Sri Lankan shares close steady, political woes weigh

(Reuters) - Sri Lankan shares ended steady on Monday, hovering near their more than six-week closing high hit in the previous session, while investors waited for cues on the political front as the country's parliament started a two-day debate on proposed constitutional reforms.

Investors have been cautious due to political uncertainty as Prime Minister Ranil Wickremesinghe's party does not have a majority in the parliament and President Maithripala Sirisena promised to dissolve the parliament after the end of his 100-day programme on April 23.

The passage of reform measures, including establishing independent police, judiciary, and election and public service commissions, is seen as a test for President Maithripala Sirisena's government.

The main stock index ended 0.07 percent, or 4.66 points, weaker at 7,125.12, hovering near its highest close since March 10 hit on Friday. It has gained 3.25 percent since the central bank cut key rates on April 15 through Monday, while yields on t-bills have fallen 37-48 basis points since then.

"Political stability is the main concern. Many (investors) are waiting to see the outcome of the debate and when the parliamentary elections will be," said Reshan Wediwardana, research analyst at First Capital Equities (Pvt) Ltd.

The parliament on Monday started the two-day debate on constitutional reforms.

Some analysts said the markets would stay volatile until parliamentary elections are announced.

The market saw a net foreign inflow for the first time in four sessions. Foreign investors were net buyers of 149.3 million rupees ($1.12 million) worth shares, extending the net foreign inflow so far this year to 3.78 billion rupees.

Turnover was 670.3 million rupees, compared with this year's daily average of around 1.07 billion rupees.

Analysts said the market could be dull until the perception on political uncertainty is addressed and many investors were in a wait-and-watch mode before the parliamentary elections.

Shares of Ceylon Brewery Plc fell 5.44 percent, while DFCC Bank Plc dropped 0.37 percent. Diversified conglomerate Hayleys gained 2.56 percent.

The index lost 6.6 percent last month, its biggest monthly drop since October 2012, as investors sold holdings to settle margin trades amid concerns about political stability and a rise in interest rates. 

($1 = 132.9000 Sri Lankan rupees) 

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

South Asian Exchanges formulate road map for the future, at regional conference in Colombo

Colombo:

The South Asian Investment Conference (SAIC) organised by the Colombo Stock Exchange (CSE) in association with the South Asian Federation of Exchanges (SAFE), took place today (27th April) at the Galadari Hotel, Colombo. The Minister of Finance Hon. Ravi Karunanayake, the Deputy Minister of Policy Planning, Economic Affairs, Child, Youth and Cultural Affairs Dr. Harsha De Silva, the Chairman of the Securities and Exchange Commission of Sri Lanka Mr.Tilak Karunaratne, Chairman of SAFE and Chairman of CSE Mr. Vajira Kulatilaka and outgoing Chairman of SAFE Dr. Muhammad Abdul Mazid addressed the audience at the inaugural ceremony. 

Following the inaugural session, decision makers from Member Exchanges of SAFE made presentations and took part in panel discussions; charting the course for the future development of regional Exchanges. 

“South Asia has emerged as the 2nd fastest growing region in the world, with predicted growth rates of 6 to 8 percent to be continued until 2025. Confidence of the investors will rest not only on growth rates, but will also on market integrity, good governance and transparency coupled with political stability and the political will to embrace foreign investment with the right spirit. All such ingredients are abundant in the current political regime in power,” Minister of Finance Hon. Ravi Karunanayake said. 

“All of us in the SAFE are facing similar situations as developing countries, the need to and are elevate poverty and create a strong middle class. However Exchanges always develop instruments for the rich, for those who can invest Millions; they don’t pay enough attention to the small and medium enterprises. In order to create a market where, various investors are able to invest, we need to provide diverse asset classes for investment. Therefore we need to cooperate and create these various asset classes and present South Asia to the world as a unified whole that also serves the bottom of the pyramid. We also need to compete amongst ourselves I do not think that the extremes can compete, however markets of similar size can. However we need to formulate a structure where we can all compete and we all win,” Deputy Minister of Policy Planning, Economic Affairs, Child, Youth and Cultural Affairs Dr. Harsha De Silva said. 

“As we begin to show the various facets of our Exchanges, international investors who have been viewing this market cautiously as a risky investment have now changed their minds. All international investors now want to come to this part of the world, mainly because of high growth and the possibility of diversification. Therefore, I think we have a great opportunity to take SAFE to a different level. This conference which is aimed at exploring the true investment potential of our region, is a relevant forum to highlight the combined strength of South Asia. The conference has looked at the development of new products, and towards bringing diversity in investment choices to international investors,” Chairman of SAFE and Chairman of CSE Mr. Vajira Kulatilaka said. 

“Traditionally capital markets are considered as powerful engines of economic growth that mobilize savings towards productive corporate financing. Even though the role of the capital market is widely accepted, developing a robust and efficient capital market is a difficult task for many emerging economies – nonetheless we should work towards developing significant improvements in the capital markets of the region ,”Chairman of the SEC Mr.Tilak Karunaratne said. 

