03.2011 compared to the previous year’s profit of Rs. 40.7 million. Return on Equity stood at 24.18% on par with the industry average and Return on Total Assets also recorded 6.2% as against the 2.71% in the previous year. Earnings per share (EPS) for the year was Rs. 3.45, which is a 102.9% increase over the previous year," the company said in a statement. 
The Board of Directors comprise of Dayanath Jayasuriya P.C. (Chairman), Prakash Schaffter, Ramesh Schaffter, Travis Waas, Ananda Atukorala, Ms. Lakshmi Gunetilleke, Anil Tittawela P.C. and Sarath Wickramanayake.
"The company expects to expand customer reach points through service points and fully fledged branches in order to provide convenient access for potential and existing customers. OFSCL also intends to expand the  portfolio of the Company to mid size corporate customers enabling the company to further increase its market share in the low risk category, thus maintaining the quality of its credit portfolio. OFSCL will focus on enhancing its lending portfolio under prudential norms in the coming years, mainly through geographical penetration and catering to niche markets. 
"The company has proven its ability to remain steady throughout and perform well even during challenging macro conditions. As a part of its expansion program OFSL opened window offices in Vavuniya, Kegalle and Anuradhapura in 2012. Taking into consideration the Company’s future plans, its  business development strategies and its existing strong presence in the market backed by an experienced board to give direction and a dynamic management team with a wealth of experience, OFSCL is poised for a paradigm shift in its business and is confident of sustained growth in revenue and profits," the company said.
Reported in Island
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...by i3gconsultants@ 12:06:19 on 2012-06-07

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Regulator shows some teeth Capital market analysts say more needs to be done to curb manipulation, violations


article_image

The country’s small stock exchange, that has fast gained a reputation of being a den of gamblers and  manipulators, has last year seen an increase in detections into market malpractice carried out by the watchdog Securities and Exchange Commission (SEC), with cash penalties for compounded offences nearly doubling during the year.

Offenders are allowed to pay a compounded penalty without admission of guilt which goes into the Compensation Fund maintained by the SEC. Compounding fees collected during 2011 amounted to Rs. 13,875,000, up 82.56 percent from Rs. 7,600,000 the previous year, the SEC highlighted in its 2011 Annual Report released yesterday (6).

Last year, there were 33 surveillance detections of market malpractice and violations investigated by the SEC. Insider dealing accounted for 15 percent of these, market manipulation 58 percent, front running 12 percent and others (unfair trading practices, churning, complaints, rumour verifications and error trades) accounting for 12 percent. Only 18 percent of these were investigated.

In 2010, 30 detections were made of possible market malpractice and violations were made of which 20 were investigated by the SEC.

In 2011, there were 2 investigations into insider dealing (5 in 2010), 10 investigations into market/price manipulation (6 in 2010), 2 concerning front running (1 in 2010) and 1 each looking into business affairs of listed companies, non-submission of audited financial statements, complaints and conduct of a chief executive of a stock broking firm.

"We continued to remain vigilant and maintain robust surveillance of the trading activities to ensure that the market operates in a fair and orderly manner and promote efficient price discovery. The SEC is able to monitor trading activities on a real time basis to detect a wide range of possible market misconduct. This enabled us to act promptly to curb potential market misconduct and enhance investor protection," SEC Chairman Thilak Karunaratne said.

These sentiments were also echoed by the Acting Director General of the SEC, Prof. Hareendra Dissabandara: "Effective surveillance forms an integral part of our regulatory process and enables us to achieve our mission of investor protection. In order to ensure timely detection of potential breach of regulation the SEC has put in place an effective and integrated surveillance and monitoring system which generates alerts out of unusual market movements. During the year the SEC was able to detect possible market violations and promptly initiated appropriate action whenever warranted."

The SEC, which had been called a toothless tiger, could do a lot more to clamp down and punish market offenders without over regulating the market, analysts and other stakeholders have always pointed out. Compounding offences is not enough some argue, stressing the need to take firmer action against offenders. Others say increasing compounding fees might help."Since no one is guilty until proven, the SEC should also be more transparent in its investigations so that the public is convinced the SEC is keeping a watchful eye. If it questions brokers or investors on a certain deal, the market should be informed, there is nothing wrong with this, it happens in other markets. Our offenders are far too bold, perhaps this would make them more cautious," a market analyst said not wanting to be made.2011 was a bad year for the Colombo Stock Exchange. It fell 8.5 percent after recording phenomenal growth rates of 125.25 percent in 2009 and 96.01 percent in 2010.

Market cap to GDP fell to 34 percent in 2011, from 39.4 percent in 2010 but was still higher than the 22.6 percent recorded in 2009. This was despite a surge in trades, 4.58 million in 2011. The number of trades in 2010 was 3.3 million and 1.26 million in 2009.

Reported in Island

(See page 8 for highlights)

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...by i3gconsultants@ 12:06:20 on 2012-06-07

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SEC Annual Report: No show of Indrani and thankless to ex-DG Malik


In what is perhaps a case of sheer oversight or disregard for detail and courtesy, the 2011 Annual Report of the Securities and Exchange Commission (SEC) has failed to recognise the Immediate Chairperson and Director General who were part of the organisation for almost entirety of the year under review.On record former Chairperson Indrani Sugathadasa and Director General Malik Cader were on the job for 11 of the 12 months of 2011, yet the SEC’s Annual Report has not only been conspicuous by its silence but gone thankless to former DG whilst the former Chairperson too had been downplayed.
The SEC’s 2011 Annual Report released yesterday hadn’t included Sugathadasa in the profiling of Commissioners. The best practice would have been to include her with a note indicating duration of her stewardship during the year (11 months) as it is done in annual reports.  The same could have been done for Cader too in the profiling of senior management of the SEC in the Annual Report.Top career civil servant Sugathadasa served as Chairperson of the SEC from early May 2010 to 30 November 2011, for 19 months. The only reference to past Chairperson and thanks came from Acting Director General Prof. Hareendra Dissabandara, though he failed to mention his predecessor and longstanding senior official at the Secretariat Malik Cader.
The usual best practice is that if a senior executive and in this case Director General has left the organization just before the release of the Annual Report, the incumbent administration makes it a point to include the person/s as part of records.
Cader left the SEC on 1 November 2011 after being the Director General for one year, which was the climax of his 13-year stint at the SEC.
Analysts said that including reference or description of immediate past Chairman and Director General may not be required by law, but is part of best practices.
“Though these ex-members of the SEC may not personally want any recognition or acknowledgement, the onus is on the organisation to duly record same, especially since it is concerning the Chairman and the Director General, the two topmost positions in the organisation and the period under review in the Annual Report were under their leadership of it,” they added.
Furthermore, a cursory look at the SEC’s Annual Report by a foreign investor may also give the wrong impression that the current administration, especially the Chairman and Acting Director General, had been in office for the whole of 2011.However, a closer scrutiny by a reader for details in the Annual Report could indicate the key changes.

Reported in Dailyft
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...by i3gconsultants@ 12:06:26 on 2012-06-07

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Market must earn confidence to be more attractive for investors: SEC


The Securities and Exchange Commission (SEC) Chairman Tilak Karunaratne has emphasised that for the Colombo stock market to be attractive, it must earn investor confidence.
“The SEC is of the view that for a market to be attractive to potential investors and draw wider participation, it must earn investor confidence,” Chairman Karunaratne said in his review in the SEC’s 2011 Annual Report released yesterday.
In his review, the Chairman also said in 2011 the SEC continued to provide proper direction and consistency in policies towards fulfilling its mandate of fostering a fair, efficient and transparent capital market.
“In line with our objectives the SEC made significant strides in developing market infrastructure, institutions, intermediaries and investors in order to expand the role of our capital market in financing the growth of the economy,” he said.
“During the last three years, the Colombo stock market provided the public an additional avenue of investment even though many did not tread this path carefully by not assessing the risks involved in an appropriate manner. The high growth in the Colombo stock market seen in 2009, 2010 and in the first quarter of 2011 caused a high degree of price volatility and it also created many regulatory and supervisory issues. The SEC was forced to step in and take several – perhaps not very popular – measures to curb the volatility and to reduce the systemic risk in the capital market,” SEC Chairman Karunaratne said.
He also said that the regulatory reform process of the SEC was focused on strengthening investor protection and market integrity.
“We continued to remain vigilant and maintain robust surveillance of the trading activities to ensure that the market operates in a fair and orderly manner and promote efficient price discovery. The SEC is able to monitor trading activities on a real time basis to detect a wide range of possible market misconduct. This enabled us to act promptly to curb potential market misconduct and enhance investor protection,” the SEC Chairman said.
SEC is also of the view that the settlement risk which currently exists between T (Trade Day) and T+3 (Settlement Day) will be fully eliminated by improving equity-market infrastructure such as establishing a Clearing Corporation.
“We will also pay more attention to improving corporate governance, improving market liquidity, creating a well informed and educated investor base, re-evaluating market volatility controls and developing a long-term listed debt market in the immediate future. Introducing a minimum free float is one measure that the SEC is currently contemplating in order to increase the liquidity of the market,” Chairman Karunaratne added.
His review also stated that in 2011 SEC embarked on a more proactive role to make the capital market accessible to the masses through financial literacy programs.
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...by i3gconsultants@ 12:06:28 on 2012-06-07

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Sri Lanka's SEC to boost investigation capacity


 Sri Lanka's Securities and Exchange Commission is boosting its investigations capacity this year and modernizing is supervision and regulations, its chairman Thilak Karunaratne has said.
"In the coming year we are determined to further strengthen the regulatory and supervisory arrangements in keeping with modern trends," Karunaratne said in the regulators 2011 annual report."Investigation capability will certainly be enhanced and we expect better performance in this area."The SEC has brought in a slew of new rules which has met with some resistance from market participants.Last year it ordered brokers to cut credit and placed price ceilings on volatile stocks, as loose monetary policy and margin trading fired a stock bubble.Interest rates increased later in the year as credit growth put Sri Lanka's dollar peg under pressure, and the market has since fallen.
The SEC also progressively relaxed credit rules. Analysts say investors who sold down their leveraged portfolios when the SEC first ordered credit to be cut would now be much better off, than others who continued to hold stocks on margin.

Reported in LBO
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...by i3gconsultants@ 21:06:19 on 2012-06-06

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Sanasa share peaks to Rs. 770, Commercial Leasing dips by 40%


Despite the market suffering a near 3% dip, debutants Sanasa Development Bank fared well whilst Commercial Leasing and Finance drew activity though losing value.
Sanasa which saw its shares trade for the first time yesterday though listed on Main Board last week, opened at Rs. 375 whilst touching a high of Rs. 770 and a low of Rs. 360 before closing at Rs. 125, unchanged from its reference price. Only 204 shares of Sanasa traded. Yesterday’s debutant Commercial Leasing with a reference price of Rs. 5 saw a number of large trades with a cumulative volume of 3.75 million shares changing hands. It started at Rs. 5.30 which was also its highest and closed at Rs. 3, down by Rs. 2. Despite losing 40% in value, Commercial Leasing on debut joined the top 20 most valuable league with a market capitalization of Rs. 19.1 billion or 1.05% of the total. Commercial Leasing, which posted a profit before tax of Rs. 3.2 billion in FY12 was also way above its parent LOLC which was placed 30th yesterday with a market capitalisation of Rs. 13.59 billion.
Both debutants were listed via introductions whilst tomorrow Orient Financial Services Corporation Ltd., will go on the Diri Savi Board.

Reported in Dailyft
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...by i3gconsultants@ 21:06:16 on 2012-06-06

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Sri Lanka key IPO stock profits sharply below analysts' forecasts


Profits of two diversified business groups which went public during the tail end of a stock market bubble, have fallen far shown of analysts' forecasts made around the time of the initial public offer, emerging data shows.Profits of Softlogic Holdings Plc, which has interests in healthcare and electronics retail, fell around 60 to 80 percent short of forecasts made around the time of its IPO. Softlogic Holdings reported profits of 493 million rupees for the year to March 2012, and analyst forecasts ranged from 1.320 billion rupees by the broking house Lanka Securities to 2.5 billion rupees by Asia Wealth.A forecast of 2.5 billion rupees is over 450 times of the actual profits made. Softlogic raised 4.0 billion rupees from shareholders. Forecasts made for Expo Lanka group, which has a strong focus in logistics were 30 to 50 percent below forecast. Expo Lanka reported profits of 1.05 billion rupees for the year to March and forecasts ranged from 1.5 billion rupees by Bartleet Mallory to 2.0 billion by John Keells Stock Brokers. A forecast of 2.0 billion represents about 190 percent of the actual profits.



Expo Lanka raised 2.4 billion rupees from the share sale. Analysts say forecasting profits of a diversified group is particularly difficult. Softlogic had also made a large acquisition that analysts did not know about at the time of the IPO. But even at the time of the IPO there were rumblings of discontent about both issues, including about pre-IPO placements. But shareholders bought the stock anyway, with some brokers also giving 'subscribe' recommendations. Investors who were hoping to unload the stocks on someone else soon after the IPO were then disappointed when the stocks fell. The securities watchdog has since brought it lock-in rules. The two IPOs were among the largest completed during Sri Lanka's stock market bubble, where punters lit fuses under illiquid stocks with margin credit - including some with weak fundaments - sending them rocketing up. The stock bubble, fired by an extended period of loose monetary conditions which triggered a credit bubble, ended last year amid a balance of payments trouble and a sharp rise in interest rates. Currency depreciation has also destroyed purchasing power of people's salaries and lifetime financial savings in banks and pension funds, which can help highly leveraged firms selling real goods.

Reported in LBO

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...by i3gconsultants@ 14:06:04 on 2012-06-05

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Poson lights up Bourse, rupee


The stock market rose more than one per cent on Friday with retail and foreign investors buying shares in thin volumes in an overall skittish market concerned about a weak Sri Lankan Rupee and the outlook for interest rates.The main index gained 1.1 per cent, or 53.03 points, to 4,885.18, its highest since 28 May.“There was bargain hunting and we saw buying creeping in with the start of the fresh month,” said a stockbroker, speaking on condition of anonymity.
Yields in Sri Lanka’s 364-day and 91-day T-bills have risen 330 basis points and 233 basis points since the Central Bank raised policy rates for the first time since 2007 on 3 February.Last week, the Securities and Exchange Commission (SEC) issued a rule barring brokers from selling shares for six months from the day of buying, and that triggered selling.
But foreign investors were net buyers of Rs. 94.4 million ($ 715,200) worth of shares on Friday, which analysts attributed to a weaker rupee, extending total net inflows into the stock market to 22.6 billion this year. Turnover was Rs. 313.1 million. The rupee strengthened to 131.00/20 against the dollar from Thursday’s close of 132.80/132.20 on dollar sales by two private commercial banks after a state lender sold less than a million dollars at 132, dealers said. The Central Bank on Thursday said it still believed the rupee would stabilise at levels stronger than 125 to the dollar.


Reported in Dailyft

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...by i3gconsultants@ 18:06:50 on 2012-06-02

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Summon SEC, CSE officials, Ravi K writes to COPE


UNP MP Ravi Karunanayake has written to Committee On Public Enterprises (COPE) Chairman D.E.W. Gunasekara requesting him to summon officials of the Securities and Exchange Commission (SEC) and the Colombo Stock Exchange (CSE) over the fiasco in capital markets and boost investor confidence.Following is Karunanayake’s full letter to the COPE Chairman:Over the last five to six months the country’s economy has been traversing through some turbulent times. If these trying times are a result of uncontrollable factors and world economic meltdown being one of there we can console ourselves and accept it. However, if it is owing to arrogance, ignorance, corruption and manipulative practices where insider trading is being pursued by a few at the expense of the majority we need to expose and eliminate these white collar fraudsters.
You as the Chairman have been alive and responsive to our requests to act on institutions such as Central Bank, SriLankan Airlines, Ports Authority, Ceylon Electricity Board, National Savings Bank, Lankaputhra Bank, EPF and Bank of Ceylon, etc.
The recent development of the National Savings Bank and The Finance Company Ltd. share purchase transaction reversal has led to exposing many problems, this only being the ‘tip of the iceberg’.
We also should bear in mind and recall with respect Indrani Sugathadasa, who a couple of months ago tendered her resignation in disgust trying to ameliorate the wrongs that were happening in the Securities and Stock Exchange. Considering her close political affiliation, it is nothing but right to commend her bold act of protecting her good name and also honouring the dignity of high office by resigning to prove a point.
Therefore, let us not lose this opportunity to take cognisance of the fact of her resignation and summon the Securities Exchange, the Stock Exchange, the former Chairperson and the present Chairman, the former Director General, the present Directors General and the senior officers of both institutions before COPE for immediate investigation.
I would look forward to your usual prompt and favourable response in order to restore confidence among the Sri Lankan foreign investors and the citizens of our country.

Reported in DailyFT
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...by i3gconsultants@ 17:06:22 on 2012-06-01

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Sri Lanka regulators should be firm on wrongdoers: former watchdog


Sri Lanka’s central bank should strip National Savings Bank’s directors off their posts, and prevent them from serving on boards in the future, after an attempt buy stock at an inflated price, a former securities regulator said.
NSB, Sri Lanka’s biggest savings bank, bought a 13 percent stake in the loss-making The Finance Company at 60 percent above the market price on April 27.The controversial deal was aborted on the instructions of Sri Lankan President Mahinda Rajapakse, after the state-bank’s unions brought it to his attention.
NSB also fell foul with the securities market, after failing to cancel the deal within the mandatory three day period and later defaulting on payment.
"NSB defaulted on the payment. It has a serious implication on the credibility of the settlement system,” said ArittaWikramanayake, a former tough talking Securities and Exchange Commission (SEC) chief.
By defaulting, Wikramanayake said NSB, which looks after the majority savings of Sri Lanka’s 20 million people, had “tarnished” its image and solid reputation.
"The directors of NSB are not fit and proper to hold directorship of any institution," Wikramanayake said addressing a public gathering on insider dealing on Wednesday that was organised by Transparency International Sri Lanka chapter.
As pressure mounted from the regulators, the media and opposition legislators led by Harsha de Silva, NSB’s chairman, PradeepKariyawasam and a working director, astrologer SumanadasaAbeygunawardena quit this month.
The SEC suspended Dinal Wijemanne, the chief executive of Taprobane Securities Limited, who acted on behalf of the buyers and sellers. Wijemanne, who was among the key sellers, was also an alternate director on The Finance Company (TFC) board.
"Directors of Taprobane clearly acted in a conflict of interest,” said Wikramanayake who is a partner at the law firm, Nithya Partners.
“Some of them (Taprobane Securities) held position of TFC. They (Taprobane directors) are not fit and proper to hold position in financial services companies,” Wikramanayake said. “Prosecuting will take time, so they should be stripped off their position,” he said.
Wikramanayake commended the SEC for its flurry of recent directives to restore market confidence. The regulator reversed the transaction and ruled that large transactions of 20 percent and above need stock exchange approval  The regulator also issued a directive limiting short term trading of stockbrokers. The new rules come into effect from June 1. 
"It’s a good sign that we finally have a regulator that has woken up and sending a strong message to the market,” Wikramanayake said urging the SEC to be firm and objective. Since the SEC regulation, Colombo’s main index has fallen, with brokers blaming the drop on excessive regulation.
In the past when a tough directive was issued, Wikramanayake said the market fell. But the government caved into certain market players pressures and unravelled the SEC’s directives to push up the bourse.
"Insider dealing hurts everyone in the market," said Wikramanayake, who also blamed state-run institutions like NSB, pension funds (the Employees Provident Fund and Employees Trust Fund) of being gullible to market manipulators.
"It raises questions about their competence of the management. Raises concern in the future that people can use this as an excuse to make money on unsound stocks.Markets players who dump stocks on EPF, affects the returns of our pension funds," he said.
The opposition Marxist JVP parliamentarian Sunil Handunetti, blamed the government for the crisis on the capital markets and turning a blind eye on pension funds investing in stocks that give a poor return.
"The main problem here is the ethics. It’s not practiced by people in higher echelons," Handunetti said.
United National Party legislator, EranWickramaratne noted that insider trading was "not a Colombo 7 problem. It affects the whole country."
He said pension funds are crucial to millions of private sector workers who retire in the hope of building a house or paying for their children’s education.
"We have to name and shame perpetrators," said Wickramaratne, a banker by profession.
However, the former head of Transparency International Sri Lanka chapter, J C Weliamuna, a lawyer, disagreed with the panellists views on naming and shaming culprits.
"Shaming and naming won’t help for shameless people," said Weliamunna.

Reported in LBO
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...by i3gconsultants@ 12:05:08 on 2012-05-31

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Bourse bounces back


After a 2.5 percent fall on Tuesday, the Colombo stocks bounced back quite strongly yesterday with the benchmark All Share Price Index (ASI) rising over 1 percent, amidst thin margins.During yesterday's trading, The ASI gained 52 points (1.08 percent) to close at 4865 while the more liquid Milanka Price Index (MPI) lost 15 points (0.34 percent) to close at 4,327.
The turnover recorded was Rs.674 million and the share volume was 24.3 million.According to brokers, the forced selling scenario which sent the market into deep red territory on Tuesday seemed to have temporarily over.
The trading yesterday was dominated by share transactions of selected blue chip companies like John Keells Holdings (JKH) and Central Finance.
As per brokers, nearly half of the day’s turnover came from the trades that took place on JKH shares.
Three-large blocks of JKH shares of 271,000, 430,275 and 1 million parcels crossed the trading floor at 185.00 rupees a share each. A separate block of 158,943 JKH shares was also sold at 187.80 rupees.
In the meantime retails counters including Environmental Resources Plc, HVA Foods Plc, Blue Diamond Plc traded actively during trading hours.
Foreign participation stood at 48.6% of the total market activity and foreign investors were the net sellers with a net foreign outflow of Rs.110.4 million.

Reported in Dailymirror
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...by i3gconsultants@ 11:05:17 on 2012-05-31

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Sanasa Development Bank obtains approval to list on CSE


Sanasa Development Bank has obtained the approval to list on Colombo Stock Exchange( CSE) and 25,175,322 ordinary voting shares will be listed on the main board of the CSE subject to the compliance with Rule 2.1.2 of the Listing Rules of the CSE. The listing would be done by a way of Introduction. Shares of the company will commence trading from May 31 and would be classified under the bank, finance and insurance sector. Sanasa Development Bank is one of the leading banks in Sri Lanka that is committed to uplift the standards of living for low income Sri Lankan families with its range of micro finance activities. The mission of the bank is to develop and maintain a permanent customer base while introducing innovative, cutting edge financial products while expanding the bank’s existing outreach through the available network and use of modern technology in the banking sector. The bank was also 2008’s winner of the Business Excellence Award, presented by the National Chamber of Commerce Sri Lanka, and adjudged the top Sri Lankan company and placed second among microfinance institutions in the world in 2009, by Mixed Market Ratings. SANASA Development Bank was adjudged the top Sri Lankan company and placed among the first 50 out of 641 micro finance institutions in the world in 2007 and third out of the 652 micro finance institutions in the world in 2008 by Forbes Magazine.


Reported in Dailynews

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...by i3gconsultants@ 18:05:05 on 2012-05-30

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Right of Reply: SEC responds to ‘Cracks in SEC?’


The Securities and Exchange Commission of Sri Lanka (SEC) writes in response to the article published in Daily FT on Monday 28 May 2012 under the caption ‘Cracks in SEC?’The article has stated that the Chairman has written to the Ministry of Finance that the Senior Commission Member  P. Jayawardena must be removed from the SEC.The reason cited was the non attendance of Commission Meetings on three consecutive occasions.
The SEC categorically states that the SEC Act Section 5(5) requires that “an appointed Member of the Commission who without leave of the Commission first being obtained, absents himself from three consecutive meetings of the Commission, shall be deemed to have vacated his office.” Please note that  P. Jayawardena’s vacation of office is by operation of law.
The SEC notes with interest as to why certain interested parties are attempting to mislead the public by headlines such as ‘Cracks in SEC’ where there are no cracks whatsoever. It is surprising that your paper that appears to crusade for the upholding of the law is trying to carry on a campaign against the SEC that has exercised the law.The SEC is shocked at the disregard shown in your statement “the rule non attendance for three consecutive meetings is not strictly enforced”. This is not a mere rule but a strict provision of the Act and the SEC cannot ignore or disregard provisions of its own Act.
Without prejudice to the stance taken above, the SEC states that Mr. P. Jayawardena has absented himself without prior leave from the Commission first having being obtained for eight meetings out of nine ( five consecutive meetings) after the present Chairman took office.
All Members of the Commission have to discharge their responsibilities towards the office upholding the best institutional interests of the Commission. It is the duty of all Commission Members to uphold the very provisions of the Act which they seek to enforce on the public.
It is with serious concern that the SEC notes that your paper has misled the public in remarking “However, it was only Commissioner Jayawardena who had been present in Courts along with lawyers when a case against the SEC by Melstacorp was taken up recently”.
This is a false and irresponsible statement made by your paper in respect of a matter which came up before the Court of Appeal on 15th May 2012. At no stage, was Mr. P. Jayawardena retained to appear for the SEC. It is a senior President’s Counsel who was retained to appear on behalf of the SEC and its Chairman and the said Counsel represented the SEC in Court. There was no necessity for any Commission Member to be present, since notice has not been issued on them by the Court.
Your paper article gives misleading information to the readers as if lawyers retained by the SEC were not present other than Mr. P. Jayawardena. This kind of misrepresentation is a serious concern especially when the information is contrary even to Court records.
Further the article states that “the recent tougher rules announced last week too hadn’t received unanimous approval from SEC Commissioners”. The SEC reiterates that the decision in question received unanimous approval of the Commission as usually done contrary to the statement in the article though the Act indicates all questions for decision at any meeting of the Commission shall be decided by the vote of the majority of the members present.We wish to further state that the SEC Act does not provide for “tougher” or “milder” rules but rules to provide effective capital market regulation.If the SEC had failed to implement the provisions of the Act which pertains to the removal and resignations of appointed Members, your esteemed newspaper would have carried yet another headline stating that the SEC had violated its own Act. When the SEC implemented the Act your paper carries a headline stating that there are ‘Cracks in the SEC’.
We would appreciate if you could resort to responsible journalism and verify facts from the SEC prior to publishing articles of this nature which only contributes to help parties with agendas which are detrimental to the proper regulation of the capital market.


Editor’s Note:
The Daily FT article at the onset did clearly state that removal of SEC Commissioner P. Jayawardena was on account of non-attendance for three consecutive meetings over which he is deemed to have vacated post as per SEC Act.The SEC Chairman’s reply is silent over other issues such as strained relations including Jayawardena writing to authorities on some matters.Furthermore, the Daily FT article only mentioned that Jayawardena was present when the case filed by Melstacorp Ltd. was taken up and didn’t state he was retained to appear on behalf of the SEC.The Daily FT also rejects improper insinuations made against the newspaper in the SEC’s statement.The SEC’s response on the article concerning use of private counsel will be published tomorrow with the Daily FT’s response.


Reported in DailyFT

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...by i3gconsultants@ 12:05:04 on 2012-05-29

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Upper limit of 20% for crossings and details of other Directives


Directives issued by the SEC, under section 13(c) of the SEC Act are published on the CSE website.In terms of item 1 of the above Directive, an upper limit of 20% will be applicable for transactions carried out on the crossings board with effect from 5th of June 2012.


Please find the Full document at:-http://www.cse.lk/cmt/upload_cse_announcements/1681338177609_.pdf


By i3g Consultants


 

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...by i3gconsultants@ 11:05:26 on 2012-05-28

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CSE approves Sanasa Bank, Ramboda Falls listings


The Colombo Stock Exchange (CSE) has approved in principle an application by Sanasa Development Bank for the listing of 25,175,322 ordinary voting shares on the Main Board by way of an introduction.CSE has also approved an application by Ramboda Falls Ltd., for listing of 20 million ordinary voting shares on the Diri Savi Board.


Reported in Dailyft

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...by i3gconsultants@ 11:05:50 on 2012-05-28

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Cracks in SEC?


Chairman writes for removal of Commissioner P. Jayawardena who failed to attend three consecutive meetings; Strained ties the cause, say insiders



Some cracks have appeared within the Securities and Exchange Commission (SEC), just less than six months under new Chairman Tilak Karunaratne.The Chairman has written to the Finance Ministry that senior Commissioner P. Jayawardena must be removed from the SEC. The reason cited was non-attendance of the Commissioners Meeting on three consecutive occasions.The SEC Act states that absence on three consecutive meetings by an appointed member/commissioner without leave from the Commission is deemed to have vacated the post.
However, analysts said Karunaratne’s move was unprecedented and linked it to strained relationship in recent times between Jayawardena, formerly a State Counsel at the Attorney General’s Department, and the SEC Chairman.It is claimed that Jayawardena who was appointed in May 2009, having opposed certain Commission decisions, had written to higher authorities expressing his displeasure.Analysts speculated that this could be the reason for the Chairman himself to write to the Finance Ministry for his removal and seek a fresh appointment in place.“The rule that non attendance for three consecutive meetings isn’t strictly enforced, but in this case the two not meeting eye-to-eye was the real reason,” they added.However, it was only Commissioner Jayawardena who had been present in Courts along with lawyers when a case against the SEC by Melstacorp was taken up recently. (See boxed story).
Jayawardena hadn’t received a letter from Karunaratne in terms of intimation that he has deemed to have vacated the post due to non attendance prior to the latter writing to the Finance Ministry seeking removal and replacement.
The recent tougher rules announced last week too hadn’t received unanimous approval from SEC Commissioners, the Daily FT learns.After receiving his primary and secondary education at Nalanda College, Jayawardena entered the Law College in 1985. Following completion of his studies at the Law College he was called to the bar and enrolled as an Attorney-at-Law of the Supreme Court in 1988.
He was engaged in private practice until he joined the Attorney General’s Department to work in the Government Institutions Division in 1991. Thereafter, he proceeded to the United Kingdom and obtained a Master’s Degree in Commercial Law from the University of Aberdeen in 1993.On his return to the country he joined the Attorney General’s Department and served as a State Counsel and reverted back to the unofficial bar in 2000 and is now engaged in private practice. Whilst serving in the Attorney General’s Department he worked as a Consultant to the Ministry of Food, Internal and International Trade and Commerce and also participated in drafting legislation.In addition to other duties he has served as a member of the Advisory Commission on Intellectual Property Law of Sri Lanka. He was an Examiner of the Council of Legal Education and a Visiting Lecturer of the University of Moratuwa.


Reported in Dailyft

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...by i3gconsultants@ 11:05:50 on 2012-05-28

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SEC introduces interim measures


The Securities and Exchange Commission of Sri Lanka at its meeting held on May 22 , 2012 having deliberated at length on the transaction of "The Finance Company PLC" shares by National Savings Bank through the Stockbroker-Taprobane Securities (Pvt) Ltd which also led to a settlement failure by the custodian bank, decided to introduce certain interim measures to enhance the smooth functioning of the payment and settlement cycle for trades carried out through the Colombo Stock Exchange until a DVP System is introduced as a pre cursor to the establishment of a clearing house which will manage the Central Counterparty risk.
Therefore the Colombo Stock Exchange is hereby directed;To introduce an upper limit on the price of transactions carried out on the crossings board, where the price variance of a unit share price does not exceed twenty per centum (20%) from that of the closing price.

