Sri Lankan shares rise for 5th session to 4-mth closing high

Reuters: Sri Lankan shares rose for a fifth straight session on Wednesday and posted their highest close in four months, led by gains in diversified and beverage stocks including Ceylon Tobacco Company Plc and Nestle Lanka Plc.

However, the gains were capped as foreign investors continued to sell and on concerns that the government's move to increase the value added tax and impose new taxes, effective from May 2, would hit the bottom lines of companies.

"Market was up on the positive sentiment from last few days," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

The benchmark stock index rose 0.36 percent to 6,661.45, its highest closing level since Jan. 8.

Shares of Ceylon Tobacco Company rose 0.9 percent, while Nestle Lanka gained 1.2 percent.

Turnover was 1.26 billion rupees ($8.7 million), the highest since April 29, and well above this year's daily average of around 784 million rupees.

Foreign investors offloaded a net 452.8 million rupees worth of shares, extending the net selling so far this year to 3.75 billion rupees worth of equities.

The stock index gained 1.2 percent last week, its fifth straight weekly rise. The 14-day relative strength index stood at 81.677 on Wednesday, compared with Tuesday's 80.541, Thomson Reuters data showed. A level of 70 and above indicates the market is overbought. 

($1 = 145.2000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

‘Billions of rupees lost to EPF in 2013/’14 as a result of market manipulation’

By Hiran H.Senewiratne

Investments made on behalf of the Employees Provident Fund (EPF) by the previous government in 2013/2014 in the Colombo Stock Market have diminished by billions of rupees, the EPF annual report revealed.

It is reported that of the total long term and short term investments amounting to Rs. 71,690,881,118 made by the Fund in 80 companies in the share market as at December 31, 2013, an investment of Rs. 52,092,805,864 made in 61 of these companies had diminished by Rs. 13,823,352,605 as at that date,the report revealed, which was presented to parliament last week.

Professor of Economics, Colombo University, Sirimal Abeyratne told The Island Financial Review that it is bad for any government to use public funds to manipulate the market because it has a very high risk factor.

According the FPF annual report, the entire investment of the Fund made in 93 companies in the share market as at June 30, 2014 had been Rs. 75,393,966, 488, while the share market value of the investment amounting to Rs. 45,533,044,007 made in 57 companies had diminished by a sum of Rs. 9,679,212,488 as at that date.

Prof Abeyratne said the use of the huge fund for the manipulation of the stock market led to a lot of corruption and many malpractices.

Eight companies in which the EPF had made long term investments amounting to Rs. 3,285,216,703 as at December 31, 2013 had incurred losses during the year 2013/2014, according to the annual reports of those companies.

Two out of these companies in which investments of Rs. 199,555,228 and Rs. 711,242,903 were made had incurred losses continuously for a period of three years. "The Fund had received no benefits whatsoever from these companies, the report added.

The report further revealed that a surcharge alone which amounted to Rs. 194,273,332 that had to be recovered from 360 institutions from 2000 to 2013 had not been recovered even as at December 31, 2013.

www.island.lk

Fitch assigns ‘B+(lka)’ rating to Kotagala

Fitch Ratings Lanka has assigned Sri Lanka-based Kotagala Plantations PLC (Kotagala) a National Long-Term ‘B+(lka)’ rating, with a negative outlook.

Fitch has also assigned Kotagala’s outstanding senior secured debentures a National Long-Term Rating of ‘B+(lka)’. The rating reflects Kotagala’s weak liquidity, high leverage and low end-market demand for its products, despite holding a strong market position.The Negative Outlook reflects Fitch’s expectations the weak operating environment will further deteriorate the company’s liquidity unless it can restructure its debt maturities or arrange additional liquidity lines.

As at end-December 2015, Kotagala had Rs 787m of unrestricted cash and zero unutilised credit facilities to meet Rs 1.4bn of short-term debt (about 45% of which was bank overdrafts) falling due in the next 12 months, placing the company in a weak liquidity position. Fitch expects the company to be FCF negative in the financial year 31 March 2017 (FY17), owing to operational weaknesses and ongoing capex plans, further pressuring its liquidity profile.

Kotagala continued its negative trajectory, reporting losses in the year FY15 and FY14 due to weak end-market demand and cost pressures, which are faced by the entire plantation industry. Fitch expects demand from key end-markets, such as Russia and the Middle East, to remain subdued over the next 12 to 18 months, resulting in continued operating losses for the company.

www.dailynews.lk

Sri Lanka’s Insurance industry facing snag - IBSL Chairperson

Insurance Board of Sri Lanka, (IBSL) Chairperson Indrani Sugathadasa said the insurance industry of Sri Lanka is heavily dependent on the motor insurance industry which constitutes more than 60%.

Speaking at the General Insurance Sales Congress (GISC) held for the first time at the Water’s Edge, Sugathadasa said it is obvious that the industry needs to establish itself within the public.

The event focused on improving the situation of the General Insurance industry.

“There are many people who do not fully trust the insurance industry and there is a lack of loyalty and an overall lack of education about the industry. However insurance is a necessity for today’s public. Yet our growth in other sectors are marginal for an example the insurance for fire only amounts to10%, and miscellaneous insurance which includes health had only penetrated the market up to 20%,” Sugathadasa said.

Dr. Christian Bartsch from Munich Re in his address to the audience stated that though the insurance industry in Sri Lanka seemed to be fairing well the global market was very much under pressure. He stated that the fierce competition in market, the on going low interest, shrinking or stagger in premature in developed market, excess capital that is not utilised are some of the reasons that can drive the situation towards innovation.

www.dailynews.lk

March tea production hits new 27.5% low

March tea production hit a new 27.5% low since 2010 mainly due the drought with the output falling by 8.3 million kilos to 22.06 million kilos from 30.4 million kilos in March 2015.

Forbes & Walker Tea Brokers said, “All elevations, High, Medium and Low Growns, have shown a decrease in production.” Low Grown production fell by 5.4 million kilos to 13.2 million kilos, the lowest since 2010 when Low Grown production dropped to 11.7 million kilos.

Tea output in the January - March 2016 period was down 9.1 million kilos to 70.2 million kilos from the same 2015 period.

www.dailynews.lk

BAT Sri Lanka unit March net up 23-pct

ECONOMYNEXT – Ceylon Tobacco Company PLC, the Sri Lankan unit of British American Tobacco Holdings said March 2016 quarter net profit rose 22.7 percent to just over Rs3 billion from a year ago.

Sales of the firm, in which foreign funds are among top shareholders, rose 14 percent to Rs29.6 billion over the period, a stock exchange filing said.

Earnings per share for the quarter were Rs16.31 up from Rs13.29 the year before.

Ceylon Tobacco Company said its tax payments to the government during the first quarter of 2016, in the form of excise tax, corporate tax and other levies, increased 20 percent to Rs25.6 billion over the same period last year.

This was “driven primarily by higher prices as a result of the excise-led price increase experienced in October 2015 and relatively stable volumes during the first three months of 2016,” it said.

“Top-line growth for the three months ended 31 March was spearheaded by mainstream and premium segments in the company’s brand portfolio,” CTC said.