Sri Lankan shares fall in dull trade

(Reuters) - Sri Lankan shares ended weak on Tuesday, near their lowest close in more than three weeks, led by shares of beverage makers in lacklustre trade but stockbrokers said the market was on a gaining trend due to a lower interest rate outlook.

The main stock index ended 0.10 percent, or 6.39 points lower at 6,286.02. It had closed at its lowest since May 7 on Friday.

Tuesday's turnover was 405.2 million rupees ($3.11 million), its lowest since May 26 and lower than this year's daily average of 1.01 billion rupees.

The bourse saw net foreign inflows of 8.6 million rupees, extending year-to-date net foreign inflows to 2.89 billion rupees.

Analysts said the market expects a further fall in interest rates after central bank governor Ajith Nivard Cabraal told Reuters on Friday that the central bank is creating room to cut interest rates further.

Cabraal signalled "a lot a space being created for some more dovish action".

Stockbrokers expect the market to gain in the near future due to lower interest rates after the central bank kept key rates at multi-year lows in May for the fourth straight month, as expected.

Shares of Lion Brewery (Ceylon) PLC fell 5.73 percent to 419.5 rupees a share.

($1 = 130.3500 Sri Lankan Rupees)

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

Sri Lanka stocks close down 0.1-pct

June 03, 2014 (LBO) - Sri Lanka's stocks closed down 0.10 percent on Tuesday amid low foreign participation, brokers said.

The Colombo benchmark All Share Price Index closed 6.39 points lower at 6,286.02 down 0.10 percent. The S&P SL20 closed 0.56 points higher at 3,470.75, up 0.02 percent.

Turnover was 405.22 million rupees, down from 781.96 million rupees a day earlier with 93 stocks closed positive against 93 negative.

No off-market transaction reported on Tuesday.

Laugfs Gas non-voting shares closed 40 cents lower at 30.00 rupees, attracting most number of trades during the day.

Foreign investors bought 84.49 million rupees worth shares while selling 75.89 million rupees worth shares.

Lion Brewery Ceylon closed 25.50 rupees lower at 419.50 rupees and Trans Asia Hotels closed 5.70 rupees lower at 91.30 rupees, contributing most to the index drop.

Dialog Axiata closed 10 cents lower at 9.80 rupees and Sri Lanka Telecom closed 10 cents lower at 48.00 rupees.

Carson Cumberbatch group’s oil palm firms, Indo-Malay closed 98.70 rupees lower at 1,701.30 rupees and Good Hope closed 237.00 rupees higher at 1,745.00 rupees.

Nestle Lanka closed 37.60 rupees higher at 1,940.00 rupees and CT Holdings closed 2.90 rupees higher at 135.00 rupees.

Commercial Leasing and Finance closed 10 cents higher at 4.10 rupees and Commercial Bank of Ceylon closed 40 cents higher at 130.40 rupees.

Sri Lanka’s Central Banker: Emerging Markets Should Be Prepared for Fed Tightening

By PAUL HANNON

The time to have started preparing for the end of the Federal Reserve’s quantitative easing program was at the beginning of the Federal Reserve’s quantitative easing program.

So says Ajith Nivard Cabraal, governor of the Central Bank of Sri Lanka. In an interview with the Wall Street Journal Thursday, Mr. Cabraal said he would not expect the Fed to take account of the impact its actions will have on some developing economies when the time comes for it to end its program of bond purchases, and then begin to raise its benchmark interest rate.

“Every country will make their own decisions based on their own requirements,” he said. 

“As to whether it will be the most benign impact for other countries, I don’t think they have the luxury of contemplating. I think that’s something we all have to recognize and appreciate. If we understand that, and we build up our own cushions to deal with any kind of impact that follows such decisions, I think that’s the best way of handling these types of conditions.”

