Saturday 31 January 2015

Ravi defends controversial retrospective tax

Sri Lanka Finance Minister Ravi Karunanayake defended a deadly retrospective tax slammed on companies, which analysts fear is a tactic that is likely to be followed by future administrations to finance their election promises.

The tax was supposedly to take back ‘ill-gotten’ gains.

"It may be on the short run we have been offensive in certain areas but we have put fundamental reason as to doing so as well," Finance Minister Ravi Karunanayake said.

"We will ensure when we say it is one-off that it is one-off unless the market decides to behave in a different way."

Karunanayake was speaking at a forum organized by the Ceylon Chamber of Commerce Friday the day after he presented the government budget which announced the tax .

Ill-gotten Super Gains
Ceylon Chamber Chief Suresh Shah had earlier referred to a windfall type 25 percent levy labeled ‘super gains tax’ slapped on companies which supposedly had ill-gotten gains.

Shah said not all companies had made such gains and he was concerned about the perceptions created in the country that all businesses had ill-gotten gains.

Practices followed by the United National Party led administrations such as setting up state companies under the Companies Act instead of an Act of Parliament and the executive presidency itself had been abused by subsequent administrations against the people with interest added.

Karunanayake said the budget was done in a few days to give effect to the ‘political aspirations.’

"Our intention was not to distort the market, but ensure that if there had been any ill-gotten gains in certain areas, certainly there won’ be any mercy on them," he said.

"But any area where there is a genuine error we will be the first to say sorry and get it corrected."

Indrajith Coomaraswamy an economist and former Central Bank and Treasury official said there was a debate whether it was better to increase the overall tax rate rather than have a one-off rate.

"As we go forward we need learn lessons to see whether we have done it the best way," he said.

A retrospective tax means that all shareholders who bought shares on the basis of expected profits per share for the current year on reported earnings will find that the profits are not true and their investment decisions were wrong, an analysts who declined to be named said.

No Witch Hunt
"In my opinion it is not a good thing do," economist Laxman Siriwardene said. "It should not create a precedent. It should be transparent to a company what they have to do."

"The only saving grace is taxation is better than printing money."

There were also perceptions in the market that the retrospective tax and other large one off levies were ‘revenge’ taxes imposed on firms linked to or who supported the previous regime or refused campaign finance, an analyst who declined to be named for fear of reprisals said.

It may have opened a Pandora’s Box for the budget to be used to wreak vengeance by future administrations, critics say.

The claims of being ‘one-off’ bring back memories when an ad hominem or targeted expropriation law was brought against several companies including many owned by those with connections to the United National Party.

"The problem now is that there is no opposition. The opposition anyway is clueless about these issues," one banker said. "The media is also with them. People like Harsha (de Silva) who spoke on behalf of economic freedom and rule of law is also with them. Please don’t quote me."

Minister Karunanayake confirmed that the super gain tax was based on the 2013/2014 financial year but insisted that there was no witch hunt.

"We have looked at two billion rupees (in profits) from a transparent basis. There is no witch hunt on anybody, it is just on what is declared."

He said tax exempt companies will not be included, and there were "effectively 42 companies (caught up in the net)", but we’re awaiting returns to see the exact number.

No profit warnings have so far been issued by any company in the stock market, as it is uncertain which listed firms will get hit. December quarter results are just coming in.

In Sri Lanka some firms including banks have a financial year ending in December and most others March.

Minister Karunanayake said that the ill-gotten gains tax applied only to single entities and not to consolidated group results.

"We are only using a one-off to clear the dead past," Karunanayake said. "We have inherited this. If we can say we can write off what was done in the previous regime, we do not need to have this super tax.

"But owing to the fact that you took everything sitting down for 11 years – you won’t have white vans running around hereafter – so please look at the state the economy is in. Help us to take this forward. That is why we said we are taxing two percent for the benefit of 98 percent."

New Structural Problem
Coomaraswamy however said the new current expenditures initiated by the regime would be permanent streams compared to the one-off tax that would bring some money this year and would have to be fixed later.

"The interim budget has put in place streams of recurrent expenditures, in terms of reliefs offered. But a lot of the revenue measures are one-off and that is a structural challenge that needs to be addressed."

The self-created massive salary hike to state workers had reversed gains in containing current expenditures over several years. This would need more money to be taken from the citizens to be used to finance current state expenses by raising the revenue to gross domestic product ratio.

Sri Lanka’s stocks took a battering on Friday falling 2.6 percent mainly due to the retrospective tax. Stocks were already falling on the basis of the election manifesto of the administration especially the massive salary hike promised to state workers.

Analysts say retrospective taxes, which is a law that applies to the past, are among the worst types of violations of rule of law that a legislature of elected rulers, who control the police and the prisons, can impose on an unarmed citizenry who are like helpless serfs, however rich they are.

Some one billion rupee taxes imposed on sports television stations believed to be targeted at a channel connected to the last regime which was set up with blatant state privilege’s also go against a fundamental principle of taxation, particularly in South Asia which is the ability to pay.

"The Ruler should act like a bee which collects honey without causing pain to the plant," says the Mahabharata, a principle that has also been articulated not only by Ved Vyas but also by Chanakya (Kautilya) in his work Arthashastra and has been followed by Sri Lankan kings as well.

Rule of Law
The very nature of rule of law is predictability. While ignorance of the law is not an excuse, no man can be subject to a rule that did not exist for him to follow in the first place. Economist and philosopher F A Hayek explained this succinctly in his work Road of Serfdom:


"Stripped of all technicalities [the rule of law] means the government in all its actions is bound by rules fixed and announced beforehand—rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances, and to plan one’s affairs on the basis of this knowledge."


The new administration has promised to restore rule of law by reducing the arbitrary powers of the President and re-appointing a Constitutional Council to redress the arbitrary misuse of the public service that was possible after an independent public service was destroyed.

The key tool of the executive presidency was the direct appointment of ‘impermanent’ secretaries to ministries driving the last nail into the coffin of a previously independent public service and killing off the institution of permanent secretaries which was already hit by a constitution in 1971.

The `impermanent’ secretaries are either completely servile to the ministers and have to do wrong things to remain in office or they are very powerful and act like ministers in arbitrary ways.

Critics say if there were permanent secretaries, President Mahinda Rajapaksa would not have been able appoint his brother as defence secretary.

Minister Karunanayake promised a clean administration going forward.

"We are a responsible government and we want the economy to move, not in the hands of a few; open it for a clean operation to go forward," Karunanayake said.

"It is going to be an open government. There will be no necessity for one lot to be moving around the Finance Ministry, the Prime Minister or the President.

"When you look at it initially, I know some of the businessmen in the upper echelons have got a little concerned. But 98 percent of the country is extremely happy."
www.island.lk

JKH expresses confidence on viability of Water Front project

Will “engage” with govt. on proposed restrictions

John Keells Holdings said in a stock exchange filing on Friday that they will "engage with the government" with regard to the Prime Minister’s announcement in parliament on Thursday that the agreements entered into with Water Front Properties (Pvt) Ltd. under the Strategic Development Projects Act will be amended to restrict the ability to rent space for gaming activities.

"Whilst the proposed amendment will constrain the ability to command premium rentals on this component of the project, the multi-faceted nature of this development gives your Board the confidence that the project will still be viable given its diverse portfolio of revenue streams and iconic designs which, we believe, will transform the landscape of Colombo," the filing said.

"As such, the project will continue as planned. The overall brand architecture for ‘Water Front Project’ has now been finalized with the project being branded as ‘Cinnamon Life’ and demand for both the residential and commercial spaces remain encouraging."

JKH on Friday reported healthy profit growth in the third quarter of the current financial year and the first nine months of fiscal 2014/15.

Third quarter group profits before tax (PBT) at Rs. 5.2 bln. was up 27% From the Rs. 4.27 bln. posted a year earlier.

The PBT for the first nine months of the current financial year at Rs. 12.18 bln. was up 33% over the Rs. 9.11 bln recorded in the comparative period in the previous financial year.
www.island.lk

Sri Lanka shares hit 2-month low after govt's retrospective tax plan

Jan 30 (Reuters) - Sri Lankan shares fell 2.89 percent to a more than two-month low on Friday, their biggest fall since February 2011, led by blue chips on concerns over future earnings after the government imposed a retrospective 25 percent 'super gain tax' in its supplementary budget.

Sri Lanka's new government on Thursday announced a budget that imposed new taxes on cash-rich firms to pay for pay hikes for workers and tax cuts on key commodities, hoping to woo voters as it approaches a parliamentary election.

The main stock index, which fell as much as 2.89 percent during the day, ended 2.66 percent weaker, or down 196.46 points, at 7,180.05, its lowest since Dec. 1, Thomson Reuters data showed.

Finance Minister Ravi Karunanayake imposed a one-time super gain tax of 25 percent on individuals or companies that earned more than 2 billion rupees in profits in 2013/2014.

