Sri Lanka bourse at 33-month high on low rates

(Reuters) - Sri Lankan stocks hit 33-month highs on Tuesday, led by diversified shares such as Carson Cumberbatch Plc and John Keells Holdings Plc a day after the central bank left policy rates steady at multi-year low.

Continued foreign buying also boosted sentiment.

The central bank kept policy rates steady at multi-year lows for a sixth straight month, as expected, despite private sector credit growth slowing to a 4-1/2-year low.

The main stock index rose 0.43 percent, or 28.76 points, to 6,727.79, its highest close since Oct. 3, 2011.

The index is in overbought region since July 3 as it has gained 5.47 percent so far this month, Thomson Reuters data showed.

"There can be profit-taking here and there, but the market will continue to gain with lowinterest rates and continued foreign buying. Investors are awaiting to see how the foreigners are reacting (in an overbought situation)," said a stockbroker asking not to be named.

Turnover was 2.19 billion rupees ($16.82 million), twice this year's daily average of around 1.09 billion rupees. Foreign investors accounted for 45.7 percent of the day's turnover.

Foreign investors were net buyers of 48.6 million rupees worth of shares on Tuesday, extending net foreign inflows in stocks to 9.46 billion rupees so far this year.

Tuesday's gains were led by Carson Cumberbatch, which rose 7.14 percent to 450 rupees, and Bukit Darah Plc, which gained 4.60 percent to 674.7 rupees.

Shares in conglomerate John Keells Holdings gained 1.29 percent to close at 243.4 rupees.

Lower interest rates have prompted local investors to buy shares and shift their savings from unattractive fixed assets, analysts said, as yields on treasury bills edged down further at a weekly auction on Wednesday.

Analysts said foreigners have been buying risky assets because they see value in them, while falling yields in fixed assets gradually prompt local investors to shift to equities.

The market has been on a rising trend since late February due to continued foreign buying and lower interest rates.

($1 = 130.1800 Sri Lankan Rupees)

(Reporting by Ranga Sirilaland Shihar Aneez; Editing by Anand Basu)

Sri Lanka shares close up 0.4-pct

July 15, 2014 (LBO) - Sri Lanka's stocks closed 0.43 percent higher with diversified stocks gaining despite strong foreign buying and selling, brokers said.

The Colombo benchmark All Share Price Index closed 28.76 points higher at 6,727.79, up 0.43 percent. The S&P SL20 closed 29.03 points higher at 3,750.26, up 0.78 percent.

Turnover was 2.19 billion rupees, up from 597.19 million rupees a day earlier with 107 stocks closed positive against 87 negative.

Distilleries closed 80 cents higher at 205.00 rupees with two off-market transactions of 816.00 million rupees changing hands at 204.00 rupees per share contributing 37 percent of the turnover.

The aggregate value of all off-the-floor deals represented 56 percent of the turnover.

PC Pharma closed 30 cents higher at 3.10 rupees and PCH Holdings closed 20 cents higher at 3.80 rupees, attracting most number of trades during the day.

Foreign investors bought 1.00 billion rupees worth shares while selling 952.31 million rupees worth shares.

Carson Cumberbatch closed 30.00 rupees higher at 450.00 rupees and Bukit Darah closed 29.70 rupees higher at 674.70 rupees, contributing most to the index gain.

Nestle Lanka closed 18.60 rupees higher at 2,090.00 rupees and John Keells Holdings closed 2.10 rupees higher at 242.40 rupees.

JKH’s W0022 warrants closed 30 cents higher at 64.20 rupees and its W0023 warrants closed 80 cents higher at 74.70 rupees.

Lion Brewery Ceylon closed 32.10 rupees lower at 652.10 rupees and Ceylon Tobacco Company closed 5.00 rupees lower at 1,102.30 rupees.

Jegatheesan Durairatnam has been appointed as the new managing director and chief executive officer of the Commercial Bank, the company said in a stock exchange filing.

CBSL Press Release - Monetary Policy Review – July 2014

The low inflation environment has continued, with year-on-year inflation remaining benign in June 2014 recording its lowest level since February 2012, while the annual average inflation has trended downwards. Headline inflation (y-o-y) for June 2014 recorded 2.8 per cent from 3.2 per cent in the previous month, while core inflation remained low at 3.5 per cent in June, although marginally higher than 3.3 per cent in May 2014. Prices of some items in the food category increased, but the base effect and the decline in non-food prices have contributed to the low inflation. Looking ahead, year-on-year inflation is expected to remain comfortably within mid-single digit levels during the remainder of the year in spite of weather related variations in agricultural produce.