In other words, it’s every central bank for itself, and that is unlikely to change. Mr. Cabraal’s view of the obligations central banks have to each other is at odds with that ofRaghuram Rajan, the governor of the Reserve Bank of India, who Wednesday again called on the Fed and other developed country central banks to plan for a normalization of monetary policy “whose pace and timing is responsive, at least in part, to conditions they (emerging markets) face.”

Hence Mr. Cabraal’s argument that the only way to have prepared for a withdrawal of foreign capital when the Fed begins to tighten is not to have allowed very much of it in to your country in the first place.

“At the time QE commenced, we took a fairly calculated position that it would end at some stage,” he said. “We didn’t encourage huge inflows of capital. We didn’t change our limits on foreign investment. Our investors are there for the longer term.”

As the Fed’s easy money policies helped lower interest rates around the world, many emerging markets fueled breakneck growth in part by issuing record levels of government and corporate debt.

But as the Fed began to wind down some of those policies, economic growth in many developing economies started to slow. In two periods around the middle of last year and early this year, investors began to pull their cash out of emerging market equities and bonds en masse.

In recent days, however, there have been signs that investors are returning to emerging markets.

Sri Lanka limits the share of foreign capital allowed in its treasury markets to 12.5%. Mr.Cabraal said he isn’t advocating that all developing economies follow that example, since some may need more foreign capital than others to generate growth. Instead, he said regulators should focus on whether the level of capital flows is appropriate to an economy’s needs.

“We should always be conscious of what flows are necessary for an economy,” he said. “Low inflows could be one of the factors that would not provide you with sufficient resources. High outflows can cause many shocks. Always be conscious of that.”

http://blogs.wsj.com/economics/2014/05/29/sri-lankas-central-banker-emerging-markets-should-be-prepared-for-fed-tightening/?KEYWORDS=sri+lanka

Sri Lanka sees weak demand for poultry in 2013, feed costs high

June 03, 2014 (LBO) - Sri Lanka has seen weak demand for chicken in 2013 a top poultry firm while costs were elevated, a poultry firm said, as the country emerged from a balance of payments crisis and steep currency depreciation.

Bairaha Farms, which sells processed meat, branded chicken, day old chicks and parent breeder chicks said revenues rose just 4.6 percent 3.0 billion rupees in 2013 while direct costs rose 5.6 percent to 2.61 billion rupees.

In 2012 when Sri Lanka's currency depreciated from 110 towards 130 to the US dollars following credit taken to subsidized energy, Bairaha's revenues rose 3.1 percent to 2.9 billion rupees and costs jumped 19.3 percent to 2.4 billion rupees.

The company said there was a "noticeable dip demand" by low and middle income consumers while demand was stable among high income segments, while raw material costs were high.

"The industry was characterized by many months of glut and excess production, as result of depressed demand for chicken meat," Bairaha Chairman M T A Furkhan told shareholders in the annual report.

"The quality of poultry feed available in the market deteriorated due to high prices that prevailed in the market for raw materials.

"These factors heavily impacted the financial performance of industry players with the prices of both broiler and lay day-old-chicks declining steeply, stemming from an industry oversupply coupled with a decline in sales volumes."

However the price of eggs had now risen from 11 rupees to 15 rupees reflecting the cost of raw materials.

In February 2014 there had been a sudden demand for chicken amid a breakout of foot and mouth disease in cattle and pigs, the company said.

Sri Lanka now exported parent breeder chicks, table eggs and hatching eggs. Furkhan said there was room to export chicken meat as current production capacity exceeded demand. There was demand for chicken in the Middle East.

Bairaha said the government had also announced incentives for exporting chicken.

But Sri Lanka's feed prices were high and volatile, making cost of production high and uncompetitive.

The firm said maize which was the main ingredient in feed was subject to import restrictions.

Bairaha said Sri Lankan farmers now produced 60 percent of the maize requirement for feed and there was a plan to produce the entire requirement of soya bean meal as well with a guaranteed price for farmers.

But because corn was a seasonal crop prices tended to spike. The firm claimed that prices were 'manipulated by intermediary traders'.