The "closing price" shall have the same meaning as set out in the Automated Trading Rules of the Colombo Stock Exchange; To amend the relevant provisions of the Automated Trading Rules to incorporate clause (1) above;When undertaking transactions for an on behalf of the National Savings Bank to require all Stockbrokers to obtain a Certified Board Resolution in respect of all transactions of Rs. 20 Million and above.
The format of the Certified Board Resolution of the bank to be in compliance with the provisions of the National Savings Bank Act No. 30 of 1971 (as amended).
Require the National Savings Bank to use a third party custodian bank in respect of all custodial trades of the bank in the future.
The CDS to ensure strict compliance with the Central Depository Systems Rules by all participants and discourage the adoption of practices deviating from the rules, especially in respect of the minimum margin rule of 15 % which has to be provided by the brokers for all purchases over and above the value of Rs. 20 Million and the rule pertaining to the affirmation of trades by the custodian banks by T+1 in respect of all purchases, both of which are currently in force.
In addition to the above, the SEC was concerned about some investment advisors not following best practices with regard to avoiding conflicts of interest between themselves and their clients.
Therefore it was decided to introduce trading restrictions to all employees of Stockbroking Companies until the SEC is satisfied that the industry has adopted improved practices and effective compliance mechanisms on the procedures followed by licensed Stockbrokers in handling staff trades.
Therefore the Colombo Stock Exchange is further directed;To prohibit Executive Directors, Employees, their spouses and their nominees of all licensed stockbrokers and stock dealers from selling listed shares purchased from the secondary market for a period of 6 months from the date of purchase.
The above said prohibition shall not apply to shares purchased at an Initial Public Offering, shares owned as an entitlement under an Employee Share Option Scheme or with regard to subscriptions to a rights issue.
Clause (1) of this directive shall come into effect on June 5, 2012 and shall continue to be in force until a DVP system is established by the Colombo Stock Exchange.
Clauses (2) to (5) of this directive shall come into effect from June 1,2012 and shall continue to be in force until a DVP system is established by the Colombo Stock Exchange. Clause (6) of this directive shall come into effect on June 1, 2012.
Colombo Stock Exchange is required to inform all licensed Stockbrokers and Stock dealers of this directive.

Reported in Dailynews
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...by i3gconsultants@ 01:05:08 on 2012-05-28

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SEC issues directive to CSE on new rules


The Securities and Exchange Commission (SEC) yesterday issued its directive incorporating some of the new rules originally announced on Tuesday following the fiasco involving the NSB-TFC transaction which was later reversed.The new rules have sparked criticism as well as opposition whilst the SEC has refined some since the original announcement. For example the prohibition of share trading has been confined to executive directors of market intermediaries as opposed to generalized “directors.” However spouses and their nominees of executive directors and employees have been included.
Here is the full text of the SEC’s directive.
The Securities and Exchange Commission of Sri Lanka at its 301st Meeting held on 22nd May 2012 having deliberated at length on the transaction of “The Finance Company PLC” shares by National Savings Bank through the Stockbroker-Taprobane Securities (Pvt) Ltd which also led to a settlement failure by the custodian bank, decided to introduce certain interim measures to enhance the smooth functioning of the payment and settlement cycle for trades carried out through the Colombo Stock Exchange until a DVP System is introduced as a pre cursor to the establishment of a clearing house which will manage the Central Counterparty risk.                  
Therefore the Colombo Stock Exchange is hereby directed;
1.To introduce an upper limit on the price of transactions carried out on the crossings board, where the price variance of a unit share price does not exceed twenty per centum (20%) from that of the closing price. The “closing price” shall have the same meaning as set out in the Automated Trading Rules of the Colombo Stock Exchange;
2.To amend the relevant provisions of the  Automated Trading Rules to incorporate clause (1) above;
3.When undertaking transactions for an on behalf of the National Savings Bank to require all Stockbrokers to obtain a Certified Board Resolution in respect of all transactions of Rs. 20 Million and above. The format of the Certified Board Resolution of the bank to be in compliance with the provisions of the National Savings Bank Act No. 30 of 1971 (as amended).
4.Require the National Savings Bank to use a third party custodian bank in respect of all custodial trades of the bank in the future.
5.The CDS to ensure strict compliance with the Central Depository Systems Rules by all participants and discourage the adoption of practices deviating from the Rules especially in respect of  the minimum margin rule of 15 % which has to be provided by the Brokers for all purchases over and above the value of Rs. 20 Million and the rule pertaining to the affirmation of trades by the custodian banks by T+1 in respect of all purchases, both of which are currently in force.
In addition to the above, the SEC was concerned about some investment advisors not following best practices with regard to avoiding conflicts of interest between themselves and their clients. Therefore it was decided to introduce trading restrictions to all employees of Stockbroking Companies until the SEC is satisfied that the industry has adopted improved practices and effective compliance mechanisms on the procedures followed by licensed Stockbrokers in handling staff trades.
Therefore the Colombo Stock Exchange is further directed;
6.To prohibit Executive Directors, Employees, their spouses and their nominees of all licensed Stockbrokers and Stock dealers from selling listed shares purchased from the secondary market for a period of six (6) months from the date of purchase.
The above said prohibition shall not apply to shares purchased at an Initial Public Offering, shares owned as an entitlement under an Employee Share Option Scheme or with regard to subscriptions to a rights issue.
Clause (1) of this directive shall come into effect on 5th June 2012 and shall continue to be in force until a DVP system is established by the Colombo Stock Exchange.
Clauses (2) to (5) of this directive shall come into effect from 1st June 2012 and shall continue to be in force until a DVP system is established by the Colombo Stock Exchange.
Clause (6) of this directive shall come into effect on 1st June 2012.  
Colombo Stock Exchange is required to inform all licensed Stockbrokers and Stock dealers of this Directive.

Reported in DailyFT
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...by i3gconsultants@ 07:05:40 on 2012-05-26

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SEC issues directive to CSE on new rules


The Securities and Exchange Commission (SEC) yesterday issued its directive incorporating some of the new rules originally announced on Tuesday following the fiasco involving the NSB-TFC transaction which was later reversed.The new rules have sparked criticism as well as opposition whilst the SEC has refined some since the original announcement. For example the prohibition of share trading has been confined to executive directors of market intermediaries as opposed to generalized “directors.” However spouses and their nominees of executive directors and employees have been included.
Here is the full text of the SEC’s directive.
The Securities and Exchange Commission of Sri Lanka at its 301st Meeting held on 22nd May 2012 having deliberated at length on the transaction of “The Finance Company PLC” shares by National Savings Bank through the Stockbroker-Taprobane Securities (Pvt) Ltd which also led to a settlement failure by the custodian bank, decided to introduce certain interim measures to enhance the smooth functioning of the payment and settlement cycle for trades carried out through the Colombo Stock Exchange until a DVP System is introduced as a pre cursor to the establishment of a clearing house which will manage the Central Counterparty risk.                  
Therefore the Colombo Stock Exchange is hereby directed;
1.To introduce an upper limit on the price of transactions carried out on the crossings board, where the price variance of a unit share price does not exceed twenty per centum (20%) from that of the closing price. The “closing price” shall have the same meaning as set out in the Automated Trading Rules of the Colombo Stock Exchange;
2.To amend the relevant provisions of the  Automated Trading Rules to incorporate clause (1) above;
3.When undertaking transactions for an on behalf of the National Savings Bank to require all Stockbrokers to obtain a Certified Board Resolution in respect of all transactions of Rs. 20 Million and above. The format of the Certified Board Resolution of the bank to be in compliance with the provisions of the National Savings Bank Act No. 30 of 1971 (as amended).
4.Require the National Savings Bank to use a third party custodian bank in respect of all custodial trades of the bank in the future.
5.The CDS to ensure strict compliance with the Central Depository Systems Rules by all participants and discourage the adoption of practices deviating from the Rules especially in respect of  the minimum margin rule of 15 % which has to be provided by the Brokers for all purchases over and above the value of Rs. 20 Million and the rule pertaining to the affirmation of trades by the custodian banks by T+1 in respect of all purchases, both of which are currently in force.
In addition to the above, the SEC was concerned about some investment advisors not following best practices with regard to avoiding conflicts of interest between themselves and their clients. Therefore it was decided to introduce trading restrictions to all employees of Stockbroking Companies until the SEC is satisfied that the industry has adopted improved practices and effective compliance mechanisms on the procedures followed by licensed Stockbrokers in handling staff trades.
Therefore the Colombo Stock Exchange is further directed;
6.To prohibit Executive Directors, Employees, their spouses and their nominees of all licensed Stockbrokers and Stock dealers from selling listed shares purchased from the secondary market for a period of six (6) months from the date of purchase.
The above said prohibition shall not apply to shares purchased at an Initial Public Offering, shares owned as an entitlement under an Employee Share Option Scheme or with regard to subscriptions to a rights issue.
Clause (1) of this directive shall come into effect on 5th June 2012 and shall continue to be in force until a DVP system is established by the Colombo Stock Exchange.
Clauses (2) to (5) of this directive shall come into effect from 1st June 2012 and shall continue to be in force until a DVP system is established by the Colombo Stock Exchange.
Clause (6) of this directive shall come into effect on 1st June 2012.  
Colombo Stock Exchange is required to inform all licensed Stockbrokers and Stock dealers of this Directive.

Reported in DailyFT
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...by i3gconsultants@ 07:05:40 on 2012-05-26

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Sri Lanka to issue equity investment rules, exposure limits for state funds


Sri Lanka's finance ministry will issue a circular to set up investment committees at state entities to make equity purchases through a defined process with exposure limits, Treasury Secretary P B Jayasundera said."A new circular on investment committees will be issued," Jayasundera told reporters after releasing the finance ministry's annual report Thursday.
"There will be a process where the committee will be protected from interference (angili nogaseemater krama vedayak)"His comments came after the sale of stock in a troubled finance company whose liabilities exceed its assets by 3.7 billion rupees by December 2012 at over 60 percent above market price to state-run National Savings Bank.
Several purchases of stock by the Employees Provident Fund, including investments in Laugfs Gas and Nawaloka Hospitals have been controversial.
Jayasundera said there were Treasury nominees in many state entities but they did not necessarily have expertise in stock purchases.
"There are people who know better in these institutions. Also government entities have to depend on market participants to make investments," he said.
"If there is a defined process it will protect everyone. These institutions also have to set exposure limits."
Jayasundera said there was a justification for long term contractual savings institutions, including the EPF to invest in stocks. Some state entities had also rushed into stock when interest rates fell to improve returns, he said.
Jayasundera said all except one director of National Savings Bank had resigned and Sri Lanka's post master general was acting as chairman until the appointment of a new board.
Thought the finance ministry representative to the board had also resigned, it was not clear whether he was actually attended the meeting when the decision to buy The Finance stock was made. Only four directors were needed for a quorum officials said.Senior career officers of the bank had been unhappy at the deal, according to reports.Jayasundera said a committee had been appointed to probe the deal.In Sri Lanka resignations over financial scandals are rare.The country does not have an independent civil service to ensure rule of law or justice as the institution of permanent secretary was broken by successive constitutions in 1972 and 1978 paving the way to arbitrary rule.
But Jayasundera said there was no interference by ruling politicians on this matter. NSB halted the deal after Jayasundera intervened.
Jayasundera said he had told the board to stick to the bank's core business.

Reported in LBO
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...by i3gconsultants@ 09:05:00 on 2012-05-25

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Sri Lanka to issue equity investment rules, exposure limits for state funds


Sri Lanka's finance ministry will issue a circular to set up investment committees at state entities to make equity purchases through a defined process with exposure limits, Treasury Secretary P B Jayasundera said."A new circular on investment committees will be issued," Jayasundera told reporters after releasing the finance ministry's annual report Thursday.
"There will be a process where the committee will be protected from interference (angili nogaseemater krama vedayak)"His comments came after the sale of stock in a troubled finance company whose liabilities exceed its assets by 3.7 billion rupees by December 2012 at over 60 percent above market price to state-run National Savings Bank.
Several purchases of stock by the Employees Provident Fund, including investments in Laugfs Gas and Nawaloka Hospitals have been controversial.
Jayasundera said there were Treasury nominees in many state entities but they did not necessarily have expertise in stock purchases.
"There are people who know better in these institutions. Also government entities have to depend on market participants to make investments," he said.
"If there is a defined process it will protect everyone. These institutions also have to set exposure limits."
Jayasundera said there was a justification for long term contractual savings institutions, including the EPF to invest in stocks. Some state entities had also rushed into stock when interest rates fell to improve returns, he said.
Jayasundera said all except one director of National Savings Bank had resigned and Sri Lanka's post master general was acting as chairman until the appointment of a new board.
Thought the finance ministry representative to the board had also resigned, it was not clear whether he was actually attended the meeting when the decision to buy The Finance stock was made. Only four directors were needed for a quorum officials said.Senior career officers of the bank had been unhappy at the deal, according to reports.Jayasundera said a committee had been appointed to probe the deal.In Sri Lanka resignations over financial scandals are rare.The country does not have an independent civil service to ensure rule of law or justice as the institution of permanent secretary was broken by successive constitutions in 1972 and 1978 paving the way to arbitrary rule.
But Jayasundera said there was no interference by ruling politicians on this matter. NSB halted the deal after Jayasundera intervened.
Jayasundera said he had told the board to stick to the bank's core business.

Reported in LBO
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...by i3gconsultants@ 09:05:00 on 2012-05-25

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Sri Lanka’s securities watchdog suspends Taprobane Securities chief


Sri Lanka’s securities watchdog on Thursday suspended the chief executive and managing director of Taprobane Securities Private Limited, pending a probe related to a controversial share transaction between a savings bank and a troubled finance company.
In a directive to the chairman and board of directors of Taprobane Securities on May 23, the Securities and Exchange Commission asked the CEO/Managing Director Dinal Wijemanne be suspended immediately.
It also asked the board to ensure Wijemanne does not operate in any other capacity for an behalf of Taprobane Securities, until the investigations are completed.Wijemanne has been embroiled in the sale of The Finance Company Limited shares to state-run National Savings Bank at a steep premium.The state bank bought 13 percent stock of the loss-making finance company from a consortium of buyers including Wijemanne. Taprobane Securities acted as the broker for the buyer and the seller.
The savings bank failed to honour the payments, after its unions petitioned the president and the treasury chief. The deal was later aborted on the directives of the president.The SEC last week allowed the transfer of shares to take place off-the trading floor and imposed stiff regulations on stockbrokers, the NSB and the sale of future large parcels.
Full statement below:
SEC Media Release – 24th May 2012

Notice of Directive issued on the Chairman and Board of Directors of Taprobane Securities (Pvt) Ltd to suspend the CEO/Managing Director of the Company from functioning in that capacity or in any other capacity for and on behalf of the Company pending the conclusion of investigations by the SEC.
The Securities and Exchange Commission of Sri Lanka (SEC) issued a Directive dated 23rd May 2012 to the Chairman and Board of Directors of Taprobane Securites (Pvt) Ltd to suspend with immediate effect Mr. Dinal Wijemanne CEO/ Managing Director of Taprobane Securites (Pvt) Ltd from functioning in that capacity or in any other capacity for and on behalf of the above said Company pending the conclusion of the investigations by the SEC.
This decision was taken by the Commission at its 301st Meeting held on 22nd May 2012 inter alia as a necessary interim measure conducive to the continuation of investigations launched by the SEC into the activities of the role played by the Stockbroker - Taprobane Securities (Pvt) Ltd and its CEO/Managing Director Mr. Dinal Wijemanne in respect of the transaction of The Finance PLC shares by National Savings Bank (NSB) through the Stockbroker firm Taprobane Securities (Pvt) Ltd on 27thApril 2012.

Reported in LBO
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...by i3gconsultants@ 15:05:32 on 2012-05-24

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Dollar borrowings send some listed corporates reeling


Sri Lanka’s listed corporates so far have incurred over Rs.5.7 billion loss as foreign exchange losses due to the depreciation of the Lankan rupee (LKR) against the US dollar, a quick compilation of data by Mirror Business revealed.

According to market analysts, as some of the listed companies that have borrowings in US dollars have not released their interim financial reports for the quarter ended March 31, 2012, the cumulative loss is likely to increase.

Since last budget in November 2011, LKR has depreciated nearly 14 percent as the country’s exchange rate policy shifted from an interventionist dollar peg to floating exchange regime.

“The Central Bank should be responsible for the exchange losses some of the companies have incurred. They encouraged corporates to opt for dollar borrowings assuring that the rupee will be kept stable against the dollar,” an analyst who preferred anonymity told Mirror Business.

Sri Lanka allowed the rupee to be determined by the market since Feb. 9 after the Central Bank spent more than $2.6 billion since last June to defend the currency, depleting foreign exchange reserves by a third.

However, he also pointed out that the companies themselves are partly responsible for the exchange losses they’ve made.

“Almost everyone in the country knew that the LKR was artificially propped up and the Central Bank wouldn’t have been able to keep it up against the dollar in the long run. So they should have had some contingency plan for the worse case scenario,” he opined.

While depreciation of the LKR has become a bane for some companies, it has become a boon for several other listed firms including for the country’s commercial banks as well as the export companies.

Banks like Commercial, Hatton National, Sampath, National Development and Nations Trust posted significant increases in their bottom lines, largely boosted by foreign exchange gains.

However analysts Mirror Business talked to were little skeptical about the mid term or the long term sustainability of these exchange gains, as a few of the commercial banks have raised moneys from foreign sources fot capital requirements.

But they also stressed that since banks confront currency fluctuations almost on a daily basis, they will create strategies to tackle any loss stemming from rupee depreciation.
reported on Daily Mirror
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...by i3gconsultants@ 21:05:42 on 2012-05-21

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Reversing NSB-TFC deal


The Securities and Exchange Commission (SEC) has granted approval to transfer The Finance shares to the seller outside the trading system of the stock exchange, the SEC said in a statement.
The full statment issued by the SEC:
Transfer of The Finance Company PLC shares purchased by the National Savings Bank through the Colombo Stock Exchange
Taprobane Securities (Pvt) Ltd (TSL) and the National Savings Bank (NSB) by letters dated 11th May 2012 made an application to the Securities and Exchange Commission of Sri Lanka (SEC) seeking prior approval under Section 28 (1) of the SEC Act to transfer The Finance Company PLC (TFC) shares purchased by NSB on 27th April 2012 on the Colombo Stock Exchange (CSE) to persons identified by TSL outside the Trading Floor of the CSE.
TSL in their application undertook to pay Sampath Bank PLC the consideration due on this transaction including the interest due thereon in settlement of the monies due to Sampath Bank for the settlement services rendered by Sampath Bank on the share purchases done by NSB of TFC on the Trading Floor of the CSE on 27th April 2012.
NSB in their application also agreed to transfer TFC shares purchased on 27th April 2012 in its entirety to the persons identified by TSL outside the Trading Floor of the CSE. The NSB agreed to allow TSL to pay Sampath Bank the consideration sum due on this share transfer in satisfaction of the amounts due to Sampath Bank for the settlement services rendered on the share purchases transacted by them on the CSE on 27th April 2012.
Sampath Bank too intimated to SEC that the bank will discharge NSB and all parties connected with the impugned transaction, if TSL as undertaken by its letter pays Sampath Bank all sums due to them including interest/levies due thereon.
In terms of Section 28 (1), the SEC has the discretionary power to approve transfers outside the trading procedure of the CSE.
In this backdrop the SEC has granted approval to allow NSB to transfer TFC shares purchased on 27th April 2012 in its entirety to the persons identified by TSL outside the Trading Floor of the CSE. This approval has been granted under exceptional circumstances for the smooth functioning and the system stability of the payment and settlement cycle of the Capital Market of Sri Lanka. It is stressed that the SEC will not consider this instance of granting approval to conduct a trade of this nature off the Floor of the CSE as creating a precedence.
The SEC is separately investigating the above mentioned transaction and the parties involved in it. Firm action will be taken against all those who are found to have violated the SEC Act.
The SEC is currently studying this entire issue and expects to take a series of appropriate measures, rule and procedure changes to prevent such incidents in the future. The SEC will also intensify its efforts in implementing the Central Counter Party (CCP) for the CSE which will be the final solution to address settlement failure risk.

Reported in Dailymirror

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...by i3gconsultants@ 02:05:04 on 2012-05-19

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The dangerous reality of a bear market: Wake up Sri Lanka!


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A bear market can be catastrophic for any economy, especially an emerging one which does not understand the ramifications of such conditions. A bear market can bankrupt an innocent small investor who bought Soft logic (SHL) shares at LKR 29 on leverage and now is paying interest which he cannot afford on a stock that currently trades at LKR 10 and is expected to go down to LKR 8.A bear market can slap and spit at the face of a supposedly healthy company that is generating strong revenues such as Peoples leasing (PLC) which was heavily promoted at LKR 18 and currently trades at LKR 11 and has a target price of LKR 9 on it.A bear market can disgrace and ridicule a central banker who promises 8.5% growth over the next decade, the sun and moon full of foreign direct investment (FDI) pouring into Sri Lanka and boast about a stable economic environment.A bear market can crush a country’s currency, play havoc with inflation and abuse the macro economic landscape of a country. Yes, a bear market can be quite detrimental to an economy but the worst thing about a bear market is the fact that no one wants to accept her faith, understand her reasons and learn from her mistakes which have ripple effects that can last for years.Sadly all the salesmen in the country only continue to feed the public a spoon full of sugar so that the bitter medicine can go down.


WAKE UP SRI LANKA!


MarketsNeverLie 1 year forecasts (probability 70%)



* All Share Price Index to head towards 4,000


* The Rupee to head towards 140-150


* 3 month interest rates to move towards 14% and the yield curve to flatten


8 reasons behind my forecast


Technical view-I expect the All Share Price Index (Chart A) to come down to 4,000 which is the markets 61.8% Fibonacci level. Historically during bust phases markets usually head towards these levels. It is difficult to forecast the intermediary swings within this range but the end result has a 70% probability.


Rising interest rates-We are currently seeing a rising interest rate cycle and historically these cycles can last for 1 or 2 years. The rates have currently increased 40% YTD, however technically I see the 3 month yield increasing another 100 to 200 basis points towards 14%. Simply a rising interest rate environment causes stocks and bonds to fall.


Beware of central bank and government forecastsEven though the central bank continually talk about large sums of foreign direct investment (FDI) and other window dressing statements, realistically we should question it with a bowl of salt.We cannot keep relying on the IMF or China for money, this makes me question the stability of the currency and we could see the currency move towards 140 - 150 in the coming year. Given the VOLATICS (Political uncertainly + volatility) of macro conditions foreigners and the local public should ideally not touch stocks with a yard pole.


Everybody is looking to sell-Large supplies of stocks are currently held at high prices and as a result any move to the upside will cause heavy selling, crushing the hopes and dreams of the minor bull move. Don’t be fooled about the minor rallies, they are there to help lose your pants in the market.


Dodgy Deals-The TFC deal is a perfect example of how directors and owners of companies are desperately trying to get into cash. These types of agreements are famous in most bear markets.


Entering the 3rd phase of the BEAR market-Phase 1: Prices decline for no reason. The first leg starts when prices start to fall for no apparent reason. The economy looks rosy, the future growth potential of corporations look strong, the experts along with the general public feel optimistic and there doesn’t seem to be anything to worry about. However "smart money" starts to leave the markets and investors start to suffer losses in their portfolios refusing to believe that there is a paradigm shift taking place and continue to hold/add onto their losses.


Phase 2: Macro conditions deteriorate-During the second phase of the bear market investors go broke and start to panic sell, suddenly the economy looks gloomy and there are various macro factors that continue to pile drive prices lower. This is the time that equity analysts start to get bearish as they are historically considered lagging indicators. During this period usually there is some activity from fund managers seeking long term value. Corporate profits are still strong and therefore there can be a short term bull market run, as new and old money finds its way into the market.


Phase 3: Corporate earnings fall.-During the third leg corporations finally start to shed profits and earnings and there can be certain companies that go bust. Most of them suffer from a state of illiquidity and a lack of credit in the system. The macro issues are now priced into the markets and the government and central bank come to the rescue.The local equity markets seem to be in-between phase 2 and 3. There are macro issues which are troubling however, corporate results are still strong. We expect stellar performances in certain sectors such as hospitality in Q1 and possibly Q2, however there is a concern over the banking sector earnings due to net interest margins shrinking and loan growth caps. This may have ripple effects on the broader economy as higher interest rates may slow private sector growth.


The Banking sector consolidating for a move to the downside-I have been watching the consolidation in the banking sector over the last few months to gauge the direction of the general market and it seems like the market wants to break lower. As depicted in the chart below, the banking sector is expected to deteriorate another 20% – 25% towards its 61.8% Fibonacci level, which will drag down the economy and the market.Before Sri Lanka experienced its boom and now bust so did our regional counterparts. Based on history the Sri Lankan market should



* Drop at least another 20% to 30% which will be close to the average loss of the regional markets (- 76%)


* The currency should devalue another 10% - 15%


* Interest rates could stay flat or rise slightly


To date Bangladesh is still down 43 % from its peak (Chart D) and Vietnam has gained 25% from its crash after losing all of its gains in the bust phase (Chart C). Surprisingly Pakistan is the only country that has recovered from its bust (Chart E). Sri Lankan investors would be hopeful for a similar result. However, we are only in the middle of the bear market and we have a long way to go. Unfortunately the Sri Lankan economy closely resembles Vietnam and we could be in for a rude reality check.


Summary


Understanding the stock market, the economy, dissecting corporate earnings can all be complicated and hard to fathom. History therefore provides an insight into the markets which ignores the noise and confusion along the way.The movements in the Sri Lankan market and the economy are nothing new to global markets. Investors should not assume that the Sri Lankan markets are special and witnessing extreme circumstances. History will show you that nothing has changed over the hundreds of years because humans have not changed.Investing is a volatile game. Trust no one but the market. Try and understand her, where she is coming from, what she feels and what she has done in the past in order to understand what she plans to do next.


Profile: MarketsNeverLie


MarketsNeverLie is a pen name for a global investment specialist who has technical experience in global markets ranging from commodities, currencies and equities. The author has worked for a major global bank and runs his own trading operation in Singapore. The author’s thoughts, comments and trade ideas on global investments can be found on Twitter and Stocktwits under his pen name MarketsNeverLie. The author encourages investors to tweet him for specific advice regarding their investments.

Reported in The Island
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...by i3gconsultants@ 16:05:52 on 2012-05-14

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‘Investor Association’ to voice CSE’S minority concerns


Sri Lanka’s Securities and Exchange Commission (SEC) is to establish an ‘Investor Association’ to safeguard minority shareholder interests as well as function as a whistleblower against unlawful activities taking place in the Colombo Stock Exchange (CSE), a top SEC official said.

“We are currently in the process of preparing a board paper, to be presented to an ‘Investor Association’ comprising of small investors and minority shareholders to make sure their rights are protected due to market activities,” SEC Chairman Thilak Karunaratne said.

According to him, in most developed and a few developing markets, ‘Investor Associations’ have been formed to protect investor rights and are playing a proactive role in ensuring the integrity of those markets.

“For example if you take Malaysia, their equity markets have these investor associations playing a vital role safeguarding rights of small shareholders, and even sometimes taking legal actions against listed companies on unjust acts,” Karunaratne said.

He also pointed out that the proposed ‘Investor Association’ will function as an independent entity and will be funded by market stakeholders, including all listed companies. According to Karunaratne, many incidents have taken place in the recent past, where some listed companies have treated minority shareholders unjustly, using loopholes in the systems.

“What the market currently has is a few scattered organizations which are said to be protecting minority shareholder rights. And also some lone crusaders like K.C Vignarajah. The proposed ‘Investor Association’ will unite them into one force and defend their rights,” Karunarathne noted.

Despite objections by minority shareholders, Watawala Planataions PLC recently went ahead with a transaction, which minority shareholders accuse would allow the transfer of profitable assets of the company to a private company owned by majority shareholders.

“In Watawala’s case, we advised the Golden Shareholder, which is the Treasury to vote against this transaction. That’s all we could do as the regulator. But if there was an ‘Investor Association’, the minority investors could have exerted more pressure on the company, paving way to a different outcome” Karunaratne pointed out.

He also said, the independent nature of the proposed ‘Investor Association,’ will also allow it to voice concerns about issues like market manipulations, insider dealings and various other issues.

reported on Daily Mirror
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...by i3gconsultants@ 11:05:19 on 2012-05-14

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Free hand vital to tackle market issues – SEC Chief


In his first newspaper interview after becoming the regulator of the country’s only equity market, Colombo Stock Exchange, Thilak Karunaratne who was once a member of Sri Lanka’s Parliament spoke to Mirror Business about regulations, market manipulations, the recent The Finance-nsb deal and much more. Excerpts: I studied the SEC Act and discussed with the SEC’S directorate and the Finance Ministry Secretariat and found out that the laws in the Act were quite archaic

Q: Has your perception about Colombo Stock Exchange changed after becoming the regulator?

Well, Colombo Stock Exchange compared to some of the more mature capital markets was not really performing up to expectations. I’m not talking about volumes, but the regulatory aspects of the market. There were a lot of cases of insider trading and manipulation. So I knew those things were happening even as an investor. When I accepted this position, my objective was to do something about the illegal activities taking place in the market. Even when I was an investor in this market, I had this idea that the market should be well regulated for it to do better and create investor confidence. So I wouldn’t say my perception has changed. But of course, my approach has now changed after becoming the regulator.

Q: It was no secret that the former SEC Chairman and the Director General had to step down from their positions as a result the pressure exerted on them mainly by powerful investors.What were you thinking when you accepted the offer?

Yes of course I was aware of all these things. I knew that former SEC Chairman Mrs.sugathadasa, to her credit did an excellent job and it was unfortunate that she had to leave. But still I thought, this was something I should take on and see whether I could make a change.

Q: Were there any conditions from your side when you accepted the job?

I’m of course not well connected as Mrs. Sugathadasa. But I have a reputation to maintain and a credibility to safeguard. So, with those two I thought I wouldn’t have to ask for any guarantee from anybody and if they respect me for what I’ve been doing in the past, I should be permitted with a free hand and so far there hasn’t been any pressure on me.

Q: What are the key issues you have identified that should be rectified immediately for the betterment of the market?

It is nothing to do with the Colombo Stock Exchange’s management. It’s the systemic weaknesses the regulator has not addressed. When I came here, I studied the SEC Act and discussed with the SEC’S directorate and the Finance Ministry Secretariat and found out that the laws in the Act were quite archaic. It needs a lot of amendments to bring up the regulator to the level of developed and mature markets. So, that’s what we’ve now embarked on. What we want is the SEC to become a modern regulator with all the powers that it needs to regulate the market.

And also, we don’t have systems such as Central Counter Party (CCP) and Delivery Verses Payment (DVP). Dialogue has been going on about for four years brining these things, but unfortunately it has not happened. So I’m determined with the support of our commission and the board of the CSE to make sure that this can be implemented before the end of this year. There had been so many timelines set for these things to be implemented. So there’s no excuse this time.

Q: But some say the market is overregulated and that is killing the investor sentiment

I don’t subscribe to that all. Markets have to be well regulated. If you take US capital markets they are extremely well regulated. That’s how they were able to catch a big fish like Raj Rajaratnam. I think Colombo Stock Exchange is loosely regulated. But most of the necessary technology and other resources were there in place for the CSE to be well regulated.

Q: There has been this allegation for some time that SEC only investigate the small timers and always let the big time offenders who are well connected and have money and power go free. What is your response to this allegation?

I suppose there is some truth in it, though I cannot say it’s fact. But the fact remains that we haven’t brought to books the so called high networth individuals who have become high networth recently, who made their money between 2009 and 2011. But of course, the investigations are still on, on some of the cases. But, when I took over I found that most of the investigations had been stalled due to some reason or the other. And they were not on a continuous basis and even the ones that were being investigated were slowed down. With the fullest co-operation of my commission, we gave necessary individuals to fast-track investigations and it is happening now. Hopefully, we’ll be able to see something in the coming few months. In fact, surveillance and monitoring had been carried out quite regularly. But as I said, due to some unexplainable reasons, proper investigations had not been carried out on them.

Q: Most of the times when SEC brought in rules, it tended to bow down to investor/broker pressure and amended them. Hasn’t this lenient approach affected the credibility of the regulator?

I can’t agree with you more. The SEC lost its credibility sending wrong signals. That’s why when I assumed my duties we relaxed this credit rule. There was so much of outcry, specially the media, saying that the SEC is trying to kill the market. When we analyzed we found that it was not the limitations on brokercredit that had been hurting the market. So that’s why we relaxed it and then showed everybody that credit is not panacea for all the ailments CSE is suffering from. The thinking behind lifting the price band was same. And also, price bands are not the thing for a market that is trying to emerge. But of course, if the need arises we will not hesitate to use it again.

