Another Rs 5.2B foreign exit from govt. securities market

By Paneetha Ameresekere

Ceylon Finance Today: With Rs 5,223 million worth of foreign investments having exited from the government securities market week-on-week, in the week ended Wednesday (29 October) according to statistics, Central Bank of Sri Lanka (CBSL) continued to exert moral suasion on importer (seller) banks, with the exchange rate in interbank spot next trading remaining unchanged at Rs 131 to the US dollar on Friday, market sources told Ceylon FT. Nevertheless, year-on-year (YoY) the exchange rate has weakened by 10 cents, having closed at Rs 130.90 to the dollar in interbank spot trading as at 31 October, 2013, data further showed.

Spot trading is settled in two market days after the date of transaction and in the case of spot next, it's three days.

Moral suasion is imposed on spot by the CBSL at the Rs 130.85 to the dollar price, they said. There however is no moral suasion on the spot next, the sources said.

"But, exporters are holding on to their dollar proceeds, expecting foreigners to continue to exit from the government securities market, with the belief that this 'holding on' would ultimately give them a better price for their dollars in the future," they said.

As a result, seller (exporter) banks are thereby refusing to sell spot at Rs 130.85 with the 'remaining' dollars in their reserves, feeling that the administered price of the dollar, too cheaper a price, they said. Therefore, with 'no trades' being done on spot, seller banks thereby have no option other than to sell their dollars at the spot next price in order to get more rupees, but, at the expense of having to wait for an additional day to get their rupee proceeds from such dollar sales, they said.

However, such exchange controls may but make Government of Sri Lanka's (GoSL's) wish to transform the island into a financial services hub a pipe dream, sources said.

Data further showed that in the last two months Rs 39,134.74 million worth of foreign investments had exited from the government securities market. Foreign investments in government securities have currently come down to Rs 462,284 million.

Foreigners are allowed to invest up to 12.5% in government securities outstanding.

According to latest statistics, government securities outstanding as at Wednesday was Rs 4,024,813 million. Therefore, 12.5% of that number is equivalent to Rs 503,101.63 million. With foreign investments in government securities currently at Rs 462,284 million, this therefore shows that there is space for foreigners to invest up to another Rs 40,817.63 million in government securities outstanding, in absolute terms.

Meanwhile, foreign investments in government securities amounting to a total of Rs 462,284 million as at present, is equivalent to an investment of 11.5% in total government securities outstanding.

This also shows that there is a space of one percentage point yet available for foreign investments in such securities. That is equivalent to Rs 40,817.63 million in absolute terms.

Government securities mean Treasury (T) bills and T bonds.

Sources further said that yields of the longer tenure T bonds fell by around five basis points (bps) at Friday's trading due to local buying interest on thin volumes.

Statistics further showed that CBSL provided an interest free loan of Rs 1,460.88 million to GoSL, by buying Rs 1,460.88 million worth of T bills on Friday. But the danger in such purchases is that it may fuel demand side inflationary pressure on the economy. 

According to GoSL controlled Census and Statistics Department, inflation, as measured by the Colombo Consumers' Price Index, increased by 3.5% on a YoY basis in September. Last month's inflation data was not available at the time of going to press.
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DFCC realizes Rs. 842 mn. capital gain exiting NTB

The DFCC Bank has realized a gross capital gain of Rs. 842 million by selling its 9.92 percent stake in Nations Trust Bank PLC on Friday for a consideration of Rs. 2,172 million.

The bank said in a stock exchange in filing that the cost of the investment was Rs. 1,330 million.

Brokers and analysts said that foreign buyers had taken the 22.9 million shares crossed in about five parcels at a price of Rs. 95 a share with one big parcel accounting for 12 million shares and the balance split into four or five parcels.