"The ideal situation would be to achieve self-sufficiency in raw material required to produce animal feeds while making them available at competitive prices," the company said.

Bairaha also praised what it called an "unprecedented bold step in April 2014" to import maize at a "concessionary 10 percent duty" and said the "action of the government must be commended".

But economists have said that import restrictions gave an incentive for all domestic producers including farmers to be inefficient and cost of production to be high.

Other analysts have said that Sri Lanka is a textbook case of German-nationalist style autarky policies at work which were keeping maize prices high, allowing rents to be earned by producers and collectors while keeping feed prices and therefore chicken prices high.

The high overall protein prices, which also tended to push up prices of substitutes like fish and meat may also be helping in malnutrition of small children in poor families critics have said.

Analysts say export competitive of exports and big business could be improved by restoring the economic freedoms of the poor.

Singapore firm triggers Takeovers Code on E-Channelling

Buys 17.5% more for Rs. 300 m at Rs. 14 per share to increase holding to 47.4%

Singapore’s Senior Marketing Systems Asia Pte Ltd., (SMS) yesterday triggered the SEC Takeovers and Mergers Code on eChannelling PLC at Rs. 14 per share.

This is following SMS buying 17.5% or 21.429 million shares at Rs. 14 each to increase its overall holding to 57.946 million shares or 47.4%. The major seller was British American Technologies which exited from eChannelling divesting 16 million shares.

The price paid by SMS yesterday was higher in comparison to Rs. 9 when it acquired a 15% stake in October last year, also from BAT of Ruwan Silva-fame who is also a Director of eChannelling.

SMS first acquired eChanneling shares in September last year at Rs. 8.50 each.
Other major shareholder of eChannelling is Trading Partners Ltd., holding 28%. It acquired the bulk of the stake at Rs. 10 per share in November 2013.

SMS also bought around 5 million shares from the market including around 3 million from a foreign shareholder.

As at 31.3.2013, eChannelling had 2,275 shareholders of which over 1,800 were holding between 1 to 10,000 shares each.

Net asset per share of eChannelling was Rs. 1.31. It finished FY14 with a profit of Rs. 52 million, down from Rs. 77 million in the previous year.
www.ft.lk

Softlogic Holdings ends FY14 on a high note

The business performance of Softlogic Holdings PLC (SHL) was healthy with turnover almost reaching Rs. 30 billion in FY 2013/14 (up 15.6% YoY) along with the quarterly revenue steadily improving 18.9% YoY to Rs. 7.5 billion.

This growth trend was primarily led by the Group’s healthcare, retail and financial service sectors. Group Gross Profit increased 19.1% YoY to Rs. 9.7 billion in FY14.
Gross profit rose by 19% to Rs. 9.8 billion whilst results from operating activities improved by 29% to Rs. 2.8 billion.

Pre-tax profit amounted to Rs. 1.3 billion, up by 170.5% over FY13. In the 4Q it registered a strong 186.1% YoY growth to Rs. 284.4 million.

After tax profit was Rs. 1.05 billion, up by 455% over FY13. The quarter recorded an impressive growth rate to Rs. 254.4 million. Earnings were chiefly derived from the healthcare and financial services sectors, followed by retail and ICT.

Net profit attributable to equity holders rose by 173% to Rs. 249 million in FY14.

A steady improvement in GP margins were noted during the period to 33.4% from 32% in the comparative period. Operating cost margins were contained at 25% despite the Group’s expansion mode.

Sectoral Operating Profit contribution was led by healthcare services, retail and ICT. Finance Income which increased 42% YoY to Rs. 1.2 billion was as a result of investment income decisions at Asian Alliance Insurance PLC.

Softlogic saw finance expenses increase marginally by 0.37% to Rs. 2.8 billion in FY14 due to the declining market interest rates. Consequently, Net Finance Expenses reduced by 17.5% YoY to Rs. 1.6 billion.
www.ft.lk