“South Asia is at the very brink of attaining new heights in the global order and this is witnessed through our capital markets. It is vital to sustain this momentum of growth, which is in our collective best interest. Thereby, integration allows for the less developed markets to grow exponentially by exposure to higher developed markets,” Outgoing Chairman of SAFE Dr. Muhammad Abdul Mazid said. 

Local Capital Market representatives, including CEO’s from Member Firms of the CSE and CEO’s from Unit Trusts and other market intermediaries will also attend the event. 

The sponsors of the SAIC are Thomson Reuters, MillenniumIT, Treet Corporation Limited, the Chittagong Stock Exchange, NDB Bank, BNP Paribas, Cyan Limited, Efu General Insurance, Hascol Petroleum, AKD Securities and Softlogic Stockbrokers and Lanka Securities (Bronze sponsor for Gala Cultural Night ). 

Chevron Lanka 1Q15 net profit down

Says would be liable to pay a total of Rs.847.3 million as Super Gains Tax 
Chevron Lubricants Lanka PLC, the local unit of US-based multi national saw its net profit for the quarter ended March 31, 2015 (1Q15) falling Rs.210 million amid subdued top line growth, the interim financial accounts released to the Colombo Stock Exchange showed. 

The earnings per share deteriorated to Rs.6.19 from Rs.6.36. The revenue for the quarter under review fell by Rs.177 million to Rs.2.81 billion while the gross profit fell to Rs.1.19 billion from previous year’s Rs.1.24 billion despite a considerable fall in cost of sales from Rs.1.74 billion to Rs.1.161 billion. 

The administrative expenses also edged down to Rs.108 million from Rs.115 million. 

The finance income fell to Rs.28.7 million from Rs.45 million. 

The company said it would be liable to pay a total of Rs.847.3 million as Super Gains Tax in three equal installments in May, July and September if the Draft Act gazetted by the government for the imposition of the tax is enacted by Parliament. 

 However Chevron Lubricants Lanka said it had not provided for the liability. The company has announced Rs.5 per share as first interim dividend. 

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BOC posts Rs. 20.3 billion profit before tax

The Bank of Ceylon (BOC) closed its 75th year by recording the highest ever profit before tax (PBT) in the bank’s history as well as in the Sri Lankan banking industry of Rs.20.3 billion, up 29 per cent compared to the previous year, according to a BOC media release.

Post tax profit stood at Rs. 13.6 billion – a 12 per cent growth. “The group has reported Rs.21.4 billion PBT recording a 33 per cent growth over last year with the bank dominating the results of the group accounting for 95 per cent of earnings and 97 per cent of the group’s assets,” the release added.

Despite the dip in interest margin due to the low interest rate regime, PBT was boosted by fee income, trading income and gains from financial investments. Fee income increased by 42 per cent to Rs.9.2 billion due mainly to the increase in export and import transactions and guarantees fees, it said, adding that net gains from trading in treasury bills and dealing securities grew by 50 per cent to Rs.4.9 billion. “Increase in these income bases shows the bank’s ability to find alternative income generating channels at difficult times.”

Amidst the challenging operating environment which prevailed throughout most of the year, the bank’s assets grew by 11 per cent to Rs.1.3 trillion, the release said. The bank is the first domestic bank to achieve a trillion assets balance sheet and continues as the only bank to have done it so far. BOC is the largest provider of finance to both Government and private sectors.

Loans and advances account for 56 per cent of the bank’s one trillion asset base and gross loans stood at Rs.777.5 billion as at end 2014. The release said that the growth of the assets was also supported by the increase in financial investments and reverse repurchase agreements. “Even though the asset growth is at a moderate level, BOC continues to secure its market leadership in terms of assets, advances, deposits, profits, NRFC deposits and Inward Remittances.”

Deposits accounted for 74 per cent of the bank’s liabilities as at the end of 2014, according to the release which said that the total customer deposit base has grown from Rs.842.1billion in December 2013 to Rs.934 billion as of end 2014 amidst interest rate margin pressure.

“This is an 11 per cent growth and is in line with the industry growth rate which reflects the strong domestic franchise of the bank. The CASA ratio also has been improved to 43 per cent from 38 per cent resulting in a favourable deposit mix.”
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LAUGFS to buy second ship

By Duruthu Edirimuni Chandrasekera

Laugfs Gas PLC’s new subsidiary, Laugfs Maritime Services (P) Ltd (LMS) with plans to strike partnerships in international shipping, logistics and maritime services, is to ink its second cargo ship deal next week, officials said.

“We were on the lookout for a second liquefied petroleum gas (LPG) vessel, having secured our first last September and we’ll finalise this deal in a few days time,” an official told the Business Times.

The company has been inspecting many ships over the past few months. According to him, the first cargo ship had an initial investment of US$ 6.9 million while the new ship will cost about the same. “Our first ship was named as ‘Gas Challenger’ and we will appropriately name the second one which will sail under the Sri Lankan flag,” he added.

He said that plans to sign with international partners for business in this area are also progressing. “Many international firms are talking to us,” an official told the Business Times, adding that those in discussion are mostly British and Middle Eastern firms.