And also SEC’S move not to allow share Introductions in the CSE is also a step taken toward shutting regulatory loopholes. We don’t bother about the number of companies that will get listed on the CSE for one year but the value it can bring to the market as well as to the investors. Likewise we are now trying to correct things, which of course should have been done earlier.

Q: Many small time investors in the CSE have got themselves wiped off when the market started to come down. They blame the SEC for it. What do you have to say?

It’s nobody’s fault but theirs. They should have known better. Everything that goes up should come down. They knew about the risks in the equity market and they should have evaluated the risk element involved when following the big fish with a herd mentality. As much as they were willing to accept profits when the going was good, they should also prepare to accept the losses.

Q: You think the steep rises we saw in the market indices were unrealistic?

That rise was mostly manipulated. Proper actions should have been taken at that time to curb it, which unfortunately didn’t happen. So when the market started to come down, a lot of small timers got their fingers burned.

Q: Let’s talk about the recent The Finance- NSB deal that has created much controversy.

I can assure that SEC will do the maximum to bring the wrongdoers to books involved with this deal. We already have summoned the particular stock broker involved in the case and the director board of his brokerage for clarifications. What has happened is really unfortunate as this is first instances where a payment has not been honoured. This will definitely impact the credibility of the CSE and it has set a very negative precedent. We are trying our best to bring the culprits to books and minimize the systemic risk the deal has already created.

Q: Any final thoughts?

It’s a challenging job and challenging times for SEC. My dream is with the assistance of the SEC Commission and the Secretariat to make the CSE a well regulated and well respected capital market.
reported on Daily Mirror
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...by i3gconsultants@ 11:05:19 on 2012-05-14

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Two more listings via introductions


The Colombo Stock Exchange (CSE) last week announced the approval of two more listings via introductions.
One is by Orient Financial Services Corporation Ltd., to list 115,625,000 ordinary voting shares (115.6 million) on the Diri Savi Board, whilst the other is Commercial Leasing & Finance Ltd., also on the Diri Savi Board with the quantum of ordinary voting shares being 6,377,711,170 (6.377 billion).
These two are the latest to be approved on top an equal number (AgStar Fertilisers Ltd. and Taprobane Holdings Ltd.) year to date
Last year there were 16 listings via introductions as opposed to two in 2010. The remaining 10 are likely to be the final set arising out of applications by end March as the SEC has suspended future listings via introductions.
For Commercial Leasing it is a re-listing as it was originally a public quoted company before moving out in 2009.
It is now under the LOLC Group which took it over from the founders – Commercial Bank, Singer Sri Lanka and Chemanex.
LOLC has been able to build on the strong foundation with shareholders’ funds seeing an impressive growth of 280% to Rs. 6.4 billion by September 2011. The total assets of CLC grew by 176% to Rs. 26 billion. Profit before tax for the year ended 31.03.11 reached Rs. 741 million and the Company reached a PBT of Rs. 2.9 billion for six months ended in September 2011.
Its lending portfolio consisting of lease, loan hire purchase and factoring receivables, grew by 88% over the previous year to Rs. 18.4 b. CLC was successful in maintaining a very high credit quality along with the rapid growth of the portfolio, with a gross non-performing loan ratio of 0.8% and a net NPL ratio of negative 1.9%.
Last week former Central Bank Deputy Governor Priyantha Fernando was appointed to the Board of Commercial Leasing.
reported on Daily FT
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...by i3gconsultants@ 11:05:19 on 2012-05-14

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CSE rejects Rienzie’s contention:Promises action if rules have been breached


The Colombo Stock Exchange (CSE) Friday rejected a contention of one of its former chairmen, Mr. Rienzie. T. Wijetillake, on the NSB – TFC deal published in The Island of May 11."The CSE regrets the manner in which the said article seeks to misrepresent the functions and duties of the CSE, to the public,’’ a statement from the Exchange said.It has been stated that the CSE had "failed in their duties" and "not done its duties on the day of the suspicious deal". All share transactions are carried out by licensed stock broker firms based on the determinations of buyers and sellers. In this regard, the role of the CSE is to ensure that these transactions are executed on the Automated Trading System (ATS) of the CSE in conformity with the applicable Rules.The ‘order matching’ takes place in a completely automated environment and hence, the CSE cannot intervene in the execution of a particular transaction. In the circumstances, the CSE could not have "halted" the deal in question "for a few hours to conduct a special research reasoning on the deal", as claimed by Mr. Wijetilleke.Additionally, the Central Depository Systems (Pvt.) Ltd (CDS), a fully owned subsidiary of the CSE, has suspended NSB from carrying out any CDS functions as a CDS Participant with effect from May 8, 2012.Whilst denying all allegations made against the CSE in the article, the CSE assures the public that, in the event of any violation of the CSE/CDS Rules, necessary action has been / will be taken by the CSE, as deemed appropriate.


Reported in The Island

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...by i3gconsultants@ 11:05:09 on 2012-05-13

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NSB- TFC deal: Maximum penalties for offenders


The Securities and Exchange Commission (SEC) is currently negotiating with all the concerned parties in the National Savings Bank’s acquisition of The Finance Co. Ltd shares and is confident that a solution could be arrived at before end of business on Monday.

"We have been talking to all parties concerned, some individually, person to person, and others by phone and are confident that an amicable solution will be arrived at before end of business on Monday, acceptable to all parties," SEC Chairman Tilak Karunaratne told The Island Financial Review last night.

"We are working on an amicable settlement but that will also not preclude us from continuing the investigations which have been launched as to how it all happened," the SEC Chief said.

"Any party- institution or individual found guilty will be imposed the highest penalty under the Securities and Exchange Commission Act," he asserted.
reported on The Island
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...by i3gconsultants@ 11:05:36 on 2012-05-11

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SEC summons Taprobane directors over TFC - NSB deal


The Securities and Exchange Commission (SEC) will be meeting the Board of Directors of Taprobane Securities today in connection to the contentious The Finance-national Savings Bank deal, a SEC top official said.
“We have summoned the director board of Taprobane Securities, the brokerage involved in this deal for discussions. Last Friday we summoned Taprobane CEO/ Director Dinal Wijemanne for clarifications,” SEC Chairman Tilak Karunaratne told Mirror Business.
He also said that the SEC has ordered Wijemanne to provide all his explanations in writing by this Friday.
“We’ve told him to submit his explanations in writing by May 8. However, he had asked for time till this Friday,” he said.According to Karunaratne, being the broker for both the buyer and seller, Taprobane cannot avoid its responsibility towards the completion of this transaction.As he pointed out, this is the first default that has taken place in the history of the Colombo Stock Exchange. “They (Taprobane) were the brokers for the buyer as well. When the buyer does not pay, the broker should try to talk to the buyer and make sure the payment is done on time. This default has set a very negative example and it has created a systemic risk for the market.” “And also, the issue has become more complex with one of the major selling parties being the broker as well as a non-executive director of the company of which he sold shares. So, there is an obvious case of conflict of interest,” the SEC Chairman said.
He also confirmed that the SEC is also currently investigating into any possible incidents of ‘insider dealing’ related to the TFC-NSB deal and said that the SEC officials last Friday visited the premises of Taprobane Securities and took into possession several documents and data that might be useful in the investigation process.
When asked about the actions that can be taken against Taprobane, Karunaratne said that if there is proof of malpractice, the penalty can range from a temporary ban to the revocation of brokering license.
He also noted that as the regulator, the SEC will be doing its maximum to discover had there been any wrongdoing with regard to this deal, and said the SEC has also drawn the attention of the Central Bank on the matter.
However, on Tuesday, Central Bank Governor Ajith Nivard Cabraal said that as the banking regulator, it has no role to play in the transaction.
Cabraal told the media that the banking regulator in a broad sense generally defines the parameters within which banks can engage in equity investments, and said that thereafter it is "their business."
On April 27, National Savings Bank (NSB) purchased a 13 percent stake in TFC for Rs.390 million, paying Rs.50 each share. The main sellers were Dinal Wijemanne, Rayynor Silva, Yogananda Perera and Nandadeva Perera. On the day of the trade, the TFC share opened at Rs.30, and during the month of April, the TFC share had been trading between Rs.30-32.50.
However, following the deal, Finance Ministry Secretary P.B. Jayasundara directed NSB to hold payment on the grounds of the premium price NSB had agreed to pay for the shares. Meanwhile, President Mahinda Rajapaksa has ordered an investigation into the matter.
Reported in Dailymirror
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...by i3gconsultants@ 11:05:55 on 2012-05-10

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SEC considers 10% minimum float rule


Reuters: Sri Lanka’s Securities and Exchange Commission (SEC) wants listed companies to have a free float of at least 10 per cent to increase market liquidity and could make a decision on the matter this month, the Head of the regulator said on Tuesday.
Foreign investors have long been reluctant to invest in the country’s Rs. 1.97 trillion ($ 15.42 billion) stock market, complaining of a lack of free floating shares along with market manipulations and insider trading.
The 10 per cent minimum public float rule, which requires the shares to be held by investors independent of a company and its management, applies to companies when they get listed.
However, once listed, a company’s management and its related interests can buy shares from the market, resulting in some big firms having only about five per cent of their shares public, though the market has an overall 30 per cent free float.
“We are looking to increase liquidity seriously for a minimum of 10 per cent float,” SEC Chairman Thilak Karunaratne told Reuters in an interview. “A final decision will be taken as soon as possible, hopefully before June.”
Karunaratne said there was a risk a minimum float requirement could be counter-productive as some big firms may decide to delist, and he would consult with the market before finalising the regulation.
“We don’t want anybody to get delisted. Perhaps we will talk to big companies and multi-nationals and ask their view on the minimum float,” he said.
In 2009 and 2010, after Sri Lanka’s long civil war ended, the Colombo Bourse was a star performer. It rose 125 per cent in 2009 and another 96 per cent in 2010.
But last year, when there were both economic and market problems, Colombo’s benchmark All Share Price Index fell 8.5 per cent. And so far in 2012 – a year when Asian markets have rallied – it has slumped 12.8 per cent in spite of eased restrictions on broker credit and margin trading.
Foreign investors have been net sellers for the past three years with the country seeing a net outflow of Rs. 19 billion last year, 26.3 billion in 2010 and 789 million rupees in 2009. But they have been net buyers for Rs. 21.5 billion worth of shares so far this year.
Past attempts by officials to tighten the regulation of stock trading in Sri Lanka met stiff resistance from some traders and brokers.
Karunaratne’s predecessor, Indrani Sugathadasa, quit in December saying she did so “to uphold her principles,” after starting probes on several cases of share-price manipulation.
“We do have the teeth to bite, but we were not biting enough. Even though the regulations were there, we were not strictly enforcing the regulations to control or regulate the market,” Karunaratne said.
“Even investigations were slowed down to some extent. So people were of the impression that the SEC is a toothless tiger. Still we are trying to change that perception among the retail investors.”
Karunaratne, however, said a lot of investigations are still going on and the SEC is strengthening the investigation side. “What I would like to see is a well-regulated market. It should be an impetus and incentive for not only local investors but even for the foreigners to come and invest.”
reported on DailyFT
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...by i3gconsultants@ 13:05:09 on 2012-05-09

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NSB’s custodial role suspended, Sampath clears Friday settlements


The National Savings Bank’s (NSB) role as a custodial bank has been suspended by the Colombo Stock Exchange following its failure to honour the payment on its purchase of a 13% stake on 27 April, the Daily FT learns.
CSE officials refused to comment about the suspension whilst there was no official statement either.
The suspension of NSB’s custodial role was anticipated by the capital market after it originally failed to reject the original buy order within the T+1 window after the transaction whilst it has failed to make the payment amounting to Rs. 390 million to date.
In a related development, Sampath Bank yesterday cleared the backlog of settlements it didn’t carry out on Friday after it was overdrawn to the tune of Rs. 390 million on account of settling the sellers of TFC shares to NSB on 27 April without having funds in place from NSB.
Market talk was that outstanding T+3 settlements due on Friday were estimated at around Rs. 100 million. Sampath is the leading settlement bank with a base of at least 15 brokers. It refused to participate in settlements on Friday on the grounds funds hadn’t been cleared.
Speculation was that it had settled all brokers except Taprobane Securities Ltd. This appears to be a direct fallout of the NSB-TFC deal for which the major broker was Taprobane Securities.
Meanwhile, Daily FT learns a meeting between NSB Chairman Prasad Kariyawasam and the Secretary to the Treasury was scheduled yesterday afternoon to resolve the impasse whilst a Board meeting of the NSB was on last evening.
These meetings were taking place amidst market talk that the Securities and Exchange Commission (SEC), which is probing the ill-fated deal, may in fact cancel it in its entirety. This however will require the buyer and seller making a joint request to the SEC.
 Other analysts however have cautioned against such a move since a reversal will have major repercussions. The suggested compromise is for NSB to pay and then divest the stake to a willing buyer.
The controversial NSB-TFC deal is also expected to come under fire today during a media briefing convened by UNP MP and its Chief Spokesman on Economic Matters Dr. Harsha De Silva.
reported on Daily FT
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...by i3gconsultants@ 13:05:09 on 2012-05-09

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25% of 4Q stock market earnings from financial sector : Report


Sri Lanka's financial services sector was the biggest earner for the country's stock market over its December 2011 quarter, contributing 25% to total market earnings. However, while this sector recorded a 2% year-on-year increase in earnings, it also showed a 2% drop when compared to the previous, September 2011 quarter, according to a research report by Asia Wealth Research, a unit of local stockbroker Asia Capital.

The report, titled "Sri Lanka Country Report - 2012", and based on data from the country's Central Bank, also added that earnings by this sector were followed by both the diversified and the beverage, food and tobacco sectors, each accounting for 17% of total market earnings.

It also noted that, in terms of the diversified sector, market earnings were dominated (58%) by two companies, John Keells and Aitken Spence. While, when it came to beverage, food and tobacco, the biggest earners were Ceylon Tobacco (36%), Nestle Lanka (11%), Ceylon Tea Services (9%), Ceylon Brewery (8%) and Ceylon Cold Stores (7%). Although, the report also signalled that top earners such as Ceylon Tobacco and Distilleries Company had faced declining corporate returns and, as a consequence, overall sector earnings for the quarter had been pulled down along with them.

Meanwhile, commenting on trends in the agriculture sector, the report went on to indicate that, while agriculture "continued to maintain its relevance", this was due to "backward linkages" to the industrial sector and exports rather than its import on essential goods. For example, a shift from growing potatoes and big onions, for local consumption, to maize and sesame, for export, was highlighted.

At the same time, the report also suggested that, while coconuts as an export was on the decline, the highly lucrative and in demand palm oil would, more and more, take its place as one of the country's top cash crops alongside tea and rubber. On the other hand, it was also opined that the latter, as an export, would always remain somewhat "limited".

Additionally, while signalling positive growth for the construction and the industrial sectors, mostly as a result of heightened expectation for tourism, the report also predicted that a new trend in the financial sector was a "tendency for the retail credit market and the economy's deposit base to shift towards finance companies from banking sector since former is free from the limits imposed on credit growth. Further, in this setting, medium scale finance companies that are more skewed towards meeting SME sector requirements will prosper over the major finance houses owing to the fact that credit growth of the latter is mainly channeled towards leasing and hire purchase of vehicles; and the vehicle imports are expected to fall 60% to 70% this year due to the rise in import taxes".

Further, the report was of the opinion that the "continued existence of an untenable fiscal mismatch concomitantly with one of region's highest consumer tax rate systems was the critical economic setting under which Sri Lankan governments have been planning its fiscal proposals over the years. When austerity measures are regarded infeasible owing to socio-economic setbacks that carry with it, the persistence of high fiscal deficits averaging eight percent of nominal GDP for the past ten years along with 120% average duty implied that alteration of tax rates sans general macroeconomic planning, is incapable of curbing the fiscal deficit without exposing the economy to solvency problems...

Under this general backdrop, in 2011, government set about to curb the deficit by increasing tax rates on essential inflationary goods such as sugar, wheat flour, milk powder, etc., to which there is a degree of price inelasticity of demand attached, and on the other hand opted to lower taxes on non-essentials such as motor vehicles and consumer durables.

This is the critical terrain where a change in one factor does not fail to lead into another: high tax rates on essentials and low rates on non-essentials meant decreasing fiscal deficit at the expense of rising price levels, decreasing international competitiveness and promoting balance of payments issues. On the other, hand opting to the converse meant rising fiscal mismatch stemming from declining import tax revenue coupled with increasing cost of capital. This contradiction still persists providing an important glimpse into the future".
reported on SundayTimes
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...by i3gconsultants@ 10:05:11 on 2012-05-06

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CSE Market holiday on 7th May


The Labour and Labour Relations Minister Gamini Lokuge today said the  government had decided to declare Monday (7) a public and special bank holiday on account of the Wesak festival falling on Saturday and Sunday
Minister Lokuge requested the employers of the private and semi government sector to extend this privilege to their employees as well.


Reported in Dailymirror

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...by i3gconsultants@ 12:05:07 on 2012-05-05

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CSE Main Board turns back on Mackwoods Energy


Mackwoods Energy Limited (MEL) has not met the requirements to be listed in the Colombo Stock Exchange’s (CSE) Main Board and hence will be listed in the secondary Diri Savai Board, a statement by the CSE said.
According to rule 2.1.2 of the CSE listing rules, for shares of a company to be listed on the Main Board, it has to fulfill the minimum public holding requirement of 25 percent and the minimum number of 1000 shareholders’ holding not less than 100 shares each. According to the CSE statement, subsequent to the completion of MEL’S Initial Public Offering (IPO), the firm had notified the CSE that these requirements had not been fulfilled.
However, the CSE said the firm has fulfilled the criteria for a Diri Savi Board listing as set out in rule 2.1.3 of the listing rules, and accordingly the shares of the company would be listed on the Diri Savi Board with effect from April 25.


Reported in Dailymirror

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...by i3gconsultants@ 12:04:54 on 2012-04-24

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SEC directs lift of 10% price band


Securities and Exchange Commission of Sri Lanka (SEC) has decided to direct the Colombo Stock Exchange to lift the 10% price band, imposed for five market days on certain securities based on an agreed formula which takes into account volatility and volumes with immediate effect. The SEC will continue to monitor the behavior of the market and the price band may be re-imposed in future if the situation so warrants. 
Monetary Board of the Central Bank of Sri Lanka has granted the People's Merchant PLC the licence to carry on finance business under the Finance Business Act No 42 of 2011 with effect from April 17.

Reported in Dailynews
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...by i3gconsultants@ 15:04:36 on 2012-04-20

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Blue chips gain investor attention in March


Index heavy blue chip stocks gained investor attention during the month. This led the market to incur only minor losses (-0.7% MoM, down 37.89 points) during March compared to heavy losses seen in January (-6.3% MoM) and February (-4.1% MoM). The market has been incurring losses since last August and has lost 10.8% during Jan - March this year. Such sharp losses have now paved the way for the CSE to trade at low multiples, appealing to value and growth investors, in our view. Market attractiveness and certain positive news from the macro front (expectation of the receipt of the next tranche of IMF loan) kept the sentiments alive towards the end of the month. The market traded on thin volumes during the month recording an average daily volume of 30 million, compared to 54 million and 46 million in February and January. Despite lean volumes, the average daily market turnover was recorded at Rs 1.6 billion. However, the figure is inflated by the Rs 16 billion turnover the market witnessed on March 16, on account of JKH deal between the EPF and a Malaysian sovereign wealth fund. Excluding that, the average monthly turnover would have been Rs 873 million for the month. The month saw a net foreign inflow of Rs 18 billion, mainly aided by EPF selling JKH and SPEN stakes to foreign investors. In early March, the SEC ceased listing via 'introduction' in an attempt to curb manipulation. Most of the companies that took a listing through an 'introduction' offered little or no free float, making the shares very illiquid and favourite picks among price manipulators. Access Engineering was oversubscribed 1.5 times at its Initial Public Offering. The company offered 20 million shares at Rs 25 per share to raise Rs 500 million. Mackwood Energy IPO was also oversubscribed on its opening day, drawing applications worth of Rs 400 million. The IPO offered 25 million shares at Rs 14 per share to raise Rs 350 million. The inflation rose 5.5% YoY mainly due to revision in domestic petroleum prices, electricity charges and bus fare in mid February 2012. However, the annual average inflation has come down slightly from 6.1% in February to 5.9% in March.


Crude oil prices


Oil prices surged during the month in tandem with increasing supply side shocks. Geopolitical tension and unplanned outages in non OPEC countries hurt supply of oil.


Rubber prices


Rubber prices sharply edged up during the month, supported by rising oil prices and heavy rains in Malaysia and Hainan region in China, which is China's major rubber producing belt. The Association of Natural Rubber Producing Countries (ANRPC) estimates that global demand for natural rubber to see a muted growth during 2012 because of unexpected heavy rains in plantations in Malaysia and China.


Tourist arrivals


Arrivals for the month of February rose 27.0% YoY. Arrivals from the Western Europe recorded a low growth of 17%, while arrivals from the Eastern Europe recording a growth of 62%The Sri Lankan Tourist Development Authority source says that online visa system and the infrastructure development have positively contributed towards the high arrivals. Arrivals from the UK market were subdued owing to the economic recession and the murder of a British tourist in December. YTD the country has seen arrivals of 169,423, up 29.0% YoY. The International Energy Agency expects global oil demand to grow by 0.9% YoY to 89.9 million of barrels per day (mb/d) in 2012. Downcast global economic outlook and high oil prices are expected to lower demand for energy consumption.


Copper prices


Copper prices further dipped during the month, with China's manufacturing sector slowing down. China is the world's largest red metal consumer. However, as the demand from the US and other major copper consuming countries remains strong, it is expected that copper will see a steady demand.


Tea prices


Tea plantation crop declined notably during March as a result of extremely hot and humid conditions. The crop intake for the month has fallen ~20% to 25%YoY. Meanwhile, regional plantation companies and privately owned tea factories are facing stern cash flow problems as the tea prices are experiencing a slump. Rise in production cost owing to wage hike and recent fuel and electricity charges has also aggravated the situation. However, towards the end of the month low grown tea prices in particular rose in the Colombo Auction owing to strong demand with the rupee.


Bartleet Religare Securities


Reported in Dailynews

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...by i3gconsultants@ 15:04:22 on 2012-04-17

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Sri Lanka regulator aims to lift market's integrity, foreign holdings



COLOMBO, April 11 (Reuters) - Sri Lanka's once-buoyant, now-ailing stock market needs integrity and greater participation by foreigners to grow well, the new director-general of the country's exchange regulator said.Hareendra Dissabandara, who has a Ph.D. in finance from Japan, said the Securities and Exchange Commission (SEC) has to take strong steps to help improve the performance of the Colombo Stock Exchange."We need to introduce a number of changes to increase foreign investors," the 43-year-old Dissabandara, promoted from heading the SEC's education and training division, told Reuters this week in his first interview since becoming director-general on April 2."We have to make possible arrangements to enter into MSCI Emerging Markets Index," he said, adding one of his aims is to double the stake of foreign investors in Colombo's market to 30 percent.


Dissabandara said he knows that much needs to be done before Sri Lanka could fulfil requirements to be part of the MSCI index. Among the needed steps is updating the exchange's payments system, establishing clearing corporations and increasing liquidity. At present, the capitalisation is about 2 trillion rupees ($15.69 billion).In the next few months, Dissabandara said, the SEC expects to come up with a minimum three-year strategic plan for tackling problems that have hurt investor confidence."As the regulator, we have to manage systemic risks, protect investors, especially small and retail investors, and maintain a fair and transparent secondary market trading system," he said.




MARKET'S STAR PERFORMANCE ENDS


In 2009 and 2010, after Sri Lanka's long civil war ended, the Colombo bourse was a star performer. It rose 125 percent in 2009 and another 96 percent the next year.But last year, when there were both economic and market problems, Colombo's benchmark All Share Price Index fell 8.5 percent. And so far in 2012 -- a year when Asian markets have rallied -- it has slumped 11 percent in spite of eased restrictions on broker credit and margin trading.Dissabandara faces "a very challenging task", according to Sriyan Gurusinghe, president of the Colombo Stock Brokers Association, "but since he has been in the market for a reasonable period, I think he should able to resurrect it."Previous attempts by officials to change exchange rules and practices have met stiff resistance from some market players and brokers.Dissabandara's predecessor, Malik Cader, was transferred to the Finance Ministry in November after spearheading steep restrictions on credit, which brokers said hurt their volumes, and leading market manipulation probes that touched politically connected investors.One month later, SEC chairwoman Indrani Sugathadasa quit, saying she did so "to uphold her principles."



'PUMP AND DUMP' SCHEMES


During her tenure, the SEC investigated several cases of share-price manipulation, including "pump and dump" schemes involving previously-illiquid shares, and tightened up the amount of credit brokers could give clients.The SEC moves were criticised by brokers, who said the restrictions damaged sentiment without addressing share manipulation and insider trading.Dissabandara said that for Sri Lanka's exchange, "the issue is how to protect integrity... Protecting the integrity of the market is the responsibility of all the stakeholders... everyone must understand the importance of this."The new SEC executive said he wants to see the Colombo exchange converted into a member-owned entity that itself could be listed.The SEC has planned to introduce a minimum public float, while it is also pushing some big private firms to get listed.Dissabandara said the minimum public float system "will be reviewed soon."



A MALAYSIAN INVESTMENT


Foreigners have been net sellers the past three years, but some foreign funds, approached by the largest state-run pension fund, have helped reverse that to a 21.1 billion rupee inflow so far this year. In the largest deal, Malaysia state investment arm Khazanah Nasional bought 8.9 percent of conglomerate John Keells Holdings for about $120 million in March.The Sri Lankan market is dominated by retail investors who often engage in speculative buying of penny stocks. Local retail investors who have portfolios of less than 1 million rupees (account for around 60 percent of the bourse's volume.The market's forward price-to-earning ratio has fallen to an attractive 10.9 from more than 30 in 2009, according to Thomson Reuters StarMine data.But a small free float, share manipulation and insider trading have caused some foreign investors to look for other frontier markets.


($1 = 127.51 rupees)

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...by i3gconsultants@ 17:04:19 on 2012-04-15

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Sri Lanka regulator aims to lift market's integrity, foreign holdings


Sri Lanka regulator aims to lift market's integrity, foreign holdings
* SEC to set strategic plan to curb manipulation
* Target of doubling foreign stake in market to 30 pct
* Past efforts to curb price-manipulation were stymied
COLOMBO, April 11 (Reuters) - Sri Lanka's once-buoyant, now-ailing stock market needs integrity and greater participation by foreigners to grow well, the new director-general of the country's exchange regulator said.
Hareendra Dissabandara, who has a Ph.D. in finance from Japan, said the Securities and Exchange Commission (SEC) has to take strong steps to help improve the performance of the Colombo Stock Exchange.
"We need to introduce a number of changes to increase foreign investors," the 43-year-old Dissabandara, promoted from heading the SEC's education and training division, told Reuters this week in his first interview since becoming director-general on April 2.
"We have to make possible arrangements to enter into MSCI Emerging Markets Index," he said, adding one of his aims is to double the stake of foreign investors in Colombo's market to 30 percent.
Dissabandara said he knows that much needs to be done before Sri Lanka could fulfil requirements to be part of the MSCI index. Among the needed steps is updating the exchange's payments system, establishing clearing corporations and increasing liquidity. At present, the capitalisation is about 2 trillion rupees ($15.69 billion).
In the next few months, Dissabandara said, the SEC expects to come up with a minimum three-year strategic plan for tackling problems that have hurt investor confidence."As the regulator, we have to manage systemic risks, protect investors, especially small and retail investors, and maintain a fair and transparent secondary market trading system," he said.
MARKET'S STAR PERFORMANCE ENDS

In 2009 and 2010, after Sri Lanka's long civil war ended, the Colombo bourse was a star performer. It rose 125 percent in 2009 and another 96 percent the next year.But last year, when there were both economic and market problems, Colombo's benchmark All Share Price Index fell 8.5 percent. And so far in 2012 -- a year when Asian markets have rallied -- it has slumped 11 percent in spite of eased restrictions on broker credit and margin trading.
Dissabandara faces "a very challenging task", according to Sriyan Gurusinghe, president of the Colombo Stock Brokers Association, "but since he has been in the market for a reasonable period, I think he should able to resurrect it."Previous attempts by officials to change exchange rules and practices have met stiff resistance from some market players and brokers.
Dissabandara's predecessor, Malik Cader, was transferred to the Finance Ministry in November after spearheading steep restrictions on credit, which brokers said hurt their volumes, and leading market manipulation probes that touched politically connected investors.
One month later, SEC chairwoman Indrani Sugathadasa quit, saying she did so "to uphold her principles."

'PUMP AND DUMP' SCHEMES
During her tenure, the SEC investigated several cases of share-price manipulation, including "pump and dump" schemes involving previously-illiquid shares, and tightened up the amount of credit brokers could give clients.The SEC moves were criticised by brokers, who said the restrictions damaged sentiment without addressing share manipulation and insider trading.
Dissabandara said that for Sri Lanka's exchange, "the issue is how to protect integrity... Protecting the integrity of the market is the responsibility of all the stakeholders... everyone must understand the importance of this."The new SEC executive said he wants to see the Colombo exchange converted into a member-owned entity that itself could be listed.The SEC has planned to introduce a minimum public float, while it is also pushing some big private firms to get listed.Dissabandara said the minimum public float system "will be reviewed soon."
A MALAYSIAN INVESTMENT
Foreigners have been net sellers the past three years, but some foreign funds, approached by the largest state-run pension fund, have helped reverse that to a 21.1 billion rupee inflow so far this year. In the largest deal, Malaysia state investment arm Khazanah Nasional bought 8.9 percent of conglomerate John Keells Holdings for about $120 million in March.
The Sri Lankan market is dominated by retail investors who often engage in speculative buying of penny stocks. Local retail investors who have portfolios of less than 1 million rupees (account for around 60 percent of the bourse's volume.
The market's forward price-to-earning ratio has fallen to an attractive 10.9 from more than 30 in 2009, according to Thomson Reuters StarMine data.But a small free float, share manipulation and insider trading have caused some foreign investors to look for other frontier markets.($1 = 127.51 rupees)

Reported in Rueters
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...by i3gconsultants@ 02:04:32 on 2012-04-12

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Mackwoods Energy announces IPO allotments



Mackwoods Energy Limited announced the basis of allotment of its Rs. 350 million IPO, which was oversubscribed on the first day of its opening on March 22.

With a view to maximize investor participation, all the retail investors and the investors who applied upto 3,571,400 shares (approx Rs 50 m) under the non-retail investor category were allotted 100% of the shares applied for, according to the basis of allotment.Investors who applied for more than 3,571,400 shares were allotted a minimum of 3,571,400 shares plus 24.67% of the shares applied for over and above 3,571,400 shares.Based on the Stock Exchange filing, 512 investors have applied for 28,476,100 shares at the IPO and 446 investors under the retail category were allotted 794,800 shares while the balance 24,205,200 shares were allotted to the investors who had applied under the non-retail investor category.The shares of the company will be listed on the Colombo Bourse towards the end of April 2012.The company raised Rs 350 million through the issue of 25 million ordinary voting shares to the public at Rs 14 each, amounting to a 25% stake of the company's, post IPO.

Reported in Dailynews

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...by i3gconsultants@ 06:04:54 on 2012-04-07

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New appointments at SEC


Dr. D B P Hareendra Dissabandara has been appointed as Acting Director General of the SEC with effect from April 2. He was the Professor of Finance at the Faculty of Management Studies and Commerce, University of Sri Jayewardenepura and has been released to the SEC.
The Securities and Exchange Commission of Sri Lanka (SEC) also announced the following appointments.
Commission members:
Sajith R. Attygalle, Deputy Secretary to the Treasury has been appointed as a member of the commission with effect from March 23, 2012. Attygalle will succeed D. Widanagamachchi, Deputy Secretary to the Treasury, who resigned from the Commission on March 23, 2012.