In the external sector, the trade deficit has contracted for the eighth consecutive month in May 2014 led by a contraction in expenditure on imports while an increase in earnings from exports was observed mainly as a result of higher industrial and agricultural exports. Inflows from workers’ remittances and earnings from tourism have continued to grow. In the meantime, increased foreign inflows, on a net basis, were recorded due to investments in Government securities and inflows to the Colombo Stock Exchange and the private sector. Given the substantial foreign inflows, the Central Bank has absorbed around US dollars 735 million from the domestic foreign exchange market by 10 July 2014. Gross Official Reserves as at end May 2014 remained strong at US dollars 8.8 billion, equivalent to 5.9 months of imports.

Broad money (M2b) recorded a y-o-y growth of 13 per cent in May 2014. The improvement in net foreign assets (NFA) of the banking system largely contributed to the growth of broad money supply during the month. Indicating a positive trend, net credit to the government (NCG) contracted by around Rs. 11.5 billion during the month, while credit to public corporations also recorded a marginal decrease.

Nevertheless, lower credit disbursements to the private sector by commercial banks along with the decline in pawning advances resulted in a deceleration of the growth of private sector credit by the banking sector to 2.2 per cent (y-o-y) in May 2014. As markets remained sufficiently liquid, the continued moderation of growth of credit to the private sector is deemed temporary in view of gradually adjusting bank lending rates. At the same time, given the continued low inflation environment, the Central Bank would continue to encourage the banks to utilise the available space to reduce market lending rates further while tightening their spreads to provide further stimulus to the private sector to demand credit from the banks. Further, in support of credit granted on gold backed loans, the Central Bank introduced a new credit guarantee scheme for pawning advances in June 2014 for Licensed Commercial Banks and Licensed Specialised Banks engaged in pawning activities, to provide enhanced levels of credit to their customers. This scheme would assist farmers, small business owners and the SME sector entrepreneurs who use pawning advances for their economic and business activities.

Meanwhile, the Central Bank has also noted with satisfaction, the recent steps adopted by several bank and non-bank financial institutions supervised by the Central Bank, to introduce a number of investment instruments providing long term benefits aimed at senior citizens who rely on interest income. Such innovative financial products and schemes would provide the essential comfort to this segment of the population in a sustained low inflation environment. At the meeting held on 11th July 2014, the Monetary Board also noted the ongoing downward adjustments in market lending rates, which would result in the expected benefits of low cost of finance being fully transmitted to productive sectors of the economy.

In the above background, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at their current levels of 6.50 per cent and 8.00 per cent, respectively.

The date for the release of the next regular statement on monetary policy would be announced in due course. http://www.cbsl.gov.lk/pics_n_docs/latest_news/press_20140714.pdf

Room for indices to decline by 100 points - Sources

By Paneetha Ameresekere

Ceylon FT: Market turnover slipped by 70.1% yesterday compared to the previous week's daily average, with market sources telling Ceylon FT that simultaneous with poor turnover, indices gaining ground yesterday however was abnormal, saying that there is space for indices to come down by 100 points.

"Indices making gains yesterday was not good, only when it comes down can it go up," they said.

On a turnover of Rs 597.2 million, the ASPI gained by 0.56% to 6,699.03 points; while the S&P SL 20 Index increased by 0.35% to 3,721.23 points yesterday, over their closings the previous market day, Friday, 11 July.

In the previous week, daily average turnover was Rs 2,000 million.

The market yesterday recorded a pyrrhic net foreign inflow (NFI) of Rs 28.3 million led by Anilana Hotels, taking NFIs in the year to date to Rs 9.694 billion, from the previous day's figure of Rs 9.666 billion.

On a day largely dominated by traders (that is, those who don't have the holding power to hang on to their purchases and generally dispose of such at the first given opportunity and who generally the capacity to invest in only low value stocks), yesterday's turnover was given a boost by Com Bank, the market's fourth largest capitalized stock with Rs 43.4 million on a share volume of 297,241. Com Bank closed, down 0.14% over its previous day's close at Rs 146.10 a share.

The second largest contributor to yesterday's turnover was JKH with Rs 28.5 million on a share volume of 118,693. JKH closed at Rs 240.30 a share, up 0.12% over its previous day's close.

As the value of market indices is directly linked to market capitalization (market cap), when the share value of a stock increases, its market cap also increases. Stocks such as JKH and Com Bank which have large market caps, have a greater weightage in regard to the movement of market indices.

In this context, yesterday, the market's second and third largest capitalized stocks, namely CTC and Nestlé also saw their market shares gain in value, the former on a low turnover figure and the latter on both a low turnover and share volume, thereby giving a thrust to market indices.

