Sri Lankan shares edge up to over 1-yr high on banks, rate-cut hopes

(Reuters) - Sri Lankan shares rose for the second straight session on Tuesday to a one-year closing high, led by gains in banking stocks on hopes of a further 50 basis points rate cut in this week's central bank policy rates announcement, stockbrokers said.

The main stock index rose 0.11 percent, or 6.88 points, to 6,344.10, its highest close since June 6, 2013.

Continued foreign buying and expectations of interest rate cuts have boosted sentiment and the market has been on a rising trend since late February.

The bourse saw a net foreign inflow for the 12th straight session. Foreign investors bought 198.7 million rupees ($1.53 million) worth of shares on Monday, extending the net inflow for the past 12 days to 3.91 billion rupees. They have been net buyers of 5.75 billion rupees so far this year.

Analysts said the market is broadly expecting a 50 basis point rate cut this week.

"People are expecting a rate cut and they are pushing banking shares, expecting further cut," a stockbroker said on condition on anonymity.

The central bank has reduced its key policy rates to multi-year lows, but has not yet seen any improvement in credit and import growth. March credit growth slowed to a four-year low of 4.3 percent year-on-year.

Central bank governor Ajith Nivard Cabraal told Reuters on May 30 that the central bank was creating room to cut interest rates further.

The central bank will announce its June monetary policy rates on Wednesday.

Turnover was 957.2 million rupees, below this year's daily average of 1.01 billion rupees.

Financial firm Orix Leasing Co Plc rose 0.44 percent to 91.20 rupees, while Commercial bank of Ceylon Plc rose 0.90 percent to 135.00 rupees.

Palm oil firm Bukit Darah Plc advanced 0.55 percent to 653.60 rupees. 

($1 = 130.2000 Sri Lankan Rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

Sri Lanka shares close up 0.1-pct

June 16, 2014 (LBO) - Sri Lanka's shares closed 0.11 percent higher on Monday starting the week on a positive territory, brokers said.

The Colombo benchmark All Share Price Index closed 6.88 points higher at 6,344.10 up 0.11 percent. The S&P SL20 closed 15.64 points higher at 3,520.67, up 0.45 percent.

Turnover was 957.31 million rupees, up from 809.41 million rupees last Friday with 105 stocks closed positive against 79 negative.

Softlogic Holdings closed 50 cents higher at 13.70 rupees with two off-market transactions of 148.73 million rupees changing hands at 13.50 rupees per share contributing 16 percent of the turnover.

The Finance Company non-voting closed 30 cents higher at 8.50 rupees, attracting most number of trades during the day.

Foreign investors bought 252.70 million rupees worth shares while selling 53.95 million rupees worth shares.

Commercial Bank of Ceylon closed 1.20 rupees higher at 135.00 rupees and Chevron Lubricants Lanka closed 7.30 rupees higher at 287.70 rupees, contributing most to the index gain.

Carson Cumberbatch closed 4.20 rupees higher at 406.20 rupees and John Keells Holdings closed flat at 234.00 rupees.

JKH’s W0022 warrants closed 20 cents higher at 62.20 rupees and its W0023 warrants closed flat at 72.00 rupees.

Commercial Leasing and Finance closed 10 cents higher at 4.10 rupees and Lanka Orix Leasing Company closed 40 cents higher at 91.20 rupees.

Dialog Axiata closed 10 cents higher at 10.20 rupees and Sri Lanka Telecom closed 10 cents lower at 47.90 rupees.

Nestle Lanka closed 71.00 rupees lower at 1,926.00 rupees and Lion Brewery Ceylon closed 3.00 rupees lower at 430.00 rupees.

HNB closed 1.80 rupees lower at 155.70 rupees and Seylan Bank closed 2.40 rupees lower at 64.00 rupees.

Equity Markets hit 12m high as ASPI surges past 6,300 resistance

Equity markets closed the four day trading week in the green with both indices recording W-o-W gains. The ASPI increased 58.08 points (or 0.92%) to close at 6337.22 points; the S & P SL 20 Index meanwhile, gained 0.74% (or 25.86 points) to close at 3505.03 points.

Turnover and Market Capitalization

JKH was the highest contributor to the week's turnover value as the counter's contribution of Rs. 1.63bn accounted for 36.82% of total turnover. Commercial Bank followed suit accounting for 5.60% of turnover (value of Rs 248.27mn) while Distilleries Company contributed Rs 173.90mn to account for 3.92% of the week's turnover.

The daily average turnover value over the holiday shortened week amounted to Rs 1.11bn (up 40.71% W-o-W) compared to last week's average of Rs 787.25mn.

Total turnover value for the week amounted to Rs 4.43bn relative to last week's value of Rs 3.94bn. Market capitalization meanwhile, increased 0.98% (or Rs 25.69bn) to Rs 2655.60bn relative to last week's value of Rs 2629.91bn.

Liquidity (in Value Terms)

The Diversified sector was the highest contributor to the week's total turnover value, accounting for 52.07% (or Rs 2.31bn) of market turnover. Sector turnover was driven primarily by JKH, Expolanka, Hemas Holdings and Adam Investments which cumulatively accounted for 81.70% of the sector's total contribution.

The second highest sectoral contribution stemmed from the Banking and Finance sector, which contributed 20.22%(or Rs 895.94mn).

The sector was helped by Commercial Bank and HNB (NV) which accounted for 36.63% of the sector's total turnover value.

The Manufacturing sector was also amongst the top sectoral contributors to the market, accounting for 7.84% (or Rs 347.28mn) of the week's total turnover value.

The sector was helped by Royal Ceramics which contributed 19.20% to total sector turnover.