Dr. S. W. Prathiba Mahanamahewa, Dean Faculty of Law, Kotelawela Defence University has been appointed as a member of the Commission with effect from March12, 2012 to succeed C P E Gunasingam, who resigned from the Commission on December 21, 2011.Director Legal and Enforcement Ayanthi Abeyawickrama has been appointed Director Legal and Enforcement with effect from April 02 2012.
Reported in Dailynews
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...by i3gconsultants@ 06:04:29 on 2012-04-07

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SEC issues new directive


The Securities and Exchange Commission has issued a directive stating that all listed companies are prohibited from trading warrants in the secondary market after the initial cut-off date with effect from 2 April 2012.The SEC said that according to the listing rules of the Colombo Stock Exchange, listed companies are required to announce to the market the terms and conditions of warrants at the time of issuing them.The terms and tenure of a warrant are determined by the risk attached to such financial instrument. Therefore, the warrant holders should not be allowed to transfer the risk attached to the terms of such share warrant after the risk event has occurred, by extending the cut-off date. 
Reported in News.lk
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...by i3gconsultants@ 06:04:23 on 2012-04-07

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Mackwoods get 28.4m application for it's IPO


Mackwoods Energy Ltd has received 523 applications for 28.4 million shares worth of nearly LKR 400 million of which 2 applications were through bank guarantees covering nearly 25% of total shares applied for. The Company offered 25million shares at LKR14 on 22nd March 2012. 

i3g Consultants
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...by i3gconsultants@ 15:03:53 on 2012-03-30

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Diversification – Is it the way forward?










Diversification – Is it the way forward?

By Duruthu Edirimuni Chandrasekera

Compared to the late 1970s era of the economy when big companies slowly began diversifying but essentially connected to core operations, today it has changed completely. Now new conglomerates are reaching all over irrespective whether there is expertise in th company or not and becoming ‘seemingly’ successful. But the moot point is – by delving into hitherto in-experienced business lines, are companies – particularly those listed putting their shareholders at risk because the risk is greater in such acquisitions and a longer return on investment or, are they?


Forced to diversify
According to Deshan Pushparajah, Head of Corporate Finance Capital Alliance, conglomerates have historically been significant in Sri Lanka and in frontier markets in general for two specific reasons. One is because frontier market companies generally wouldn't have scale in operations in one business area, hence they diversified into many and some examples are Aitken Spence and John Keells Holdings. "Tourism or plantations weren't big enough on their own. Without being big enough they couldn't make best use of their expertise. Banks wouldn't lend as much to them, etc which is why they were forced to diversify,” he explained.







Conglomerates: Then and now

In the late 1970s when Sri Lanka’s closed economy opened out to the world big companies like John Keells Holdings and Aitken Spence Holdings, etc whose core business were tea and other trades slowly began diversifying into other areas. But the new businesses too were essentially connected to core operations.
Today, some 35 years later, it has changed completely with many firms putting their monies – and some of it publicly raised – into totally, unrelated new businesses. Diversification can put you on the fast track to growth but if the strategy fails it can also burn up your money.


History tells us that it’s not advisable to consider diversification until your core business is steady, stable and secure and profitable. If you’re still struggling to win orders and build a sales time for the core product, there is a real danger that diversification will take your eye of the ball.


There is a range of new and earlier established businesses like LOLC, Laugfs, Raigam, Softlogic, Vallibel, etc whose investments range from financial services, insurance, consumer products, real estate, food, banking, etc. Then there are the old established firms like CIC or Cargills that have newly expanded into core sector-related businesses.


The Business Times spoke to some entrepreneurs, analysts, academics and top CEOs to set straight this record.


The second reason Mr. Pushparajah noted was that there is very little venture capital available in Sri Lanka. “And banks are not willing to lend much to start ups either. Because conglomerates have large balance sheets, they could borrow/ source equity much faster and cheaper for start up ventures,” he noted, adding that some years ago only conglomerates could support fledgling businesses in frontier markets such as Sri Lanka.


However, he also noted that things are changing fast in Sri Lanka. “With operations scaling up, I think in four to five years you are going to see a fast de-conglomerizing (dropping non-core units) of companies. Whilst even in today's context conglomerates make sense, it won't in a few years. Most frontier markets (South Africa is a case in point) have gone through this phase,” he explained. According to him, once competition arrives in core business areas for these groups and volume and scale becomes demanding, they will start shedding non-core business areas. Sattar Kassim, Director Expolanka Group said that diversifying is more to do with economies of scale. “For example just by building one hotel the economies of scale won’t be achieved. The real scale will come only by managing hotels and increasing the room capacity," he said. He added that today is a specialist world where in the long run haphazard diversification won’t be a sustainable model.” One day they’ll be forced to scale down and divest the particular business or really go up the ladder and get proper economies of scale,” he added. Mr. Pushparajah noted that early conglomerates have subscribed to this thought and have slowly started shedding non-core businesses.A business analyst noted that one can diversify his/ her business by natural progression. For instance, if you sell men’s shirts, adding ties and cufflinks to the range are an obvious next step. More radically, you extend the brand by offering a much wider range of products that will nonetheless appeal to the same customers. Alternatively, you can use the strength of a brand to move into new markets.
According to a researcher on capital markets, stock prices track productivity of firms and this tracking is equally strong for diversified and stand-alone firms.


Conglomerates don’t add value
He also highlighted that on a long term basis, conglomerates don't add much value to shareholders and in most instances they tend to destroy value. He added that this is especially so when firms diversify into business areas totally foreign to their own.“It is true that expertise can be bought, so can businesses and track records, but they will (a) come at a steep price and (b) would take on capital which could have been more effectively used by reinvesting in one's own core business,” he stressed. What isn’t a moot point is that while expertise could be there, focus may not. This is why Mr. Pushparajah noted that shareholders stand a great chance of losing value when a firm diversifies without focus. The new age conglomerates, he added seem to be building empires instead of adding value to shareholders.


As far as risk goes - there is risk added on two fronts. The first is in terms of business risk. As much needed capital for core operations could be identified for a non-related venture, Mr. Pushparajah stressed that this is also putting the company at risk of competition and falling behind.
Second, most of the new age conglomerates are leveraged buyers. “Huge amounts of leverage could enhance return for shareholders, but also put shareholders at much greater risk. Hence the risk premium attached to the business should be much more. This is what rating agencies are warning against,” he highlighted.


On the longer term, he added that markets and investors would rationalize towards shareholders diversification viz a viz conglomerates. “This is always a much better way of diversifying risks and returns.”







Tea brokers like John Keells have diversified into other businesses.

The chairman of a heavily diversified firm, who declined to be named, stressed that a businessman in a diversification attempt has to look at what the growth sectors of the economy are during both medium and long term and align them to the growth sectors of the country.


“During this medium and long term cash flows of those growth sectors and their capital gains need to be considered. Cash flows in the short term can be mediocre, but capital gains can be exceptional and vice versa. After aligning the identified business to the country’s growth sector, one must examine whether the company possesses the internal competencies to venture into the particular business. "This follows an acquisition of a related business or starting afresh,” he explained.


Selective diversification
Nirmali Samaratunga, Co-Chairman Mackwoods Ltd noted that from Mackwoods’ experience diversification has been sustainable. "In the case of Mackwoods, with our long business experience we have, over the years strategically followed a business approach of continuously developing our core business areas whilst selectively diversifying into new businesses which primarily relate to our core domain and expertise," she explained.


She noted that this has enabled Mackwoods to create value and selectively spread the business risk whilst harnessing both institutional memory and also maintaining lean overhead costs, whilst leveraging on the broad existing knowledge base.


“This is exemplified by our theme 'tradition with vision'. This model has proved to be strong and sustainable and has worked for us,” she stressed.
In the case of new businesses’ diversification, Ms. Samaratunga noted that there's no definite 'yes' or "no' answer regarding the ability to succeed and whether this is a sustainable business model. “I feel it is subjective, dependant largely on that individual company or group's ability to undertake such diversification into unrelated lines, to ensure long term success and sustainability.


Whilst long years in the business and the accompanying reputation, trust, resilience and synergies with the existing businesses, certainly is an advantage and is an index of sustainability, still if the new business was to approach diversification in an informed manner and with an objective approach and taking a long term view of the sector it is entering, then there is no reason why they should not succeed. Many new companies have shown their ability to strongly succeed through such diversification, as is evident if one looks around.


I would (also) say the risk is not greater nor the return on investment less, provided the right approach and required conditions for success are in place and diversification is aimed at creation of value and the long term sustainability of the business. It's spreading one’s risks. We are into selective diversification into other areas. We were leveraging on our existing strengths," she explained, adding that Mackwoods always went for selective diversification in areas where they saw definite potential.


Winning strategy
Diversification, according to Dr. Ravi Liyanage, Chairman Raigam Group which has diversified during the past two years considerably said that it is a winning strategy. "It'll work if is implemented meaningfully, but not as a herd instinct or because it's the ‘in thing’.


As an academic and also as a CEO using public funds, my recommendation and also my practice in diversification decisions necessarily follow a mix of theoretical and practical formulae,” he said, explaining that fundamental in a diversification formula is the products or business units which have to be analyzed in terms of their position in the product life cycle (introduction, growth, maturity, decline) and market share plus growth momentum (BCG analysis; stars, cash cows, dogs, question marks).


With this analysis, how to go about the diversification process could be theoretically figured out. “For an example while retaining cash cows its excess cash generation could be considered for diversification, due to the fact that further investment in cash cow industry (cash inflows) is pointless as its growth potential is low,” he explained.


He also noted that when considering related diversification, that cash could be invested in good ventures which will be next cash cows. But Dr. Liyanage agreed that there are instances in the Sri Lankan context, where large businesses / conglomerates suddenly collapse due to ignoring fundamentals in diversification. “Especially once companies raise funds from the public, those are used in a wild way or as a passion for new investments / industries where management is not knowledgeable about the basic fundamentals of those businesses. They do trial and error while losing focus or sacrificing their core businesses. These new investments are ‘question marks’, it is really questionable whether it will work or not,” he explained.


Copy cats
He stressed that diversification as a 'copying others' strategy is a business model deserved for short-sight business people. “Any businessman who value sustainability of his business will never go in for such a wrong-diversification model," he added.


Prof. Uditha Liyanage, Director Postgraduate Institute of Management, noted that diversification is a matter of becoming opportunistic or sticking to one's core business. While noting that all entrepreneurs have great growth expectations, he said that the emotional factor of becoming 'big' plays an even bigger role in their diversification attempts. "With a single business, their growth potential is limited. Sri Lanka is a small country and for many businesses, the markets are small. So a single business doesn’t give those adequate numbers. In their core business the projected numbers are small, which is why they go into non-core areas.”


Prof. Liyanage noted that non-core areas come with two facets -opportunity for growth and the capability. “There should be a good fit of both these facets. What could typically happen is that they may see growth, but they won’t ask whether they possess the requisite competencies and capabilities,” he said. For instance, he noted that the tourism sector is a growth sector, but no one asks where exactly the growth is.


“One cannot work on a generalization that tourism is a growth sector,” he added, saying that getting into any sector shouldn’t be a knee-jerk reaction as invariably those businesses won’t sustain or they’ll be spreading themselves thin.


He added that when identifying an opportunity a company has to back it by getting in the relevant competencies. There’re also emotional reasons because being big is a good feeling. "The society expects them to grow their businesses and create jobs. If this sentiment overrides, it becomes dangerous. It’s important to separate each business unit and make them accountable for each of their businesses," Prof. Liyanage said.


Nishan Sumanadheera, CEO Frontier Capital Partners noted that in business, growth can be achieved in many different ways and that organic and inorganic growth is considered two of the key methods.


Organic growth is painful
"Organic growth is painful and time consuming process which requires considerable amount of time and effort. This is what most companies in the early 70's were engaged in, starting new business that compliment with their core business and tirelessly building bridges between businesses. But today’s business managers have a more dynamic and fast way to growth or conglomeration. This is via mergers and acquisition of well run businesses through capital market activities,” he explained. Although this method can be considered as an easy way to the top, today’s business managers have the more challenging task of identifying businesses opportunities that may bring synergies with its existing business in a more complex macro economic environment, according to Mr. Sumanadheera.
“Currently we see, hospital owning companies acquiring insurance companies, financial conglomerates diversifying into hotels and media but common justification for most acquisitions are often been stated as the growth potential of the specific sector as against the corporate synergies.” He added that sectoral diversification is good but it should come at the correct time. "Diversification should happen only after integration and consolidation of the exiting core businesses. It is difficult for a business to grow in the long run unless acquisition is planned in a way that would compliment the overall business position of the acquirer across all its businesses regardless of the sector.”

Reported in Sundaytimes ......

...by i3gconsultants@ 13:03:56 on 2012-03-25

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Sri Lanka corporate earnings growth seen losing steam



Sri Lanka corporate earnings growth seen losing steam

Mar 24, 2012 (LBO) - Double-digit earnings growth among listed companies in a post-war economic boom in Sri Lanka appears to have ended according to the latest quarterly figures, a report by a stock brokerage said. Earnings growth was led by the financial services sector with the health care sector also posting good growth, Lanka Securities said in its quarterly earnings review for the December 2011 quarter. "Having recorded double digit earnings growth for back-to-back quarters, listed companies in the Colombo Stock Exchange were unable to continue the same mind-blowing pace in earnings growth for 4QFY2011," it said. "Earnings for the quarter were 43.7 billion rupees (including non-recurring items) with an underwhelming growth of 6.5 percent year-on-year."  But annual earnings in the 2011 calendar year increased sharply by 21.0 percent from the year before "owing to the impeccable profit growth recorded by the preceding quarters."  In addition, on a quarterly basis earnings were up by 13.1 percent, quarter-onquarter.  The brokerage said the earnings growth meant a compounded annual growth rate of 19.5 percent for the post-war period starting from the second quarter of the 2009 financial year.  Sri Lanka's 30-year ethnic war ended in May 2009, sparking an economic boom that included a sharp revival in tourism as well as consumer spending.  Historically, Lanka Securities said, the fourth quarter of the calendar year is the strongest in terms of earnings especially due to companies in the financial services booking high profits during this quarter.  The report covered 261 companies out of which 36 companies did not release financial data for the fourth quarter of 2011 as they are listed under the 'Diri Savi' second board in which companies publish earnings only on a six months basis. Most of the companies that came to the market through initial public offers and listing by introduction during the post-war period listed on the Diri Savi Board. "Despite consumer goods and utilities sectors ending up in the negative growth territory all other sectors recorded vigorous bottom line growth," the report said. "Financial services sector recorded an imposing earnings growth (of 24.4 percent from a year ago) being the highest contributor (at 37.0 percent) to the sector earnings," Lanka Securities said.  "Industrials sector barely touched the green zone with a marginal 0.9 percent year-on-year improvement in profits. "Diversified holdings subsector failed to generate a significant growth (with only 3.8 percent year-on-year growth) in earnings while industrial goods and services subsector pulled down sector earnings." Industrials contributed 26.0 percent of the sector earnings regardless of having a slightly lower contribution of 23.0 percent to market capitalization. The consumer goods sector which encompasses 33.0 percent of the market capitalization delivered only 25.0 percent of the sector earnings while profits shrank 8.7 percent from the year before. The food and beverage sub sector profits crashed 18.7 percent on account of a disappointing performance by plantations and alcohol producers, the report said. Profits of utilities fell 7.3 percent given the slide in profits recorded specially by the electricity subsector. "The healthcare sector (with profits up 62.7 percent) emerged from the pack as the top gainer on a year-on-year basis irrespective of a much lower contribution to both sector earnings and market capitalization," the report said. Hotels had a strong quarter, with profits up 33.5 percent, due to the peak tourist arrivals recorded during the quarter.

 

Reported in LBO
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...by i3gconsultants@ 18:03:12 on 2012-03-24

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Mackwoods Energy IPO opens


Mackwoods Energy IPO opens
Mackwoods Energy Ltd, a member of the Mackwoods Group launched the Initial Public Offering (IPO) of Rs 350m. The company through the IPO is offering 25 m ordinary voting shares to the public at Rs 14 each and will amount to a 25 percent stake in the company. The shares would be listed on the main board of the Colombo Stock Exchange.
The issue will open on March 22 and the minimum subscription amount would be Rs 7,000 or 500 shares .
The financial advisors and managers to the issue are NDB Investment Bank and the registrars are SSP Corporate Services Ltd.
Co-Chairman Mackwoods Group Nirmali Samaratunga said that recognising the power sector as an essential driver of socio economic development of the country the group strategically focused on this sector through the subsidiary Mackwoods Energy Ltd .

"Our aim is to harness available sources of energy particularly renewable energy and contribute to meet the growing energy need of the country through the provision of cost effective energy solutions.
The company already provides thermal energy solutions and the IPO will enable the company to broadbase its present operations into power plants, marine power generators and marine engines and expand its activities in the renewable energy sector through several small hydro power projects as well as other non conventional renewable energy projects in wind and solar energy.
The proceeds of the IPO will be used to finance the working capital requirements of the core business of providing thermal power solutions as well as to finance the diversification into small hydro projects through construction rehabilitation and upgrading of the small hydro projects and to finance the future expansion plans by way of new products and services.
Reported in Sundayobserver
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...by i3gconsultants@ 09:03:29 on 2012-03-18

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Access announces IPO allotment basis


Access announces IPO allotment basis
Access Engineering Limited announced the basis of allotment of its Rs. 500 million IPO which was oversubscribed within few hours of its opening on March 6, 2012.
According to the basis of allotment, all the retail investors and the investors who applied up to Rs. 10 million (400,000 shares) under the non-retail investor category were allotted 100% of the shares applied. Access Engineering raised Rs. 4.5 billion in June 2011 through an issue of shares where the minimum investment was Rs. 10 million. Investors who applied for shares above 400,000 and up to and inclusive of 1,000,000 were allotted 90.53% of the shares applied whilst all other investors who applied for more than 1,000,000 shares were allotted 1,000,000 shares each.
"The maximum limit on allotment for large investors was with a view to broad base our shareholding through full allotment being given to small and medium scale investors, since large investors at the Private Placement got the full allotment in accordance with the shares they applied for," the Chairman of Access Engineering, Sumal Perera said.
Based on the Stock Exchange filing, 942 investors have applied for 30,644,400 shares at the IPO and 802 investors under the retail investor category were allotted 909,200 shares whilst the balance 19,090,800 shares were allotted to investors who had applied under the non-retail investor category. The shares of the company are expected to be listed on the Colombo Bourse towards the end of March 2012.The company raised Rs. 500 million through the issue of 20 million ordinary voting shares to the public at Rs. 25 each, amounting to a 2% stake of the company, post IPO. 
The funds raised will be used to partly finance the working capital requirements of a housing project to the value of Rs. 3 billion undertaken by the company on behalf of UDA.
Access Engineering is now the first construction company pioneered by Sri Lankan entrepreneurs to be listed on the Colombo Stock Exchange (CSE) and would be within the top 20 corporates listed in terms of market capitalization at the share issue price of Rs. 25/- per share.

Reported in Dailynews
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...by i3gconsultants@ 09:03:53 on 2012-03-18

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Khazanah buys Sri Lanka Keells stake for $120 mln


(Reuters) - Malaysia's state investment arm, Khazanah Nasional, has taken an 8.8 percent stake in top Sri Lanka conglomerate John Keells Holdings for about $120 million, three sources said on Friday, in line with Sri Lankan efforts to boost foreign investment in stocks.

The main seller was the island nation's largest pension fund, the Employee's Provident Fund (EPF), which is managed by the central bank, two central bank officials said on condition of anonymity.

Ajith Nivard Cabraal, the central bank governor, confirmed the bank had taken steps consistent with it efforts to boost foreign investment in the country's share market, but declined to give details.

The central bank has targetted a $500 million net inflow into the share market this year, after outflows of $168 million in 2011 and $240 million the year before. Foreign buyers had invested a net $25.7 million so far this year before the Keells sale.

Khazanah acquired 74 million shares in Keells in 29 block deals for about $120 million, the sources with direct knowledge of the deal said.

Keells shares were down 0.2 percent at 0620 GMT, but the trades boosted wider investor sentiment on the Colombo bourse and took turnover to its highest level since April 1, 2008.

The country's main stock market index soared after the end of a 25-year civil war in mid-2009 but has performed poorly this year, down 10.4 percent against a 13.6 percent gain for MSCI's Asia Pacific ex-Japan index.

Foreign investors still see the market as overheated, and have also been discouraged from investing by lack of liquidity, insider trading, and market manipulation, mainly driven by local retail investors, analysts say.
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...by i3gconsultants@ 19:03:41 on 2012-03-16

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Access IPO oversubscribed









The Initial Public Offer (IPO) of Access Engineering has been oversubscribed and will be closed at 4.30 pm today, the Managers to the Issue said.
 Access Engineering offered 20 million ordinary shares, each at Rs.25 to raise Rs.500 million from the public.



The shares will be listed on the Diri Savi Board of the Colombo Stock Exchange.

Reported in Dailymirror


 

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...by i3gconsultants@ 17:03:06 on 2012-03-06

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SEC investor day in Batticaloa


SEC investor day in Batticaloa


The Securities and Exchange Commission (SEC) of Sri Lanka is committed to impart capital market knowledge and build awareness across all sections of the society in its endeavor to develop the capital market in Sri Lanka. The SEC in association with the Batticaloa District Chamber of Commerce, Industry and Agriculture has organized an 'Investor Day' an educational workshop' on Saturday March, 3 9.30 a.m. to 1.30 p.m at the Thevanayagam Hall in Batticaloa. The 'Investor Day' will feature prominent professionals from the securities industry, who will address the gathering on a wide spectrum of topics ranging from basics of investing in the stock market, salient features of the stock market, risks and return in investing and investing in Unit Trusts. The lectures will be conducted to suit a diverse audience.


Dailynews

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...by i3gconsultants@ 12:03:32 on 2012-03-03

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Mackwoods Energy to be listed on CSE Main Board


Mackwoods Energy to be listed on CSE Main Board


Mackwoods Energy Ltd (MEL), a member of the Mackwoods Group, received approval to list on the Main Board for their Initial Public Offer (IPO) with an offer for subscription of 25 million ordinary shares at Rs.14 each. The official opening of the IPO is scheduled for 22nd March and the prospectus would be delivered to Member Firms/Trading Members of the CSE on 8th March 2012. Financial Advisor and Managers to the issue is the NDB Investment Bank Ltd, and Registrars to the issue is SSP Corporate Services (Pvt) Ltd. Mackwoods Group, having commenced its operations in the energy solutions business in 1996, and catering to the demands of a variety of sectors of the economy, thereafter, in 2008, brought its activities under a common identity through MEL, which previously functioned as Mackwoods Engineering (Pvt) Limited. This was aimed at harnessing, at an optimum level, the growing opportunities in the area of power and energy, and for greater specialisation in the sector. The advent of peace in 2009 accompanied by the strong growth in the economy and the emerging potential presented by the far reaching national infrastructure development programme, particularly in the North and East regions of the country, led to MEL repositioning itself as a total energy solutions provider of an extensive array of products and services including the development of hydropower and renewable energy projects, to enable the Company to be a significant player in the sector, leading to focused growth and expansion of the business.


Reported in Dailynews

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...by i3gconsultants@ 13:02:17 on 2012-02-25

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What foreigners see, locals don’t!


Goldman Sachs fund buys Rs. 1 b worth of COMBank shares
Year to date net foreign inflow healthy at Rs. 1.76 b
As Daily FT has been emphasising the redeeming feature of Colombo Bourse is the continued foreign investor interest.
On Friday net foreign buying topped Rs. 600 million bringing the year to date total to Rs. 1.76 billion, a record level for the past three years.
Friday’s inflow was on account of Rs. 1 billion investment by Goldman Sachs funds in to Commercial Bank.  Bulk of the selling from the 10.6 million shares in total was SBI Venture Holding whilst Captains had shed some stake as well. Commercial Bank saw its foreign holding increase by 8 million shares last week.
What…
Interest by Goldman Sachs funds is midst premier blue chips JKH continuously being favoured by foreign investors. Recently a JP Morgan fund bought into Expolanka Holdings whilst in recent weeks among other stocks which had elicited non-national interests were CTC, Tokyo Cement, Softlogic Holdings, DIMO, Aitken Spence, and Chevron Lubricants.
Asia Wealth Management last week said the current exchange rate is very much attractive to potential foreign investors to enter the market. “We observed foreigners being positively responding to this stimulus, and a continuation of this would lead fresh capital flowing to the market. But we strongly believe that stability in the economic policies is vital to retain investor’s confidence,” Asia added.
reported on DailyFT
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...by i3gconsultants@ 17:02:48 on 2012-02-21

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Market rebounds from new low


Market rebounds from new low


Hayleys MGT recorded the highest price decline of the week, closing at Rs 13.60 to represent a 32.67% price decrease. Softlogic Capital Ltd followed suit, declining 31.82% week-on-week to close at Rs 16.50. Mercantile Shipping Company Plc closed down 30.43% from last week's Rs 235.00 to close at Rs 163.50. AMF Company Ltd and CDIC, were also amongst the top price losers, losing 29.27% and 27.01%, respectively. Foreign participation in the bourse this week recorded a net inflow of Rs 1.17 billion as against last week's net sales position of Rs 285.56 million.


Total foreign purchases increased by over 200% to Rs 2.78 billion from Rs 918.61 million recorded last week. The daily average net buying position amounted to Rs 233.07 million compared to last week's daily average net selling position of Rs 95.19 million. Blue Diamonds (NV) topped the volume list accounting for 7.05% or 28.82 million shares of the week's aggregate share volume. Commercial Bank of Ceylon Plc contributed 5.91% (24.19 million shares) to the market's total share volume. Both indices closed the week on a negative note with the ASPI losing 31.82 points (down 0.60%) and the MPI losing 77.71 points (down 1.68%). The ASPI closed at 5285.17 and the MPI closed at 4549.43.


The daily average turnover value for the week was Rs 1.73 billion, a 68.66% increase relative to last week's value of Rs 1.03 billion. Commercial Bank of Ceylon Plc, JKH and Lanka Milk Foods Plc together contributed 39.91% to the week's aggregate turnover value. Market capitalization however, declined marginally by 0.45% during the week to Rs 1937.72 billion. Over the week, the Banking and Finance sector contributed the most to total market turnover value, accounting for 43.79% or Rs 3.79 billion. The Diversified sector trailed behind contributing 16.81% or Rs 1.45 billion to the market; the Beverage Food and Tobacco sector meanwhile accounted for 9.09% of total market turnover, a contribution of Rs 786.08 million. Weekly turnover volume for the week was once again dominated by the Banking and Finance sector with the sector accounting for 32.43% (or 132.67 million shares) of the market's total share volume. The Manufacturing sector trailed behind with 65.08 million shares changing hands to represent a 15.91% share of total turnover volume. The Diversified sector meanwhile accounted for 13.76% or Rs 56.27 million of weekly turnover volume. The week's top price gainers list was led by debutant Agstar Fertilizer Ltd, with the non-voting share increasing 150.00% from its reference price of Rs 6.00. Agstar Fertilizer Ltd's voting share meanwhile gained 93.33% from its reference price of Rs 9.00 to close at Rs 17.40. Lanka IOC too was amongst the top gainers, increasing 32.45% over the week to close at Rs 20.00. ACME and Huejay International Investments Plc were also among the week's price gainers with share prices recording gains of 24.41% and 21.42% respectively.


Point of view


Volatility pre-dominated over the week, with the main Index falling to a new low since January 2011. Co-incidentally, and in stark contrast to a year-ago when it hit an all-time high, the Index fell to 5009 on February 14 as margin calls, FX volatility and fuel price hike induced inflationary fears dulled sentiment. Foreign inflows and local institutional buying however propped up turnover levels with foreigners remaining net buyers for five consecutive days.We expect speculative counters to dominate the week ahead but anticipate interest in fundamental counters gathering steam. With corporate earnings thus far being robust (approximately 50% of the corporates reporting earnings this week recorded Y-o-Y growth) we expect retail sentiment too to be positive in the week ahead.


Acuity Stockbrokers Research / Sri Lanka Equities Weekly Market


Reported in Dailynews

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...by i3gconsultants@ 12:02:47 on 2012-02-20

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Sri Lanka May Remove Stock Trading Limits, Exchange Chief Sellahewa Says


Sri Lanka may remove a 10 percent price trading limit on some stocks listed on the Colombo Stock Exchange, according to its chief executive officer.
The bourse planned to introduce a “transparent, Sri Lanka- centric” volatility management mechanism, CEO Surekha Sellahewa said by phone today, without giving a timeframe.
Stocks identified using a formula designed by the exchange are restricted from rising or falling more than 10 percent from their previous closing levels. The Securities and Exchange Commission of Sri Lanka imposed the price caps in September 2010 to curb speculative trading following the end of a civil war against Tamil rebels in 2009. The Colombo All-Share Index surged 125 percent that year and 96 percent in 2010.
“We have recommended to the Securities and Exchange Commission that it can go off if broker credit is managed,” Sellahewa said. “It was brought in at a time when market volatility was out of control.”
The Colombo gauge has slumped 13 percent in 2012, the most among 93 major gauges tracked by Bloomberg, as the central bank raised interest rates, while the government scrapped a currency trading band against the dollar to help preserve its foreign- exchange reserves. The government also raised petroleum prices last weekend, fanning speculation inflation will quicken.

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...by i3gconsultants@ 08:02:09 on 2012-02-17

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EPF on a buying spree


EPF, which returned to the market on Monday, was most active yesterday as well.
It picked up available quantities of JKH, Bukit Darah, Carsons, Dialog, CT Holdings, Cargills, Asian Hotels, CIC Holdings and LOLC among others, whilst ETF too remained active collecting select stocks, which it has done in recent weeks.
Some analysts said that if EPF’s intention was to give confidence to the market by buying blue chips on long-term value, then a more concerted buying role by active State funds would have been the best course.
Some viewed EPF’s return from Monday onwards as being too late to whip up positive sentiments.
It was not only EPF and ETF but several private sector institutional investors as well who were also active on the buying side, collecting good stocks. Analysts viewed this as a welcome sign as inertia on the part of local institutional investors despite sound macro fundamentals had been cited as a cause for the worsening performance of the Colombo Bourse.
reported on DailyFT
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...by i3gconsultants@ 12:02:21 on 2012-02-15

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Foreigners step up buying in a market full of local blood


The world’s worst performing Colombo Bourse’s redeemer is the continuing net foreign inflow for the fourth consecutive day.
Yesterday’s inflow was Rs. 468 million, bringing the total up to to Rs. 1.1 billion.
Among favourites of foreigners were premier blue chip JKH, Commercial Bank, CTC, Tokyo Cement and Expolanka.
Yesterday Commercial Bank was the hot favourite of foreign investors as non-national shareholding rose by 2.5 million shares. Among foreign buyers were US fund Ruffer which had bought 10 million shares. Overall 11.1 million shares of Commercial traded for Rs. 1.19 billion.
Majority of the selling came from SBI Ven Holdings.
Captains also sold some big blocks of Commercial yesterday and Monday midst buying of Sampath Bank, HNB and NDB shares yesterday whilst they traded heavily on JKH.
Bulk of 2 million shares of JKH traded for Rs. 317 million was also bought by foreigners with many locals among sellers.
reported on DailyFT
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...by i3gconsultants@ 12:02:21 on 2012-02-15

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SEC to tighten private placement rules


Tight rules governing private placements (PP) are being considered by the Securities & Exchange Commission (SEC) including a suggestion that such investors can sell their stock only a year after a connected Initial Public Offering (IPO) is floated, the SEC chief said.

