Sri Lanka shares down from 11-month high on profit taking

May 13 (Reuters) - Sri Lanka stocks on Tuesday fell from an 11-month closing high, ending a four straight-session winning streak, as investors booked profits, but market sentiment remained positive on lower interest rates and continued foreign inflows.

The main stock index fell 0.29 percent, or 18.20 points, to 6,284.96, slipping from its highest close since June 11.

It rose 1.24 percent in the last four sessions through Monday, while it enjoyed a 7.15 billion rupee ($54.85 million) inflow in the last seven sessions through Tuesday.

Stockbrokers said many investors have been compelled to return to the stock market due to multi-year low interest rates, which has made fixed income assets less attractive.

Ceylon Tobacco Company PLC fell 0.76 percent to 1,071.80 rupees after a court ruling on Monday said it should cover up to 60 percent of the printable area with pictorial warnings depicting the risk of smoking on cigarette packs.

Analysts said the ruling could hurt the consumption of tobacco, hitting company profits.

Market heavyweight and conglomerate John Keells Holdings PLC fell 0.21 percent to 234.50 rupees, while shares in Bukit Darah PLC, fell 1.60 percent to 669.10 rupees.

Foreign investors were net buyers of 141.1 million rupees ($1.08 million) of stocks on Tuesday. They have been net sellers of 262.2 million rupees so far this year.

The day's turnover was 757.6 million rupees, below this year's daily average of 1.04 billion rupees.

Analysts, however, said lower credit growth has raised questions around growth and earnings amid lower consumer spending.

Despite a multi-year low interest rate regime, private sector credit grew just 4.4 percent in February from a year earlier, the slowest expansion since May 2010. That compared with growth of 5.2 percent in January and 13.3 percent in February 2013.

($1 = 130.3500 Sri Lanka Rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Jacqueline Wong)

Sri Lanka shares close down 0.3-pct

May 13, 2014 (LBO) - Sri Lanka's shares closed 0.29 percent lower reversing the gains a day earlier with index heavy stocks losing ground, brokers said.

The Colombo benchmark All Share Price Index closed 18.20 points lower at 6,284.96 down 0.29 percent. The S&P SL20 closed 1.92 points lower at 3,478.99, down 0.06 percent.

Turnover was 757.85 million rupees, down from 866.48 million rupees a day earlier with 80 stocks close positive against 99 negative.

Shalimar closed 98.00 rupees lower at 1,600.00 rupees with market transactions of 148.06 million rupees contributing 20 percent of the daily turnover.

Ceylinco Insurance closed 27.80 rupees lower at 1,280.50 rupees with two off market transactions of 99.67 million rupees contributing 13 percent of the turnover.

Sierra Cables closed 10 cents higher at 2.20 rupees attracting most number of trades before the company temporary suspended its shares trading in the stock exchange.

Foreign investors bought 323.65 million rupees worth shares while selling 182.51 million rupees worth shares.

Sri Lanka Telecom closed 90 cents lower at 46.60 rupees and Ceylon Tobacco Company closed 8.20 rupees lower at 1,071.80 rupees, contributing most to the index drop.

Bukit Darah closed 10.90 rupees lower at 669.10 rupees and Trans Asia Hotels closed 4.90 rupees lower at 90.00 rupees.

NDB Capital Holdings closed 28.40 rupees lower at 470.10 rupees and Commercial Bank closed 50 cents higher at 129.00 rupees.

Lion Brewery Ceylon closed 15.00 rupees higher at 450.00 rupees and Cargills Ceylon closed 4.00 rupees higher at 145.00 rupees.

Carson Cumberbatch closed 1.80 rupees higher at 401.90 rupees and John Keells Holdings closed 50 cents lower at 234.50 rupees.

JKH’s W0022 warrants closed 50 cents lower at 63.50 rupees and its W0023 warrants also closed 50 cents lower at 69.50 rupees.

Sri Lanka's Sierra Cables finds Rs172mn fraud

May 13, 2014 (LBO) - The Board of Directors of Sri Lanka's Sierra Cables Plc said a probe had revealed a 172 million gap in its accounts and further investigations were planned.

The Board of Sierra Cables, asked Colombo Stock Exchange to suspend trading in the stock.

The Board in a statement said following suspicious raised, KPMG, an accounting firm, was asked to inquire and its preliminary findings show a 172 million rupee gap in work-in-progress between the March 2014 accounts and a physical verification.

"The Board has been further informed by KPMG that it needs to conduct further investigations into other areas of relevance," the statement said.

"In the meantime, the Board is of the opinion that there could be other significant matter sin the accounts especially inter alia, in relation to recording of stocks."