Liquidity (in Volume Terms)

The Diversified sector dominated the market in terms of share volume too, accounting for 32.23% (or 56.14mn shares) of total volume, with a value contribution of Rs 2.31bn.The Banking and Finance sector followed suit as 40.91mn shares (or 23.48%), amounting to Rs 895.94mn changed hands.

The Manufacturing sector meanwhile, contributed 9.68% to the week's total turnover volume as 16.85mn shares changed hands.

The sector's volume accounted for Rs 347.28mn of total market turnover value.

Week's Top Gainers and Losers

Adam Investments was the week's highest price gainer, increasing 43.33% from its issue price of Rs 3.00 to close at Rs 4.30. SMB Leasing (NV) gained 25.00% W-o-W to close at Rs 0.50. Office Equipment meanwhile, gained 24.86% W-o-W to close at Rs 2,544.00.

Lankem Development and Ramboda Falls were also amongst the week's top price gainers with W-o-W gains of 22.00% and 21.61%, respectively.

Browns Investments was the week's highest price loser as the stock declined 22.73% W-o-W to close at Rs 1.70, relative to Rs 2.20 last week. PC Pharma recorded a W-o-W price decline of 13.33% to close at Rs 1.30 while Sinhaputhra Finance closed at Rs 116.20, representing a W-o-W decline of 9.64%.

Foreign investors closed the week in a net buying position, with daily average net inflows amounting to Rs 0.34bn relative to daily average foreign inflows of Rs 0.337bn recorded last week (+1.50% W-o-W). Daily average foreign purchases increased 51.23% W-o-W to Rs 0.63bn, from Rs 0.42bn recorded last week, while daily average foreign sales amounted to Rs 0.29bn, relative to last week's value of Rs 0.08bn (-260.67% W-o-W). In terms of volume meanwhile, JKH and Hemas Holdings led foreign purchases while Expo Lanka and Renuka Agri led foreign sales. In terms of value, JKH and Namal Acuity Value Fund led foreign purchases while Distilleries and Ceylon Investments led foreign sales.

Point of View

Last week's positive momentum by HNIs and foreign investors continued this week, helping push markets past the key 6300 resistance level.

The benchmark ASPI reached a 12-month high of 6337.22 points, with retail, HNIs and institutional investors showing renewed vigor ahead of the Central Bank's policy decision next week. Banking and Finance counters such as COMB, DFCC and HNB [NV] contributed significantly to volume with turnover value reaching a 4-week high of Rs 1.41bn to boost average daily turnover value (for the week) to Rs 1.11bn.

Markets in the week ahead are likely to look for direction from the Central Bank's monetary policy directive.

Still, the recent recovery in sentiment is likely to remain as foreign buying and HNIs and institutional investors continue to prop market activity. Some retail profit-taking is, nevertheless, likely.

WB Estimates Sri Lanka GDP at 7.2% In its mid-year appraisal and estimation of global economic prospects, the World Bank (WB) forecasted World GDP at 2.8% in 2014E, 40bps lower than its initial estimate in January (3.2%). The Bank added that the setbacks in early 2014 - namely US weather patterns and geopolitical tensions in Eastern Europe - are temporary and that a partial rebound is likely toward year end.

The WB projects global growth picking up to 3.4% in 2015E and 3.5% in 2016E as high-income countries gain momentum as fiscal consolidation slows, employment stabilizes and financial conditions remain accommodative.

Tailwinds from these are expected to benefit developing countries with growth projected at 5.4% in 2015E and 5.5% in 2016E.

Sri Lanka's economic growth meanwhile, is estimated at 7.2% in 2014E, significantly ahead of the rest of the South Asian region.

Sri Lanka's economic growth is expected to remain broadly stable (7.2%) in 2014E, and moderate to a more sustainable level of 6.7% by 2016E.

The World Bank added that although international financial conditions continue to add pressure on regional growth, strengthening global demand, particularly from USA and EU and increased domestic investment are likely to drive South Asia's medium-term growth. Risks to growth however exist, with upside to oil prices (due to heightened geopolitical uncertainty), and adverse weather conditions in particular likely to impact regional consumption and growth.

Source:Global Economic Prospects June 2014
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Aitken Spence mulling more Indian hotel acquisitions

By Ravi Ladduwahetty

Ceylon FT: Leisure rich diversified blue chip Aitken Spence will be going in for more Indian hotel acquisitions based on the success of the newly acquired ‘Fern’ the five star property in Chennai for US$ 22 million.

“We are buoyant on the prospects in the Indian hotel industry, with the IT industry also building up there, which has been developing at a rapid pace since 2011. This is the area that is called the OMR stretch, where there are a large number of star class hotels,” Aitken Spence Group Managing Director/ CEO Rajan Brito told Ceylon FT.

He also said that the group would be monitoring the performance of the newly acquired hotel for the next three years against the Indian hotel backdrop and if the performance was positive, they would be proceeding with more acquisitions in the sub continental market, which would impact the group’s bottom line.

The group would also be looking forward to merging tourism synergies between its local chain of hotels, its new Indian acquisition and the already operated ones in the Maldives as well. “This will be a new option that we will be offering to the European visitors in our sales programmes, Brito said.

One of the reasons for the Spence decision of acquiring the Fern was due to the belief that the Indian economy would be booming under the leadership of Prime Minister Narendra Modi, who transformed the state of Gurarat as its former Chief Minister

He also described the acquisition price of US$ 22 million for Fern as very competitive as the Indian seller – the Rayala Group had wanted to sell it due to being burdened by debt. “They had finished the hotel at a cost of 120 Crore (1 Crore= Indian Rs 10 million) and decided to get rid of it due to these problems and the price was cheap,” he said. One of the principle challenges that the Spence Group would be faced with, would be maintain average prices and rates, which would also be impacting the group’s bottom line.
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