Along with this the beleaguered institution is also strengthening its investigation arm to expand its probe against market manipulators and insider traders and restore public confidence. "We have to tighten the PP regulations. My personal opinion, which is also one suggestion is to permit PP investors sell their stock a year after a connected IPO comes to the share market," Tilak Karunaratne, Chairman SEC told the Business Times in an interview.

Current rules governing the PP say that the shares allotted on private placement shall be locked-in for a period of one year from the date of allotment of such shares. Mr. Karunaratne added that a company's PP should be imposed a lock in period from the date the firm goes public, which will prevent it's share price from falling after trading on the Colombo Stock Exchange (CSE). "This way the retailers are protected," he added.

Last year several small retailers burnt their fingers when IPOs came into the market - not realizing there had been a PP earlier (at a lower than IPO price). When trading opened after the IPO float, almost all these stocks fell below the IPO price as PP investors made a killing, an issue that was consistently raised by the Business Times on the unfairness of the system.

Mr Karunaratne also noted that SEC's investigations unit needs a lot of strengthening. "We need more staff at investigations as there are a lot of investigations which are ongoing and many more to be started. Therefore we need to strengthen the investigations directorate," he noted.

reported on SundayTimes

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...by i3gconsultants@ 12:02:52 on 2012-02-13

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Sri Lanka good place to invest - IESC, Vice President


Sri Lanka is a good place to invest as returns on investments are high compared to the United States said International Executive Services Corp (IESC) of USA Vice President Charles Conconi at a ceremony to ink a partnership between IESC and the American Chamber of Commerce (AmCham) to promote foreign direct investment from USA.  He said Sri Lanka’s infrastructure development is conducive to invest and added that IESC will encourage US businessmen to invest in Sri Lanka. Foreign direct investment inflows exceeded its target of$ 1b last year as there was an influx of investment in the tourism sector.


The FDI reached $ 1.07 b by December 2011 and the Government targets $1.75 b investments this year. Sri Lanka received 236 million US dollars in foreign direct investments in the first quarter of 2011. Tourism apparels and the IT sector were among the key contribution to the growth. Conconi said the new initiative will help Western economies to focus on Asian supply chains which have expanded operations due to the global demand. The landmark agreement will boost US FDIs to Sri Lanka which are vital to enhance productivity and economic growth. IESC is a loan originator for the Enterprise Development (EDN) , a program sponsored by the Overseas Private Investment Corporation (OPIC), an agency of the United States government. OPIC works with the US private sector and helps businesses to gain a foothold, in emerging markets catalysing revenues, jobs and growth opportunities in countries. AmCham President Vijaya Ratnayake said that the critical challenge for Sri Lanka is to increase FDIs to boost productivity and economic development. “Sri Lanka is targeting an eight percent economic growth rate this year for which an investment growth of 35 percent of the GDP is essential”, Ratnayake said. The economic growth forecast of 8.3 percent this year was lowered to 8 percent given the slow global economic growth expected this year.


OPIC provides investors with financing, guarantees, political risk insurance and support for private equity investment funds. The Corporation will finance up to US$ 250 million for projects in Sri Lanka. Ratnayake said the SME sector will be a key beneficiary of the partnership. Political risk insurance for currency iinconvertibility expropriation and political violence for assets and business income are some of the services offered by OPIC.


Sundayobserver


 

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...by i3gconsultants@ 12:02:27 on 2012-02-05

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Sri Lanka allows foreign firms to lend to equity investors


Feb 2 (Reuters) - Sri Lanka on Thursday allowed foreign-owned companies registered by the Securities and Exchange Commission (SEC) to lend money to investors in the island nation's stock market, the central bank said on Thursday.
The bank's decision comes after the Colombo Stock Brokers Association in December made that request to President Mahinda Rajapaksa, to help boost flagging trading.

"This move would help develop the business of margin providing, and also increase market activity by improving the access to finance for investors," the central bank said in a statement.

Reuters
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...by i3gconsultants@ 08:02:04 on 2012-02-03

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Foreign companies allowed to operate as Margin Providers


The Central bank yesterday (Feb. 02) announced that it would permit foreign owned companies which are registered with the Securities and Exchange Commission of Sri Lanka as Margin Providers, to engage in the business of provision of credit to investors of the Colombo Stock Exchange.

"The Central Bank is of the view that this move would help develop the business of margin providing, and also increase market activity by improving the access to finance for investors," the Central Bank said.
reported on The Island
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...by i3gconsultants@ 07:02:44 on 2012-02-03

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Large SL companies strong enough, says S&P


S&P report says rated South Asia firms can endure turbulence

Feb 01 - Large companies in India, Pakistan, and Sri Lanka are strong enough to withstand the effects of a slowdown in demand and a rise in input costs and country risks. Nevertheless, the credit quality of a large number of their smaller peers is likely to deteriorate. That is according to a report, titled "Increased Country Risk And Reduced Demand To Test Most South Asia Companies In 2012," that Standard & Poor's Ratings Services published today.

"The outlook on most of the companies that we rate in South Asia is stable. These companies are generally large in their respective markets and have diversified operations, experienced managements, and strong financial resources. This should help them sustain their credit profiles," said Standard & Poor's credit analyst Mehul Sukkawala.

Nevertheless, South Asia companies are vulnerable to any further weakening in domestic demand in 2012. That's because their respective governments have limited capability to provide a fiscal boost in the face of a domestic or global crisis.

The report notes that country risk continues to play an important role in the credit profile of companies in South Asia. The risk has increased in India and Pakistan in the past two years. The rise in risk in India is due to a perceived increase in corruption and uncertainty in policies. Political turmoil and an energy crisis have raised country risk in Pakistan. Such risks make it harder for companies to manage their cash flows, form long-term strategies, and proceed with investment plans.

In India, the government is engaging with the industry to address policy issues, but we have yet to see any significant positive actions.

"We expect new capital expenditure commitments to continue to slow down in South Asia, with the exception of Sri Lanka. The slowdown is most intense for projects in the electric utilities, and metals and mining sectors," said Mr. Sukkawala.

We anticipate that liquidity for companies we rate in the region will remain adequate to strong because of companies' large cash balances, strong banking relationships, and access to capital.

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...by i3gconsultants@ 14:02:26 on 2012-02-02

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Five billion rupee quick fix can’t help the bourse


The additional Rs. 5 billion than was infused to the stock exchange, after the Securities and Exchange Commission (SEC) relaxed broker credit restrictions, failed to lift the bourse despite an early morning rally with brokers warning that there was a much bigger problem to deal with.

"The SEC had taken its time to revise the broker credit restriction while most broker firms clamoured for an early relaxation, griping that it was hurting sentiment at the Colombo Stock Exchange resulting in the slump that we saw. But the SEC realised there was a bigger problem and the relaxation announced on Monday may have been a move to placate the nagging market. After, the performance of the CSE on Tuesday, regulators maybe saying ‘we told you so’," a market analyst told The Island Financial Review.

Meanwhile, a broker firm that had earlier said relaxing broker credit restrictions may not help much and that other capital sources may have to be tapped, said reality set in twenty minutes into the opening of the day’s trading session and that the problem was much deeper.

"The most anticipated announcement hit the market Tuesday morning and both indices had their quick fix for about 20 minutes and slowly came back to reality within the hour," Bartleet Religare Securities (BRS) said.

"This is a clear indication of the amount of selling pressure that persists in the market. What will the key stakeholders now do to kick start the system? Clearly a quick fix wont work as the problem is much deeper than a few billion rupees," it said.

"AAF continued its stunning run as most market participants jumped in and out to make quick profits. We are currently unsure of the market direction and unable to forecast any stocks to watch for. We advise clients to stay in cash as the probability of a move up is very low.

Technically the ASPI has clear resistance at 6,030 and support is at 5,850. We could see the index now fall back to support unless we see a speculator or two take control of a stock or two which hopefully will help the index trade within its range," BRS said.
reported on The Island
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...by i3gconsultants@ 10:01:01 on 2012-01-18

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Foreigners were buying Renuka Agri,Dunamis Capital, Chevron and Colombo Land


During Last 3 consecutive trading days. foreigners were actively buying Renuka Agri, Dunamis Captial, Chevron, Colombo land, HAV foods and Hapugastanne Plantations. More details, please refer our daily report " foreign trading highlights" on 17/01/2012.

i3g Analyst Team
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...by i3gconsultants@ 09:01:21 on 2012-01-18

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Broker credit ruling next Monday


Capital market watchdog the Securities and Exchange Commission of Sri Lanka (SEC) said it would make a final decision on allowing brokers to extend credit to their clients next Monday (Jan. 16).

"At the 294th Commission Meeting of the Securities and Exchange Commission of Sri Lanka held on Wednesday (Jan. 12), the Commission Members discussed the subject with regard to extension of credit by Stock Broker Firms and decided to take a final decision on Monday 16th January 2012," a brief statement issued by the Commission said.

There was no word as to the appointment of the next Director General, but sources said the selection process, handled by SEC Chairman Tilak Karunaratne, was ongoing.

"We are made to wait a while longer for the credit extension ruling, but on more serious issues such as the direction and intensity the regulator would take on market irregularities, we would probably have to wait a while longer until the Director Generalpost is filled," a broker said.
reported on The Island
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...by i3gconsultants@ 14:01:48 on 2012-01-12

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Race for SEC DG down to three


*Commission meets today to deliberate on price bands, broker credit and DG post

The Commission Members of the country’s capital markets watchdog, the Securities and Exchange Commission, are expected to meet today to deliberate on the price bands and credit restrictions plaguing the exchange and also to appoint the next Director General, with three names being shortlisted for the post.

The three-pronged race is between the SEC’s incumbent Director Training, Dr. D. B. P. H. Dissa Bandara, Attorney General’s Department’s former Senior State Counsellor Harsha Fernando and top Investment Banker Nishan Sumanadheera, sources told The Island Financial Review.

Analysts said the Colombo Stock Exchange continues to slump as investors eagerly await a policy directive from the regulator, but until it gets its house in order, this may not happen.

The once-best performing stock exchange in the world declined by 8 percent in 2011. Year-to-date, the exchange has slumped 3.54 percent by the end of day’s trading yesterday (Jan. 10).

Last year, the government removed Malik Cader from the Director General’s post when influential investors complained to the President about the SEC’s tough stance on market manipulation. Soon after, Chairperson of the SEC Ms. Indrani Sugathadasa resigned saying it was a ‘matter of conscience’.

Tilak Karunaratne was appointed Chairman of the SEC in December. Since then the market has been in anticipation as to whether or not the SEC would continue to implement the tough stance adopted by Ms. Sugathadasa, Cader et al.

"Until the SEC gets its act together and finalises key appointments, a policy direction may not be forthcoming anytime soon," a market analyst said.
reported on The Island
......

...by i3gconsultants@ 07:01:33 on 2012-01-11

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SEC Director General’s post not lucrative enough?


The much awaited appointment of the Director General of the Securities and Exchange Commission (SEC) has taken a new turn with the favourite who was handpicked rejecting the offer while two insiders who applied for the post following the media advertisement, have also withdrawn.

SEC insiders told The Island Financial Review yesterday that the initial panic had been triggered with Varuna Epasinghe , the US based Fund Manager and son of Presidential Advisor and ICTA Chairman Prof. Epasinghe announcing his non- availability for the post, despite the market and the authorities expressing their confidence of his taking up the post.

Earlier, SEC Chairman Tilak Karunaratne also expressed confidence that he will be ideal in the light of the experience that he has in Fund Management and similar operations which was believed to be useful for the post. These sources also said that Epasinghe (Junior) had declined the appointment on the basis that it was not financially lucrative for him to take up the post.

These sources also said that SEC’s incumbent Director ( Investigations) Dhammika Perera who was a more senior official to the deposed Director General Malik Cader in the Commission along with Director Surveillance Chandu Epitawela who had earlier applied for the post of Director General at the time of the applications being advertised, had later withdrawn theirs for personal reasons.

It is also well known in market circles that it was Chandu Epitawela who had brought up the research paper and the proposal for the price bands, due to the migration from the ATS ( Automated Trading System ) to ATS 7 was taking a longer time than expected to materialise.

The reason for the proposal for the price band is reported to be that the system at the Colombo Stock Exchange could not hold the volume of the transaction and the high turnover which was being reported on a daily basis.

Meanwhile, the SEC has interviewed some candidates who had applied for the Director General’s post with the shifting of Malik Cader, but no finality has been reached yet in this regard.

The market is awaiting the ruling of the SEC Commissioners who are scheduled to meet next Wednesday (11), to announce not only the name of the new Director General but also on its stand on the price band as well. However, it is fairly uncertain whether the ruling on the price band will be given until the installation of the ATS 7 at the Colombo Stock Exchange is complete, the sources said.
reported on The Island
......

...by i3gconsultants@ 08:01:34 on 2012-01-09

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CSE has recorded a 65% increase in fund raising last year


2011 has been a vibrant year for the Colombo Stock Market with a 65% increase in funds raised and the number of new investors almost doubled compared to 2010.
 Data released by the Colombo Stock Exchange said that the amount raised via rights issue last year was Rs. 28.01 billion, compared to Rs. 24.3 billion.  Money raised via initial public offering had been Rs. 19.1 billion, compared to Rs.4.3 billion raised in 2010.  Both form of fund raising has recorded a 65% increase over 2010.
 CSE sources said that local individuals were the most active class of investors increasing their contribution to turnover to 54.6% out of Rs. 546.2 billion from 44% in 2010.  They said that the high growth in local individual investor base helped propel the total number of securities accounts to top the half a million mark, at 508,014, up from 424,288 in 2010, and accounts operated by local companies increased to 7,321 from 6,114.
 The number of non-national accounts has also grown last year.  Foreign individuals category has increased to 3,847 from 3,345 and companies have improved to 4,112 from 3,893. (niz)
Reported on News.lk
......

...by i3gconsultants@ 02:01:27 on 2012-01-09

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CSE plans upgrade in early Feb


The Colombo Stock Exchange (CSE) which was to go online with its Automated Trading System (ATS) upgrade with ATS Version 7 on Friday postponed it amidst some resistance from the stock brokers, CSE sources said.

“This has to be done as the hardware in our system is outdated. We cannot afford another system crash like last year," a CSE source said, adding that last year on 19 September the system went out of control and was not reflecting the actual prices of some shares after it started functioning.

He said that on Tuesday, all CEOs of broking firms met with CSE CEO, Surekha Sellahewa on the ATS upgrade. Here brokers complained that this new ATS version doesn’t have many features which are in the present version and that it’s not user friendly. “The new system is cumbersome. When placing an order the customer ID isn’t easily accessible and when cancelling orders it is difficult, unlike in the current system,” a broker told the Business Times.

The source said that the CSE plans to incorporate some of the features that the brokers suggested and is trying to upgrade within two to three weeks.
reported on Sunday TIMES
......

...by mrrohana@ 08:01:10 on 2012-01-08

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CSE to introduce new global index in March


In a bid to attract foreign investment, the Colombo Stock Exchange (CSE) is on target towards introducing the global index under the Standard & Poor’s (S&P) banner by the end of first quarter next year, CSE sources said.

“We are looking at introducing a global index by March- April next year and we already are working on this target,” a CSE source told the Business Times. He added that a team from S&P was in Colombo to meet key stakeholders recently.

He highlighted the main reason to introduce such an index was to have a globally recognized brand which will give credibility to the index, in particular to large foreign investors. He also said that S&P, together with the CSE, will develop criteria for inclusion in this index and that the existing indices such as the Milanka and All Share Index will continue to be available.

He also said that the systems at the exchange will be upgraded and modernized within a year. The CSE has also hired Mckinsey Consulting to do a study of the capital markets in the country and recommend a way forward and action plan to develop the capital markets. He also said that the CSE has hired the National Stock Exchange of India (NSE) to act as a consultant to implement a risk management system and a delivery versus Payment (DVP) settlement system. “By implementing DVP, both the ownership transfer and payment for securities will occur simultaneously, thus minimizing risk. The implementation of DVP and risk management practices is to be completed in mid-2012 and will be a first step towards transforming the CSE into a modern exchange on par with the most developed global exchanges,” he noted.

He said that the strategy for implementation of risk plans at the CSE envisions an extensive consultation process with market participants, custodians, investors and regulators. For the successful completion of the process brokers and other participants would have to take steps to convert to the new settlement mechanism and risk management practices.

This would entail meeting necessary technical requirements, streamlining of back office operations, participating in related training and adopting of certain procedures in particular with respect to the maintaining of liquid assets for margining requirements.
reported on SundayTimes
......

...by i3gconsultants@ 20:01:09 on 2011-12-25

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SEC defers decision on credit restriction


The Securities and Exchange Commission (SEC) has deferred a decision on broker credit until early next year, a spokesman of the SEC said.

SEC Chairman Tilak Karunaratne chaired his first meeting with commissioners yesterday (December 20) where the issue of restrictions on broker credit had been discussed among other routine matters concerning the operations of the SEC.

"The commissioners decided to make a final decision on broker credit when they next meet again," Thushara Jayaratne, SEC Assistant Director External Relations and Market Development told The Island Financial Review.

He said the next date for the commission meeting was yet to be set.

In recent weeks the Colombo Stock Exchange has been sliding on credit restrictions imposed by regulators to correct what some analysts call an ‘undisciplined market’. The Central Bank has already lifted a 5 percent restriction on margin lending because the market was "no longer overheated," according to governor Ajith Nivard Cabraal.

However, restrictions still remain on brokers extending credit to investors.

The once best performing stock exchange in the world yesterday fell 11.8 percent year-to-date.
reported on The Island
......

...by i3gconsultants@ 18:01:28 on 2011-12-22

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Bank lending restriction lifted as CSE no longer overheated, says Cabraal


Central Bank Governor Ajith Nivard Cabraal said the 5 percent lending restriction on commercial bank lending on stock exchange related transactions were lifted because the market was now under control.

"The (Colombo Stock Exchange) is down and it is no longer overheated and we feel the banks too are now in a better position to understand the risks so we decided last week to remove the 5 percent lending restriction," Cabraal told The Island Financial Review yesterday evening.

Brokers said the removal of this restriction had buoyed sentiments in the Colombo Stock Exchange yesterday but the bourse still closed in the red.

The All Share Price Index closed 0.54 percent lower, down 31.73 points to 5,860.96 while the Milanka Price Index of more liquid stocks closed 29.27 points lower at 5,105.41, down 0.57 percent from the previous close. Turnover amounted to 537.6 million on 18.7 million shares changing hands on day which saw 85 counters close in positive territory against 79 in the red.

The once best performing stock exchange in the world has now fallen 11.68 percent since the beginning of this year. Analysts said this was because the market was correcting itself after a period of erratic behaviour.

"The market started the day (Monday, December 19) in the red but soon moved to breakeven as soon as the Central Bank announced that they were lifting restrictions on the 5 percent lending rule for banks. The usual suspects to take advantage of this announcement were LHCL, HVA , SFS, EAST and plenty more. However the dull sentiment in the markets dampened these speculator efforts and at the end of the day only minor movements were witnessed," Bartleet Religare Securities said.

"This is a worrying sign as the markets were looking for any of these measures to boost sentiment for a few days. The euphoria was short lived and the markets sold down to close lower," it said.

"The indices continued to trend lower amid low turnover levels with activity dominated by trades on JKH, SPEN and COMB," John Keells Stockbrokers said of yesterday’s trading session.
reported in The Island
......

...by i3gconsultants@ 18:01:34 on 2011-12-19

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Sri Lankan stock brokers to be guided by a code of conduct


Sri Lankan stock brokers are supportive of regulations and any action taken against offenders and plan to adopt a code of ethics in line with international best practices in the near future, according to the Colombo Stock Brokers Association (CSBA).


It said providing credit is a basic necessity, with almost all stock brokering companies around the world providing margin-trading facilities. Issuing a statement to clarify some issues that have confronted the association relating to its proposals, it said the proposals were aimed at stimulating investor participation and restoring confidence to the market.


Amongst the proposals made by the CSBA is allowing stock broking firms to extend credit up to a maximum of three times its leverage of net capital was prominent which will bring more liquidity to the market.


The statement said that now the credit offered is based on the computation of liquid assets less obligations of the broking company and that CBSA assured that giving credit in the future would not create any systemic risk as all the stock brokers will be required to establish risk management systems shortly under the initiatives taken by the Colombo Stock Exchange (CSE).


Reinstating circuit breakersand removing the price band, according to the CSBA, is expected to ensure a level playing field more efficiently. They said that using price bands disrupts the price discovery mechanism in the market.


The lending on listed equity by commercial banks, to be increased from its current 5% to the 7.5% of bank’s loan portfolio and also for the CSE to provide a 50% subsidy to cover the cost of opening stock broking branches outside Colombo, while encouraging more state institutions to participate in the market were also proposed by the CSBA.


reported on SundayTimes

......

...by i3gconsultants@ 16:12:38 on 2011-12-19

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Some brokers say they prefer conforming to rules


Following the resignation of two stockbrokers from the Colombo Stockbrokers’ Association (CSBA) last week, many are raising questions on the apparent dissent amongst a section of an influential group and whether others will follow this trend.


CT Smith Stockbrokers and IIFL Securities Ceylon Ltd., with its Indian based parent - both headed by two women (Cecilia Muttukumaru and Priyani Ratnagopal respectively who have nearly 40 years of experience in the capital markets between them) resigned from the CSBA on December 5, citing differences with the main stock broking body and their thought processes. Ms. Muttukumaru is also the longest standing Chairperson and Managing Director of a stock broking firm.


Sources close to both firms told the Business Times that they didn’t subscribe to some decisions by the CSBA in the recent past. “The request by the CSBA to let stock brokers lend twice of their net capital is not a good proposal. One cannot have so many times credit leverage as it’s not healthy for the long term sustainability in the market," a source told the Business Times, adding that both CT Smith and IIFL don’t agree with this proposal. “They don’t want to be seen as they subscribe to what is happening and they don't want to be a part of this," the source further added. While these two firms agree to ‘some’ sort of credit lending concession, they don't agree to this particular proposal as they feel it's detrimental to the market in the long run, according to one source.


The Securities and Exchange Commission (SEC) has also pointed out that brokers already have Rs 2.2 billion worth of unutilised credit and that as at now they can lend credit up to the value of their liquid assets. The SEC says that what they haven’t used from their liquid asset values adds to this amount.
The source also noted that the two dissenting firms didn’t want to be a part of the ongoing controversies which some of the CSBA members have been accused of in the past such as powerful lobbying and pressurising the government to 'get what they want’. “They also didn’t want to be associated with the term ‘market manipulators’ and be in a body which represented people who resorted to such things,” the source added.


Both CT Smith and IIFL believe in conforming to the rules and regulations, while functioning within a level playing field, according to the source. Both these firms are also worried about the way the foreign investors view the Colombo share market and they say that changing the SEC Chairperson and kicking the SEC Director General upstairs – all within a space of less than a month - isn’t a good sign to the foreigners.


Some CSBA members aren't happy with the CT Smith and IIFL move to breakaway from them, saying that it's not the 'right' thing to do. "They are abandoning the camp and to agree with the majority is a democratic way of going about things," a CSBA member pointed out. But the source noted that it's also their right to leave an organisation if they want to.


reported on SundayTimes

......

...by i3gconsultants@ 16:12:03 on 2011-12-19

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Qatar keen on investing in Sri Lanka


Qatar keen on investing in Sri Lanka

Wednesday, 14 December 2011 - 11:30 AM SL Time


The Government of Qatar is keen to invest in the travel and tourism sector in Sri Lanka, Qatar Prime Minister Sheikh Hamad Bin Jassim Bin Jabar Al Thani said addressing the Sri Lankan top businessmen at the Hilton Colombo yesterday. 


Qatar Prime Minister Sheikh Hamad addressing the gathering at Hilton Colombo. Ministers G L Peiris and Sarath Amunugama and Qatar Finance Minister Yoosuf Husein look on. Picture by Sumanachandra Ariyawansa 

He said that a business conference for Sri Lankan business community will be arranged next year in Qatar with their Chambers of Commerce. I see great potential and opportunities in the education and tourism sectors in beautiful Sri Lanka and good infrastructure is very important for the development of the tourism sector, he said. 

External Affairs Minister G L Peiris said the discussion between the Sri Lankan President and Qatar Prime Minister emphasised concrete confirmation on the Kalpitiya Tourism Development Project. He said the political relationship between the two governments have been excellent and this meeting will enhance the economic content of the relationship. 

International Monetary Cooperation Minister and Senior Minister Sarath Amunugama said the fruitful discussions with the Prime Minister of Qatar on the economic front agreed to increase air travel frequencies from Doha to Colombo and Colombo to Doha as a large number of people are travelling both ways. 

The toll road from Colombo to Katunayake is already in progress and discussions were held to develop the toll road from Katunayake to Kalpitiya. 

The development of the City Hotel concept and fish farming also were discussed. 

Looking at possibilities for Qatar people to enter the Sri Lankan stock exchange is another idea and a feasibility report will be done on this subject he said. 

Courtesy: Sri Lanka Business News
......

...by i3gconsultants@ 10:12:55 on 2011-12-15

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Quarterly Earnings Review - 3CQ 2011


Industrials

The industrial sector was the top contributor to the
earnings (32.0%). The net earnings grew by 30.6%YoY supported by
20.3%YoY growth in revenue. Construction subsector posted 77.8%QoQ
growth aided by 17.4% QoQ growth in sales with better margins. However
on YoY basis, the sector earnings were marginally low (1.1%), despite
the 15.7%YoY increase in revenue. This was partially due to the drop in
margins in the Lanka Ceramic group.

The building material sub sector witnessed another
successful quarter (+25.0%YoY) with ACL, KCAB, RCL and TKYO leading the
pack. The sharp decline in profits in DOCK (42.8%YoY) and LDEV led to
42.0%YoY decline in earnings in the heavy construction sub sector.




Financial services


The banks reported solid earning growth of 26.4%YoY
driven by volume growth, provision reversals, recoveries and tax
reductions. Fall in NIMs led to a marginal growth (+6.8%YoY) in the
total income. As expected, the loans and advances accelerated at a
remarkable pace of 18.9% while deposits grew at 13.0% during the first
nine months of 2011. The NPLs declined across the board. Apart from NDB
(19.4%YoY), HDFC (51.7%YoY) and DFCC (0.2%YoY) the rest reported double
digit growth in net profit.

The non bank financial institutions continued its
nascent earnings momentum and posted 100.5%YoY growth in the bottom
line. After series of massive losses, The Finance managed to post profit
for the second successive quarter.

On the other hand, insurance sector witnessed a dry
spell, a dip of 31.2%YoY, as a result of the slowdown in core business
and fall in investment income. Out of the four insurers that reported
earnings, Ceylinco Insurance, Aviva NDB and HNB Assurance reported
de-growth while UAL posted 47.2%YoY growth in net profit.




Consumer staples


As anticipated, consumer staples reported robust net
profit growth of 52.0%YoY. The top line saw a steady growth of 22.8%YoY
while the operating profit posted 50.6%YoY increase from the comparative
quarter. The largest growth came from alcoholic beverage sub sector
(+89.8%YoY).




Consumer Discretionary


Consumer discretionary sector saw a hefty 83.4%YoY
growth in bottomline. Auto sub sector fueled the growth reporting
96.3%YoY and 174.4%YoY increase in terms of revenue and profits. The
carried forward impact of tax revisions in the last year continued to
support the growth and all automobile retailers posted notable increase
in their earnings.

The durable household goods sub sector lost its pace
but posted 11.3%YoY growth in net profit despite the liberalisation of
import duties. The top line grew by 19.2%YoY while 33.3%YoY increase was
seen in the operating profit.

On the other hand, the clothing and footwear sub
sector continued to be on negative zone for the fourth consecutive
quarter despite the 116.4%YoY growth in the net profit. The top line
grew by 25.0%YoY in the Sep‐11 quarter.




Investment holdings


Investment holding was one of the worst affected
sectors, largely due to the downturn in the Colombo Stock Exchange. All
most all the companies reported drop in earnings, shedding their capital
gains recorded in the comparative quarter. The bottom line fell sharply
by 77.1%YoY while the revenue declined by 30.7%YoY.




Healthcare


Healthcare sector posted sharp increase in the net
profit (+99.6%YoY) after two successive de‐growth. The Asiri group
(AMSL: +102.5%YoY and ASIR: >+1500%) led the pack supported by
58.6%YoY growth in profit from LHCL.




Leisure


Surprisingly, the leisure sector reported a squeese in
net earnings (‐14.4%YoY). Some of the hotels were not operating at
their full capacity during the period as the hotels were refurbished
before the tourist season. The sector revenue grew moderately at a rate
of 11.2%YoY (+18.8%QoQ). Operating profit grew by 15.8%YoY resulting 70
bps growth in operating margin to 16.5%.




Plantations


Tea and rubber plantations suffered from low
production, sluggish demand and were saddled with increased labour costs
leading to a drop in profits by ‐ 108.1%YoY. On the other hand, oil
palm plantations reported 127.8%YoY growth in top line (+27.3%YoY) led
by comparatively higher prices while posting ‐29.1%YoY dip in bottom
line.


 


Real estate

The top line of the real estate sector grew by
22.9%YoY while 48.4%YoY increase was seen in the operating profit,
largely due to the better performance by Overseas Realty. The bottom
line reported a solid growth of 55.6%YoY.


 


Utilities and Telco

Utility sector saw a dip in profits of 11.3%YoY, while
reporting mere 4.5%YoY growth in revenue. Power sub sector reported
drop in earnings of 19.8%YoY but reported better results than the
preceding quarter (+6.3%QoQ). Margins fell sharply by 10.9%. The low
rainfall impacted most of the power plant operation leading to lower
performance during the quarter.

After series of successive growth Telcos reported 9.9%
drop in earnings in Sep‐11 quarter. The revenue increased marginally by
4.0%YoY while operating profit dipped 5.1%YoY resulting the operating
margins to decline by 120bps. SLTL managed to post a marginal profit
growth of 3.0%YoY while 17.7% drop was seen in Dialog Axiata as a result
of increase in costs. ......

...by mrrohana@ 14:12:48 on 2011-12-11

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SEC must be independent, able to withstand ‘extraneous’ pressure – investors say


Three stock market investors said this week that it was imperative
that Sri Lanka’s Securities and Exchange Commission (SEC) – the capital
markets regulator - be independent and of the highest standards of
integrity, honesty, and have the ability to withstand extraneous threats
and pressures.

“(Former SEC Chairperson) Mrs. (Indrani)
Sugathadasa and her team fulfilled this role. Indeed, under her resolute
leadership, the SEC was about to institute action against wrongdoers.


This was especially necessary as the SEC had
made an extraordinary attempt to attract small and rural investors; a
noble effort to ensure that the benefits of the post war economic boom
percolated to the masses. The SEC rightly felt that it was its duty to
protect the honest public investors and to curb the activities of the
insider traders, market manipulators and corporate looters. In taking
action against such wrongdoers it was only performing its statutory
duties,” the trio - K.C. Vignarajah (former chairman of the Ceylon
National Chamber of Industries), Dr. Dilesh Jayanntha and Tissa
Seneviratne – said in a letter to the Treasury Secretary on Tuesday,
urging that Ms Sugathadasa be re-instated in a position she had quit in
disgust.


Their efforts however failed, for, two days
later (Thursday), former parliamentarian and businessman Tilak
Karunaratne assumed office as the new chairperson, on being appointed by
President Mahinda Rajapaksa. They had urged Treasury Secretary Dr. P.B.
Jayasundera not to accept her resignation saying she is a ‘public
servant of unimpeachable integrity and dedication’ and only doing her
duty – by going after the wrongdoers.


Ms Sugathadasa resigned last week after a
failed battle with a group of powerful brokers and influential
investors, dismayed by her efforts to probe insider trading. The market
was also pressuring the SEC to lift tough, restrictive credit rules.


The investors, among whom Mr Vignarajah is
well-known for fighting for the rights of investors and supporting
efforts by the regulator to punish insider traders and manipulators,
said Ms Sugathadasa had sought to fulfill her duties conscientiously, in
the interests of savers, investors, the general public and the nation
at large. “It appears that certain selfish crooked groups tried to
undercut her, the Commissioners and the efficient (former)
Director-General,” they said.