"Today's drop was led by the fall in the big caps after the budget," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.

"Interestingly huge net foreign buying was seen. With the net foreign inflow, the market fall might slowdown."

Foreign investors were net buyers of 451.3 million rupees worth of shares on Friday, reversing the net foreign trade so far this year to net buying. They have been net buyers of 120.1 million rupees. They bought a net 22.07 billion rupees worth of stocks last year.

Analysts said the market came off due to panic selling because of the super gain tax which affects large caps.

Analysts said the market would trade lower in the coming days on selling in top conglomerate John Keells Holdings , Dialog Axiata, Sri Lanka Telecom, Ceylon Tobacco Company and Nestle as they would have to pay the new tax.

Shares in Dialog Axiata Plc fell 12.41 percent while conglomerate John Keells Holdings Plc fell 5.02 percent, and biggest listed lender Commercial Bank of Ceylon Plc lost 6.56 percent.

After the market closed John Keells posted a 28 percent gain in its third quarter net profits.

Analysts, however, expect the raft of tax concessions and salary hikes in the budget to increase consumers' disposable income and help the market rally over the long term.

Turnover was 2.07 billion Sri Lankan rupees ($15.66 million), more than last year's daily average of 1.42 billion rupees, exchange data showed.

($1 = 132.1500 Sri Lankan rupees) 

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

Thursday 29 January 2015

13 Essential goods price reduction by removal of taxes - with effect from midnight

Sugar: Rs. 10 reduction - tax reduced from Rs. 28 up to Rs. 10
Milk powder 400g packet will be Rs. 325 (maximum retail price) - reduction of Rs. 61
Sustagen milk powder to be reduced by Rs. 100 (400g)
Flour prices reduced by Rs. 12.50 per kilo
Bread - reduced by Rs. 6
Green grams - reduction by Rs. 40 per kilo
Sprats: Reduction of Rs. 15
Canned fish - Reduced by Rs. 60
Coriander - Reduced by Rs. 60 per kilo
Maldive fish - taxes reduced by Rs. 200
Canned fish - Reduced by Rs. 60
Coriander - Reduced by Rs. 60 per kilo
Chilli powder - Reduced by Rs. 25 (powdered) 
www.dailymirror.lk

Casino licences of 3 mixed development projects cancelled

Casino licences for three mixed development projects which drew a lot of controversy has been cancelled,Prime Minister Ranil Wickremesinghe told Parliament a short while ago. Speaking before the budget presentation, he said these projects – Waterfront Properties, Queenbury and Lake Leisure – can continue without casinos. - See more at: http://www.sundaytimes.lk

Sri Lankan shares near 2-wk closing high; budget awaited

Jan 28 (Reuters) - Sri Lankan shares hit a near two-week closing high on Wednesday, a day ahead of the new government's supplementary budget, on hopes of strong corporate earnings after the government implements its promised concessions and tax reductions on key commodities through the budget.

President Maithripala Sirisena's administration will announce its first budget on Thursday and Finance Minister Ravi Karunanayake told Reuters on Monday that the government aims to fulfil its election pledges, including tax cuts and salary hikes.

The main stock index ended up 0.38 percent, or 27.64 points, at 7,395.29, its highest close since Jan. 16. It hit a one-month closing low on Friday.

"The market was driven by speculation on the budget, specially on the expectation of gas price reduction which has a direct impact on the manufacturing sector," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

"The budget is expected give a boost to disposable income as they are looking at reduction of taxes on essential goods and increase in salaries. All in all, this will boost disposable income."

The index also gained after the central bank kept key policy rates steady on Tuesday saying inflation is expected to ease further, though the market had expected some tightening.

Some analysts said investors are still waiting for clarity on the government's policies.

Turnover was 1.3 billion rupees, the highest since Jan. 13 but less than last year's daily average of 1.42 billion rupees, exchange data showed.

Foreign investors were net buyers of 370.4 million rupees ($2.80 million) worth of shares on Wednesday, but they have been net sellers of 453.6 million rupees worth of shares so far this month. They bought a net 22.07 billion rupees worth of stocks last year.

Shares of Lion Brewery Plc rose 5.2 percent, while Hemas Holdings Plc gained 1.12 percent. 

($1 = 132.2500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Wednesday 28 January 2015

Sri Lanka plans sovereign bond in February: CB Governor

Sri Lanka is planning a sovereign bond sale in February after a revised budget for 2015 is presented by a new administration, Central Bank Governor Arjuna Mahendran said.

“As soon as the budget has been announced on the 29th (of January) we will start talking to markets,” Mahendran said.

“I am hopeful that by February we will have a mandate to tap the markets for a new bond issue.”

Sri Lanka was earlier planning to go the markets with a 1.5 billion US dollar bond ahead of a maturing 500 million US dollar bond on January 21.

The bond was paid with foreign reserves following elections in January which brought a new administration to office.

Among key investment banks who helped Sri Lanka manage bond issues earlier are Citibank, Standard Chartered and HSBC.

Mahendran said Sri Lanka hoped to reduce dependence on markets going forward, with higher revenue collections. Taxes are expected to be simplified in the January 29 budget.

He said interest rates in Western markets were low.

“There is no shortage of people out there who are willing to lend money to us,” Mahendran said. “Of course we have to be judicious in our borrowings to see that we do not overpay the rates of interest that we pay.”

He said Sri Lanka’s government will shrink the budget deficit over time, which will improve confidence of foreign lenders.

A recent reduction in fuel prices came from falling raw material prices and not from tax reductions, he said.
economynext.com

Tuesday 27 January 2015

Sri Lankan shares hit over 1-wk closing high; cbank keeps policy rates steady

Jan 27 (Reuters) - Sri Lankan shares hit a more than one-week closing high on Tuesday after the central bank kept key policy rates steady at record lows without any tightening measures amid foreign outflows, while investors waited for clarity from a supplementary budget later this week.

The main stock index ended higher 0.7 percent, or 51.57 points, at 7,367.65, its highest close since Jan. 20. It hit a one-month closing low on Friday.

Foreign investors sold a net 86.5 million rupees ($655,800) worth of shares on Tuesday, extending the net foreign outflow so far this month to 865.9 million rupees. They bought a net 22.07 billion rupees worth of stocks last year.

The central bank kept key policy rates steady on Tuesday, saying inflation is expected to ease further.

"Market is a little better with the policy rates announcement. People see some kind of direction," said a stockbroker asking not to be named.

Some analysts said investors are still waiting for clarity on the government's policies.

Turnover was 1.13 billion rupees, the highest since Jan. 22 but less than last year's daily average of 1.42 billion rupees, exchange data showed.

Finance Minister Ravi Karunanayake will present a supplementary budget on Thursday, aiming to fulfil election pledges by President Maithripala Sirisena, including pay hikes for the state sector and price reductions on essential goods.

Shares of top conglomerate John Keells Holdings Plc rose 2.98 percent, while Nestle Lanka Plc gained 1.98 percent. 


($1 = 131.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Tough regulator will ensure better governance: stockbroker

A local stockbroking firm with a foreign partner said in a report that the appointment of Thilak Karunaratne as the new Chairman of the Securities and Exchange Commission (SEC) will be beneficial for the country’s capital market in the longer run.Stock brokerage Bartleet Religare Securities (Pvt.) Ltd (BRS), a joint venture between Sri Lanka’s Bartleet group and India’s Religare Capital, said the return of Karunaratne, who is generally perceived a tough regulator, is likely to ensure better governance and transparency at the Colombo Stock Exchange (CSE). 

“The regulator SEC is getting the tough enforcer Thilak Karunaratne back in the saddle as the new head. We believe this will be a move towards better governance and transparency in the CSE,” BRS said.Karunaratne was first appointed as the SEC Chairman in December 2011, when the then Presidential Secretary’s spouse Indrani Sugathadasa resigned from the post to ‘uphold her principles’. 

However, he was asked to resign by former President Mahinda Rajapaksa, who was also the then Finance Minister, just nine months into his Chairmanship, for supposedly antagonizing some high-net-worth investors and influential stockbrokers.When Karunaratne resigned, 17 investigations into market malpractice were on-going. His successor Dr. Nalaka Godahewa later said all or most of those investigations had been concluded. 

The announcement of Karunaratne’s return sent shockwaves among some capital market stakeholders due to his reputation for tirelessly going after market malpractices, at times even at the risk of upsetting the market sentiment. 

