Colombo bourse chugs along the same route – analysts say

Share price trends have been on the lower side for several weeks since a new administration emerged with analysts attributing the downturn to a combination of reasons including uncertainty over impending polls and, as of this week, the approaching April season.

The Colombo bourse started the week on a slightly higher note on Monday’s early trade in another trading session marked by thin trade, but closed the week on a slump owing to investors opting to wait of a ‘clearer direction’, brokers said.

The momentous coalition between the country’s two main political parties, UNP and SLFP didn’t do much to uplift the listless sentiment in the Colombo bourse with the indices edging higher in early trades during the first three days and ending lower by day’s close. This pattern changed during Thursday when indices slumped right throughout.

During the week a common chorus by analysts was that traders opted to stay on the sidelines amid the developments in the political and economic fronts as the days dragged on. Brokers lamented that the index has fallen below 7,000 after nearly seven months. They added that activity levels weren’t high for the past few weeks, another reason why the market momentum isn’t picking up. “The retail and the high networth investors are waiting on the sidelines till the elections are over,” an analyst said, noting that both these segments are hardly investing based on fundamentals.

“This isn’t the case with foreigners,” he said, noting that this is why they have been net buyers for the most part of this year. A broker added that the market will ‘chug along’

in the same mode till April end. “This has much to do with the lack of direction and the holiday season,” he said.

On Friday, Colombo shares showed early gains with media reports of President Maithripala Sirisena promising the Chinese government that Sri Lanka intends to resume the contentious port project after problems are “sorted” out, only to fall at the close.

“This was a sore point in the share market, where questions were being raised about Sri Lanka halting the US$1.4 billion port city project, which was damaging ties with China. Many investors were questioning this move which impacted the market negatively in the past months,” an analyst said. He said that suspending this project would deter foreign investors.

But the market shed returns on Friday for the fifth consecutive session amid the uncertainties in the government policies which continued to affect the market sentiments, analysts said.
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SEC probes take a decisive turn

By Duruthu Edirimuni Chandrasekera

The Securities and Exchange Commission (SEC) is reopening investigations in cases that were closed during the past regime in a bid to determine if ‘all’ information had been considered in scrutinising the alleged malpractices especially when files were closed due to ‘insufficient’ information.

“This was a popular ‘excuse’ when certain probes didn’t see the light of day,” an analyst commented, adding that this should be sufficient cause to restart inquiries pertaining to market misconduct.

This new turn in the SEC has come on the back of Prime Minister Ranil Wickremasinghe slamming corrupt sections of Sri Lanka’s private sector to the extent of naming businessmen like Dilith Jayaweera and Nimal Perera.

“There are a number of allegations of violations of the Colombo Stock Exchange market rules and SEC regulations. The minor ones were compounded. Thirteen large cases were abandoned purportedly on a lack of evidence,” he told parliament, adding that they were not probed or were settled when it should have been probed further.

“I would like this to be recorded in the Hansard. I have requested the Securities and Exchange Commission to go into these cases. If necessary, I will bring legislation to permit such inquiry. I am also seeking the appointment of a Parliamentary Select Committee (PSC) to inquire into these transactions.”

A SEC source said that a PSC is not immediate, but his comments on compounding and abandoning certain cases purportedly were being pursued in all ‘seriousness’. “We want to verify whether earlier they (SEC) had ‘sufficiently’ gone into matters with these probes.” Further he said that many are now coming forward with stock market related complaints as they feel that there’s a free and fair climate for investigations. “They are free from fear and intimidation,” he said, noting that the SEC has got a ‘substantial’ number of complaints pertaining to share market misconduct during the past two months.

“We have received files full of complaints. Some are with names and some anonymous,” he said, adding that these complaints range from manipulation, insider dreading, pump and dump, stockbrokers and investment advisors misleading small shareholders, trading on accounts under third party names, etc.
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Several bank heads resign, some likely to challenge Finance Ministry order

Following the resignations of Dr. Rani Jayamaha as Chairperson of Hatton National Bank and Sunil Wijesinha as National Development Bank PLC Chairman and the likelihood of more such resignations, very reliable sources indicated that the Finance Ministry has notified several private commercial bank heads who had been appointed to represent government owned shares to step down.

The government owns nearly 33 per cent of shares in the Hatton National Bank and 28 per cent in the National Development Bank.
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Sri Lanka to ease rules to draw more foreign investment: Ravi

COLOMBO (EconomyNext) - Sri Lanka's new government will loosen regulations to attract more foreign investment, Finance Minister Ravi Karunanayake has said.