Malik Cader, SEC Director-General was eased
out from his position and transferred to the Finance Ministry as a
consultant.
The letter said the equity market in Sri Lanka
now has investments not only of traders (including big short term
speculators), but more importantly long term investors, big and small,
and a large section of the productive work force (through the EPF and
ETF). These latter investments represent the life savings of many poorer
segments of the beloved country, which will count on these funds for
their existence after retirement.


It is the sacrosanct duty of the government to
ensure that these funds are protected through proper regulation of the
capital market, the letter said. They said Mrs. Sugathadasa, Mr. Cader
and the team were also spearheading efforts to create a decent ‘public
float’ of at least 30%, (still less than in many other developing
countries, which average about 45%). They were also conscious of the
evils of delisting- a fraud perpetrated on the innocent investing
public.


The letter said Ms. Sugathadasa’s resignation
and Mr. Cader’s transfer are major blows to the image of Sri Lanka’s
capital market here and abroad.
They also pointed out that Sections 50A and 51
of the SEC Act deal with persons who threaten, intimidate, defame or
obstruct members, officers and servants of the Commission in the
performance of their duties. Penalties range from terms of imprisonment
of either description to fines or both. “It is well known that insider
traders, market manipulators and corporate looters made direct and
veiled threats against Commission members, officials and honest
activists protecting the good name of the market. It is important that
every decent public official stands up for their duty conscious
colleagues and obtains deterrent punishment for those who attempt to
threaten them,” the trio urged.

reported on SundayTimes

......

...by mrrohana@ 14:12:48 on 2011-12-11

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Markets: Greed wins over integrity and accountability


Indrani Sugathadasa, chairperson of the Securities & Exchange Commission (SEC) has finally buckled under pressure after a bruising battle with powerful brokers and investor interests, an issue that was watched with interest in Sri Lanka and abroad over the past few months.


Ms Sugathadasa, an able public servant inexperienced however in the affairs and ‘ways’ of the stock market but appointed to the position by virtue of being the wife of Lalith Weeratunga, influential Secretary to the President, threw in the towel, resigning, just weeks after Malik Cader, SEC Director-General was eased out and given a ‘promotion’ at the Ministry of Finance.


However that influence (with the President) was nothing compared to the authority of a few but far more powerful market operators whose constant needling of the regulator and other pressures led to the fall of the two top officials at the SEC. This newspaper has focussed on these issues over the past few months constantly suggesting that interference in the regulatory mechanism was not the right way to go.
Foreign investors have already been complaining about governance and fundamental issues, and now a new issue has emerged: the independence (and credibility) of the regulator.


As K.C. Vignarajah, a former chairman of a top Colombo chamber and now, a one-man demolition squad of the wrongdoing in the market who has steadfastedly criticised irregular happenings in a sea of corruption, says: “Our image has been sullied. Crony capitalists and greedy investors have succeeding in ousting an honest and upright official (Ms Sugathadasa) who was not prepared to bow to their threats, and even after Malik Cader was eased out, had insisted that investigations (against market manipulators) should continue. These investors will now overwhelm the market at the expense of a large segment of small and minority shareholders.”


Jokingly he suggested, “I recently saw this advertisement for the vacant SEC Director General’s position and to the qualifications that were called for, we must also add ‘ability NOT to regulate’.”
He also described efforts to hold roadshows across the country to entice, innocent investors to put their money in the market, “like lambs being taken to the wolves,” and agrees that the SEC shouldn’t have been involved in promoting the market – although there is provision in the law to do so.


Regulating and promoting can be a contradiction of the SEC role and counter-productive, and was proved in this particular case. Pronouncements by a few investors to pull out their huge investments in the market (in a veiled threat to force it to collapse) if investigations were pursued, led to concern and uneasiness in SEC circles. While rules and regulations shouldn’t dampen enthusiasm or stiffle the market, regulators must not be dictated to by the market.


Some investors and brokers - not in the elite, influential list -, argue that the SEC has been slow in moving on many issues like for example permitting margin trading for foreign brokers, a request delayed for many years. Other complaints is that the price bands and credit limits were constraints, arguing that the SEC should have gone after individuals (price manipulation) rather than allow everyone to suffer. The same applied in the case of credit where some brokers advanced credit which was 300 times their portfolio worth. “What do you do if the regulator is stiffling the market? There is no choice other than seeking relief from elsewhere,” argued one broker.


However seeking ‘relief’ elsewhere and getting redress like in the present case results in the credibility and authority of the regulator being questioned. Furthermore what is the confidence level, here and abroad, when decisions taken by a regulator can be reversed by another administrative or political authority?


The same applies in the case of the Central Bank (notwithstanding the recent decision by the Ministry of Finance to devalue the rupee which proponents claim was necessary because vested interests were keeping the dollar value down). What happens if banks, unhappy with Central Bank decision-making, seek relief from elsewhere (other than the judiciary)? These precedents are not a healthy sign in a functioning democracy and in the larger context, a departure from the proven, and tested practice should be avoided. The moment the independence of the regulator is called to question, confidence and accountability becomes a problem.


On the other hand, the wrong people in high positions can also give negative signals to the market or create havoc. What is required is for honest, credible and upright people to be appointed to regulatory bodies and other state agencies and due recognition given – by the highest authority in the land - towards exercising their rights and obligations.


reported on SundayTimes.lk

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...by mrrohana@ 17:12:21 on 2011-12-04

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SEC cancels meeting tomorrow with stock brokers


Indrani quits after long battle with powerful interests


Following Indrani Sugathadasa’s resignation as chairperson, the Securities and Exchange Commission (SEC) has cancelled the scheduled meeting on Monday between commission members and members of the Colombo Stock Brokers Association (CSBA) to discuss critical market issues, SEC officials said.
They said that at a SEC commissioners' meeting on Wednesday, SEC Chairperson Indrani Sugathadasa had requested the SEC Secretariat to ‘seriously’ consider the CSBA proposals.


“They will go through CSBA proposals with the brokers and explore what can be done in terms of granting (concessions)," a CSBA representative confirmed to the Business Times on Thursday. But on Friday SEC officials said that with Ms. Sugathadasa's resignation (the previous day) this discussion and all the decisions they might have taken have come to a standstill.


They said the planned meeting follows a discussion the CSBA had with President Mahinda Rajapaksa earlier this week where they submitted proposals to prop up a crisis-hit market. They said that the SEC is focussing on two proposals which are under its purview – replacing price bands with circuit breakers and extending broker credit twice to the value of their net liquidity capital. While they say that circuit breakers are a possibility, they point out that brokers already have Rs 2.24 billion worth of unutilised credit. “As at now they can lend credit up to the value of their liquid assets. So what they haven’t used from their liquid asset values adds to this amount,” a SEC official told the Business Times.


He added that this was a pertinent area that SEC wanted to discuss with the CSBA. When asked about her resignation, Ms. Sugathadasa told the Business Times that she was upholding her principles and that despite it being a thankless job, she enjoyed the nearly two years in this position. She stressed that due to the unfolding circumstances she decided to tender her resignation.


It is widely speculated that the vacancy will be filled by former MP and industrialist Tilak Karunaratne.
Independent analysts were wondering what use a regulator is to the capital market when powerful lobbying by a handful of brokers and investors can pressurise the government to 'get what they want’. “They are largely manipulators who are misleading the higher authorities. This is a bad precedence to the capital markets,” an analyst said.


President Rajapakse after Monday’s meeting with the CSBA told brokers that their proposals will be looked at positively and a decision will be made after deliberations with relevant institutions are held on the matter, CSBA representatives said.


They said that the CSBA proposal to increase banks’ lending to stock broking firms by 2.5% to 7.5% (from the now 5%) of their net capital was looked upon favourably by the President and he asked some Central Bank officials to explore this option.


The CSBA had also requested to let foreigners invest in margin trading companies and lend in rupees. “Currently this option isn’t there and when discussing proposals on reviving market sentiments we wanted this done as well,” the CSBA representative said, adding that this was the first-ever interaction CSBA had with a head of state. Basil Rajapakse, Economic Development Minister, Secretary to the President Lalith Weeratunga, Dr. P.B. Jayasundera, Secretary to Treasury and senior officials of the Central Bank were present at the meeting.


The President had urged brokers to try to attract foreign investments and Dr. Jayasundera has been especially vociferous in requesting the CSBA to market Sri Lanka abroad. "He wanted us to bring in US$100 million foreign inflows," another CSBA member said.


The President also had asked them to avoid the steep price fluctuations and volatilities in a bid to cut losses made by those who invest at higher prices. “The importance of more listing of firms was also discussed and it was noted that although more companies were keen on listing in the Colombo Stock Exchange, they have been discouraged by prevalent market sentiments and the failure of several initial public offerings," an analyst said. The CSBA members had also pointed out that despite the positive earnings and favourable macro-economic fundamentals, the market activity levels are on the slump.
Monday's speculative rally in anticipation of the President’s meeting with the CSBA saw a strong recovery in the indices, but this lost steam quickly by Tuesday when the market learnt that no concrete decisions as predicted were arrived at.


The market was seen sliding from its initial spike as most of the retail rallies were on speculation, according to analysts. They said that retail investors booking their profits on the penny counters dragged the indices down.

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...by mrrohana@ 17:12:52 on 2011-12-04

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Overall budget analysis for listed firms good : Analysts


All export oriented companies in the Colombo share market are winners in the 2012 budget, especially due to the 3% devaluation of the rupee, while the rest will see a negative impact. The growth in the domestic economy and new North & East markets will boost volume growth while ensuring the overall profitability, analysts say. Firms such as Dipped Products PLC, Textured Jersey will see immediate benefits but those dependent on imported raw materials will experience an adverse effect escalating their cost of sales to go up and reducing margins.

"But the growth in the domestic economy with new markets such as the North and East will increase their volume growth which will add to their bottomlines," an analyst said. He said that industries such as cables, which solely depend on imported copper, will see low margins, but the rapidly growing construction activities in the country will have a positive impact on their bottomlines.

Analysts also said that milk powder import tax which is to be increased aimed at encouraging local dairy production will see firms such as Kothmale Holdings and Lanka Milk Foods being benefited. They also said that the proposal cutting taxes on vehicles for tourism will see all the passenger motor vehicle importers benefited. Further, the import tariff and VAT which will be reduced on heavy vehicle imports will enhance firms such as DIMO and Ashok Leyland who are the major importer of heavy vehicles (TATA, Leyland).

With maize taking up nearly 40% of feed cost of most poultry operators; Bairaha Farms and Ceylon Grain Elevators along with its subsidiary, Three Acre Farms continue to see their margins being affected with the high Cess of imported green grams, peanuts,ginger and maize so as to increase self-sufficiency in the domestic cultivation of these crops.

reported on SundayTimes

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...by mrrohana@ 08:11:20 on 2011-11-27

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&P 500 Slips Back Into Negative For Year



  • NYSE down 82 (-1.1%) to 7,494.07
  • DJIA down 73.26 (-0.6%) to 12,080.42
  • S&P 500 down 11.97 (-1%) to 1,251.89
  • Nasdaq down 21.53 (-0.8%) to 2,657.22

GLOBAL SENTIMENT



  • Nikkei up 1.05%.
  • Hang Seng up 1.94%.
  • Shanghai Composite up 1.92%.
  • FTSE-100 down 0.5%.
  • DAX-30 down 1.2%.

Stocks fell after a two-session surge at the end of last week capped by swirling uncertainties in Europe's debt drama. The S&P's 0.9% drop fronted the broad market's decline. The S&P is now negative for the year though the Dow and Nasdaq remain positive for 2011.


Investor concern remains focused on Europe as Italy's borrowing costs - which had declined toward the end of last week - rose again. Also in view: a panoply of economic data - including the Empire State index and retail sales data - are due tomorrow. No major economic news was out today.


Across the Atlantic, Italy sold $4.1 billion of five-year notes with a 6.29% yield - the highest since June 1997, according to Bloomberg. Also. German Chancellor Angela Merkel, speaking at her political party's annual conference, called for closer political ties and stricter budget rules, the report also said.


The resignation of Berlusconi followed by the approval, by the new parliament, of additional austerity measures reassured investors that the eurozone would work swiftly to get its massive debt load under control. European stocks opened higher, but swiftly drifted into negative territory. The appointment of new Italian PM Monti proved positive for the Asian markets.


In Asia, Japan's economy grew at 6% in the latest quarter. Exports from the country have surged as the economy recovers from the devastating earthquake earlier this year.


Stateside, the U.S. Supreme Court said it will hear challenges to the president's landmark healthcare law. Specifically, challenges focus on the law's mandate for individuals to have health insurance or pay a fine as lower courts have both upheld and rejected the law. A ruling could come as early as this summer - just ahead of the presidential election. Health insurance stocks were largely higher; drugmakers fell.

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...by mrrohana@ 10:11:18 on 2011-11-15

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Stocks down on asset takeover bill


(Reuters) – Sri Lanka’s stock market edged down on Wednesday to a one-week low, as cautious investors stayed on the sidelines over concerns over a proposed government act to acquire underperforming assets, including from two listed firms.
After the market closed Sri Lanka’s parliament began to debate the proposed legislation to acquire underperforming enterprises and underutilised assets, despite concerns the move amounted to nationalisation.

Analysts said the bill will further hurt the institutional long-term investor sentiments and investors were confused about a proposed law that will allow the government to take over the properties of 37 firms including listed Pelwatte Sugar Industries and Hotel Developers Lanka Plc.
The main share index ended 0.1 per cent, or 5.14 points weaker at 6,316.87.
Shares in Pelwatte Sugar fell 2.1 per cent to Rs. 23.50 on Wednesday and Hotel Developers Lanka, which owns the five-star Hilton Colombo hotel building in the commercial heart of Colombo, plummeted 22.6 per cent to Rs. 94.80.
Analysts said investors were also concerned about future regulation of the market after removal of the Securities and Exchange Commission director general.
Turnover was Rs. 619 million ($5.6 million), compared with last year’s average of Rs. 2.4 billion and this year’s Rs. 2.5 billion.
The bourse has fallen 6.9 per cent since 1 October. It is Asia’s sixth-best performer with a year-to-date loss of 4.8 per cent after being on the top for most of 2011 and in 2009 and 2010.
The bourse saw a net foreign inflow of Rs. 151.5 million on Wednesday, but thus far in 2011, offshore investors have sold 16.6 billion, and a record 26.4 billion in 2010.
Foreign investors bought 500,032 shares in conglomerate John Keells Holdings, which ended 0.7 per cent down at Rs. 193.10. 
Losers outnumbered gainers by 110 to 88 on Wednesday, Thomson Reuters data showed. Total volume was 22.6 million shares, against a five-day average of 50.1 million. The 30-day and 90-day average trading volumes were 64.7 million and 103.2 million. Last year’s daily average was 67.9 million.
The rupee closed flat at 110.18/20 per dollar as importer demand for dollars was offset by banks’ dollar sales on short covering, dealers said.
Stock and currency markets will be closed on Thursday to mark a Buddhist religious holiday and normal trading will resume on Friday.
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...by mrrohana@ 06:11:51 on 2011-11-10

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Stock market sentiment defies buoyant earnings


Corporate earnings by listed companies continued to be buoyant defying negative sentiment evident in the stock market today, Acuity Stockbrokers said in its weekly market report.


"Market lacked direction over the week with indices see-sawing amidst media speculation over regulatory body changes," the report said. "Turnover continued to see-saw, closing the week at its lowest level since December 2009."


The report said that Acuity expected similar sentiments to prevail in the week ahead with investors adopting what the brokers called "a reactionary attitude" - reacting to various external events.


"Corporate earnings however defied the current market sentiment and continued to be buoyant," the report said.


While a large proportion of the companies have recorded net profit gains over the September quarter, 57% of the 58 companies that have released earnings up to now have recorded year-on-year growth, the report noted.


The week closed with both indices moving up marginally – the ASPI gaining 58.08 points (0.91%) and the Milanka up 36.96 points (0.65%).


The big business generators were Galadari Hotels, Hayleys and HVA Foods with turnover for the week increasing substantially in value from the previous week gaining over 100%.


The bourse saw net foreign inflows for the second week running with net buying last week up 43.47% to Rs.126.2 million.


Foreign purchases over the week topped Rs.2 billion compared to the previous weeks Rs.362.2 million.


John Keells Stockbrokers said in its Weekly Market Report that the indices recovered sharply in the middle of the week due to renewed buying on speculative counters but lost ground on selling pressure before closing the week on a mixed note whilst registering the lowest daily turnover since December 2009.


"Buying of a 16% stake in Galadari Hotels Lanka by the Dubai Government boosted foreign participation during the week," the report said.
reported on The Island
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...by mrrohana@ 18:11:25 on 2011-11-07

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SEC: It's the market not Malik


Despite sentiment driven high on Wednesday upon hearing that Securities and Exchange Commission (SEC) Director General (DG) Malik Cader was leaving to take up an appointment at the Treasury, the Colombo bourse subsequently witnessed a steep crash with analysts saying that his resignation cannot sustain an upward trend at the Colombo bourse.

“It was an initial reaction and the market is back to square one. So it’s not Malik, (the cause of the Colombo Stock Exchange’s downfall), but the market (dynamics playing up),” an analyst told the Business Times.

The view on Wednesday by many investors that Mr. Cader moving out from the share market led to the surge didn't hold water in the next two days as it came 'tumbling down', he said. Investors said that the market's downfall on Thursday and Friday, following Wednesday's retailer euphoria over Mr. Cader leaving the SEC which sent the indices shooting up is ample testimony that his resignation won't keep the indices up. "It was definitely an artificial rise, which may have been instigated by some brokers,” a second analyst added.

Meanwhile, many names are being flaunted in stock market circles for the 'coveted' SEC post. 
A top official from the Shipping Corporation, along with two senior CEOs of stockbroking firms and even a former SEC DG are said to be on top of the list as the 'next' in line. "It'll probably be a week or two before this vacancy is filled," a source close to the SEC told the Business Times.

Mr. Cader, now wrapping up things at the SEC told the Business Times that he is pleased about the promotion. He was also grateful to SEC Chairperson, Indrani Sugathadasa, the SEC Commission and the entire Secretariat at SEC. "The Chairperson, Mrs. Sugathadasa was a tower of strength and I'm grateful to the Commission and the Secretariat for standing by their principles," he said.

reported on SundayTiimes

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...by mrrohana@ 08:11:44 on 2011-11-06

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Run on penny stocks impacting portfolios


Runs on penny stocks have caused investors to divest blue chip counters, posing questions on their impact on the All Share Price Index in recent times.

“The rise in penny stocks has had a mixed impact on the indices. The rapid rise of certain penny stocks during the last few months have resulted in certain investors exiting blue chip counters in order to invest in these penny stocks, this has had a negative impact on the indices,” researchers from SC Securities said.
However, the rapid rise in the penny stocks also created a livelier atmosphere in the market, which helped activity levels improve, they added.

Earnings reported by penny stocks do not support their changing prices, but are sometimes the result of news of prospective developments which could result in improved earnings.

Blue Diamonds (Voting  and Non Voting shares), E-Channelling, SMB Leasing, Tess Agro, Seylan Developments and Nation Lanka Finance are some of the stocks that have been moving in addition to fundamentally-sound companies or companies such as Piramal Glass, which are backed by earnings.
“It is important that investors diversify their portfolios to include penny stocks that are fundamentally sound (e.g. Piramal Glass). However, looking at today’s context, it seems an investor could benefit by having a small exposure towards even the penny stocks that are not fundamentally sound,  in order to take advantage of the current situation, where penny stocks have the tendency of rising rapidly, especially the low cap (illiquid) penny stocks,” researchers from SC Securities said.
The rise in the price of penny stocks has helped the share market by enhancing activity levels and promoting a positive sentiment among investors, just as what we have seen during the past few months, they said.
“However, if the rise in the price of penny stocks that are not supported by fundamentals attracts a broader base of investors during a considerable time period, it could affect the market negatively as the blue chips or high cap counters will not be sought after which are fundamentally sound, the performance of which directly affects the indices,” SC Securities said.
Another brokerage which did not wish to be named said that penny stocks are low caps, hence it has a minimal impact on the All Share Index as it is a value weighted index. They said that when building a portfolio it is necessary to include different types of stocks such as value, growth, cyclical, non cyclical, etc., representing different sectors to gain the maximum returns while minimising risks.
Even though it is not a must, investors can include penny stocks which match their investment appetite to their portfolios. Most of the time, penny stocks can be chancy and are considered riskier.

reported on FT.lk

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...by mrrohana@ 22:10:34 on 2011-10-27

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SEC won’t bow to pressures on probes: Chairperson


Reuters: Securities and Exchange Commission (SEC) has said the regulatory body will not bow to any pressure against investigating allegations of market manipulation and undue price fluctuations.

Chairwoman Indrani Sugathadasa also reiterated a denial of speculation that her Deputy is being forced to resign after influential investors complained to President Mahinda Rajapaksa, who has the SEC in his portfolio as Finance Minister.


SEC Director General Malik Cader has caused unhappiness in some circles for his moves to curb manipulation and excessive margin trading.

Some investors and brokers say such practices are hurting the Colombo Stock Exchange, which was Asia’s best performer in 2009 and 2010.
The SEC has been moving to bring its regulations in line with global best practices, as part of a Government plan to give greater confidence to foreign investors.
“I don’t think anybody will tell us to stop investigations. I don’t think that will happen,” Sugathadasa told Reuters at a weekend investor exhibition in Colombo.
Share prices in Sri Lanka have often been driven up when smaller investors flock to buy previously illiquid companies on rumours that big investors are getting in, and then get hurt when the prices collapse.
Referring to inquiries the SEC started that involve some influential investors, Sugathadasa said: “We are still finding facts and discussing with them.”
She added “If we think it needs to be investigated, then that’s the last stage.”
In the past, politically-connected investors have been able to get investigations halted through pressure on SEC officials.
“They might want us to not to regulate. Then there is no point of having a regulator and the Government can close the regulator. But I don’t think the present Government wants to do that,” Sugathadasa said.
Brokers, whose commissions grow with volumes, say increased regulation, in particular restrictions on credit, has hurt liquidity and caused a recent slide.
Sri Lanka’s share market had until this year been on a constant upward trajectory since January 2009, when it began to rise in anticipation of the end, which came in May that year, of a three-decade civil war.
The Colombo exchange gained 125 per cent in 2009 and 96 per cent in 2010. As of Monday, it was down 3.2 per cent in 2011

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...by mrrohana@ 13:10:25 on 2011-10-25

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‘Those who live by the Dhamma are protected by the Dhamma’ SEC Chief tells investors


Securities and Exchange Commission (SEC) Chairperson Indrani Sugathadasa on Saturday used religion to bring some sanity to the capital market, currently marred by allegations of greed and power.
Before concluding her speech at the ceremonial opening of the SEC-organised Investment Day 2011 at the Sri Lanka Exhibition and Convention Centre, Sugathadasa, quoting Lord Buddha, said: “Those who live by the Dhamma are protected by the Dhamma, if not…”



This message of ethical and fair practices at the highly-patronised event was perhaps aimed at all investors, some of whom upon hearing the quotation chipped in saying that it applied to officials as well.
The SEC Chief said that positive independent regulation had been a key contributor to the rebound in capital markets in post-war Sri Lanka, in addition to the end of terrorism.
Sugathadasa also highlighted the voluntary and professional role played by commissioners, whose twice-monthly meetings span from 2 to 8 p.m. “We take decisions that are beneficial for the capital market from a long-term perspective as well as to ensure an efficient and fair market,” she added.
It was pointed out that following the end of the war and rebound in the economy, the capital market’s attractiveness for raising funds by companies as well as to reap higher returns by investors had grown.
“We are keen to expand the number of companies as well as the investor base,” she said, adding that the SEC had stepped up the effort to take the capital market to rural areas via events such as exhibitions, seminars and TV shows.
She thanked President Mahinda Rajapaksa and Chief Guest Basil Rajapaksa as well as Secretary to the Ministry of Finance Dr. P.B. Jayasundera for the support they extended to the capital market.
Minister Rajapaksa in his speech at the outset confessed that he was not a stock market investor, but emphasised how the end of the war and the ‘Mahinda Chinthana’ had given a big boost to the economy overall.
“The Government has created the best macroeconomic environment for the capital market to thrive and we are keen to ensure that the people become beneficiaries,” the Economic Development Minister added.
However, he cautioned that the Government was committed to protecting the public from unscrupulous entrepreneurs like Sakvithi or those who disguise themselves as philanthropists but destroy people’s wealth.
The SEC’s Investment Day drew around 15,000 people, mostly young, and the Colombo event was the most successful to date. The Daily FT saw people queuing up for entry even before 9 a.m., despite the official opening being at 9:30 a.m.
SEC Director General Malik Cader said the Colombo event was following successful road shows conducted in Galle, Kandy, Kurunegala, Negombo and Ampara, whilst Investment Day would be taken to areas such as Jaffna, Kilinochchi, Trincomalee and Batticaloa as well.
The full day Investment Day 2011 comprised over 50 stalls from the SEC, Colombo Stock Exchange and stock broking, unit trust management and top listed companies. Its objective was to showcase listed companies on the Colombo Stock Exchange and give potential investors the opportunity to obtain investment advice, discuss investment opportunities with stock broking companies, open CDS accounts to transact in shares, meet unit trust companies and explore investment opportunities in unit trusts. Participants also got the chance to witness the re-enactment of the open outcry system.
Investment Day 2011 featured prominent professionals from the securities industry, who addressed the gathering on a wide spectrum of topics throughout the day, ranging from investing in the stock market, unit trusts and the debt market in all three languages.


reported on FT.lk

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...by mrrohana@ 10:10:56 on 2011-10-24

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CSE to introduce new global index


The Colombo Stock Exchange (CSE), in a bid to attract foreign investment, is looking at introducing a global index under the Standard & Poor’s (S&P) banner within a year, a top official said.


“We are looking at introducing a global index within the next 12 months and we are starting work on this soon,” Krishan Balendra, CSE Chairman told the Business Times. He added that a team from S&P will be in Colombo to meet key stakeholders in early November. He highlighted the main reason to introduce such an index was to have a globally recognized brand which will give credibility to the index, in particular to large foreign investors. Mr. Balendra said that S&P, together with the CSE, will develop criteria for inclusion in this index and that the existing indices such as the Milanka and All Share Index will continue to be available. He also said that the systems at the exchange will be upgraded and modernized within a year.


Mr. Balendra added that the CSE will be conducting roadshows both here and abroad over the next year to educate local and foreign investors on the investment opportunities on the CSE. The CSE has also hired Mckinsey Consulting to do a study of the capital markets in the country and recommend a way forward and action plan to develop the capital markets. “Within six weeks we will have an action plan and will implement their recommendations accordingly,” Mr. Balendra explained.


He also said that the CSE has hired the National Stock Exchange of India (NSE) to act as a consultant to implement a risk management system and a delivery versus Payment (DVP) settlement system. “By implementing DVP, both the ownership transfer and payment for securities will occur simultaneously, thus minimizing risk.


The implementation of DVP and risk management practices is to be completed in mid-2012 and will be a first step towards transforming the CSE into a modern exchange on par with the most developed global exchanges,” Mr. Balendra added.


Courtesy: Sunday Times

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...by mrrohana@ 10:10:30 on 2011-10-23

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Crisis at SEC: Malik Cader under pressure


Colombo’s share market was gripped by a crisis centering on Securities and Exchange Commission (SEC) Director General Malik Cader’s imminent resignation along with some other commission members also possibly stepping down, while many investors posed the ‘what next’ question.


SEC commissioners met on Friday morning at an emergency session but details of the discussion were not revealed. Speculation about Mr. Cader’s future due to pressure exerted by a handful of powerful people widely known to be close to the authorities, was rife in business circles. Many said the main grouse by those who complained against Mr. Cader was that the share market was ‘overregulated’, which is why the indices are down at most times.


But others say some top investors were furious with the SEC for cracking down on market manipulators who resorted to ‘pump and dump’ to make a fast buck as the authorities closed in on them. “These high networth investors (who allegedly complained against Mr. Cader) had visibly refrained from their usual trading activity to drive a point on what’ll happen to the market if they don’t invest.


Then when the market crashed they could point fingers at SEC,” a source close to the SEC told the Business Times.


He said that if Mr. Cader resigns, some other commission members are also likely to step down. Sources close to Mr. Cader confirmed that there is immense pressure on him pertaining to certain recent investigations by the SEC.


A top businessman on the basis of anonymity told the Business Times that it’s a ‘sad’ day for Sri Lanka’s capital market. “The SEC brought in many things and it was a trial and error situation. It’s unfair to single out ‘a’ person and the person who had taken this decision (to target the DG) was ‘clearly’ misguided by vested interests,” he said.


Some businessmen were appalled at the ‘power’ that this small group of high networth investors can wield.


“The regulators shouldn’t be meddled with according to those people's whims and fancies. What the 'top' doesn't comprehend is that such action against Cader can give a wrong signal to long term foreign investors who we need for sustainability in the market,” another businessman noted.


Courtesy: Sunday Times

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...by mrrohana@ 10:10:11 on 2011-10-23

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Colombo speculators toast impending resignation of top SEC official .


Colombo's indices closed higher on Friday, for the first time this week amid speculation over the removal of a senior official in the markets regulator which has cracked down on manipulators, brokers said. Speculation is rife that Securities & Exchange Commission Director General Malik Cader is stepping down owing to pressure from politically powerful high network investors over a crackdown against insider trading and market manipulation.The main All Share Price Index rose 1.19 percent (74.94 points) to close at 6,356.94, while the more liquid Milanka index rose 0.82 percent (45.93 points) to close at 5,674.86, according to Colombo Stock Exchange figures. Turnover was 795 million rupees. (DEC)


reported on Sunday Times

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...by mrrohana@ 10:10:21 on 2011-10-23

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October ordeal at CSE persists; Rs. 179 b in value wiped off so far


The October ordeal as exclusively speculated by the Daily FT early this week is persisting at the Colombo stock market, with Rs. 179 billion in value wiped off – just Rs. 2 billion short of being the biggest monthly loss for the year.

The continuity of the miserable run saw the market dip further yesterday with the All Share Index’s year to date negative return topping the 5 per cent mark and MPI’s contraction crossing 20 per cent. As at end September the ASI had a positive year to date return of 2.2 per cent whilst the market capitalisation was Rs. 2.43 trillion as opposed to Rs. 2.25 trillion yesterday. In recent history, June had the worst loss in value amounting to Rs. 181 billion.
Analysts feared that unless bargain hunters return in hoards or sentiments improve, the CSE could mark the biggest monthly fall in value today.
For the second consecutive day, turnover at the Colombo bourse at Rs. 689 million was its lowest for the year. Indices dipped sharply yesterday in comparison to Wednesday, though volume of shares traded improved.
NDB said it was yet another disappointing day for the investors as the ASPI lost 65 points breaking a support level at 6,300.
“While low liquidity levels suggest the investors are uncertain whether to buy or sell, more margin calls triggered forced selling. More margin calls are likely to be witnessed (today) due to the steep drop which continued from Wednesday,” NDB added.
Arrenga Capital said nothing could restore market momentum with the recent retail dominance seen on a slow run.
“Market has reached its fullness of speculative trades to now fan off the flames of the speculative run-ups, which in turn has caused a serious tumbledown. Several high net worth individuals, who have been active in the past few weeks, too had quietened after SEC sharpened its investigation eye,” it said.
“However, the market has reached its point to understand that it is the value investors who would outperform speculative ones in the long run after most of the speculative-run portfolios making losses. Right now, we would advise our investors to have a short term selectivity structure drawn up, to hit on the counters due to announce strong 3Q2011 earnings,” Arrenga added.
Noting that market PEs have been on a declining trend DNH Financial expressed belief that the current multiple of 16X does not fully reflect the valuations of a number of fundamentally strong stocks which are trading at multiples of below 10X.
“With investors having pushed up the price of lower quality companies during the 2009/2010 bull run, an opportunity to invest in companies of higher fundamental value now exists with significant upside potential of reversing relative underperformance. With trading volumes showing increasing signs of declining, we believe that the market is coming close to consolidating before changing course towards a rerating. Consequently, with the majority of 3Q2011 results yet to be released, we advise investors to take advantage of this window period to select stocks that are likely to outperform based on solid intrinsic values,” DNH added.

