Sri Lankan shares fall on technical correction, outflows

(Reuters) - Sri Lankan shares fell on Wednesday on a technical correction and foreign outflows, with investors selling blue-chips such as John Keells Holdings Plc after the central bank held the key policy rates steady, stockbrokers said.

Investors were expecting a rate cut at the central bank's policy review, said analysts.

The main stock index fell 0.42 percent or 26.80 points to 6,317.61, edging down from its highest close since June 6, 2013.

Before the market opened on Wednesday the central bank kept policy rates steady at multi-year lows for a fifth straight month as it expects lending to pick up in the second half of the year.

"It was a long awaited technical correction," Hussain Gani, the deputy CEO at Softlogic Securities said.

Other analysts said investors were expecting a rate cut, but the central bank's decision dented sentiment.

The bourse saw a net foreign selling on Wednesday for the first time in 13 sessions. Foreign investors sold 41.5 million rupees ($318,700) worth of shares on Wednesday. But they have been net buyers of 5.81 billion rupees so far this year.

The market has been on a rising trend since late February due to the continued foreign buying and expectation of an interest rate cut.

Dealers said investors were waiting to see the impact of weekend violence that killed at least three people and left 75 people seriously injured on the market and tourism sector.

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. April private sector credit growth contracted 3.3 percent year-on-year, its worst performance since January 2010.

Turnover was 713.9 million rupees, less than this year's daily average of 1.01 billion rupees.

Shares of Conglomerate John Keells fell 2.36 percent to 227.10 rupees, while Nestle Lanka Plc declined 1.35 percent to 1,923.00 rupees. 

($1 = 130.2000 Sri Lankan Rupees) 

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

Sri Lanka stocks close down 0.4-pct

June 18, 2014 (LBO) - Sri Lanka's stocks closed 0.42 percent lower with index heavy John Keells Holdings losing ground ahead of the U.S. Federal Reserve's policy statement, brokers said.

The Colombo benchmark All Share Price Index closed 26.80 points lower at 6,317.61, down 0.42 percent. The S&P SL20 closed 21.58 points lower at 3,499.49, down 0.61 percent.

Turnover was 713.88 million rupees, down from 1.08 billion rupees a day earlier with 67 stocks closed positive against 103 negative.

Kelani Tyres closed flat at 66.00 rupees with seven off-market transactions of 147.51 million rupees changing hands at 63.00 rupees per share contributing 21 percent of the turnover.

Bansei Royal Resorts Hikkaduwa closed 60 cents lower at 11.50 rupees, attracting most number of trades during the day.

Foreign investors bought 160.95 million rupees worth shares while selling 202.42 million rupees worth shares.

Index heavy John Keells Holdings closed 5.50 rupees lower at 227.10 rupees, contributing most to the index drop.

JKH’s W0022 warrants closed 1.00 rupee lower at 60.00 rupees and its W0023 warrants also closed 1.00 rupee lower at 69.50 rupees.

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

Sampath Bank closed 3.00 rupees lower at 193.40 rupees and Commercial Bank closed 30 cents lower at 134.70 rupees.

Nestle Lanka closed 26.40 rupees lower at 1,923.00 rupees.

Chevron Lubricants Lanka closed 4.20 rupees higher at 291.00 rupees and Lanka IOC closed 50 cents higher at 39.50 rupees amid violence in Iraq pushing world oil prices higher.

Colombo commercial high court has appointed a liquidator for Touchwood Investments with effect from 05th June 2014, stock exchange filing said.

Sri Lanka may encourage smaller insurers to merge: CB Governor

June 18, 2014 (LBO) - Sri Lanka's smaller insurers should merge to become larger players and which will give an assurance to customers that they will survive in the longer term, Central Bank Governor Nivard Cabraal said.

"I would like to see bigger and more stable insurers," Cabraal told a forum on pensions organized by Citibank in Colombo, with insurers being ideally placed to offer retirement products such as annuities.

"People will be more discerning; they will evaluate insurers more carefully. They will not only look at pension products; they will also look at the person who is offering them.

"That is why there will be a need to have bigger more stable companies."

Sri Lanka's insurance regulator is now in the process of splitting existing composite firms into life and general insurers.

Cabraal said the process itself may see some elements of consolidation.

"We would like to see that," he said. "Small tiny companies will find it difficult to offer products, to also assure the public that they are going to be around for the next 30 years, by the time that you are ready to retire."

"They have to have mass and that is something we have to encourage. Within the industry also there needs to be consolidation to go forward.

Cabraal said banks and non-bank lenders have already been encouraged to merge and acquire.

"That policy is taking place and a similar policy in the insurance industry may be on the cards."

Chairperson of the Insurance Board of Sri Lanka said the regulator was now focusing on the segregation and listing of insurance companies, but consolidation was being considered.

Sri Lanka policy rates unchanged, banks urged to narrow spreads

June 18, 2014 (LBO) - Sri Lanka's central bank held policy interest rates at 6.5 and 8.0 percent but urged banks to narrow spreads by cutting lending rates, as credit growth continued to be slow.

The Central Bank said it was "of the firm view that the banks now have adequate space to reduce market lending rates further" to boost credit demand, as deposit rates have fallen over the past few months.

"Accordingly, the Monetary Board also decided to urge banks to lower their market lending rates in order to reflect these changing circumstances."

In April private sector credit grew 3.3 percent from a year earlier, the monetary authority said in its May policy review indicating that private sector credit stock may have shrunk by about 15 billion rupees in April.

In the first two months of the year private credit shrank as banks cut back on gold backed loans after prices of the precious metal fell and defaults rose.