However, BRS advised investors not to worry. “The market will take some teething pains in the short run, particularly with the retailers reacting to the changes, but over the long run we believe the CSE will be a more level playing field for investors,” it said.In an earlier interview with Mirror Business, Karunaratne said his first priority would be to stabilize the market but that he would reinvestigate those cases following careful examination of what transpired in the market during his absence. Karunaratne is expected to assume duties at the SEC in a couple of days. 
www.dailymirror.lk

Monetary Policy Review – January 2015 - Policy interest rates unchanged

Press Release - CBSL

In December 2014, headline inflation on a year-on-year basis was at 2.1 per cent compared to 1.5 per cent in the previous month. Core inflation, which directly measures underlying price pressures, continued to remain between 3-4 per cent while decelerating to 3.2 per cent in December 2014 from 3.6 per cent in November. While low inflation is mainly attributable to contained demand pressure in the economy, it was also supported by favourable supply side developments, particularly the downward revisions in domestic energy prices in the last few months of 2014. Subdued demand pressure and inflation expectations in the economy, the favourable impact of further reductions in fuel prices in January 2015, and the expected reduction of administered prices of other key commodities announced in the Government’s ‘100-Day Programme’ are expected to reduce inflation further in the months ahead.

Supported by historically low market interest rates in nominal terms, credit obtained by the private sector from commercial banks continued to expand at a healthy pace. Credit flows to the private sector increased by 6.5 per cent on a year-on-year basis in November 2014, while in absolute terms, the increase was Rs. 57.8 billion during the month, bringing the cumulative credit flows to the private sector to Rs. 147.4 billion during January November 2014. Credit granted against immovable property, plant and machinery, personal Economic Research Department guarantees and promissory notes, and other securities as well as unsecured loans increased substantially in November 2014. It is expected that the increasing trend in private sector credit disbursements can be sustained throughout 2015 providing the necessary impetus to the growth momentum of the economy.

Looking at the real sector, the Sri Lankan economy grew by 7.7 per cent during the third quarter of 2014 supported by strong performance in the Industry and the Services sectors. The Industry sector, which posted a growth of 12.4 per cent in the first half of 2014, maintained its growth momentum in the third quarter recording an expansion of 12.6 per cent. The performance in the Industry sector was supported by the significant growth observed in the construction, manufacturing and mining and quarrying sub sectors. In the meantime, the Services sector grew by 7.0 per cent while the Agriculture sector, which was hampered by weather related disruptions, contracted by 2.0 per cent. With appropriate macroeconomic policies to boost domestic and foreign investor confidence, the Sri Lankan economy is expected to record a robust performance in the period ahead.

Taking the above developments in the economy into consideration, the Monetary Board at its meeting held on 26 January 2015, was of the view that the current monetary policy stance is appropriate, and accordingly, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank of Sri Lanka unchanged at 6.50 per cent and 8.00 per cent, respectively. Access to the Standing Deposit Facility (SDF) will remain rationalised.

The date for the release of the next regular statement on monetary policy would be announced in due course.

Monetary Policy Decision: Policy interest rates unchanged.
Access to SDF remains rationalised.
Standing Deposit Facility Rate (SDFR) 6.50%
Standing Lending Facility Rate (SLFR) 8.00%
Statutory Reserve Ratio (SRR) 6.00%

Port City Project before Parliament in February




By Ravi Ladduwahetty

Ceylon Finance Today: Thefuture of the Chinese financed US$ 1.4 billion Colombo Port city project will be submitted to Parliament in February, subject to the feasibility, cost appraisals and other environmental considerations.

We are for investments; but we have to see how feasible they are and also the cost and the benefits and the social impact as well, Deputy Minister of Highways and Investment Promotion Eran Wickremaratne told Ceylon FT.

The project is still at the review stage and the implementation and the going ahead will depend on these criteria, he said.

Other official sources confirmed that despite the project going through the Board of Investment only, the present government would make the entire project go through with the technical advice of not only the Board of Investment, but also the Sri Lanka Ports Authority and the Coast Conservation Department.

However, the project, if it has to proceed, would have to be approved in Parliament on or before 17 February, which is exactly three months after the project was gazetted on 17 November, 2014, which was two months after the first phase of the project was jointly commissioned by former President Mahinda Rajapaksa and Chinese President Xi Jinping on 17 September, 2014
The Chinese-financed US$1.4 billion.... 'Colombo Port City' project is its largest foreign-funded investment in Sri Lanka.

The Port City will be built by a unit of State-controlled China Communications Construction Co. Ltd on 233 hectares (576 acres) of reclaimed land. The offices, hotels, apartments and shopping centres will draw as much as US$20 billion in investment over about 15 years, which was meant to provide competition to Singapore and Dubai which were perceived to be running out of capacity."
Sri Lanka will own rights to 125 hectares of the reclaimed land and 20 hectares will be held by China Communications, with the remaining 88 hectares leased to the company for 99 years.

Colombo's Port is the only one in South Asia that can accommodate 18-metre deep draft vessels, putting it in position to serve the Indian subcontinent, the Middle East and some African States.
Chinese Government lending to Sri Lanka has increased 50-fold over the past decade to US$490 million in 2012, compared with US$211 million combined from Western countries and lending agencies.

Unlike previous infrastructure projects undertaken by Chinese companies in Sri Lanka, the port city is financed by equity from China Communications or funds raised through it, with no commitment or guarantee from the Sri Lankan Government.
www.ceylontoday.lk

Monday 26 January 2015

WATA posts LKR 409m PAT for 1HFY15, up 32% YoY, despite tough 3Q for tea




Watawala Plantations PLC (CSE: WATA) reported revenues of LKR5.3bn for the nine months ended 31 Dec 2014 (9MFY15), up 16.6% YoY. Net profit or PATfor 9MFY15 amounted to LKR409m, against LKR311m in the same period last year.WATA was able to post strong bottom line performance in a challenging environment for the plantation sector due to better than expected performance in Palm Oil.

Profit for the 3rd quarter (3QFY15) amounted to LKR147m, down 30.9% YoY due to challenges in the Tea sector which was adversely affected by heavy rains.

Palm Oil contributed LKR593m to the group bottom line in 9MFY15 which helped WATA to cover its losses in the tea and rubber sectors. Profit for3QFY15 alone amounted to LKR172m, agrowth of 23.2% YoY.

Revenue for 9MFY15 amounted to LKR1.2bn, up 9.1% YoY. The growth in revenue is attributed to 6.3% YoY increase in crop which amounted to 6.94m kg, and a19.9% YoY increase in NSA. The average NSA for 9MFY15 was LKR163 per kg. We attributes the increase in crop to better yield as a result of Good Agri Practices, and new fields yielding Fruit. Palm Oil revenue for 3QFY15 amounted to LKR404m, up 12.7% YoY.

Tea segment, the largest revenue contributor which accounted for over 67.9% of the total revenue, increased 22.4% YoY to LKR3.6bn in 9MFY15, mainly on the back of improved volumes. Weather conditions were favorable for tea during 1QFY15, but not so much in 2QFY15 and 3QFY15.For 9MFY15, own crop was up 7.6% to 4.98m kg, and bought crop increased 11.7% YoY to 2.96m kg. The NSA for 9MFY15 stood at LKR403 per kg, down 3.6% from same period last year. Instability in key export markets such as CIS, and the Middle East has put pressure on auction prices. For 9MFY15, the Tea segment had madea loss of(LKR210m), compared to a loss of (LKR197m) in 9MFY14.
www.island.lk

Asian Alliance Insurance PLC takes up 70 million shares from General Insurance

Asian Alliance Insurance PLC subscribed to and took up 70 million shares from its wholly owned subsidiary Asian Alliance General Insurance Limited at Rs. 10 per share.

This is to comply with Sri Lanka’s insurance industry amendment act.
www.adaderana.lk

Passikudah Beach Resorts legal proceedings settled amicably

Citrus Leisure PLC has amicable settled the legal proceedings before the Valaichennai District Courts against a predecessor in title of Passikudah Beach Resorts, a fully owned subsidiary of Citrus Leisure PLC.

According to the settlement entered into in courts, Citrus Leisure PLC has paid a sum of Rs. 80 million to the party which instituted legal proceedings.

Accordingly, the total consideration paid by Citrus Leisure PLC for the property at Passikudah amounts to Rs. 248,780,250. The current market value of the property as at 12 January 2015 is Rs. 317,500,000.
www.adaderana.lk

Sri Lanka shares rebound from 1-mth low close ahead of monetary policy

Jan 26 (Reuters) - Sri Lankan shares recovered on Monday from a one-month closing low hit in the previous session, but trading volume fell to a four-week low as investors awaited direction from the monetary policy and supplementary budget later this week.

The main stock index ended 0.54 percent or 39.45 points up, at 7,316.08, edging up from its lowest close since Dec. 24 hit on Friday.

The day's turnover was 338.2 million rupees, the lowest since Dec. 29 and less than a quarter of last year's daily average of 1.42 billion rupees, exchange data showed.

"People are waiting for the policies of the new government, the monetary policy and the budget," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

The central bank will unveil its first monetary policy under the new government on Tuesday and Finance Minister Ravi Karunanayake will announce a supplementary budget on Thursday.