"The Board wishes to sate that it will vigorously take all requisite action against those responsible for any improprieties if revealed in the investigations.

Financial statements in the year 2010/11, 2011/12, 2012/13 and 2013/14 had "significant misstatements," the statement said.

There had been some above average trading in Sierra Cables share in recent days.

On May 08, 212,000 shares were traded at 1.80 rupees up 10 cents followed by 2.04 million on May 09. On May 12, 17.5 million shares were traded at 2.10 rupees and 5.6 mn shares today.

Krrish given three months to pay for Sri Lanka land

May 13, 2014 (LBO) - India's Krrish which has been given city centre land in Sri Lanka's capital Colombo is expected to settle its balance payments in three months, an Urban Development Authority official said.

UDA chairman Nimal Perera said Krrish had already paid 87 percent of 4,995 million rupees for state land.

"They have promised to settle the balance amount with the legal interest within the next three months," Perera said.

Krrish had run into controversy over repeated delays on paying for the land with earlier reports saying the latest deadline was May 26.

Perera said Krrish had recently signed an agreement with a construction contractor, which had been shown to them, they he was confident that the project will start.

Sri Lanka knocked off from top of best value destinations

May 12, Colombo: Bali has taken over the top spot of best value destinations from Sri Lanka this year, according to the eighth Worldwide Holiday Costs Barometer by Post Office Travel Money.

Sri Lanka, which shared the top spot with Spain last year, has been pushed down to the 15th place with highest price rise in the 44 destinations surveyed.

Prices were down in 70 percent of the 44 destinations surveyed by the Post Office for the annual report's Worldwide Holiday Costs Barometer while Sri Lanka registered the barometer's highest price rise of 38 percent.

The Post Office barometer monitors the price of eight tourist items in over 40 destinations worldwide - including dinner for two, drinks and sun cream.

Compared to Sri Lanka, Bali's prices were a third cheaper, the report notes. Sri Lanka's prices rose to £48.84 while Bali's price dropped to £31.48 this year.

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Sri Lanka Telecom profits down 66-pct in March quarter after legal battle

May 13, 2014 (LBO) - Profits at Sri Lanka Telecom, the island's only wireline operator which also has mobile and pay television fell 66 percent to 547 million rupees, following the loss of a legal battle, interim accounts showed.

The group reported earnings of 30 cents per share for the quarter.

Revenues rose 6 percent to 15.2 billion rupees in the quarter but operating costs rose at a faster 13 percent to 11.1 billion rupees, shrinking profits before depreciation to 4.1 billion rupees, down 10 percent from a year earlier.

The firm said a one-off charge was made during the quarter after a 673 million rupee payment to Just in Time Holdings in settlement of a case involving the imported equipment.

Depreciation was up 12 percent to 3.1 billion rupees.

CSE goes for Delivery Versus Payment System

H.D.H Senewiratne (hsenewiratne@yahoo.com)

The Colombo Stock Exchange (CSE) will introduce a new Delivery Versus Payment System, which will help to settle the front and back office brokering community and enable to improve the equity market in the country.

The CSE will expeditiously implement the Central Counter Party System and the Delivery Versus Payment System encouraging more companies to list on the CSE, CSE Marketing Head Niroshan Wijesundera told Daily News Business.

He said that system will be placed soon since a relevant consultancy firm will be informed during this month. The expression of interest was called by the Central Bank of Sri Lanka along with the Securities and Exchange Commission (SEC) and the CSE to select a suitable consultancy firm for this purpose.

The Central Counter Party system was to ensure the protection of investors in the event of a trade default when the purchasing party does not pay and a pool of funds will be created towards that, CSE sources said.

"This is good for the investors and not for the manipulators. We can expect more foreign investments and a very disciplined and professional marketing behaviour," Head of Sales Softlogic Stockbrokers Eardly Kern said. He said the implementation of the Delivery Versus Payment System will help to enhance foreign investor confidence to a higher level. With the introduction of the Clearing House the market could introduce derivatives, futures and other instruments to the market.

He said the payment is made in sharp contrast to the present system where the shares are transferred immediately to the buyer and payment made after three working days, which has a high default rate.