Courtesy: Daily FT

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...by mrrohana@ 22:10:27 on 2011-10-21

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Sri Lanka stx rebound from 7-mo lows after settlements


Leisure companies, banks boost overall index
Foreigners sell net 145.6 million rupees worth shares
Rupee steady as state bank protects from falling

COLOMBO, July 1 (Reuters) - Sri Lankan stocks recovered from its near seven-month low in thin trade on Friday as forced selling eased as first-half settlements on credit transaction were accomplished, but low liquidity weighed.

Sri Lanka's main share index edged up 0.27 percent or 18.77 points to 6,844.71, from its lowest close since Jan. 6. It had shed 7.6 percent in June alone mainly due to forced selling, in line with the policy of the regulator Securities and Exchange Commission (SEC) to recover credits, aiming to eliminate all credit dealing by end 2011.

The bourse is still up 3.15 percent so far this year. It was the Asia-Pacific's top performer in 2010 and 2009 with 96 percent and 125 percent returns, respectively. Over 6 billion Sri Lankan rupees has been still locked up in the two recent initial public offerings.

Foreign investors were net sellers of 145.6 million rupees worth of shares on Friday, and have sold a 7.5 billion rupees in 2011 after a record 26.4 billion in 2010. The day's turnover was 1.4 billion Sri Lanka rupees ($12.7 million), well below last year's average of 2.4 billion and this year's daily average of 2.84 billion.

Traded volume was 54.5 million, lowest since May 11, against a five-day average of 77.5 million. The 30-day and 90-day average trading volumes were 184.4 million and 104.1 million, respectively. Last year's daily average was 67.9 million.

The rupee closed flat at 109.49/50 a dollar amid heavy importer dollar demand as a state bank defended the currency from falling by selling the greenback at 109.50, dealers said.
......

...by Admin@ 19:07:35 on 2011-07-01

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Sri Lanka stocks at 7-month lows; rupee gains


* Bourse retreats after early gain on selling pressure
* Foreigners sell net 234.1 million rupees worth shares
* Rupee firmer on cbank lowering dlr trading band

COLOMBO, June 30 (Reuters) - Sri Lankan stocks fell to a near seven-month low in thin trade on Thursday on selling pressure due to month-end settlements while speculative trading continued amid margin calls that forced selling and low liquidity.

Sri Lanka's main share index slipped 0.76 percent or 52.21 points to 6,825.94, its lowest since Jan. 6. The index gained 0.5 percent in early trade, but selling pressure on forced sales amid low liquidity weighed down on the index.

It had shed 7.6 percent in June alone, but is still up 2.86 percent so far this year. It was the Asia-Pacific's top performer in 2010 and 2009 with 96 percent and 125 percent returns, respectively.

Forced selling by brokers continued in line with the policy of the regulator Securities and Exchange Commission (SEC) to recover credits, while over 6 billion rupees has been locked up in the two recent initial public offerings.
Foreign investors were net sellers of 234.1 million rupees worth of shares on Thursday, and have sold a net 7.4 billion rupees in 2011 after a record 26.4 billion in 2010.

The day's turnover was 1.9 billion Sri Lanka rupees ($17.3 million), well below last year's average of 2.4 billion and this year's daily average of 2.85 billion. Traded volume was 72 million, lowest since May 6, against a
five-day average of 92.6 million. The 30-day and 90-day average trading volumes were 187.6 million and 104.7 million, respectively. Last year's daily average was 67.9 million.

The rupee closed firmer at 109.49/50 a dollar from Wednesday's 109.58/60 as the central bank lowered its dollar trading band by 10 cents for the second day to 108.90/109.50 from 109.00/60 despite heavy importer dollar demand, dealers said.
......

...by Admin@ 20:06:05 on 2011-06-30

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Sri Lanka stocks recover from 7-month lows; rupee up


* Retail buying of battered stocks offsets forced selling
* Foreigners sell net 346.7 million rupees worth shares
* Rupee firmer on cenbank lowering the dlr trading band

COLOMBO, June 29 (Reuters) - Sri Lankan stocks rebounded on Wednesday from a near-seven month low in light trading volume led by retail buying in battered small caps, but selling ressure continued with speculative trading amid margin calls that forced selling and low liquidity.

Sri Lanka's main share index inched up 0.22 percent or 15.32 points to 6,878.15. It had shed 6.9 percent so far in June alone, but is still up 3.65 percent so far this year. It was the Asia Pacific's top performer in 2010 and 2009 with 96 percent and 125 percent returns, respectively. "The indices remained volatile during the day with a majority of the large cap counters losing value," John Keells Stockbrokers said in a research note.

Forced selling by brokers continued in line with the policy of the regulator Securities and Exchange Commission (SEC) to recover credits, while over 6 billion rupees has been locked up in the two recent initial public offerings.

Foreign investors were net sellers of 346.7 million rupees worth of shares on Wednesday, and have sold a net 7.17 billion rupees in 2011 after a record 26.4 billion in 2010.

The day's turnover was 2.9 billion Sri Lankan rupees ($26.4 million), more than last year's average of 2.4 billion and this year's daily average of 2.86 billion. Traded volume was 85 million, against a five-day average of 101.2 million. The 30-day and 90-day average trading volumes were 188.4 million and 105.1 million, respectively. Last year's daily average was 67.9 million.

The rupee closed firmer at 109.58/60 a dollar from Tuesday's 109.69/70 as the central bank lowered its dollar trading band by 10 cents to 109.00/60 from 109.10/70, dealers said.
......

...by Admin@ 18:06:57 on 2011-06-29

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No brides but bears in June for bourse


June is renowned as being the month of brides, but the Colombo bourse has seen too many bears, with Rs. 152 billion in value wiped off so far.
A dip of Rs. 11 billion in market capitalisation yesterday brought the loss of value month to date to Rs. 152 billion. In comparison to the all-time high market cap of Rs. 2,600 billion on 14 February, yesterday’s figure of Rs. 2,363 reflects a loss of Rs. 237 billion.
Year to date the market’s gain has now been reduced to 3.4% down from 17.7% as at mid-February. However, the more important Milanka Index had produced a negative return of 9.4% year to date as opposed to a 2.65% return in mid-February. At present ASI is at a seven month low.
Capital market regulator the SEC which took pride in Colombo being world’s second best performer for two years is likely to take stock of its status quo when Commissioners hold their monthly meeting today.
Whilst some welcome the dip in value as part of correction from an overheated level as well as driving home the point that the stock market also needs to go down as opposed to moving up and up alone, others blamed negative sentiments over regulatory aspects as well as the economy for the dip.
Lack of serious foreign interest was another cause for concern because active non-national interest is critical for a healthy cycle of activity in the bourse. “It seems locals have lost much of their money power, whilst the more serious institutional players are staying on the sidelines because of play on speculative and junk stocks,” an analyst opined.
Independent observers said most retailers who reinvested past profits in dead stocks were now losing capital. This, as well as billions stuck in IPOs and private placements, could be the major reason for loss of money and staying power among majority of investors.
Lack of cash as well as other macro concerns could also explain why fresh round of buying is absent despite the market’s Price Earnings Ratio dipping to 23 times as against 30 times in mid-February. PE of blue chips and other fundamentally sound stocks remain attractive as well prompting some analysts emphasise that there are good buy opportunities for medium to long-term investors.
Meanwhile, NDB Stockbrokers commenting on the market’s performance yesterday said the ASPI fell by another 31 points despite the gains made during early trading. The index gained with Environmental Resource price moving up to Rs.82 (7.2%) and the trend started to reverse as the price came down to close at Rs. 69.80. While forced selling continued to drag the indices down, speculation on counters such as Environmental Resources, Ceylon Leather Products and Dankotuwa Porcelain seems to have resumed.
The Bank, Finance and Insurance sector was the main contributor to the market turnover (due to Central Finance), while the sector index decreased a further by 0.02%. Central Finance price increased Rs. 9.40 (0.68%) to close at Rs. 1,410. A total of 199,300 shares of Central Finance exchanged hands at a price of Rs. 1,400.
Investment Trusts sector also contributed significantly to the market turnover (due to Environmental Resources). The sector index decreased 1.71% today. Environmental Resources’ voting share declined Rs. 2.50 (3.38%) while Environmental Resources’ W0002 price fell Rs. 3.20 (8.25%) to close at Rs. 34.90.
Environmental Resources Investment (GREG) announced that it purchased 10,700 ordinary shares of its subsidiary, Ceylon Leather Products (CLPL), at a volume weighted average price of Rs. 93.38 per share on 27 June 2011, consequently increasing the shareholding in CLPL to 18.1 m ordinary shares (72.5%).
TKS Securities said the market opened the day in green and shed ground during the latter part of the day to close in the red. The top traded counter of the day, Central Finance, gained +0.7% on the back of institutional investor interest and contributed circa 27% of day’s turnover. Further, the counter saw 199.3k shares changing hands during the day.
Environmental Resources Investments (voting and warrant 2012) and Ceylon Leather Products saw mixed investor interest whilst both institutional and high net worth investors were seen active on Distilleries.
A net outflow of foreign funds were seen during the day, where foreign purchases amounted to Rs. 51.8 m (US$ 472.2 k), whilst foreign sales amounted to Rs. 185.8 m (US$ 1,693.7 k).
Reuters said stocks hit a near-seven month low on Tuesday in light volumes as cautious investors stayed on the sidelines amid margin calls that forced selling and low liquidity.
It said main share index fell 0.46 per cent or 31.43 points to 6,862.83, its lowest close since 6 January. It had shed 7.5 per cent so far in June alone, but is still up 3.42 per cent so far this year.
It was the Asia Pacific’s top performer in 2010 and 2009 with 96 per cent and 125 per cent returns respectively.
Forced selling by brokers continued in line with the policy of the regulator Securities and Exchange Commission (SEC) to recover credits, while over Rs. 6 billion has been locked up in the two recent Initial Public Offerings.
Foreign investors were net sellers of Rs. 134 million worth of shares on Tuesday and have sold a net Rs. 6.82 billion in 2011 after a record 26.4 billion in 2010.
The day’s turnover was Rs. 2.35 billion ($ 21.4 million), in line with last year’s average of 2.4 billion, but below this year’s daily average of 2.86 billion.
The rupee closed a tad weaker at 109.69/70 a dollar from Monday’s close of 109.68/70 on importer dollar demand as a State bank sold dollars at Rs. 109.70, dealers said. ......

...by Admin@ 08:06:29 on 2011-06-29

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EPF active in sluggish bourse


The Employees Provident Fund (EPF) is active in the Colombo stock market amidst bearish sentiments, picking up strategic blocks of select companies.
Yesterday EPF is believed to have picked up a majority of Central Finance shares whilst on Monday it bought 1.14 million Aitken Spence and Company shares.
Central Finance saw around 450,000 of its shares trade for Rs. 628 million, accounting for the highest turnover for the day. It peaked to a high of Rs. 1,420 before closing at Rs. 1,400, up by Rs. 9.40.
The volume traded amount to a 2.2% stake of Central Finance, whilst sellers included individual and institutional investors. Perpetual Capital of Arjun Aloysius fame holds an 11% stake in Central Finance.
On Monday EPF bought 1.14 million Spence shares, of which one million was done at Rs. 135 per share. As at 31 March 2011, EPF’s stake in Spence was 4.17%, but it had picked up few more blocks later on. Yesterday’s quantity was a mere 0.3% stake.
Renuka Consultants had also picked up one million shares of Spence on Monday. Sellers were Carson Cumberbatch Group firms Ceylon Guardian Investment and Ceylon Investments.
Deals on 2.237 million shares of Spence produced the highest turnover of Rs. 302 million on Tuesday.
It was the first time in recent weeks that EPF had picked up Spence shares, whereas of late it had been aggressively collecting available quantities of subsidiary Aitken Spence Hotel Holdings. The previous major block bought was one million shares for Rs. 78 million early this month on top of one million in May. As at mid-June, EPF’s stake in Spence Hotel Holdings was over 6%. ......

...by Admin@ 08:06:07 on 2011-06-29

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Sri Lanka stx at 7-mo low on low liquidity, margin sales


* Speculative buying, forced selling weigh on index
* Foreigners sell net 134 million rupees worth shares
* Rupee edges down on importer dlr demand

COLOMBO, June 28 (Reuters) - Sri Lankan stocks hit a near-seven month low on Tuesday in light volumes as cautious investors stayed on the sidelines amid margin calls that forced selling and low liquidity, while the rupee closed a tad weaker on importer dollar demand.

Sri Lanka's main share index fell 0.46 percent or 31.43 points to 6,862.83, it's lowest close since January 6. It had shed 7.5 percent so far in June alone, but is still up 3.42 percent so far this year.

It was the Asia Pacific's top performer in 2010 and 2009 with 96 percent and 125 percent returns respectively. "Forced selling continued to drag the indices down," NDB Stockbrokers said in a research note.

Forced selling by brokers continued in line with the policy of the regulator Securities and Exchange Commission (SEC) to recover credits, while over 6 billion rupees has been locked up in the two recent initial public offerings.
Foreign investors were net sellers of 134 million rupees worth of shares on Tuesday and have sold a net 6.82 billion rupees in 2011 after a record 26.4 billion in 2010.

The day's turnover was 2.35 billion Sri Lanka rupees ($21.4 million), in line with last year's average of 2.4 billion, but below this year's daily average of 2.86 billion.

Traded volume was 84.1 million, against a five-day average of 108.4 million. The 30-day and 90-day average trading volumes were 188.2 million and 105.6 million, respectively. Last year's daily average was 67.9 million.

The rupee closed a tad weaker at 109.69/70 a dollar from Monday's close of 109.68/70 on importer dollar demand as a state bank sold dollars at 109.70 rupees, dealers said.
Reuters ......

...by Admin@ 01:06:26 on 2011-06-29

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Sri Lanka stx steady amid liquidity, margin sales concerns


* Financials offset gains in telcos, trading shares
* Foreigners sell net 150.5 million rupees worth shares
* Rupee down on cbank widening, raising dlr trading band

COLOMBO, June 27 (Reuters) - Sri Lankan stocks ended steady on Monday as strong gains in telecom shares were offset by losses in financial shares in light trading amid concerns over margin calls that forced selling and low liquidity.

Sri Lanka's main share index edged up 0.02 percent or 1.7 points, to 6,894.26. It had shed around 7 percent so far in June alone, but is up 3.89 percent so far this year. It was the Asia Pacific's top performer in 2010 and 2009 with 96 percent and 125 percent returns respectively.

Analysts said forced selling by brokers has been continuing in line with the policy of the regulator Securities and Exchange Commission (SEC) to recover credits, while over 6 billion rupees has been locked up in the two recent initial public offerings.

Foreign investors were net sellers of 150.5 million rupees worth of shares on Monday and have sold a net 6.69 billion rupees in 2011 after a record 26.4 billion in 2010.

The day's turnover was 1.95 billion Sri Lanka rupees (17.8 million), well below last year's average of 2.4 billion and this year's daily average of 2.86 billion.

Traded volume was 91.9 million, against a five-day average of 116.9 million. The 30-day and 90-day average trading volumes were 188.4 million and 106 million, respectively. Last year's daily average was 67.9 million.

The rupee closed down at 109.68/70, from Friday's close of 109.58/60 a dollar, as the central bank widened and increased the dollar trading band by 10 cents to 109.10/70 from 109.10/60 amid heavy importer demand for the greenback, dealers said.
......

...by Admin@ 22:06:50 on 2011-06-27

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Sri Lanka shares recover from lows; concerns remain


* Telcos, diversified shares help boost index
* Foreigners sell net 136.4 million rupees worth shares
* Rupee steady again on state bank's dollar sales
COLOMBO, June 24 (Reuters) - Sri Lankan stocks rebounded on Friday from a five-and-half month closing low, snapping a four-session fall on gaining telecom and diversified shares, but concerns over margin calls that forced selling and low liquidity remained.

Sri Lanka's main share index edged up 0.3 percent or 20.88 points, to 6,892.56, from its lowest since January 6, Reuters data showed.
It had shed about 7 percent in June alone and 2.2 percent this week, but is up 3.87 percent so far this year. "The indices edged higher on renewed buying amid moderate turnover levels. Speculative trading on second tier counters continued to be evident," John Keells Stockbrokers said in a note.

Analysts said the index could dip to 6,500, once it falls below the next support level of 6,800 points. The Colombo bourse was the Asia Pacific's top performer in 2010 and 2009 with 96 percent and 125 percent returns respectively.

Analysts said forced selling by brokers has been continuing in line with the policy of the regulator Securities and Exchange Commission (SEC) to recover credits, while over 6 billion rupees has been locked up in the two recent initial public offerings. Foreign investors were net sellers of 136.4 million rupees worth of shares on Friday and have sold a net 6.4 billion rupees in 2011 after a record 26.4 billion in 2010.

The day's turnover was 1.89 billion Sri Lanka rupees ($17.2 million), well below last year's average of 2.4 billion and this year's daily average of 2.88 billion. Traded volume was 129.8 million, against a five-day average of 121.9 million. The 30-day and 90-day average trading volumes were 187.1 million and 106.5 million, respectively. Last year's daily average was 67.9 million.

The rupee closed unchanged for a second day at 109.58/60 a dollar as a state bank, through which the central bank directs the market, sold dollars at 109.60 rupees despite heavy importer demand for the greenback, dealers said.
......

...by Admin@ 23:06:59 on 2011-06-24

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Sri Lanka stx at 5-1/2-mo low on margin calls, liquidity crunch


* Speculative buying continues as index falls below 6,900
* Foreigners sell net 143.1 million rupees worth shares
* Rupee steady on state bank's dollar sales

COLOMBO, June 23 (Reuters) - Sri Lankan stocks fell on Thursday for a fourth straight session, hitting a new five-and-half month closing low in thin trade, weighed down by margin calls that forced selling across the board and low liquidity.

Sri Lanka's main share index closed down 0.81 percent, or 56.06 points, to 6,871.68, its lowest since January 6, Reuters data showed. It had shed 7 percent in June alone, but has gained 3.55 percent so far this year.

The Colombo bourse was the Asia Pacific's top performer in 2010 and 2009 with 96 percent and 125 percent returns respectively.

Analysts said forced selling by brokers continued to recover credits in line with the policy of the regulator Securities and Exchange Commission (SEC), while over 6 billion rupees has been locked up in the two recent initial public offerings.

Foreign investors were net sellers of 143.1 million rupees worth of shares on Thursday and have sold a net 6.4 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.

The day's turnover was 1.8 billion Sri Lanka rupees ($16.4 million), well below last year's average of 2.4 billion and this year's daily average of 2.88 billion.

Traded volume was 115.4 million, against a five-day average of 138.5 million. The 30-day and 90-day average trading volumes were 185.5 million and 106.3 million, respectively. Last year's daily average was 67.9 million.

The rupee closed steady at 109.58/60 a dollar as a state bank, through which the central bank directs the market, sold dollars at a flat rate of 109.60 rupees despite heavy importer demand for greenback, dealers said.
......

...by Admin@ 19:06:16 on 2011-06-23

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Sri Lanka stocks at 5-1/2-mo low; slips as Asia-Pac best


* New Zealand's benchmark index surpasses Colombo bourse as best performer
* Margin calls, low liquidity weigh on bourse
* Rupee down on importer dlr demand

COLOMBO, June 22 (Reuters) - Sri Lanka's stock market fell on Wednesday to hit a five-and-half month low in light turnover and volumes as margin calls forced selling across the board amid low liquidity, slipping as Asia-Pacific best performer of the year.

Sri Lanka's main share index closed 0.98 percent, or 68.90 points, to 6,927.74, its lowest since January 10, Reuters data showed. It slipped from Asia-Pacific region's best on Wednesday, shedding 6.6 percent in June. It has gained 4 percent so far this year, behind New Zealand's benchmark NZX 50 index , which is up 4.5 percent. The Colombo bourse was the region's top performer in 2010 and 2009 with 96 percent and 125 percent returns respectively.

Analysts said forced selling by brokers continued on Wednesday as well to recover credits in line with the policy of the regulator Securities and Exchange Commission (SEC). Over 6 billion rupees has been locked up in the recent initial public offerings by conglomerate ExpoLanka Holdings , which started trading on June 13, and Softlogic Holdings, which is yet to start trading on the stock exchange.

Foreign investors were net sellers of 1.4 million rupees worth of shares on Wednesday and have sold a net 6.25 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.
The day's turnover was 1.8 billion Sri Lanka rupees ($16.4 million), well below last year's average of 2.4 billion and this year's daily average of 2.89 billion. Traded volume was 120.9 million, against a five-day average
of 152.7 million. The 30-day and 90-day average trading volumes were 184.5 million and 106.1 million, respectively. Last year's daily average was 67.9 million.

The rupee closed a tad weaker at 109.58/60 a dollar from Tuesday's 109.57/60 on importer dollar demand despite the central bank lowered the trading band by 10 cents to 109.00/109.60 from 109.10/109.60, dealers said. It hit a 31-month high of 109.30 a dollar on June 9, its highest since Oct. 30, 2008, Reuters data showed. On Friday the central bank said it will maintain the currency steady with little volatility.
Reuters ......

...by Admin@ 19:06:32 on 2011-06-22

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Sri Lanka regulator lacks proof to act against market manipulators


Sri Lanka's capital markets regulator probed 50 complaints of abnormal market movements and manipulation in 2010 of which some were dropped on lack of evidence while others were being pursued.

The Securities and Exchange Commission (SEC) said it conducted 20 investigations during the year of which two were suspended as the issues relating to the investigations were subject matters of pending litigation.
Cases against three individuals, charged after investigations prior to 2010, were compounded upon payment of a million rupees by one individual and 3.3 million rupees by each of the other two individuals to the SEC compensation fund.

Of the five insider dealing investigations done by the SEC, two were not pursued legally as they could not be proved, according to the SEC annual report.

"However, both such investors being directors of two listed companies have purchased shares of the respective companies whilst the Boards of Directors of the said companies were discussing dividends," the report said.

"Therefore, the SEC cautioned both individuals in writing."

A third investigation was terminated without the SEC taking any enforcement action due to the absence of evidence to legally sustain a case of insider dealing against the investor concerned.

At the end of 2010, two investigations into suspected insider dealing were pending.

The SEC also probed six cases of market manipulation with one dropped owing to pending litigation and another terminated in the absence of evidence to legally sustain a case of market manipulation.

At end-2010, four investigations into suspected market or price manipulation were pending.

During 2010, SEC investigators forwarded 30 referrals to its Surveillance and Investigations Committee for perusal.

The SEC report said 33 percent of detections were possible cases of insider dealing, 27 percent of market manipulations, seven percent reported as 'front running' while the balance 33 percent were issues related to takeovers and mergers, rumour verifications and dealing by directors of Default Board companies.

Front running is trading in shares ahead of a significant purchase or sale of securities of the company for a client, with the intent to profit by trading in the shares later.

In 2010, the SEC began using a new automated surveillance system it acquired from Millennium IT (Software), a Sri Lankan firm now a member of the London Stock Exchange.

The new system supports "multidimensional historical data", has the capability for pattern recognition to quickly identify abnormal transactions, and provides an analytic platform that supports and accelerates investigations and research functions of the SEC, it said.

"The system can be linked to several data bases of insiders of listed companies, their related parties and market intermediaries to accommodate speedy detection of insider dealing."

"We engage in real time monitoring of the market to detect abnormal market movements and manipulations in order to protect the integrity of the securities market and its participants," the annual report said.

"We undertake frontline market surveillance functions and monitor trading activities of the CSE on a real time basis to detect irregular market activities."

The SEC conducts in-depth surveillance analysis of trading data, reviews surveillance reports received from the Colombo bourse, prepares surveillance reports and makes recommendations on appropriate action to be taken in relation to surveillance findings.

During the year the SEC also reviewed 127 annual reports of listed companies and issued five letters of caution and 39 letters of comments. (LBO) ......

...by Admin@ 13:06:43 on 2011-06-22

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Sri Lanka stx at over 5-mo low on margin calls, low liquidity


* Bourse records thin turnover, volume
* Foreigners sell 34 mln rupees worth shares on net basis
* Rupee down on importer dlr demand-dealers

COLOMBO, June 21 (Reuters) - Sri Lanka's stock market on Tuesday fell below 7,000 for the first time since January in low turnover and volumes due to sustained selling across the board weighed down by lack of liquidity and margin calls. The rupee, meanwhile, ended tad weaker owing to importer dollar demand.

Sri Lanka's main share index edged down 0.63 percent, or 44.04 points, to 6,996.64, its lowest since January 11, Reuters data showed. "Selling pressure witnessed across the board. Investor interest mostly witnessed in speculative stocks," said NDB Stockbrokers in a note.

Analysts said forced selling by brokers continued on Tuesday as well to recover credits in line with the policy of the regulator Securities and Exchange Commission (SEC).

Over 6 billion rupees has been locked in the recent initial public offerings by conglomerate ExpoLanka Holdings , which started trading on June 13, and Softlogic Holdings, which is yet to start trading on the stock exchange, bourse data showed.

Foreign investors were net buyers of 34 million rupees worth of shares on Tuesday and they have sold a net 6.25 billion rupees worth shares in 2011 after a record 26.4 billion in 2010. On Tuesday, SEC said its planned to introduce a central counterparty system for share trading to minimise default risk, along with international board and dual listings to boost foreign interest in local stocks.

The day's turnover was 1.67 billion Sri Lanka rupees ($15.3 million), the lowest since May 13, and well below last year's average of 2.4 billion and this year's daily average of 2.91 billion.

Traded volume was 126.8 million, against a five-day average of 175.6 million. The 30-day and 90-day average trading volumes were 183.1 million and 105.7 million, respectively. Last year's daily average was 67.9 million.
The bourse is still Asia's best performer in 2011 with a 5.4 percent gain, after bringing in the region's top return of 96 percent last year.
The rupee closed a tad weaker at 109.57/60 a dollar from Monday's 109.56/60 on importer dollar demand amid a state bank selling dollar at a flat rate of 109.60, dealers said.

It hit a 31-month high of 109.30 a dollar on June 9, its highest since Oct. 30, 2008, Reuters data showed. On Friday the central bank said it will maintain the currency steady with little volatility.
......

...by mrrohana@ 18:06:18 on 2011-06-21

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Capital market: systemic risk very high, SEC must act fast


A top capital market professional says systemic risk is very high in the capital market and urged the Securities and Exchange Commission of Sri Lanka (SEC) to act fast before calamity strikes.

Addressing the Capital Market Development Workshop last Saturday, organised by the SEC in collaboration with the Colombo Stock Exchange, Colombo Stock Brokers’ Association and the Unit Trust Association of Sri Lanka, Heraymila Securities Ltd CEO Ravi Abeysuriya said the infrastructure was already in place to develop the country’s capital market further.

"We do not have to worry about the infrastructure because it is adequate enough, what we need to do is to establish more ethical practices in the stock exchange in order to instil public trust. Are we deepening the capital market or deepening the distrust on the market?" Abeysuriya asked.

He said the majority of the public perceived the stock exchange as a den of punters looking for short term opportunities and not as a long term investment vehicle infested with rip-off artists.

"We would like to see a significant enhancement of SEC powers. The regulator needs to amend the SEC Act to provide for civil sanctions such as punitive penalties and disgorgement on offenders. Stern action must be taken against those who artificially manipulate the market prices to their personal advantage and people are waiting to see a few high powered offenders being prosecuted for market manipulation and insider trading," Abeysuriya said.

He said investors were questioning the ethics behind private placements followed by an IPO with investors involved in private placements making huge gains when shares are subsequently listed on the exchange. These private placements are placed by advisory institutions which tend to incentivise the clients of their brokering arms and are not open to all investors.

Abeysuriya called for the promotion of professionalism, a higher level of training for all staff in the brokering community and the need to encourage high standards of analysis and independent opinion. He also called for the swift dissemination of price sensitive information and the leakage of such information once they are made to the regulator before the press is formally informed of these.

Abeysuriya also called for more comprehensive financial reporting and making more detailed information available to investors.

Many believe the majority of stocks listed on the exchange are overvalued.

Former Director General of the SEC, Arittha Wickramanayake addressing the forum (see yesterday’s The Island Financial Review) slammed the professional bodies of the industry for not working closely with the regulator. He said broker associations were doing little to develop the capital market by consulting with the SEC.

"It is the same with the banks, where their main body has only one fulltime employee as the secretariat. It was (recently discussed at a forum) that Sri Lanka was striving to be a financial hub for the region and the bankers at that particular forum had said this was possible, why because banking stocks were making tremendous gains in the stock exchange. But I told them that this was all rubbish, the banking stocks were all overvalued and cannot be relied on to base such a conclusion," Wickramanayake said. ......

...by Admin@ 16:06:59 on 2011-06-21

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Sri Lanka stock slip in low volume trade, turnover; rupee weaker


* Bourse slips on low liquidity; turnover slumps to 5-wk low
* Foreigners buy net 7.5 mln rupees of shares
* Rupee edges down on importer dlr demand

COLOMBO, June 20 (Reuters) - Sri Lanka's stock market fell on Monday in low turnover and volumes, weighed down by lack of liquidity amid margin calls and investors locking large amount of money in two initial public offerings, while the rupee edged down on importer dollar demand.

Sri Lanka's main share index edged down 0.13 percent, or 9.35 points, to 7,040.68, retreating from 1.17 percent gain in early trades.

Analysts said the day's activities were dominated by speculative trading on a selective set of second-tier counters amid margin calls in-line with the regulator Securities and Exchange Commission's policy of ending all broker credit transactions by end 2011.

Over 6 billion rupees of cash has been locked in the recent IPOs by conglomerate ExpoLanka Holdings , which started trading on June 13, and Softlogic Holdings, which is yet to start trading on the stock exchange, bourse data showed. The bourse on Monday approved a $10.95 million initial public offering by textile firm Textured Jersey Lanka, a firm jointly owned by Pacific Textiles Holdings and unlisted Brandix Lanka.

Foreign investors were net buyers of 7.5 million rupees worth of shares on Monday, but they have sold a net 6.22 billion rupees worth shares in 2011 after a record 26.4 billion in 2010. The day's turnover was 1.7 billion Sri Lanka rupees ($15.5 million), the lowest since May 13, and well below last year's average of 2.4 billion and this year's daily average of 2.91 billion.

Traded volume was 116.7 million, against a five-day average of 197.1 million. The 30-day and 90-day average trading volumes were 180.4 million and 105.2 million, respectively. Last year's daily average was 67.9 million.

The bourse is still Asia's best performer in 2011 with a 6.1 percent gain, after bringing in the region's top return of 96 percent last year. The rupee closed a tad weaker at 109.56/60 a dollar from Friday's 109.55/58 on importer dollar demand, dealers said. It hit a 31-month high of 109.30 a dollar on June 9, its highest since Oct. 30, 2008, Reuters data showed.

On Friday the central bank said it will maintain the currency steady with little volatility.
......