CTC, on a Rs 3.7 million turnover saw its share value increase by 0.51% to Rs 1,107.30 a share, while Nestlé, on a Rs 1 million turnover, saw its share price gain by 0.28% to Rs 2,071.40 a share. CTC saw 3,330 shares traded, while in the case of Nestlé it was a miserly 499 shares.

CTC's gains come in the backdrop of the Supreme Court giving an adverse ruling to the company, asking it to display graphic warnings on its packs from next year, of the dangers of smoking.

Yesterday saw 123 gainers and 74 stock market losers of listed companies.
www.ceylontoday.lk

Global apparel label and packaging giant to set up joint venture with Printcare under BOI

Royal Pac Printcare Lanka (Private) Limited has signed an agreement with the Board of Investment (BOI) to establish an operation for the manufacture of apparel labels and packaging material for the apparel industry of Sri Lanka.

r-pac International Holding Co., the foreign investor in the new venture, is a company based in New York, USA, and is one of the largest label and packaging material suppliers to the global apparel industry. It currently has operations in over 25 worldwide locations including the Americas, Europe, Middle East and Asia, and currently enjoys an exceptionally large retailer contact base with particular access to the US market. With worldwide accreditation, r-pac International has also been experiencing continuous and steady growth in South Asian markets such as Bangladesh and India.

The company has a highly advanced manufacturing technology process including significant technological advances in RFID technology which is increasingly deployed in apparel packaging and its supply chain. These attributes coupled with the company’s innovative approach and intense focus on customer service has made it a preferred and leading supplier of apparel labels to the global apparel industry.

The local partner, Printcare Packaging Pvt Ltd, a fully-owned subsidiary of Printcare PLC, one of the largest and most sophisticated printing operations in Sri Lanka, is a leading provider of innovative printing and packaging services to export industries in Sri Lanka.

Pradeep Sugathadasa, Director, Royal Pac Printcare, said that this collaboration between the two majors is a great opportunity to add value to the apparel industry. "The new joint venture is a timely investment and will significantly contribute to the Sri Lankan economy, while enhancing the competitiveness and flexibility of the apparel sector by making available a wide variety of apparel labels and packaging products". He also added that, "The locally produced apparel labels and packaging material will be made available to the apparel sector at competitive prices and faster lead times." The new venture will enable local apparel manufacturers to reduce their reliance upon imported labels and packaging products, while generating significant foreign exchange savings. The joint venture will also greatly enhance the opportunity for indirect exports, resulting in further corresponding foreign exchange inflows into the country.

The apparel industry in Sri Lanka accounts for over 40% of exports and is therefore the leading export sector contributor to the country’s economic growth. The current annual value of this industry is estimated at USD 4 billion, and the industry is projected to achieve further significant growth in the next few years due to various changing factors in the global apparel industry. Sri Lanka has a strong backward integration in the industry, geographic location and the concurrent economic benefits of market access and an advanced manufacturing base which facilitates better product development and penetrative marketing capability. The prevalent labour standards and compliance with ethical requirements of the industry are also deemed as factors influencing the projected growth of the industry.
-BOI
www.island.lk

Adam Investments gets further Court orders over PCHH

Adam Investments Ltd. said yesterday it has got further Court orders concerning PCH Holdings, which is under takeover by the former.

In a filing to the CSE, Adam Investments said it has received the following interim orders from Commercial High Court (Case no. HC Civil 23/2014/CO) on 11 July: Interim order restraining the sale, transfer of shares of Bieco Link Carbons Ltd. to MMD Ventures Lanka Ltd. from PCH Holdings Plc; restraining MMD Ventures Lanka Ltd. from taking possession, removal of assets or alienating assets of Bieco Link Carbons Ltd.; interim order restraining Global Corporate Solutions Ltd. of 3rd Floor, No. 451, Galle Road, Colombo 3 acting as the company secretary of PCH Holdings Plc and Bieco Link Carbons Ltd.; and appointing PWC Corporate Secretarial Services Ltd. as the company secretary of PCH Holdings Plc and Bieco Link Carbons Ltd. until holding an EGM of both
companies.

These orders were issued in addition to the orders already issued by the Commercial High Court on 4 July, which were: Restraining the present directors from alienating, transferring of assets of PCH Holdings Plc and Bieco Link Carbons Ltd.; appointment of two Directors, Chaminda Dayan Banduthilake and Dharshana Padmal Galabodage to the Board of Directors of PCH Holdings Plc and Bieco Link Carbons Ltd.; and appointing Kay-Jay Group as the independent security form to secure the Bieco Link Carbons Ltd. factory premises in Giriulla.
www.ft.lk