President Maithripala Sirisena has pledged pay hikes for the state sector, reduction in the prices of 10 essential goods, and cuts in the cost of living through the budget.

Foreign investors were net buyers of 4.06 million rupees ($30,781) worth of shares on Monday. They bought a net 22.07 billion rupees worth of stocks last year.

The market has been on a downward trend, after hitting a near four-year high on Jan. 9, due to political concerns after the new government said it would hold parliamentary elections after April 23.

The reappointment of Thilak Karunaratne as the head of the market regulator also weighed on the index after the government said he would investigate suspect stock market deals. However, Karunaratne told Reuters he would not be "on a witch hunt".

Shares in top conglomerate John Keells Holdings Plc rose 2.29 percent, while Nestle Lanka Plc gained 3.59 percent, pushing the overall index up.

($1 = 131.9000 Sri Lankan rupees) 

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

Sri Lanka’s forex reserves down to US$8.3bn: Central bank

Jan 26, 2015 (LBO) - Sri Lanka's forex reserves fell to 8.3 billion US dollars in November 2014, down from 8.8 billion US dollars in October, Central Bank data showed.

The bank says the country has outflows on account of foreign debt service payments amounting to 2,054.2 million US dollars and IMF-SBA payments amounting to 704.4 million US dollars.

The Island’s foreign reserves were up in August 2014 at 9.2 billion US dollars amid weak credit growth and since then it was falling steadily as domestic credit picked up.

From January to November 2014, the balance of payment (BOP) is estimated to have recorded a surplus of 1,628.3 million US dollars compared to 581.7 million US dollars in the corresponding period of 2013.

The BOP for the eight months of January to August 2014 recorded a surplus of 2.1 billion US dollars data showed.

Ceybank Century Fund records 37% growth in 2014

Sri Lanka’s biggest ‘growth’ fund, Ceybank Century Growth Fund with net asset over Rs. 1,200 million, recorded a strong year, growing by 37% for the year 2014 exceeding the growth in benchmark All Share Index by 10.6%. The All Share Total Return Index recorded growth of 26.3% for 2014 driven by historical low interest rates that attracted increased investor participation. 

Commenting on the performance, Fund Manager Indika Rajakaruna noted the ‘Tactical asset allocation with increased exposure on growth sectors enabled the Fund to outperform the market in 2014’. He noted that the beginning of year 2014 which came with lots of uncertainty and lack of investor confidence challenged the asset allocation decisions.

However stabilisation of the interest rates at present levels improved the local investor sentiments that resulted in higher equity market activity levels during the year. Though the presidential elections and its outcome would have a temporary impact on the sentiments, Rajakaruna expects reduction of the energy prices in line with the fall in global oil prices, demand stimulating policy framework set out by the Government and continuation of reasonably lower interest rates would improve corporate earnings and the introduction of structural reforms to the economy would help to strengthen the investor sentiments on the medium term.

Rajakaruna went on to note that when investing in the equity market one may also need to take in to consideration the long term performance. “The average net return to an investor, who had invested in Ceybank Century Growth fund 10 years ago with reinvesting all the dividends would have been 20% p.a as at December 2014, much higher than the long term interest rates and inflation that prevailed during the same period.” He said. 

Therefore he proposes investors to look at a unit trust as a gateway to plan for long term financial needs of any individual, be it your retirement or your child’s education.
Ceybank AML CEO Chitra Sathkumara said, “Ceybank Century which is Sri Lanka’s first equity fund, has become the largest equity unit trust fund in the country, and has given 20% p.a. return to its investors over the last 10 years. When the financial markets are changing and interest rates have fallen to single digits, the Sri Lankan public cannot remain passive in their savings habits and have to look at other avenues of investments like Unit Trusts, and begin to assume both risks and rewards in this new investment environment. Equity Unit Trusts offer higher long term returns and risks are minimised through diversification.” Sathkumara further said, “Unit Trusts are a simple, cost effective investment product and public trust is created by strong, pro-investor regulation by the SEC which encouraged to take prudent risk.”

Ceybank Century Growth Fund is managed by the Ceybank Asset Management Ltd., one of pioneer asset management companies in Sri Lanka founded in 1991, backed by the shareholdings of Sri Lanka’s leading State-owned Bank of Ceylon, and Sri Lanka Insurance, Carson Cumberbatch PLC and Unit Trust of India. In addition to the Ceybank Century Growth fund, the company also manages four other funds catering to a wide spectrum of risk return needs of investors, with a balanced fund, a money market fund and two gilt edged funds.
www.ft.lk

First Capital Treasuries announces Rs. 500 m debenture issue

First Capital Treasuries Limited, a Primary Dealer licensed and appointed by the Central Bank of Sri Lanka and a subsidiary of First Capital Holdings PLC, has announced that it intends to issue subordinated, unsecured, redeemable debentures with a principal value of Rs. 500 million maturing in five years and bearing an interest rate of 9.5% per annum payable annually. The issue will open on Tuesday 27 January 2015. 

Debentures are priced at a face value of 100 each and will be listed on the Colombo Stock Exchange. The debenture issue is rated BBB+ while the issuer, First Capital Treasuries Limited, is rated A- by Lanka Rating Agency. First Capital Limited, the corporate debt structuring and placement arm of the group, will be managing the issue and Bank of Ceylon will act as Trustee to the issue.


First Capital Group Chief Executive Officer Dilshan Wirasekara said the company plans to utilise the funds raised through the debenture issue to achieve the following objectives;
Enhance the long term funding base of the company by way of tier 2 capital and increase capital adequacy, which will allow the company to grow its core business and allow further leverage on government securities whilst being well above the regulatory directives by Central Bank of Sri Lanka.

To minimise interest rate risk and liquidity risk by issuing fixed rate debentures for a period of five years, thereby reducing the maturity mismatch on the balance sheet.

First Capital Treasuries is licensed and appointed by the Central Bank of Sri Lanka to deal exclusively in government securities and currently stands at a commanding position as the leading non-bank Primary Dealer in the country. The company was incorporated in August 1982 and is the primary dealer arm of First Capital Holdings PLC, an investment bank pioneer in debt and equity markets.

Over the first half of the financial year 2014/15, First Capital Treasuries reported an increase in profits after tax from Rs. 673 million to Rs. 843 million. While the company declared dividends of Rs. 41 per share (Rs. 19 per share 2013/14) totalling Rs. 631 million to the shareholders during the period under review. Over the first half of the financial year 2014/2015 First Capital Holdings PLC reported a consolidated turnover of Rs. 1.7 billion and consolidated profit after tax of Rs. 868 million.

“We have done remarkably well during the current financial year and as the pioneer and leading non-bank Primary Dealer, we are extremely proud that we are the first Primary Dealer to offer a listed debenture to all our valued investors,” concluded Wirasekara.
For more details and to download the prospectus please visit: www.firstcapital.lk.
www.ft.lk

Pradeshiya Sanwardena Bank Rs. 2.5 b debenture issue oversubscribed

The Rs. 2.5 billion listed debenture issue of Pradeshiya Sanwardena Bank (RDB) has been oversubscribed and closed on Friday.


RDB intends to raise funds through this Debenture Issue to increase the Tier II Capital of RDB in order t maintain the Capital Adequacy requirements as stipulated by CBSL. The proceeds of the issue will be utilised for future expansion of RDB in terms of operations and asset base.

The issue offered 25 million unsecured subordinated redeemable five year debentures at Rs. 100 each. Three types of debentures were on offer for the investing public. Type A carried a fixed rate of Nine per centum (9.00%) per annum (before any tax) (Annual  Effective Rate of 9.00% on the principal sum); Type B offered a fixed rate of Eight point Eight One percent (8.81%) per annum (before any tax) payable biannually (Annual Effective Rate of 9.00%) and Type C- offered a fixed rate of Eight point Seven One percent (8.71%) per annum (before any Tax) payable quarterly (Annual Effective Rate of 9.00%)
The issue opened on 16 January 2015. By 22 January the issue had drawn applications requesting for 2.498 billion debentures. Final figure of oversubscription and basis of allotment will be announced shortly.

Type A had drawn 12 applications requesting for Rs. 2.137 billion debentures, Type B saw five applications requesting for Rs. 361 million worth of debentures and Type C drew four applications worth Rs. 130,000 worth of debentures.

Managers and Registrars to the Issue were Merchant Bank of Sri Lanka & Finance PLC, Corporate Advisory & Capital Markets Division.
www.ft.lk

Softlogic Finance goes for Rs. 400 m Rights

Softlogic Finance Plc plans to raise Rs. 401 million via a 10 for 28 rights issue priced at Rs. 30 each.

The company at present has 37,453,951 shares in issue and the Rights proportion of ten new ordinary shares for every 28 held will see issuance of 13,376,411 new ordinary shares.