Kern also said that under this system a clearing corporation will be established to facilitate this system and help to increase the foreign investor confidence level due to the default risk factor in trading.
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SL draws most interest among frontier markets: Asia’s No. 1 stock broker

• Hong Kong-based CLSA turns bullish on Sri Lanka

• Takes 25% equity stake in CT Smith Holdings in strategic deal; first of its kind for CLSA in frontier markets that includes Vietnam, Pakistan and Bangladesh

• Move a big boost for capital market and to lure more foreign portfolio investments; CLSA and CT to benefit from combined product and service offerings

• CLSA’s COO says improved liquidity and governance will draw more investments

• CT Smith Holdings goes for re-branding adding CLSA names in to capital market companies

Asia’s number one stock broker, the Hong Kong-headquartered CLSA (Credit Lyonnais Securities Asia), yesterday entered the Sri Lankan market with a strategic deal with CT Smith Holdings, saying the country is the most sought after frontier market in the region for global investors.

“In Asia frontier markets are Vietnam, Sri Lanka, Pakistan and Bangladesh. Within these markets, Sri Lanka has the most interest among our customer base,” CLSA Global Chief Operating Officer Donald Skinner told journalists in Colombo following the strategic deal with CT Smith Holdings Ltd., inclusive of a 25% stake in the company with an investment of $ 2 million. “Overall the demand for frontier market is on the up and Sri Lanka is also the easiest for foreign investors,” he said adding that Colombo is the first within Asian frontier markets to see CLSA’s direct equity presence. In other markets CLSA operates via brokers.

CLSA has brought in 70% of CT Smith Holdings’ foreign business as the latter’s broking arm is responsible for the largest foreign inflow to the Colombo stock market.
“Our strategic partnership makes sense and we hope to build the business further together and bring foreign investment in to Sri Lankan equity thereby help more companies,” Skinner said.

He also noted that improved liquidity in the CSE as well as good corporate governance will help boost foreign inflows.

Leading and oldest independent brokerage and investment group CLSA is Asia’s leading and longest-running independent brokerage and investment group. It has over 1,500 dedicated professionals located in 21 locations across Asia-Pacific, as well as Europe and the USA. CLSA’s parent company is CITIC Securities, one of Asia’s leading investment banks.

CLSA was voted Best Overall Brokerage in Asia (ex-Australia and Japan) for Combined Research and Sales in 2007-13 (except 2011) and Most Independent Research Brokerage for the past 12 years in the annual Asiamoney Broker’s Poll (except 2005). CLSA was also ranked No. 1 for equity strategy in Institutional Investor’s All-Asia Research Poll between 2003 and 2012 (except 2006 and 2010).

The investment in CT Smith is via CLSA’s Singapore Holdings Pte Ltd.

The two companies said the investment cements a long-standing, twenty-year partnership between the two groups and marks the beginning of a new chapter in the development of CT Smith Holdings as a client centric brokerage, investment banking and asset management group with a strong reputation for integrity and independence in Sri Lanka’s capital market.

In a statement CLSA’s Chairman and CEO Jonathan Slone said: “Having worked with CT Smith over many years, we are extremely confident this investment will provide our clients enhanced access to a dynamic, growing frontier market while expanding CLSA’s Asia market research and distribution footprint.”

Cecilia Muttukumaru, Chairperson, CT Smith Stockbrokers, CT Capital and Comtrust Asset Management commented: “CT Smith Holdings and CLSA have developed a strong relationship over the years through CLSA being a counterparty of CT Smith Stockbrokers. 

I am pleased with their decision to further strengthen our relationship. Both groups are renowned for the quality and independence of their products and the partnership will assist CT Smith Holdings to expand its already strong relationship with foreign institutional investors and deliver an enhanced service offering to its domestic clientele.”

Combined product and service offerings CLSA and CT Smith Holdings will benefit from combined product and service offerings particularly in relation to equity research, execution and capital markets advisory in Sri Lanka.

Both groups have agreed in principal to combine research and Equity Capital Markets capabilities as follows:

Economic and Equity Research: CLSA will distribute research products published by CT Smith Stockbrokers, which provide an independent, on-the-ground perspective into the Sri Lankan market. The research products of CT Smith Stockbrokers will be re-branded under “CT CLSA” once approvals are granted. In addition, CT Smith Stockbrokers will participate in CLSA’s Investor Forums which have set the benchmark for equity investor conferences globally.

Equity Capital Markets: CLSA Capital Markets Ltd. and CT Capital will join forces to capitalise on their combined strengths in client relationships, execution and global/local market insights and placement capability.

As a result of the investment by CLSA, CT Smith Holdings Ltd. will change its corporate identity to CT CLSA Holdings Ltd. CT Smith Stockbrokers Ltd. and CT Capital Ltd. will change their corporate identities to CT CLSA Securities Ltd. and CT CLSA Capital Ltd. respectively.

CT Smith Group entity Comtrust Asset Management Ltd. however will retain its current identity as a flagship unit trust management company in Sri Lanka.

www.ft.lk