"However, with the realisation of the effects of the eased monetary policy stance, a turnaround in credit growth could be expected in the second half of the year," the Central Banks said.

"The implementation of the credit guarantee scheme in relation to pawning advances is also expected to further stimulate private sector credit growth."

Many firms are busy trying to refinance their loans at lower rates as market rates fell, some bankers said. In some cases borrowers were moving to the first banks to offer lower rates and repaying high interest loans.

Deputy Governor Nandalal Weerasinghe said Tuesday such market developments would help bring down interest rates to levels in line with deposit rates.

Some firms who had over leveraged themselves during the bubble years up to 2011 were also trying to sell assets and strengthen their balance sheets, analysts say, which takes time.

However following the de-leveraging process such firms would emerge stronger for an expansion phase.

The Central Bank said firms were also borrowing abroad and going to securities markets where rates have fallen.

Indian giant Cipla buys 60% stake in Lanka’s Citihealth firm for Rs. 1.8 b

Cipla a global pharmaceutical giant from India has acquired a 60% stake in a subsidiary of family-owned Sri Lankan firm Citihealth Imports Ltd. for $ 14 million (over Rs. 1.8 billion).

In a filing to the Bombay Stock Exchange, Cipla said its wholly-owned subsidiary Cipla (Mauritius) Ltd. has signed a definitive agreement with its existing Sri Lankan distributor for acquisition of a 60% stake in a new company. Cipla didn’t name the Lankan distributor, which however is Citihealth Importers Ltd., Chairman of which is Col. (Rtd) Chandra Jayaratne.

The new company will market Cipla’s products in Sri Lanka, the Indian firm said.

“The consideration payable for the transaction is $ 14 million,” the Cipla filing said, adding that the proposed acquisition was subject to regulatory approvals.

As part of its global expansion, Cipla has been active in acquisitions.

Last year, it completed the buyout of South African pharma firm Cipla Medpro for INRs. 2,707 crore.

Cipla had also acquired Croatia-based firm Celeris, distributor of its products in that country last December.

Local pharmaceutical industry analysts viewed the Cipla-Citi health deal as a move to maximise strong growth prospects in Sri Lanka as well as Government support to local manufacture of drugs.

Over 70 years old, Cipla’s styles itself as one of the most respected pharmaceutical names in India as well as across more than 170 countries. Its annual turnover is around $ 1.5 billion and has 26,000 employees. It has over 2,000 products, 65 therapeutic categories, over 50 dosage forms. Cipla’s sales out of India account for 63%.

Citihealth is a pharmaceutical importer and distributor for near two decades set up by Col. Jayaratne, a senior marketer and a management professional. It has a work force of 270.

Apart from representing Cipla and gaining popularity in marketing its range of anti-asthmatic products, Citihealth also represents several other pharmaceutical firms from Indian, Bangladesh, Pakistan, and France.

Its tie-up with Serum Institute of India Ltd. saw Citihealth becoming the first Lankan pharmaceutical company to introduce an oral drug for thalassemic patients who otherwise were on painful daily eight-hour drips. Serum, founded in the year 1966, has progressively established as the world’s largest producer of Measles and DTP (Diptheria, Tetanus, Pertussis) group of vaccines, distributed to over 140 countries.

Citihealth also handles veterinary products and fast moving consumer goods brands.
Board of Directors of Citihealth comprises Lt. Col. (Rtd) Chandra Jayaratne – Chairman, Sunethra Jayaratne – Deputy Chairperson, Sanjaya Jayaratne – Managing Director, Dr. Chathurani Jayaratne – Directress and Asoka Senanayake – Director.
www.ft.lk

Guardian Group buys 16% stake in Hayleys MGT for Rs. 282 m

Carson Cumberbatch’s Guardian Investments Group yesterday bought a 16% stake in Hayleys MGT Knitting Mills Plc (MGT) for Rs. 282 million.

MGT saw a total of 31.05 million shares traded for Rs. 387.5 million. Of that volume 22.6 million was done via two crossings at Rs. 12.50 each.

Guardian is believed to have picked up the stake via the crossings whilst the rest had been retail activity.

Analysts noted Guardian’s entry is likely to be investment and trading purpose and not strategic.

Hayleys Plc owns a 78.5% stake in MGT whilst several other Group entity also holds some stakes. Analysts believe institutional and high net worth investors to have been on the selling side.

Deals on MGT accounted for 36% of the day’s turnover of Rs. 1.08 billion at the Colombo stock market yesterday. MGT closed Rs. 1.20 or 10.7% up to Rs. 12.40.

Last week MGT announced a 4 for 11 Rights Issue at Rs. 9.50 per share to raise Rs. 526 million to further improve the company’s financial health.

The company said funds will be utilised to strengthen the company’s financial position by retiring debt. MGT as at 31 March 2014 had Rs. 1.98 billion in interest bearing short term loans, up from Rs. 1.58 billion a year earlier. Net asset per share is Rs. 9.27.

In mid-2012, MGT raised Rs. 914 million via a 2 for one Rights at Rs. 9 per share to use Rs. 850 million to strengthen the Balance Sheet. Balance funds were to be used for an ERP system and energy saving initiatives.

Hayleys Plc holds 78.5% whilst among other shareholders are EPF (2.67%), and MAS Holdings (2%).

Retained loss was Rs. 1.2 billion as the company was impacted by a fraud in 2010/11 financial year. The company suffered a Rs. 873 million loss in FY12 and Rs. 799 million loss in FY11.

In FY14, net loss was Rs. 183 million, down from Rs. 479 million in the previous year. Revenue grew by 39% to Rs. 8 billion in FY14.
www.ft.lk