Central Bank approval has been obtained for the Rights Issue which will be now subject to CSE and shareholder approval.

Funds raised will be used to expand the lending activities of Softlogic Finance and fulfill the capital adequacy requirements which have arisen as a result of the recent expansion of the business.
www.ft.lk

MTD Walkers’ Rs. 2.4 b Rights Issue oversubscribed

The Rs. 2.4 billion Rights Issue of MTD Walkers Plc was oversubscribed, comfortably drawing applications for over and above the number of shares offered under the rights.
MTD Walkers Plc issued 53,290,428 new ordinary voting shares in the ratio of 466 shares for every 1000 shares held by the existing ordinary voting shareholders at an issue price of Rs. 45 per share raising capital amounting slightly over Rs. 2,398 million. Consequently, MTD Walkers Plc’s ordinary voting shares increased to 167,647,568 shares. The subscription was closed on 22 January.


While the primary objective behind the rights issue was to raise funds to acquire 100% equity capital in Wincon Development Ceylon Ltd., the company intends to duly exploit this opportunity to finance its growing working capital requirements of the group from the excess funds received from the Rights Issue.

Speaking on the successful Rights Issue, the Executive Deputy Chairman of the group, Jehan Amaratunga, stated: “The overwhelming response to the Rights Issue demonstrates the confidence and trust placed on MTD Walkers Plc by our shareholders, which enables us to forge ahead with our growth plans. The Rights Issue has given us the opportunity to diversify the group operations and further advance as an infrastructure solutions provider following our commendable performance recorded this year so far. The trust and support displayed by our shareholders towards our strategic direction and future plans have been very encouraging.”

MTD Walkers Plc, with its subsidiary companies, CML-MTD Construction, Northern Power Company, Walkers Piling and Walker Sons and Co. Engineers, is engaged in multidisciplinary infrastructure activities locally and overseas. The acquisition of Wincon Development Ceylon Ltd. signals its foray into real estate and property development given its belief of future upside.
www.ft.lk

Sunday 25 January 2015

Sri Lanka’s Central Bank governor appointed

Jan 24, 2015 (LBO) – Sri Lanka President Maithripala Sirisena has appointed Arjuna Mahendran, an international investment banker as the Governor of Sri Lanka's Central Bank, the president's office said.
Mahendran has headed Sri Lanka's Board of Investment (BOI) from 2002 to 2004 when Ranil Wickramasinghe was the Prime Minister.

State banks, Stock Exchange, corporations under scrutiny: PM

11-member special council to evolve ways to tackle flood of allegations

A number of state financial institutions will be probed for corrupt activities and mismanagement, Prime Minister Ranil Wickremesinghe revealed yesterday.’

“These will include the Central Bank, the Bank of Ceylon, the People’s Bank, the Stock Exchange and the Insurance Corporation,” he told the Sunday Times.

Premier Wickremesinghe was commenting after the National Unity Government’s first weekly meeting of ministers discussed proposals, including one from him, to appoint Special Commissions to probe large scale corruption. The other is a proposal from Champika Ranawaka, Minister of Power and Energy. Ministers have agreed on an eleven member Council Against Corruption to evolve ways and means of tackling it.
Since assuming office, Premier Wickremesinghe is being flooded with information about key players in the former UPFA Government engaging in corrupt activity. Among them were top officials of the Presidential Secretariat, Ministers and officials.

Among the alleged irregularities at the Central Bank is how public relations companies in the United States were hired by the then Governor Ajith Nivard Cabraal without the approval of Cabinet. The Bank has also been funding demonstrations outside the UN office in Geneva and had met the expenditure when a Sri Lankan delegation travelled in a chartered aircraft to Trinidad and Tobago where they made an unsuccessful bid to host the Commonwealth Games in Hambantota.

The two major state-run banks – the Bank of Ceylon and the People’s Bank – have been accused of giving political nominees huge loans without collateral and the funnelling funds for political activities. In this regard, allegations against the People’s Bank, then headed by Gamini Senarath, Chief of Staff of the President, have come under close scrutiny.

A Government source said that at the Stock Exchange, one of the main areas of the investigation will be insider trading. It is alleged that a select mafia was responsible for this. The Insurance Corporation, the same source said, has come under scrutiny for a number of allegations including financial irregularities.
www.sundaytimes.lk

Sri Lanka 2014 vehicle registrations up despite fall in commercial vehicles

Sri Lanka’s vehicle registrations rose to 429,556 in 2014 from a year earlier picking up from lull in February but with commercial vehicles showing a drop, Motor Traffic Department data showed.

Motor car registrations were up 36.6 per cent to 38,780 units from 28,380 a year earlier, with hybrids continuing to lead while motor cycle sales were up. However three wheelers and many commercial vehicle categories were down.

More people were buying cars on finance and leasing arrangements with the share going up considerably, a senior department official said.

Three wheeler sales were down 5.3 per cent to 79,038 units in 2014 from 83, 673 a year earlier, though recovering from a slump of 5,148 in February.

Single cab sales were down14.1 per cent to 17.345 units in 2014 from 20,198 a year earlier. Mini trucks and heavy trucks as well as lorry sales were down last year compared to the previous year.

Motor cycle registrations were up 61.5 per cent to 272,885 last year from 169,280 in 2013. The financing share of motor cycles has also gone up last year, the official disclosed.
www.sundaytimes.lk

Six major probes at SEC were swept under the carpet

By Duruthu Edirimuni Chandrasekera

Some six probes involving large amounts of cash/share transactions were swept under the carpet without being ‘properly’ investigated by the Securities and Exchange Commission (SEC) after the departure of Thilak Karunaratne, former chairperson SEC.

According to reliable sources, these were serious investigations which showed blatant manipulation. “One was pumping and dumping of low valued hotel shares by a mafia don who is famous for insider dealing,” a source told the Business Times. He is allegedly tried to meet some powerful persons in the new Cabinet, seeking to pledge support to the new regime, according to the source.

“He was constantly seen with former President Mahinda Rajapaksa’s sons and allegedly had a strong hand in the resignation of Mr. Karunaratne and also his predecessor Indranee Sugathadasa.”

He along with his close mafia colleagues had brought in the new SEC chairman Nalaka Godahewa who is maintained a defiant stand, refusing to step down despite an order by the Sri Lankan Government, official sources told the Business Times.

“He finally quit on Friday after writing a farewell e-mail to SEC staff,” one official said. This the first time under President Maithripala Sirisena’s new administration where the head of a state agency has refused to quit after being ordered to.

On Wednesday night, Finance Minister Ravi Karunanayake told the Business Times that Godahewa had sent in his resignation on Tuesday, but the latter was quoted as telling some staff members that he hasn’t tendered his resignation because the SEC comes under the Ministry of Economic Development and not the Finance Ministry.

The SEC was placed under Prime Minister Ranil Wickremesinghe’s purview according to a list of subjects of ministries gazetted on Tuesday.

The source added that during 2012 there was a transaction where an alleged ‘mafia’ trader made some Rs. 500 million in 10 days, which wasn’t dealt with properly. “This was an individual who was close to a powerful brother of President Rajapaksa and ‘frequently’ dropped his connections to this person.” The Business Times reliably learns that he was summoned to the SEC during Ms Sugathadasa’s tenure to record statements relating to manipulations.

The source reiterated that these two mafia dealers along with their cronies who aided and abetted are trying to see that the probes won’t resurface. Also an insider at the SEC who was siding the mafia and successfully stopped these probes is visibly upset over the turn of events. “He ‘leaked’ the papers tabled at the investigation committee in mid 2012. He was interested in a top post, which he believed that the mafia with their close commotions could help him to secure,” he said.

One powerful trader was quoted in the media as saying, “We never expected to get business because of the political clout…… never used any connections. Never mixed professional duties with politics. We haven’t used any connections for business gain. There were no shortcuts to our success.” The IMF, Chamber of Commerce and Sri Lanka Institute of Directors have all said in the past that they were concerned by the events where two SEC chiefs resigned in less than a year, and have said a regulated market is very, very important, and that the resignations had sent a wrong signal to the international community.

Mr. Karunaratna when contacted said that, provided that he is appointed, he will do a thorough study of the SEC and ‘put the house in order’. “I am concerned about the volatility in the market. There might be manipulation now. All the black money seems to be exiting.”

He said that he plans to call a meeting with the Colombo Stock Exchange and draw up some measures to create stability. When asked if the probes will be reopened, he said that he will not be on a ‘witch-hunt’.