...by mrrohana@ 20:06:51 on 2011-06-20

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Buying returns as market gains Rs. 12 b in value


After days of selling spree fresh buying returned to the Colombo Bourse boosting its value by Rs. 12 billion yesterday.
Both indices gained by nearly 0.5% and though modest the improvement was a sigh of relief for most stakeholders in the Colombo stock market.
Analysts said with forced selling almost through, the market went on a buying mode helping prices to improve. Others said the recovery was fragile but given the dip early in the week it was welcome. Wednesday and Thursday the Bourse lost Rs. 59 billion in value.
“The indices rebounded on renewed buying interest in predominantly small cap counters,” John Keells Stock Brokers said.
Turnover was a respectable Rs. 2.5 billion whilst the market saw continuity in net foreign buying with yesterday’s figure being Rs. 16.6 million.
“Indices closed higher today for the first time in the week, having dropped dramatically last two trading days, although they could not sustain gains made during early hours of trading,” NDB Stockbrokers said.
“Although some interest was seen in blue chip counters, once again it was speculative players who dominated the market. ASPI and MPI closed 1.90% and 1.70% lower for the week, respectively,” it added.
Yesterday Hotels and Travels sector was the main contributor to the market turnover (due to Asian Hotels and Properties), while the sector index increased by 1.30%. Asian Hotels and Properties closed flat at Rs. 178.00. Information Technology sector also contributed significantly to the market turnover (due to E-Channeling). The sector index increased 4.38%. E-Channeling gained Rs. 0.60 (8.70%) and closed at Rs. 7.30. Blue Diamond Jewellery Worldwide continued to contribute significantly to the market turnover. The voting-share closed at Rs. 9.50, having appreciated Rs. 1.10 (12.79%). Renewed interest was witnessed in Brown & Company and Environmental Resources both of which closed higher.
Reuters reported stock market recovered from its five-month closing low on Friday as investors picked up shares battered in the recent fall, but low liquidity weighed on the market.
Sri Lanka’s main share index edged up 0.49 percent or 34.32 points to 7,050.03, inching up from its lowest since 17 January.
Reuters also said over 6 billion rupees of cash has been locked in the recent IPOs by conglomerate ExpoLanka Holdings, which started trading on Monday, and Softlogic Holdings, which is yet to start trading on the stock exchange, bourse data showed.
Foreign investors were net buyers of 16.6 million rupees worth of shares on Friday extending the weekly inflow to 761.9 million for the week, but they have sold a net 6.23 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.
The day’s turnover was 2.54 billion Sri Lanka rupees ($23.2 million), slightly above last year’s average of 2.4 billion but below this year’s daily average of 2.93 billion.
Traded volume was 212.6 million, against a five-day average of 223.4 million. The 30-day and 90-day average trading volumes were 178.7 million and 105.5 million, respectively. Last year’s daily average was 67.9 million.
The bourse is still Asia’s best performer in 2011 with a 6.2 percent gain, after bringing in the region’s top return of 96 percent last year. ......

...by mrrohana@ 12:06:39 on 2011-06-18

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Realistic bourse!


Once top performed Colombo Stock Market’s All Share Price Index (ASPI) crashed back to 7,000 points for the second time during this year, exposing the realistic picture through corrective measures. Colombo Stock Market once was poised to hit the 10, 000 market.

With a turnover of Rs.2.21 billion, Colombo’s All Share Price Index (ASPI) yesterday fell 0.95% to close at 7,015.71 points and Milanka Price Index (MPI) further dipped 1.02% to close at 6,569.40 points. Expressing views on bourse’s recent fall, Chief Executive Officer of Richard Pieris Securities Jayantha Perera said, though the market needs both speculators and fundamental investors, it had been taken for a quicker ride by speculative investors in recent times.

“Fundamentals have not changed. There have been many speculations and it could be described as a quicker speculative drive” Perera said adding that amid this bad state of the market, several investors had burned their fingers hunting in to stocks that were booming last three weeks.

Though it may take a long period for the market to perform well, a number of new investors and foreign funds will infuse new capital to Colombo stocks, in spite of recent falls in both All Share and Milanka price indices, and the drop in the overall Price to forward Earnings Ratio.

On the contrary, Chief Executive Officer of Heraymila Securities Ravi Abeysuriya said the recent IPOs had suck up liquidity from the market, and the market may continue to fall during the coming weeks. Hence, Colombo stocks will further expose realistic valuations.

“I think the stocks that were pushed up by manipulators and punters tumbled mainly. But overall, the panic selling in certain counters affected the blue chip counters as well” a top analyst pointed out.

“It may be margin calls as well as several other factors” he added.

Meanwhile another analyst from the Unit Trust industry said that several investors have been recently following bargain hunters and had got stuck with ‘junk penny stocks’, and as a result the overall market had fallen. “All this has happened due to excessive punting. There is no liquidity at all” he said. Several stocks including Heladiv Foods (HVA), Expolanka (EXPO), Free Lanka Capital Holdings (FLCH) fell below the IPO price to Rs.15.50, Rs.12.50 and Rs.4.50 respectively. Several other stocks also fell to a 52 weeks-low including Environmental Resources (GREG), Ceylon Leather Products (CLPL) and Colombo Fort Land & Building Development Company PLC (CFLB). There were 57 listed gainers and 154 listed losers during the day. Bimputh Lanka Investments (BLI) was the highest gainer, rising over 49.86% to close at Rs.54.70 (up by Rs.18.20). However, only 30,800 shares changed hands. Nearly 25.13 million Blue Diamonds voting shares were traded whilst the share price rose as high as Rs.8.90 and closed at Rs.8.60 (up 13.1%). ......

...by mrrohana@ 19:06:03 on 2011-06-17

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Sri Lanka bourse recovers from 5-mo low; rupee up


* Bourse recoups losses from 5-mo low on bargain hunting; low liquidity weighs
* Foreigners buy 761.9 mln rupees worth shares on net basis for the week
* Rupee edges up after central bank comments

COLOMBO, June 17 (Reuters) - Sri Lanka's stock market recovered from its five-month closing low on Friday as investors picked up shares battered in the recent fall, but low liquidity weighed on the market, while the rupee edged up after central bank said it will allow little volatility.

Sri Lanka's main share index edged up 0.49 percent or 34.32 points to 7,050.03, inching up from its lowest since January 17. "The indices rebounded on renewed buying interest in predominantly small cap counters," John Keells Stockbrokers said in a note. Over 6 billion rupees of cash has been locked in the recent IPOs by conglomerate ExpoLanka Holdings , which started trading on Monday, and Softlogic Holdings, which is yet to start trading on the stock exchange, bourse data showed.

Foreign investors were net buyers of 16.6 million rupees worth of shares on Friday extending the weekly inflow to 761.9 million for the week, but they have sold a net 6.23 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.

The day's turnover was 2.54 billion Sri Lanka rupees ($23.2 million), slightly above last year's average of 2.4 billion but below this year's daily average of 2.93 billion. Traded volume was 212.6 million, against a five-day average of 223.4 million. The 30-day and 90-day average trading volumes were 178.7 million and 105.5 million, respectively. Last year's daily average was 67.9 million.
The bourse is still Asia's best performer in 2011 with a 6.2 percent gain, after bringing in the region's top return of 96 percent last year. The rupee closed tad firmer at 109.55/58 a dollar from Thursday's 109.57/60 after the central bank said it will main the currency steady with little volatility.

It hit a high of 109.30 a dollar on June 9, its highest since Oct. 30, 2008, Reuters data showed.
......

...by mrrohana@ 19:06:14 on 2011-06-17

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Dhammika’s Vallibel One buys Delmege for Rs. 3.1 bn


Dhammika Perera-controlled Vallibel One and Royal Ceramics have inked a deal to fully buy Lewis Brown Limited, the holding company of Delmege Forsythe, a company which dates back to the colonial era.

The deal was done at a whopping Rs.3.1 billion.

Vallibel One, which is expected to enter the Colombo bourse shortly, has purchased 51 percent of Delmege, while Royal Ceramics (RCL) has bought 20 percent.

Dhammika and RCL Managing Director Nimal Perera bought 10 percent each and RCL CEO Tharana Thoradeniya bought 5 percent. The remaining 4 percent was bought by RCL Chairman A.M Weerasinghe.

According to Nimal Perera, this strategic acquisition will open Vallibel One the doors to FMCG business.

“Delmege is like another Hayleys” Perera said.

Delemege Forsythe is a diversified group with interest in FMCG, export and import business, shipping, freight forwarding, insurance broking, pharmaceuticals and travel. The company is owned by businessman Ricky Mendis and his family.

Vallibel One has planned an IPO on June 21 to raise Rs. 532 million by selling 21 million shares at Rs.25 a share. It completed a private placement in early 2011 also at Rs. 25 and raised Rs. 4.9 billion.

Among the company’s assets are Royal Ceramics, LB Finance, PABC, ETC and Sampath Bank.

Funds from the IPO and private placement will be used to build a 300-room hotel and to service short-term debts.

The hotel, costing Rs. 5.6 billion (50 million US dollars) is to be built in Negombo, Vaikkal in Sri Lanka's Western coast, North of capital Colombo, and will be under a new group, Greener Waters Ltd. ......

...by mrrohana@ 09:06:35 on 2011-06-17

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Vallibel One IPO employee portion expanded


Vallibel One IPO employee portion expanded to Sampath, RCL and LB Finance staff as well

Vallibel One has decided to consider applications by the staff of Sampath Bank, Royal Ceramics and LB Finance to qualify for allotment under the “employees” category.
The Rs. 533 million worth IPO involving 21.311 million shares at Rs. 25 is now on and employees have been set aside 10% allocation.
Vallibel One Executive Deputy Chairman Nimal Perera told the Daily FT that the Company considers employees of Sampath (in which Vallibel One has 15% stake), and 51% stakes in RCL and LB Finance as part of one family hence the decision to widen the scope in determining qualifications for being eligible to be allotted under Employee Category.
Furthermore, Vallibel is a holding company and at present doesn’t have many employees.
As per SEC’s directive, Vallibel One IPO will allot 40% each to individual retail and non-retail investors and the balance 10% to unit trusts. Early this year VOL successfully concluded a Rs. 4.9 billion private placement, the biggest in history but was snapped up with full applications worth Rs. 7.5 billion. ......

...by mrrohana@ 09:06:49 on 2011-06-17

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Vallibel Finance IPO begins Tuesday


Vallibel Finance will go for an IPO on Tuesday offering 21,311,870 ordinary voting shares at Rs 25 each.

The funds expected to raise through this IPO is Rs 532,796,750.

The minimum subscription is 100 shares. The issue closing date is 8th July or on the day the issue is oversubscribed. The share trading will commence from early July. ......

...by mrrohana@ 09:06:07 on 2011-06-17

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Sri Lanka stocks close down 1.0-pct


June 16, 2011 (LBO) - Sri Lanka stocks fell by nearly one percent Thursday to a fresh three-month low with continued massive forced selling of popular stocks of margin traders, brokers said.

The main All Share Price Index closed at 7,015.71, down 0.95 percent (67.34 points) while the more liquid Milanka index fell 1.02 percent (67.78 points) to close at 6,569.40, according to stock exchange figures.
Turnover was 2.4 billion rupees.

Galadari Hotels closed at 37.20 rupees, up 9.09 percent or 3.10 mainly due to news of a proposed transfer of Galadari Hotel shares by the Galadari family to the Dubai government.

Royal Ceramics rose by 3.00 rupees or 1.88 percent to 163.00 rupees with 970,300 shares traded adding 159 million rupees to the day's turnover.

Vallibel One, a firm controlled by businessman Dhammika Perera, which is now making a public offer of shares, has confirmed its takeover of the country's century-old unlisted company Delmege Forsythe.

Vallibel One will buy 51 percent of Delmege and its subsidiary Royal Ceramics and related parties the balance.

Among Vallibel One's assets are listed Royal Ceramics, former Delmege Forsythe subsidiary LB Finance and Sampath Bank.

Sampath Bank closed at 255 rupees, down 7.70 rupees or 2.93 percent with 694,900 shares traded including a 400,000 single crossing at 255 rupee per share.

Blue Diamonds Jewellery Worldwide was the highest contributor to the day's turnover with trades worth over 207 million rupees. Its share closed at 8.90, up 1.30 rupees or 17.00 percent. More than 25 million Blue Diamonds shares changed hands.

Recent stock market debutant Expolanka Holdings traded below its IPO price of 14 rupees to close at 12.50, down 50 cents.

"The poor performance of Expolanka will teach those who run after IPO’s a bitter lesson," Capital Trust Stockbrokers said in a research note.

“Despite the forced selling most of the popular stocks still display 'BUY' signals,” the note also said.

There were two crossings of a total of 525,000 shares of John Keels Holdings at 298 rupees a share.

Dimo also saw a crossing or private deal of 84,673 shares at 1405.90 rupees each. ......

...by mrrohana@ 19:06:09 on 2011-06-16

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Sri Lanka bourse hits 5-mo closing low; rupee down


* Shares at 5-mo low on retail margin sales amid low liquidity after two IPOs
* Foreigners buy 73.7 mln rupees worth shares on net basis
* Rupee down on importer dlr demand-dealers
COLOMBO, June 16 (Reuters) - Sri Lanka's stock market fell on Thursday to a five-month closing low on margin calls that forced retail investors to sell their stakes to settle credit transactions amid low liquidity while the rupee edged down on importer dollar demand.

Sri Lanka's main share index ended 0.95 percent or 67.34 points weaker at 7,015.71, its lowest since January 17. It recovered from 1.42 percent fall early in the day. Over 6 billion rupees of cash has been locked in the recent IPOs by conglomerate ExpoLanka Holdings , which started trading on Monday, and Softlogic Holdings, which is yet to start trading on the stock exchange, bourse data showed.

Foreign investors were net buyers of 73.7 million rupees worth of shares on Thursday, but they have sold a net 6.25 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.

On Tuesday, diversified firm Softlogic, which offered the largest IPO in six years, informed the bourse its offer has been oversubscribed by over 300 percent.

The day's turnover was 2.37 billion Sri Lanka rupees ($21.6 million), in line with last year's average of 2.4 billion but below this year's daily average of 2.93 billion. Traded volume was 186.7 million, against a five-day average of 278.1 million. The 30-day and 90-day average trading volumes were 172.9 million and 105 million, respectively. Last year's daily average was 67.9 million.

The bourse is still Asia's best performer in 2011 with a 5.7 percent gain, after bringing in the region's top return of 96 percent last year.

The rupee closed weaker at 109.57/60 a dollar from Tuesday's 109.55/58 due to importer dollar demand, currency dealers said. It hit a high of 109.30 a dollar on June 9, its highest since Oct. 30, 2008, Reuters data showed.
......

...by mrrohana@ 19:06:47 on 2011-06-16

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Sri Lanka stock exchange gets new chairman


June 14, 2011 (LBO) - Krishan Balendra, from Sri Lanka's John Keells group has been elected chairman of the Colombo Stock Exchange, succeeding Nihal Fonseka from DFCC

Sri Lanka's stock exchange's board is made up of representatives from member stock broking firms.
The CSE said Balendra has been a director of the exchange from March 2008. He was elected chairman at a meeting on June 14.

At John Keells Holdings he is now responsible for the retail sector, John Keells Capital, John Keells Stockbrokers and corporate finance strategy. He is also a director of Union Assurance and Nations Trust Bank.

Fonseka would continue to be a director. ......

...by mrrohana@ 10:06:51 on 2011-06-14

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Sri Lanka stocks end at new 3-mo closing low; rupee down


* Retail selling continues as 6 bln rupee cash locked in IPOs
* Foreigners buy 625.6 mln rupees worth shares on net basis
* Rupee down on importer dlr demand-dealers

COLOMBO, June 14 (Reuters)
Sri Lanka's stock market fell on Tuesday to a fresh three-month closing low on retail investor selling on low liquidity after two large initial public offerings while the rupee edged down on importer dollar demand.

Sri Lanka's main share index closed 1.44 percent or 103.81 points weaker at 7,083.05, its lowest since March 15 over 6 billion rupees of cash has been locked in the recent IPOs by conglomerate ExpoLanka Holdings , which started trading on Monday, and Softlogic Holdings, which is yet to start trading on the stock exchange, bourse data showed. "Sustained selling pressure across the board dragged the indices lower while improved foreign participation supported activity levels," JK Stockbrokers said in a research note.

Foreign investors were net buyers of 625.6 million rupees worth of shares on Tuesday, but they have sold a net 6.32 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.

On Tuesday, diversified firm Softlogic, which offered the largest IPO in six years, informed the bourse its offer has been oversubscribed by over 300 percent. The day's turnover was 4.13 billion Sri Lanka rupees ($37.7 million), well over last year's average of 2.4 billion and this year's daily average of 2.93 billion.

Traded volume was 235.3 million, against a five-day average of 290.6 million. The 30-day and 90-day average trading volumes were 168.4 million and 104.3 million, respectively. Last year's daily average was 67.9 million.

The bourse is still Asia's best performer in 2011 with a 6.7 percent gain, after bringing in the region's top return of 96 percent last year.

The rupee closed weaker at 109.55/58 a dollar from Monday's 109.45/48 due to importer dollar demand, currency dealers said. It hit a high of 109.30 a dollar on Thursday, its highest since Oct. 30, 2008, Reuters data showed. Stock and foreign exchange markets will be closed on Wednesday to mark a Buddhist religious holiday and normal trading will resume on Thursday.
......

...by mrrohana@ 06:06:27 on 2011-06-14

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Sri Lanka bourse at 3-mo closing low; rupee gains


Mon Jun 13, 2011 7:29am EDT

* Blue chips, financials drag bourse on technical correction
* Foreigners buy 46.1 mln rupees worth shares on net basis
* Rupee down on mild importer dlr demand-dealers

COLOMBO, June 13 (Reuters) - Sri Lanka's stock market fell on Monday to near three-month closing lows led by blue chips and financials due to a technical correction after heavy speculative trading in the past few days, while the rupee edged up on stocks-related inflows.

Sri Lanka's main share index closed 0.62 percent or 45.06 points weaker at 7,186.86, its lowest since March 21. "This is a correction after several penny stocks boosting the index in heavy speculative trading," said a stock broker on condition of anonymity. "I think market is getting back to normal with fundamentals."

Foreign investors were net buyers of 46.1 million rupees worth of shares on Monday, but they have sold a net 6.95 billion rupees worth shares in 2011 after a record 26.4 billion in 2010. Conglomerate ExpoLanka Holdings , which started trading on Monday, ended 2.14 percent firmer than its initial public offering price of 14 rupees.

The day's turnover was 2.48 billion Sri Lanka rupees ($22.6 million), just above last year's average of 2.4 billion but slightly below this year's daily average of 2.92 billion.

Traded volume was 234.4 million, against a five-day average of 346.3 million. The 30-day and 90-day average trading volumes were 162 million and 103.7 million, respectively. Last year's daily average was 67.9 million.

The bourse is still Asia's best performer in 2011 with a 8.3 percent gain, after bringing in the region's top return of 96 percent last year.

The rupee ended a tad firmer, closing at 109.45/48 a dollar from Friday's 109.48/52 due to stocks-related inflows, currency dealers said. It hit a high of 109.30 a dollar on Thursday, its highest since Oct. 30, 2008, Reuters data showed.
......

...by mrrohana@ 08:06:44 on 2011-06-13

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S Lanka rupee ends lower; shrs at over 5-week low


* Rupee down on mild importer dlr demand-dealers
* Bourse hits fresh 5-wk low led by financials
* Foreigners sell 382.9 mln rupees worth shares on net basis

COLOMBO, June 10 (Reuters)

The Sri Lankan rupee edged down on Friday due to slight importer demand for dollars, currency dealers said, while shares hit a fresh five-week low amid retail speculative buying.

The rupee edged down to close at 109.48/52 a dollar from Thursday's 109.45/50. It had hit a high of 109.30 a dollar on Thursday during the early trade, its highest since Oct. 30, 2008, Reuters data showed.

Sri Lanka's main share index closed 0.66 percent or 47.70 points weaker at 7,231.92, its lowest since May 4. "Activity levels were driven by increased participation of local high networth individuals while retail investors chased speculative counters," John Keells Stockbrokers said in a note.

Foreign investors were net sellers of 382.9 million rupees worth of shares on Friday, extending the week's outflow to 631.6 million rupees and they have sold a net 7.02 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.

The day's turnover was 3.32 billion Sri Lanka rupees ($30.3 million), well above last year's average of 2.4 billion and this year's daily average of 2.9 billion. Traded volume was 248.2 million, against a five-day average of 421.8 million. The 30-day and 90-day average trading volumes were 155.4 million and 103.5 million, respectively. Last year's daily average was 67.9 million.

The bourse is still Asia's best performer in 2011 with a 8.98 percent gain, after bringing in the region's top return of 96 percent last year.
......

...by Rohana@ 10:06:05 on 2011-06-10

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SE Asia Stocks-Mixed end to lower week as foreigners sell


* Thailand down 3.5 pct on the week despite gains in last 2 sessions
* Gloomy global economic outlook cuts volume around region

By Shihar Aneez , COLOMBO, June 10 (Reuters) –

Southeast Asian stock markets closed narrowly mixed on Friday in light volume, with foreign outflows sending all the main bourses down on the week because of worries about global economic growth, plus political concerns in Thailand.
Appetite for risk was also reduced by continued EU debt problems and although some regional markets recovered ground in thin trade on Friday, analysts say they are running out of steam due to the gloomy global outlook.

Despite a 0.4 percent bounce back on Friday, Thailand fell 3.5 percent on the week, its worst performance since February. Singapore lost 0.6 percent on the day, Indonesia 0.5 percent and the Philippines 0.1 percent, but Malaysia edged up 0.3 percent. All were lower on the week.

There were heavy foreign outflow from Thailand, mainly due to political concerns raised in reports by several foreign brokers ahead of a July 3 general election. Bangkok suffered net foreign selling of $585 million on the week including $70 million on Friday. "Domestic political worries will be a market drag at least over the next three or four weeks ahead of the July 3 poll," said Anubhon Sriaj, head of research at BFIT Securities in Bangkok.

A modest rebound in the last two sessions of the week reflected bargain-hunting by retail investors, but in thin trade. Some analysts say the region's emerging markets still have attractive valuations and could rebound if there is better economic news from the United States, for example.

Thailand is trading at 10.9 times this year's projected earnings, the lowest in the region and compared to 11.9 for the whole of Asia. The Philippines and Singapore are trading at 12.9 and 12.7 times respectively, lower than the 13.8 of Malaysia and 14.0 of Indonesia, Thomson Reuters StarMine data showed. "The market valuation has become more attractive but investors may still want to wait amid uncertainty," Sriaj said. "In the short term, the Thai index may fall below the 1,000
level and there is major support around 985. It ended at 1,020.37 on Friday.
Jakarta saw foreign outflows of $186 million during the week, while Malaysia saw net foreign selling of $26.72 million.

SOUTHEAST ASIAN STOCK MARKETS

Change on day
Market Current Prev Close Pct Move
Singapore 3078.35 3097.57 -0.62
Kuala Lumpur 1556.19 1550.89 +0.34
Bangkok 1020.37 1016.85 +0.35
Jakarta 3787.65 3806.19 -0.49
Manila 4219.58 4224.34 -0.11
Hanoi 445.00 443.95 +0.24

Change on year
Market Current End prev yr Pct Move
Singapore 3078.35 3190.04 -3.50
Kuala Lumpur 1556.19 1518.91 +2.45
Bangkok 1020.37 1032.76 -1.20
Jakarta 3787.65 3703.51 +2.27
Manila 4219.58 4201.14 +0.44
Hanoi 445.00 484.66 -8.18

Stock Market Volume (shares)

Market Current Volume Average Volume 30 days
Singapore 261,625,800 301,017,490
Kuala Lumpur 91,342,400 119,927,277
Bangkok 2,527,031 4,481,514
Jakarta 2,634,104,500 5,288,107,633
Manila 289,335 608,585
Hanoi 41,111 28,097


Net Foreign Trading Value (million dollar)
Market Current Year to date
Singapore n.a. n.a.
Kuala Lumpur +6.91 n.a.
Bangkok -69.85 -251.52
Jakarta -16.68 +1,447.79
Manila +3.14 +688.04
Hanoi -0.18 +32.44

Source - Thomson Reuters and stock exchanges
......

...by Rohana@ 06:06:29 on 2011-06-10

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SE Asia Stocks-Mostly down on foreign selling; Bangkok rallies - Reuters


* Foreign outflows pull down markets on growth woes
* Thailands rallies from 12-wk lows on retail bargain-hunting

By Shihar Aneez COLOMBO, June 9 (Reuters)

Most Southeast Asian stock markets closed weaker on Thursday in thin volume as foreign investors sold to reduce exposure to risky assets because of worries about sluggish global growth.

Mounting evidence of weaker growth, on top of China's steady monetary tightening, the festering euro zone debt crisis and still-high oil prices, have turned investors off equities.
On Wednesday, the Federal Reserve's Beige Book, which gives an anecdotal report on the economy, pointed to a slowing in U.S. growth in May, reinforcing Fed chief Ben Bernanke's bearish assessment on growth delivered a day earlier.

Indonesia , the region's best performer this year, fell 0.5 percent with a foreign outflow of $81.6 million, although volume was just 80 percent of its 30-day average, Reuters data showed.

The Philippines , which saw net foreign selling of $5.5 million, fell 0.7 percent in volume that was just half its 30-day average and Singapore lost 0.2 percent. Malaysia edged down 0.1 percent with a foreign outflow of $12.2 million. "There is no catalyst to change the momentum unless the U.S. Fed says there will be a QE3 or China says it will stop monetary tightening or Japan says it is coming out of deflation," said a Singapore-based analyst, asking not to be named. "The debt crisis in Greece is also unresolved and there is no clear sign of growth becoming normal yet."

Asian stocks outside Japan were down 0.44 percent by 1014 GMT, while the MSCI index for Southeast Asia was down 0.30 percent.
Regional analysts said investors were also waiting for a European Central Bank policy meeting later in the day at which the ECB is widely seen laying the groundwork for a rate rise in July, responding to higher inflation.

Thailand which fell 1.6 percent to below 1,000 on the index at one stage, recovered to close 0.2 percent firmer, led by big caps, but it suffered a foreign outflow of $144.4 million, Stock Exchange data showed.

Analysts said retail bargain-hunting helped the market recoup early losses. "The twin threat of Thai political worries and the global economy will keep the Thai stock market under selling pressure for the short term at least," said Finansia Syrus Securities head of research Warut Siwasariyanon. "The major bottom for the SET index should be around 980."

In late trade, Bank of Thailand Governor Prasarn Trairatvorakul said there had been strong outflows of foreign funds over the past two weeks due to concern about the global economy and domestic political uncertainty.
......

...by Rohana@ 07:06:27 on 2011-06-09

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S Lanka rupee hits new 31-mo high on inflow; shrs recover - Reuters


* Rupee hits 109.30 on inflows, exporter dlr sales-dealers
* Bourse recovers from 5-wk low; speculative buying continues
* Foreigners sell 382.9 mln rupees worth shares on net basis
COLOMBO, June 9 (Reuters) - The Sri Lankan rupee hit a fresh over 31-month high on Thursday due to foreign inflows amid exporters' dollar sales, currency dealers said, while shares gained from a five-week lows, snapping three straight falls, on retail speculative buying.
The rupee hit 109.30 a dollar during early trades, its highest since Oct. 30, 2008, before ending at 109.45/48 from Wednesday's close of 109.45/50, Reuters data showed.
Currency dealers said exporter selling on fears of further appreciation and around $15 million inflow into a foreign bank resulted in the early gain. Later the currency retreated to close a tad firmer on importer demand for the dollar.
Sri Lanka's main share index closed 0.3 percent or 21.92 points firmer at 7,279.62, inching up from its lowest since May 5, due to speculative retail buying.
"Despite some strategic crossings taking place, the market still seems to be largely dominated by speculative investors," NDB Stockbrokers said in a research note.
Softlogic, which opened subscription for $36 million of its initial public offering on Thursday, said it had been oversubscribed within minutes after the market opened for
trading.
Foreign investors were net sellers of 382.9 million rupees worth of shares on Thursday and they have sold a net 7.02 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.
The day's turnover was 4.06 billion Sri Lanka rupees ($37.1 million), well above last year's average of 2.4 billion and this
year's daily average of 2.9 billion.
Traded volume was 486 million, against a five-day average of 408.7 million. The 30-day and 90-day average trading volumes were 148.9 million and 102.3 million, respectively. Last year's daily average was 67.9 million.
The bourse is still Asia's best performer in 2011 with a 9.7 percent gain, after bringing in the region's top return of 96
percent last year.

FACTORS TO WATCH:
- If foreign investors buy shares in large volumes
- If Sri Lanka can achieve an 8.5 pct growth target amid rising global oil prices and inflation
- The extend of the rupee appreciation ......

...by Rohana@ 07:06:48 on 2011-06-09

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Sri Lanka rupee at 31-mo high on weak dlr; shrs at 5-wk low - Reuters


* Central bank lowers dlr trading band citing dlr fall
globally
* Profit-taking drives down bourse to 5-wk low amid pre-IPO
selling
* Foreigners sell 265.5 mln rupees worth shares on net basis
COLOMBO, June 8 (Reuters) - The Sri Lankan rupee hit
over 31-month high on Wednesday as the central bank lowered its
dollar trading band amid the greenback's global decline, while
shares fell for a third straight session to their five-week low
on retail profit taking.
The rupee rose to 109.35 a dollar during the early trade,
its highest since Oct. 30, 2008, before ending at 109.45/50 from
Tuesday's close of 109.50/60, Reuters data showed, as the
central bank lowered its dollar trading band by 10 cents to
109.10/60.
"This is mainly due to dollar depreciation globally," Ajith
Nivard Cabraal, the central bank governor told Reuters.
The rupee has risen 1.44 percent so far this year, mainly
due to inflows from remittances and foreign direct investments
which have jumped 34.9 percent and 160 percent, respectively,
year-on-year in the first three months of the year.
Sri Lanka's main share index closed 0.51 percent or
36.84 points weaker at 7,257.70, its lowest since May 5, due to
retail profit-taking amid selling pressure as investors cashed
in stocks to be liquid for the upcoming Softlogic initial public
offering, which opens for subscription on Thursday.
Foreign investors were net sellers of 265.5 million rupees
worth of shares on Wednesday and they have sold a net 6.64
billion rupees worth shares in 2011 after a record 26.4 billion
in 2010.
The day's turnover was 3.3 billion Sri Lanka rupees ($30.1
million), well above last year's average of 2.4 billion and this
year's daily average of 2.9 billion.
Traded volume was 249.1 million, against a five-day average
of 344.4 million. The 30-day and 90-day average trading volumes
were 134 million and 99 million, respectively. Last year's daily
average was 67.9 million.
The bourse is still Asia's best performer in 2011
with a 9.37 percent gain, after bringing in the region's top
return of 96 percent last year. ......

...by Rohana@ 11:06:07 on 2011-06-08

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Sri Lankan capital market showcased at LSE (DM)


The London Stock Exchange (LSE) invited stakeholders of the Sri Lankan Capital Market to showcase its potential and opportunities to international Fund Managers based in London.

Sri Lankan Capital Market Day was held on June 03 at the LSE with the ceremonial opening of the day’s trading under the patronage of Senior Minister of International Co-operation, Dr. Sarath Amunugama. Subsequently, the Sri Lankan capital market was showcased to a group of over 25 reputed international Fund Managers.

The opening address was made by Tony Weerasinghe, Director of Global Development, LSE. Dr. Sarath Amunugama in his keynote address highlighted the importance of current business environment, the opportunities provided by the State and the potential of Sri Lanka being a regional financial hub.

An informative panel discussion was held with the Chairperson of the Securities & Exchange Commission of Sri Lanka (SEC), Indrani Sugathadasa, Chairman of the Colombo Stock Exchange (CSE), Nihal Fonseka and the Director General of the SEC, Malik Cader. John Keells Holdings, Hemas Holdings, DFCC Bank, Carson Cumberbatch, Dialog, MTD Walkers and Expolanka made presentations which was followed by one to one meetings with the Fund Managers which went on till 5:00 p.m.

In addition, the Sri Lankan delegation was hosted to a round table luncheon discussion on June 02, by Bloomberg News which included a television interview with the Minister and the Chairperson of the SEC. The Sri Lankan High Commission in the United Kingdom organized an event at the prestigious Carlton Club where the Minister and the delegation met the members of the British Chamber and the Sri Lankan diaspora. ......

...by Rohana@ 11:06:00 on 2011-06-08

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