NTB closed on the trading floor on Friday at Rs. 93.90, up Rs. 3.90 from the previous close, with few shares outside the crossings transacted.
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Port City land to cost Rs. 8.5 mn. a perch

It is proposed to sell land reclaimed from the sea at the mega Port City on which work began when Chinese President Xi Jinping was here at Rs. 8.5 million a perch, Sri Lanka Ports Authority Chairman Priyath Bandu Wickrema told a meeting of the Colombo Club last week.

"That is the present intention,’’ he said. ``I've already had over 25 inquiries from prospective investors.’’

He gave the price in response to a question at the end of a detailed power point presentation made at the meeting held at the Taj Samudra hotel.

Wickrema who made an extensive presentation of the project, overshooting the 20 minutes allotted, said the first phase is expected to be completed by 2017. Although a 39-month timeframe has been set, they were confident that the work could be completed in 36 months, he said.

Responding to a question on difficulties for foreigners to get resident visas, he indicated that they were already in consultation with the Immigration and Emigration authorities and he was confident that these matters could be sorted out.

He also said that with breakwaters to be built being submerged, unlike over the surface structures to be seen now, safe sea bathing and swimming off the Colombo coast will be possible.

High rise buildings will be at the centre of the development where their will be height restrictions so that the sea view of constructions extending towards the water would not be obstructed.

The luncheon meeting of the Colombo Club where Wickrema made his presentation was packed with some of the country’s leading businessmen and the demand for seating could not be met.

A number of executives from China Harbour Engineering Company undertaking the construction were present at the meeting.
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Singapore shareholder sells entitlement of Acme rights

Clovis Company Limited of Singapore which is the largest single shareholder of Acme Printing and Packaging PLC where a rights issue is pending has renounced the entirety of its rights entitlement to the Central Depository System of the CSE, Acme said in a stock exchange filing.

These rights were subsequently sold in the market on October 30 at prices ranging from between cents 30 to cents 70 per right.

The filing said that Clovis has not sold any of their shares but only sold their rights entitlements.

Acme has floated a one for one rights issue at Rs. 12 per share to infuse cash into the company which needs new equipment and downsizing of the workforce.
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Rs. 5.15 billion takeover of Three Coins by Lion concluded

* Brewing stopped temporarily at Meegoda, brands to be produced at Biyagama

The Rs. 5.15 billion deal under which Lion Brewery (Ceylon) PLC and its fully owned subsidiary, Pearl Springs (Private) Ltd. acquired Millers Brewery Ltd., makers of Three Coins beer was concluded on Thursday, the parties to the transaction announced in separate stock exchange filings.

"We hereby confirm that the disposal process was concluded on Oct. 30, 2014 with the trade marks and the entire shareholding in Millers Brewery Ltd. (MBL) Being transferred to Lion Brewery Ceylon PLC (LBCL) and its subsidiary, Pearl Springs (Private) Ltd. (PSPL) Respectively and the entire purchase consideration of Rs. 5.15 billion being settled by LBCL/PSPL,’’ Cargills (Ceylon) PLC, the seller, said.

Lion said that all liabilities of MBL had been settled by the previous management prior to the conclusion of the transaction.

The buyer further said that with the acquisition of the MBL trademarks, Lion has consolidated MBL’s brand portfolio to its own portfolio and they would soon commence the brewing of Sando Power, Irish Dark, Sando Stout, Three Coins Lager and Grand Blonde at the Lion production facility in Biyagama.

"Meanwhile, pending a detailed evaluation, operations at the MBL brewery in Meegoda will cease temporarily,’’ Lion said.

"The acquisition of MBL afford Lion Brewery the opportunity of taking advantage of supply chain synergies while ensuring that loyal consumers of the MBL portfolio continues to have access to their brands of choice.’’
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Asiri Central de-listed from CSE

Asiri Central Hospitals PLC has been de-listed from the Colombo Stock Exchange with effect from Oct. 30, the CSE announced on Friday.

Asiri Hospitals PLC owned over 99 percent of Asiri Hospitals and procedures to de-list began in March with the company’s board deciding to do so. Minority shareholders were offered Rs. 275 per share and shareholder approval for the de-listing was obtained.
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