The Business Times also reliably learns that some SEC commissioners have already tendered their resignations.
www.sundaytimes.lk

Friday 23 January 2015

Thilak says ‘market stability’ his first priority

Thilak Karunaratne, who is to assume duties as Chairman of the Securities and Exchange Commission (SEC) told Mirror Business that his first priority is to stabilize the country’s capital market. The announcement of Karunaratne’s return as SEC head has evidently sent shockwaves among some capital market stakeholders as he is perceived a tough regulator, tirelessly going after market malpractices, at times even at the risk of upsetting market sentiment.The market which reacted negatively to the news during the morning hours of yesterday, recovered strongly during the latter part, with the main All Share Price Index gaining 0.07 percent and posting a revenue of Rs.1.19 billion.

“My immediate priorities after assuming duties are to stabilize the market and get the house in order. A meeting will be held with the Colombo Stock Exchange (CSE) board to discuss steps required to stabilize the market,” Karunaratne said.He also noted that he will have to ‘clean up the stables’ as certain appointments that have been made at the SEC during the last two years were said to be not in line with the establishment code.

Karunaratne was first appointed SEC Chairman in December 2011 when the then Presidential Secretary’s spouse Indrani Sugathadasa resigned from the post to ‘uphold her principles.’However, he could survive less than a year in the post, as he was asked to step down by the then regime for supposedly antagonizing some high net worth investors and influential stockbrokers.

When Karunaratne resigned, 17 investigations into market malpractice were ongoing. His successor Dr.Nalaka Godahewa later said all or most of those investigations have been concluded.“I will start from where I left off. But before that I will do a study of what happened during the last two years and then only set course. I’m not on a witch-hunt. That should be made clear,” he stressed.

Meanwhile, Karunaratne stressed the immediate need to push the enactment of new laws drafted under the new SEC Act, which have been put into the back burner at the Treasury since 2013.

According to the current SEC Act, the regulator has the powers to initiate criminal court action against those involved in market malpractice. But since it’s the criminal courts, the regulator has to prove an offence beyond reasonable doubt, which is extremely difficult.

Therefore many have emphasized the need for new laws to enable the regulator to take offenders before civil courts where heavy financial penalties can be imposed.Mirror Business reliably learns that Karunaratne’s appointment letter as SEC Chairman will be delivered to him today.
www.dailymirror.lk

Sri Lanka shares hit 1-mth closing low on foreign fund outflow

Jan 23 (Reuters) - Sri Lankan shares fell to a one-month closing low on Friday, led by selling by foreign investors, slipping by more than 3 percent in the week on concerns over political stability concerns as the government got ready to present its interim budget on Jan. 29.

The main stock index ended 0.72 percent lower, or 52.96 points down, at 7,276.63, its lowest close since Dec. 24. It lost 3.15 percent in the latest week.

"Still there is a bit of uncertainty in the minds of people, and investors are adopting a wait-and-see approach. We believe confidence will be restored after the budget," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

There was net foreign outflow of 518.3 million rupees ($3.93 million) on Friday, the highest net offshore selling since Nov. 4. Foreign investors bought a net 22.07 billion rupees worth of stocks last year.

The day's turnover was 987.4 million rupees, less than last year's daily average of 1.42 billion rupees, exchange data showed.

The newly-elected government reappointed Thilak Karunaratne as head of the market regulator after market hours on Wednesday, and said he would investigate suspected deals in the stock market.

Stockbrokers said Karunaratne's appointment and the investigations would pull down the index in the near term, but would instil confidence over the long term.

President Maithripala Sirisena's coalition government will present an interim budget on Jan. 29 with an aim to cut cost of living.

Shares in Carsons Cumberbatch Plc fell 4.71 percent, while top conglomerate John Keells Holdings Plc fell 1.37 percent. 

($1 = 131.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

NDB Capital Holdings - De Listing

The above company will be delisted with effect from 26th January 2015 upon receiving approval from the SEC to remove CDIC.N0000 from the official list of the CSE after the successful completion of the purchase of the securities by the majority shareholder.

Sri Lanka to lose Rs65bn from fuel price cut: Energy Minister

Jan 22, 2015 (LBO) – Sri Lanka’s government will lose 65 billion rupees revenue per year by reducing the fuel prices from tax cut, Champika Ranawaka, Minister of Energy said today.

He said the manifesto promised only a 40 billion rupee tax cut.

Sri Lanka’s energy prices have not been brought down even though the international prices fell.

The Minister said fuel and electricity prices would be decided by formula and electricity prices will be revised in June.

CPC in Rs 200 billion losses for three years due to corruption – union leader Fuel pricing formula soon Prospect of further reductions

By Ravi Ladduwahetty
Ceylon Finance Today: The government will reintroduce the fuel pricing formula again with the prospect of reducing the prices further, following Wednesday's reduction of prices of petrol, diesel and kerosene.

Former Deputy Secretary to the Treasury who is now the Secretary to the Ministry of Power and Energy 
Dr. Suren Batagoda confirmed to the Ceylon FT that the pricing formula would be implemented soon, but said that a deadline for the implementation could not be announced soon. He said that there was also a strong possibility of further reducing the fuel prices, but was reluctant to spell out deadline.

He was in conversation briefly with this newspaper as he was at a meeting with the US envoy in Colombo Michele Sison. Meanwhile, President of the Petroleum General Workers Union Asoka Ranwala told Ceylon FT that the government decision to reduce the prices of fuel was a relief to the suffering masses and that it was corruption during the previous regime which resulted in Rs. 200 billion loss for the last three year period.


He said that there was a great possibility of the CPC being turned around to a profit making body, that too only if the corruption was totally rooted out and legal action was taken against the culprits.
www.ceylontoday.lk

Thursday 22 January 2015

Sri Lanka Telecom appoints president's brother as the new chairman

Jan 22, 2015 (LBO) - P. G. Kumarasingha assumed duties as the New Chairman of Sri Lanka Telecom (SLT) Group, the holding company consisting of seven subsidiaries, on 22nd January, 2015, making him the 8th Chairman of SLT following the company's privatization in 1996.

“Sri Lanka Telecom has a great responsibility towards the people of this country as well as the national economy in lieu of being one of its largest contributors. I am confident that everyone at SLT will support me with dedication, accountability and team spirit” in my efforts to make SLT realize broader and bigger dimensions. “Kumarasingha was quoted in a press release.

Prior to this appointment, Kumarasingha was the CEO and General Manager of the State Timber Corporation and holds the post of Board Director of the Land Reclamation & Development Company Ltd. LRDC Services (Pvt) Ltd., and is also the Financial Consultant for the Araliya Group of Companies (Pvt) Ltd.

Kumarasingha holds a Master of Business Administration from Wayamba University of Sri Lanka, Master of Public Management from Sri Lanka Institute of Development Administration, a post Graduate Diploma in Accountancy and Financial Management from University of Sri Jayawardanapura.

Sri Lanka shares recover from 1-month low; political woes hurt sentiment

Jan 22 (Reuters) - Sri Lankan shares ended slightly higher after hitting one-month lows on Thursday, but concerns over political stability weighed on sentiment as investors awaited the new government's interim budget scheduled for next week.

The main stock index fell 1.37 percent to a one-month low of 7,223.92 in early trade, a day after the government reappointed Thilak Karunaratne as head of the market regulator and said he would investigate suspected deals in the stock market.

The index ended 0.07 percent higher, or 5.19 points, at 7,329.59. It closed at its lowest since Dec. 31 in the previous session.

"There was panic selling in the morning with the announcement of new SEC chairman. But it recovered later in the day, though there is no concrete buying yet," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

After the market close on Wednesday, a government minister said the new administration had reappointed Karunaratne as chief of the Securities and Exchange Commission (SEC).

Karunaratne has been tasked with investigating past stock market deals suspected to involve corruption.

Stockbrokers said Karunaratne's appointment and the investigations would pull down the index in the near term, but would instil confidence over the long term.

"Most of the uncertainty will be settled after the budget next week," Karunaratne told Reuters, adding he would not be "on a witch hunt", while the investigations into alleged corrupt deals would go through.

President Maithripala Sirisena's coalition has promised a 100-day programme to restore democracy and reform the economy before he dissolves parliament for a general election after April 23. It will present an interim budget on Jan. 29 with an aim to cut cost of living.

Shares in Ceylon Tobacco Company Plc rose 2.05 percent, while top conglomerate John Keells Holdings Plc fell 1.39 percent.

Foreign investors, who bought a net 22.07 billion rupees worth of stocks last year, were net buyers of 86.6 million rupees worth of shares on Wednesday. 

($1 = 131.8500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

“I am not sure of heading Sri Lanka Securities & Exchange Commission” – Tilak Karunaratne

Tilak Karunaratne says that he cannot definitely say whether he would be appointed as Chairman of the Sri Lanka Securities & Exchange Commission (SEC) as he is yet to receive a formal appointment as head of this institution.

While expressing his views to www.adaderanabiz.lk, Mr. Karunaratne said though the media had publicized that he would take over as SEC Chairman, an official appointment as such has still not been received by him.