LMS will own, operate, hire and charter various types and sizes of ships including LPG vessel and other type of vessel that can carry various energy products and depending on the need each year LMS has plans to acquire a ship.

The official said that Laugfs Gas PLC wants to collaborate with their suppliers in a bid to trade LP Gas and oil in the South Asian region as well. The LP Gas supply in Asia is mostly linked to refining. In the Middle East, it’s linked mostly to associated gas with a growing linkage to non-associated gas, whilst North America is essentially linked to non-ssociated gas, he said, noting that the company is surveying all these aspects in its decision to enter countries in the South Asian region.

The company also has plans to set up a LPG storage terminal to be commissioned in two years.
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Stockmarket and bond market mafia in for a rude shock

By Duruthu Edirimuni Chandrasekera

Sri Lanka’s so-called stock and bond market mafia dons seem to have no bearing in the change in government, but they’ll wake up to a ‘rude shock’, a top government minister 

warns.

“This mafia whether in the stock or bond market seem to have no bearing to the change in government. Well, they’re living in false hope. They’ll wake up to a rude shock one day,” Harsha de Silva, Deputy Minister of Policy Planning and Economic Affairs, told the Business Times recently.
In this light, he said that probes on malpractices in related sectors are now on full speed.

Pertaining to the Securities and Exchange Commission (SEC) probes, Dr. De Silva added that delay in these investigations was mainly due to inadequate staff and some insider dealings’ of a unique kind. “The issue was with not having the right staff and also these probes were hampered by people within/inside (the SEC) who are connected to the stockmarket mafia,” he said, adding that, “Now with the new Director General at the SEC, share market manipulations are being investigated and the SEC chairman would have the ability to quickly move this process.”

On April 10, Vajira Wijegunawardane was appointed as the SEC Director General.

The SEC recently called for information from the Colombo Stock Exchange (CSE) on suspect transactions during 2011-2013, sources close to CSE said.

Dr. De Silva added that large scale and significant reforms in the financial markets are being done.

“We want to remove the conflicts of interests that the Central Bank (CB) has with Public Debt Department and the Employee Provident Fund (EPF).”

He reiterated that the country needs a good public debt management strategy.

“There were so many adhoc decisions in the past that may not have resulted in the optimum borrowing strategy for the country.” He added that now, some Rs. 672 billion worth of bills need to be settled for which no proper allocation seem to have been made in the earlier regime.

“There has been a window dressing of accounts. Despite the earlier regime saying that debt to GDP was falling, the actual debt burden hasn’t been captured. It’s outside of contingent liabilities.” He added that as a result, debt sustainability is different to what was said at that time.

“It’s in this context that we are trying to bring in a transparent, realistic and appropriate debt management programme,” he added.
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Fresh Interpol alert to arrest former CIFL chairman

By Quintus Perera

President intervenes to help desperate depositors

President Maithripala Sirisena’s intervention in the crisis at the battered CIFL (Central Investment and Finance Ltd) where depositors are struggling to get their money back has led to a renewed Interpol alert to arrest the company’s former chairman Deepthi Perera said to be hiding in Thailand.

K.W. Gunawardena, President, CIFL Depositors’ Association (CIFLDA), told the Business Times that on April 17 at the request of the President, a 4-member association delegation met him at his official residence at Wijerama Mawatha, Colombo.

The President told the delegation that he has submitted all the documents that were tendered to him by CIFLDA (prior to the presidential election) to the relevant officials to process them in order to settle the dues to the CIFL depositors, according to Mr Gunawardena.

He said that in the meantime, Senior Advisor to the President, Thilak Ranavirajah who has been assigned by the President to coordinate the issues between the association and the authorities has sent a memorandum to the CIFLDA, the Central Bank and the CID.

The CID Interpol OIC is taking necessary steps to bring down former CIFL Chairman Deepthi Perera, accused of misappropriating Rs. 1.6 billion of CIFL money, from Thailand where he is learnt to be at the moment. When the President was told that a similar alert had been issued some months back but little action had been taken, he had instructed the authorities to pursue the matter vigorously.

The CID, which has already alerted the Interpol on this matter, will renew the request.

Mr. Gunawardena said that the CID also has submitted a B Report to the Attorney General in a bid to file a court case against Mr. Perera. He said the President’s intervention in this manner was a blessing since 30 of their members who were senior citizens have died unable to meet their medical expenses as these elderly persons were living on the interest they received on the lifetime savings deposited in CIFL.

He said that 75 per cent of their members are all senior citizens and out of them more than 50 are in a pathetic situation having cancer, heart failure, kidney problems, high cholesterol and diabetic as they find it very difficult to get necessary funds to meet their medical expenses.

Mr. Gunawardena said that President Sirisena has instructed the Finance Ministry Secretary to take all necessary action to settle the CIFL crisis. He said that most probably, as a result of persistent media coverage on CIFLDA agitations (particularly the Business Times), the Central Bank recently inserted a newspaper advertisement in all three languages requesting all CIFL depositors to submit details of their deposits on a format given in the advertisement and that this information would be directed to the KPMG audit firm.
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