Almost three decades of civil war and years of misrule, meant that “Sri Lanka missed the opportunity to be to India what Hong Kong is to China,” he said in his keynote address to the Asian Investment Conference organised by Credit Suisse at session moderated by Sharhan Mushin, who is head of financial institutions group for the Asia Pacific region, which covers Sri Lanka.

The forum draws institutional and hedge fund investors as well as high-net-worth individuals and business leaders who seek access to influential ideas and actionable advice.

Karunanayake said the new government is keen to attract foreign investment to stimulate export-led growth and help alleviate poverty.

The government intends to revise investment rules to attract overseas flows and strengthen trading relationships with other nations through free trade deals planned with China and the U.S. adding to existing ones with India and Pakistan.

Karunanayake acknowledged that the external account is a problem.

With almost half the country’s public borrowing denominated in foreign currencies, Karunanayake said he favours a stronger rupee to reduce debt servicing costs.

However, since a stronger currency penalizes exporters, the solution, he said, is to ease barriers of entry for foreign investment which would raise skill levels and efficiency.

Karunanayake forecasts economic growth this year of 7-7.5 percent driven by sectors like tourism, agriculture and petroleum.

He identified logistics, infrastructure and housing as sectors that need more attention.
 

Sri Lankan shares fall for 5th session on margin calls, political woes

(Reuters) - Sri Lankan shares fell for a fifth straight session on Friday and closed at their lowest in nearly eight months as investors sold their stocks to settle margin trading ahead of quarter-end, while political worries also weighed on sentiment.

The main stock index ended 0.71 percent, or 49.31 points, weaker at 6,873.52, its lowest close since Aug. 6 and further moving away from the key psychological support level of 7,000. It has lost 6.07 percent in the past 20 sessions.

"The market fell across the board due to margin calls and month-end settlement selling pressure," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

Analysts expect the next support level at 6,800.

Shares of the country's top mobile phone operator, Dialog Axiata Plc, fell 0.92 percent, while conglomerate John Keells Holdings Plc dropped 0.69 percent.

Shares of the country's biggest listed lender, Commercial Bank of Ceylon Plc, fell 0.71 percent.

The day's turnover was 447 million rupees ($8.28 million), less than half of this year's daily average of 1.21 billion rupees.

Foreign investors sold a net 91.5 million rupees worth of shares. But they have been net buyers of 3.12 billion rupees so far this year.

Analysts said concerns that the government's decision-making process would slow down, also weighed on sentiment after President Maithripala Sirisena formed a national government incorporating the main opposition party in a bid to push through reforms and preserve political stability.

($1 = 132.9000 Sri Lankan rupees) 

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

Vallibel Finance debentures oversubscribed

Vallibel Finance PLC announced yesterday that applications for the debenture issue worth Rs. 750,000,000 (7.5 million) have been oversubscribed and closed. The company is on the works to issue further debentures.

Vallibel Finance planned to raise Rs.1 Billion via the issuance of a listed debenture. The company issued 7.5 million Rated, Guaranteed (Capital and two interest installments) Subordinated, Redeemable debentures at Rs.100 each with an option to issue a further 2.5 million debentures in the event of oversubscription.

Financial advisors and managers to the issue is Acuity Partners (Private) Limited. Vallibel Finance was rebranded in 2005 after their acquisition by Vallibel Group and was backed by the prestige of their parent holding group, Vallibel Finance PLC. Vallibel Finance has followed an aggressive expansion strategy in 2011 and in time, the company was ranked amongst the top 50 most respected entities in the country by LMD in its 2014 survey. (SP)
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Govt. probing previous regime's CB investments in EPF

By Ravi Ladduwahetty

Ceylon Finance Today: The Government is currently probing the transaction of the Central Bank's investments Employees Provident Fund in the Colombo Stock Exchange.
"All these transactions are heavy probe in a true spirit of transparency and good governance and we are determined to complete the findings within these 100 days," top official and political sources told Ceylon FT yesterday.

A cloud of controversy was looming over these transactions of the previous regime which also prompted the Auditor General also to comment on these transactions.
We are committed to transparency and we have given directions to the Central bank to give the maximum returns to the EPF members, whose lifetime earnings are in the fund, the sources said.

The probe also revolves round how the EPF Funds went into the shares which were making thumping losses and at present investments were being made into shares which were prone to risks, they said, adding that the investments were continued to be made into the stock market even under the present regime as well. "There has not been any directives to us not to invest EPF Funds in the CSE, Central Bank sources said

They said that investments were being made into the Treasury Bills and Treasury Bonds as well but brokers said that they were not given clear directives on what stocks to invest the EPF funds.

However, other sources said that it was conflict of interest for the Central Bank to invest EPF funds in banking stocks when the CB was expected to regulate the banks themselves!
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