Dr. Nalaka Godahewa who was the SEC Chairman is still in office and has not resigned as yet.
www.adaderana.lk

The Colombo Stock Exchange (CSE) has been named the “Most Sustainable Growth Exchange” in Asia for 2014

The Colombo Stock Exchange (CSE) has been named the “Most Sustainable Growth Exchange” in Asia for 2014 by Capital Finance International (CFI), a print journal and online resource reporting on business, economics and finance, based in the United Kingdom.

The CSE was nominated and shortlisted for the Award based on voting by CFI readers, subscribers and contributors; who include the World Bank, International Monetary Fund (IMF), Pacific Investment Management Company (PIMCO) and Fidelity Investments. Following the nomination and shortlisting the CSE was evaluated against a series of stringent criteria set out by CFI.

The criteria included market leadership, innovation, customer satisfaction, financial performance, implementation of technology, client service, added value advisory, risk management, transparency, compliance, corporate governance, quality of communications and strength of nominations.

According to the CFI Awards Panel “The aim of our Exchanges’ and Brokers Awards programme is to identify service providers (regardless of size) that truly deliver excellence. We set out to provide our readers – and hopefully a far wider audience – with a resource to help them identify Exchanges and Brokerages they should consider when making investment and corporate decisions”.

This is the first time an international award of this nature has been awarded to the CSE, in its 30 year history. This international exposure is likely to attract a greater wealth of foreign investors, building on the momentum gained through the “Invest Sri Lanka – Investor Forums”, held globally.

“We are very pleased with this international recognition and believe that it will be a further impetus to our efforts in attracting foreign investors to the market. As a Frontier Market we are making great strides forward and this is being observed by prominent institutional investors. This was evident in our performance in 2014 where the CSE achieved the highest recorded foreign purchases in its history,” Mr. Vajira Kulatilaka, Chairman the CSE said.

“As an Exchange we are continuously striving towards becoming a world class organization, which exceeds the expectations of all our stakeholders. We have streamlined our processes to international standards; having achieved ISO certifications in the areas of information security, business continuity and information services. Similarly our cutting edge technology provides all industry participants with a trading platform that is multifunctional, secure and accessible. Our efforts towards ensuring sustained growth, for both listed companies and investors, has been duly recognized by this award,” Mr. Rajeeva Bandaranaike CEO of the CSE said.

Ranil takes Central Bank, SEC from Finance Ministry purview

In a major development, Prime Minister Ranil Wickremesinghe, who is also Minister of Policy Planning and Economic Affairs, has taken the Central Bank and the Securities and Exchange Commission under him.

Traditionally these two institutions have come under the Ministry of Finance, a portfolio currently held by Ravi Karunanayake, who on Tuesday said regulatory bodies were being brought under the Prime Minister.

This explains why the Central Bank and the SEC as well as the Public Utilities Commission have been brought under Wickremesinghe’s other portfolio of Policy Plan-ning and Economic Affairs. As per the gazette dated 18 January, Wickremesinghe has got additional subjects Child, Youth and Cultural Affairs as well.

However, insurance industry regulatory body IBSL continues to be within Finance Ministry. Similarly the Consumer Affairs Authority, also a regulatory body, is under the relevant Ministry of Food Security.

Another institution brought under Wickremesinghe is the Employees Trust Fund though the Employees Provident Fund is retained under the new Ministry of Justice and Labour Relations, a portfolio held by Wijeyadasa Rajapakshe.

The Central Bank under previous President Mahinda Rajapaksa regime became very prominent and equally controversial due to the role played by the then Governor Nivard Cabraal.

Deputy Minister of Policy Planning and Economic Affairs is Dr. Harsha de Silva, who was a vociferous critic of the previous administration, especially the Central Bank and its management of the Employees Provident Fund and borrowing program as well as alleged stock market manipulations.

Whilst it appears that the move of bringing the CB and SEC under the Ministry of Policy Planning and Economic Affairs is to ensure better governance, the development drew a mixed response.

Ranil… “In a situation where Cabraal remains as Central Bank Governor, then bringing the monetary authority under Policy Planning and Economic Affairs makes sense so as to ensure better oversight. However, since Cabraal has resigned and a less politically-oriented person will be appointed and given the good governance assurances from President Maithripala and Premier Wickremesinghe regime, the latest move is puzzling,” analysts opined.

“Under the new scheme of things and emphatic assurances, it would have been best that the Central Bank and the SEC were retained with Finance Ministry,” they added.
Top banker Arjuna Mahendran has been reported as the new Central Bank Governor-designate.

Prior to release of the gazette detailing institutions under new ministries, Daily FT popular columnist and former Deputy Governor of the Central Bank W.A. Wijewardena on Monday in his article had a checklist for the new administration with regard to the Central Bank. (See online http://www.ft.lk/2015/01/19/to-regain-lost-credibility-central-bank-should-act-as-impartial-spectator-and-not-as-policy-owner/)

Among other things, Wijewardena emphasised that the central bank must act as an “impartial spectator” and not as a “policy owner.” If this recommendation is relevant, then Central Bank coming under the Ministry of Policy Planning and Economic Affairs could be interpreted as a situation where even under the new administration monetary authority will be a policy owner.

Others said that under the good governance promise of the new Sirisena-Wickremesinghe administration, thoughtemporary, what the Central Bank needs is not a shift of Ministry for oversight but true independence whilst retaining it under the Finance Ministry.

The shift however doesn’t mean the Finance Ministry will be spared of any links to the Central Bank. The Treasury Secretary will continue to be an ex-officio member of the Monetary Board.

In his widely-commended article, Wijewardena’s checklist on the future Central Bank included the following: Central banks are created to serve the people and not politicians; Central Bank can take ownership of only what is in its domain; Central Bank should present an apolitical view; and Central Bank reports should be dispassionate and objective.

With regard to the role of the Central Bank, Wijewardena said: “There are two legally-mandated goals which the Central Bank should seek to achieve. One is to maintain an inflation free world which is known as maintaining price stability. The other is to keep the financial system of the country in good health known as maintaining the financial system stability.

“Policies relating to these two goals are taken by the Central Bank and therefore it has the policy ownership for those policies. All other economic policies are taken by the Government and the Central Bank’s job in relation to them is to review policies independently and apprise the Government of the suitability of those policies.”

The former Deputy Governor emphasised that politicians should learn to honour Central Bank independence and emphasised conscience and not political will should guide Central Bankers. He also added that a subservient Central Bank will be cause of a Government’s electoral defeat and that the Governor should be accepted as an independent professional by the market.

Wijewardena went a step further suggesting the goal of ensuring full independence of the Central Bank could be included under the Sirisena-Wickremesinghe interim Government’s 100-day program which however focuses only on urgent political reforms.

Wijewardena said: “In the present 100-day program of the Government, the job of the Central Bank should be to take ownership of only the two mandates it has been given, namely, the maintenance of economic and price stability and financial system stability. It should not take ownership of the 100-day program, which seeks to establish democracy, rule of law, and good governance by abolishing the authoritarian executive presidency and re-establishing Parliamentary powers. However, the Central Bank can keep educating the public of the value of democracy, good governance and rule of law for long-term sustainable economic growth and improving the quality of life of people. Above all, the Central Bank can use this opportunity to win full independence from the Government since it goes well with the good governance principles being propagated by the Government in its 100-day program.”
www.ft.lk


Central Bank to come under PM A move towards good governance – Eran

By Ravi Ladduwahetty

Ceylon Finance Today: In a far reaching move towards the assured good governance, the government has decided to position the Central Bank of Sri Lanka under the Minister of Policy Planning, Economic Affairs, Child, Youth and Cultural Affairs whose Minister is Prime Minister Ranil Wickremesinghe himself.


This was revealed in the Gazette Extraordinary of 1897/15 of 18 January, which was released yesterday.

Accordingly, some other State sector institutions, which were hitherto under the aegis of the Ministry of Finance and Planning such as the Securities and Exchange Commission, the Employees Trust Fund, the National Insurance Trust Fund, the Department of External Resources and the Department of National Planning too, have been placed under the aegis of the Ministry of Policy Planning, whose Minister is Prime Minister Ranil Wickremesinghe.

This was a strategic move of the government, which was aimed at good governance and transparency. The reason for the chaos all these years was both the Central Bank and the Treasury being under the Minister of Finance and that was why the government decided to segregate the two; Deputy Minister of Highways and Investment Promotion Eran Wickremaratne confirmed to the Ceylon FT last night.

However, he said that there was a conflict of interest of keeping the Central Bank, which managed the Employees' Provident Fund under the Ministry of Finance. "On the one hand, the Central Bank borrows money for the government, which is expected to be at the lowest interest rates, while the Employees' Provident Fund, is expected to deliver the highest rates of return to the stakeholders, he said.

However, he said there would have to be a series of legal amendments to draw the EPF out of the aegis of the Central Bank.

