Sri Lanka shares near 5-month high on large caps, foreign buying

COLOMBO, Jan 13 (Reuters) - Sri Lankan stocks rose for a fifth straight session to a near five-month high on Monday, led by shares of large caps such as Ceylon Tobacco Company Plc , as falling interest rates helped retail investor sentiment and foreign investors bought risky assets on a net basis. 

The main stock index gained 0.55 percent, or 33.25 points, to end at 6,116.39, its highest close since Aug. 21. It gained 2.88 percent in the last five straight sessions, in an overbought market. "With the interest rates, retail investors are pushed to buy shares. 

The confidence is building up, but there is a long way to go," said a stockbroker on condition of anonymity. Shares in Ceylon Tobacco Company Plc rose 3.05 percent to 1,226.30 rupees. 

Analysts said the central bank's interest rate cut on Jan. 2 and the recent fall in T-bill yields had boosted sentiment and helped sustain the gains. 

The yield on 91-day T-bills fell at a weekly auction on Monday to its lowest since January 2007, the date the central bank made data available. 

Yields on 182-day and 364-day T-bills are at their lowest since Oct. 15, 2010. 

Stockbroker First Capital Equities in a note advised investors to refrain from taking speculative positions and to focus on high quality cash-rich companies with strong balance sheets that have underperformed and have the potential to gain their intrinsic values. 

The index has risen 3.44 percent so far this year after a 4.8 percent gain in 2013. It fell in 2012 and 2011. 

The day's turnover was 1.38 billion rupees ($10.56 million), surpassing last year's daily average of about 828.4 million rupees. 

Both the stock and foreign exchange markets will remain closed for public holidays on Tuesday and Wednesday. Normal trading will resume on Thursday. 

Foreign investors were net buyers of 68.4 million rupees worth of shares on Monday, extending the year-to-date net inflow to 166.2 million rupees. 

Offshore investors bought a net 22.88 billion rupees worth of stocks last year. 

($1 = 130.7000 Sri Lanka rupees) 

 (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anupama Dwivedi)

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Sri Lanka stocks close up 0.55-pct

Jan 13, 2014 (LBO) – Sri Lanka stocks plunge 0.55 percent for the fifth consecutive day with tobacco and insurance firms gaining amid net foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 33.25 points higher at 6,116.39, up 0.55 percent. The S&P SL20 closed 9.48 points higher at 3,393.99, up 0.28 percent.

Turnover was 1.37 billion rupees, down from 1.38 billion rupees last Friday, with stocks of 68 firms closing in the red against 127 gainers.

HNB closed 90 cents lower at 154.10 rupees with four off market transactions of 346.75 million rupees contributing to 25 percent of the total turnover today.

Aitken Spence closed 4.00 rupees lower at 102.20 rupees with market transactions of 154.57 million rupees contributing to 11 percent of the turnover.

The Finance Company closed 1.00 rupee higher at 13.70 rupees, attracting most number of trades during the day.

Foreigners bought 358 million rupees worth shares while selling 289 million rupees of shares.

Ceylon Tobacco Company closed 36.30 rupees higher at 1,226.30 rupees and Ceylinco Insurance closed 133.30 rupees higher at 1,339.80 rupees, contributing most to the index gain.

Hemas Holdings closed 1.80 rupees higher at 37.50 rupees and Lanka Orix Leasing Company closed 90 cents higher at 72.40 rupees.

DFCC dropped 50 cents at 150.10 rupees and NDB closed 4.30 rupees higher at 184.80 rupees.

Commercial Bank closed 40 cents higher at 126.70 rupees and Commercial Leasing and Finance ended 10 cents lower at 4.10 rupees.

Cargills Ceylon closed flat at 148.00 rupees and JKH fall 80 cents at 231.00 rupees.

JKH’s W0022 warrants closed 1.10 rupees lower at 83.90 rupees and its W0023 warrants closed flat at 90.00 rupees.

Carson Cumberbatch ended 3.50 rupees lower at 351.50 rupees and Nestle Lanka dropped 11.70 rupees at 2,115.10 rupees.

Distilleries ended 1.50 rupees higher at 201.50 rupees and Bukit Darah closed 2.10 rupees lower at 617.90 rupees.

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DFCC, NDB shares in sharp rise over pending merger

Share prices of both DFCC Bank and NDB last week gained sharply ahead of the pending merger over which the two institutions issued a preliminary statement on Friday saying talks will begin shortly.

Though the joint announcement came after the market was closed and timeline for merger proposal was announced on 2 January by the Central Bank via its 2014 Road Map, the gain in share price last week was significant. Whereas in the week ended 3 January, DFCC Bank share dipped by Rs. 1.50 and NDB just managed to be up by 10 cents, last week both counters rose nearly to their 52-week high.

DFCC gained by Rs. 15.60 (11.5%) to close at Rs. 150.60, whilst intra-week highest was Rs. 151, a few rupees short of its 52-week highest of Rs. 153. NDB rose by Rs. 15.70 (9.5%) to close at Rs. 180.50 whilst peaking to an intra-week highest of Rs. 182, just 50 cents short of its 52-week highest.

Most analysts linked the sharp rise to the pending merger though it is likely to take a longer time whilst others noted, post unveiling of the 2014 Road Map, sentiments have been positive on banking and finance sector stocks due to consolidation and other measures announced.

Analysts said that some investors were taking early positions on the two entities since a merger could involve a share swap. Both entities have nearly 18,000 shareholders. 

Combined staff strength is around 2,800 and as per Central Bank indications there will be no retrenchment despite a merger.

Internally and confidentially, both DFCC and NDB in the past had explored various options of acquisitions outside but none made any headway. DFCC was the pioneering

Development Finance Institution in the country and has a commercial bank as a 99% owned subsidiary. NDB which was a development finance institution originally changed its charter to become a commercial bank.

Issuing a preliminary joint statement on the merger between DFCC Bank and National Development Bank PLC (NDB), the two entities on Friday said talks will commence shortly.

“The Boards of Directors of DFCC Bank (DFCC) and National Development Bank PLC (NDB) wish to announce that they, in pursuance of the policies announced by the Government encouraging the consolidation of certain banking businesses, are about to commence preliminary discussions with a view to achieving such consolidation,” the statement signed by DFCC Bank CEO Arjun Fernando and NDB CEO Rajendra Theagarajah said.

“The Boards of DFCC and NDB wish to emphasise there have been no definite decisions on any aspect of such consolidation and that final decisions would be dependent, amongst others, on arrangements being agreed keeping paramount the interests of customers, employees (which in the case of DFCC include those of DFCC Vardhana Bank PLC) and other stakeholders of the banks. Moreover, consolidation of the two entities will be dependent on regulatory approvals and possibly, the passage of facilitative legislation,” it said.

“In conclusion, the Boards of Directors of DFCC and NDB assure its shareholders, its employees, the regulatory authorities and the investing public, that they will keep them informed of the progress in connection with the proposed transaction as and when necessary,” the joint statement added.

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