Other important State institutions, which have been placed under the Ministry of Policy Planning are: the Institute of Policy Studies, and the Census and Statistics Department.
www.ceylontoday.lk

Wednesday 21 January 2015

Breaking News : Fuel prices slashed

President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe and the new Cabinet of Ministers have decided to reduce the prices of fuel with effect from midnight tonight.

This was confirmed to News1st by Minister of Power and Energy Patali Champika Ranawaka.

The revised prices are as follows,

Petrol (92 octane) – Rs. 117 [reduced by Rs.33]
(95 octane) – Rs. 128 [reduced by Rs.30]

Diesel – Rs. 95 [reduced by Rs.16]
Super Diesel – Rs.110 [reduced by Rs.23]

Kerosene – Rs. 65 [reduced by Rs.16]

http://newsfirst.lk/

Sri Lanka shares fall to 3-wk low on budget jitters

Jan 21 (Reuters) - Sri Lankan shares fell to a three-week low on Wednesday amid low trading volumes as concern over political stability weighed on sentiment while investors awaited the new government's interim budget scheduled for next week.

The main stock index ended 0.6 percent lower, or down 44.10 points, at 7,324.40, its lowest since Dec. 31.

The day's turnover was 796.3 million rupees ($6.04 million), less than last year's daily average of 1.42 billion rupees, exchange data showed.

President Maithripala Sirisena's coalition has promised a 100-day programme to restore democracy and reform the economy before he dissolves parliament for a general election after April 23.

Sirisena's government will present an interim budget on Jan. 29 with an aim to cut cost of living.

"Local and foreign investors are waiting to see some kind of direction from the budget, especially on interest rates and foreign exchange rates," said a stockbroker.

Yields on short-term government securities edged up 1 basis point at Wednesday's auction of government securities.

Conglomerate John Keells Holdings Plc fell 2.38 percent and Caltex Lubricant Lanka Plc lost 3.99 percent, dragging down the index.

After the market closed, a government minister said the new administration had reappointed Thilak Karunaratne as chief of the Securities and Exchange Commission (SEC).

Karunaratne has been tasked with investigating past stock market deals suspected to involve corruption.

Stockbrokers said Karunaratne's appointment and the investigations would pull down the index down in the near term, but would instil confidence over the longer term.

Foreign investors, who bought a net 22.07 billion rupees worth of stocks last year, were net buyers of 69.1 million rupees worth shares on Wednesday.

($1 = 131.7500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lanka’s Lanka hospitals appoints a new chairman

Jan 21,2015 (LBO) – Sri Lanka’s Lanka Hospitals which was formerly known as Apollo appointed Gamini Wickramasinghe as the new chairman with effect from 19th this month, the company said in a stock exchange filling.

He was an independent non-executive director of the hospital prior to his appoint.

Wickramasinghe appointment follows the resignation of former Defence and Urban Development secretary Gotabayak Rajapaksa as chairman of the company with the defeat of President Mahinda Rajapaksa regime.

Lanka Hospitals Corporation Ltd commenced operations in Sri Lanka on June 2002, under the brand name of Apollo Hospitals, a part of the chain of Apollo Hospitals, India.

The hospital ended deals with Indian Apollo in 2009. The move comes in the wake of the hospital coming under state control following a court order.

In August a new board was appointed to the hospital including the head of Sri Lanka's defence establishment, Gotabaya Rajapaksa, a brother of President Mahinda Rajapaksa.

This was after Sri Lanka Insurance Corporation, which had taken control of the privately built Apollo Hospital, went back under state control.

Rajapaksa became a director with the appointment of a new board representing its controlling shareholder Sri Lanka Insurance Corporation.

Sri Lanka Treasury bill yields crepe up slightly

Jan 21,2015 (LBO) – Sri Lanka's Central Bank re-issue of 10,000 million rupees maturing Treasury bills was oversubscribed with bids amounting to 27,545 million rupees being received, the bank said.

It was decided to accept 10,891 million rupees from the auction.

The 12-month yield increased to 6.05 percent from 6.04 percent at the previous auction receiving 13,225 million rupees, data from the state debt office showed. The bank accepted 3,204 million rupees.

6-month yield was also up at 5.90 percent from 5.89 and 3,658 million rupees were accepted.

The debt office which is part of the island's central bank offered 3-month short term bills for the auction at 5.80 percent and 4,029 million rupees were accepted.


Sri Lanka to settle $500 mln bond maturing on Thursday - officials

Jan 21 (Reuters) - Sri Lanka will draw on its foreign currency reserves to settle a five-year $500 million sovereign bond maturing on Thursday, central bank officials said on Wednesday.

The officials said the authorities had opted against rolling over the issue.

"It'll be paid from the reserves," a central bank official told Reuters. Another official confirmed the move.

Foreign currency reserves declined by $474.33 million to $7.37 billion in the two months through December, the central bank data showed. (Reporting by Ranga Sirilal; editing by Simon Cameron-Moore)

Thilak Karunaratne to be re-appointed as SEC Chairman



Thilak Karunaratne will be re-appointed as Chairman of the Securities and Exchanges Commission of Sri Lanka, Minister Rajitha Senaratne told Ada Derana.

Tilak Karunaratne is a former Sri Lanka Freedom Party (SLFP) member who joined the United National Party (UNP) before joining the Sihala Urumaya. He is also a Chartered Chemist and was the Managing Director of Multiform Chemicals (Pvt) Ltd.

Earlier, Karunaratne submitted his resignation, on 17 August 2012, saying he had come under pressure from stock market players under investigation for stock manipulation.
www.adaderana.lk

Shareholders vote down Rs. 825m Rights Issue of Orient Garments

Shareholders of Orient Garments Plc (OGL) yesterday voted down a planned Rs. 825 million worth Rights Issue saying its objectives may not achieve desired results.

The OGL held an Extraordinary General Meeting (EGM) yesterday to obtain shareholder approval for the one for one rights issue at Rs. 15 each. The move meant issuance of 55 million new shares. Funds raised via Rights were to be used to retire debt.


After a differences of opinion at the EGM, the resolution was put to vote. Key shareholders including Dr. T. Senthilverl and a few others along with proxies voted against. The resolution was voted down by 57% of those present at EGM including those holding proxies. Votes in favour was 43%.

As at September 2014, Dr. Senthilverl held 45.4% stake whilst management and single largest shareholder Adam Investments collectively held 39.8%.

OGL previously said the rights issue was called to infuse much needed capital to meet overdue statutory payments and other outstanding which have been hampering the progress of the company.

OGL said the rights issue is primarily to safeguard the employment of over 4,000 faithful workers who have stood by the company through thick and thin and to drive the operations forward with renewed vigour and excellence.

Since the takeover on 8 January 2014, OGL has spruced up its compliance standards, increased the number of machines in operation by 76% – from 1,100 to 1,940 machines –and carried out an employee skill upgrade initiative resulting in improved efficiency and greater confidence by its highly quality-conscious international buyers. The revamped marketing department has built a strong confirmed order book securing a bright future for the company, OGL said in a statement prior to the EGM.
www.ft.lk

Tuesday 20 January 2015

Sri Lanka’s Access shares fall on cancellation of mega highway

Access Engineering shares fell by 11 per cent or Rs. 3.40 per share to Rs. 26.60 on Monday at the Colombo bourse days after the new Sri Lankan Government announced the cancellation of a major highway project. 

Traders appeared to panic with more than 800 separate transactions all amounting to 3.4 million shares at a turnover of Rs 95 million. 

Access is one of the most powerful contractors in the country and involved in several major road, highway and other development projects. 

At the weekend, the new Government of President Maithripala Sirisena – dismantling some of the costly projects of the former administration – said it was cancelling the proposed northern expressway project saying it was too expensive. 

Five contractors including Access had been selected for the project. 
www.sundaytimes.lk

One man hospitalised in Ceylinco Insurance shareholders fracas

One person was hospitalised after arguments and fisticuffs broke out at a stormy Ceylinco Insurance meeting of shareholders in Colombo on Tuesday morning, shareholders said. 

Officials from the Global Rubber Industries (Pvt) Ltd (GRI) which has a 22.86 per cent stake in the company, at a hastily-called media briefing alleged that Ceylinco staff was behind the assault and vowed to file a complaint with the Securities and Exchange Commission (SEC) seeking action. 

They also showed a video of how shareholders were assaulted. 

Earlier in the morning, one shareholder present told the Business Times that at one point during the meeting a shareholder bit a security guard’s chest which turned bloody when guards intervened to break up opposing factions. 

More than 200 shareholders were present at the meeting. 

The company was holding two meetings, one at the request of a shareholder, and the second one to endorse a proposal for segregation of life and general units as separate entities. 

The trouble flared at the first meeting where GRI had wanted an explanation accusing the company of ‘surreptitiously transferring the business and assets without shareholder approval’. 
www.sundaytimes.lk