Sri Lankan shares retreat from near 4-yr high; Sirisena policies awaited

Jan 12 (Reuters) - Sri Lanka's main stock index fell on Monday after climbing to a near four-year high as investors took profits amid uncertainty around new President Maithripala Sirisena's economic policies.

The main stock index rose 0.9 percent to 7,670.98, its highest since March 2011, before reversing the climb and closing down 0.51 percent, or 39.09 points, at 7,566.70. The index hit its highest close since March 2011 on Friday.

There was some profit-taking and investors were waiting for direction due to the political uncertainty, said Dimantha Mathew, manager research, at First Capital Equities (Pvt) Ltd.

Construction firm Access Engineering fell 9.6 percent. Dealers said there was speculation it may not get lucrative contracts under the new government.

Former President Mahinda Rajapaksa lost his bid for a third term on Friday, ending a decade of rule that critics say had become increasingly authoritarian and marred by nepotism and corruption.

After the election, leader of the pro-business opposition United National Party, Ranil Wickremesinghe, was appointed Prime Minister, though Rajapaksa's coalition still has a majority in parliament. Many of its lawmakers have pledged to back Sirisena.

Sirisena's coalition has promised a 100-day programme to restore democracy and the economy before he dissolves the parliament for a general election after April 23.

Analysts said the political uncertainty over Sirisena's coalition could weigh on the markets until he wins a majority in the 225-member parliament.

The day's turnover was 2.57 billion rupees ($19.6 million), well over last year's daily average of 1.42 billion rupees, stock exchange data showed.

Foreign investors were net buyers of 230.5 million rupees worth of shares on Monday. They bought a net 22.07 billion rupees worth of stocks last year. 

($1 = 131.4500 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Prateek Chatterjee)

Fitch affirms HNB Assurance; assigns rating to HNB GI

Fitch Ratings Lanka has affirmed HNB Assurance PLC's (HNBA) National Insurer Financial Strength Rating and National Long-Term rating at 'A(lka)'. Fitch has also assigned HNBA's subsidiary HNB General Insurance Ltd (HNB GI) a National Insurer Financial Strength Rating and National Long-Term rating of A(lka). All ratings have a Stable Outlook.

The ratings reflect the Sri Lanka-based Insurance group's comfortable capitalisation in terms of regulatory solvency, its prudent policy towards investment and modest market share. The ratings also reflect Fitch's expectation that HNBA will receive distributional synergies from parent, Hatton National Bank PLC (HNB, AA-(lka)/Stable), due to HNBA's importance to the bank in providing additional bancassurance products and HNB's 60% ownership of the insurance group.

HNBA was established in 2001 and operated as a composite insurer until end 2014. The ratings acknowledge the status of HNB GI as a core operating entity of HNBA.

Fitch views the consolidated capital strength of HNBA as strong. At 3Q14, the life regulatory solvency was 2.84X (2013: 2.04x, 2012: 2.28x) and this was 2.67X (2013:3.89x 2012: 3.48x) in non-life, comfortably above the regulatory required level of 1.0x for both life and non-life.
www.island.lk

Dinesh Weerakkody to be CB Governor?

Speculation was rife that top professional Dinesh Weerakkody is likely to be appointed as the Governor of the Central Bank for the 100-day period of the new national Government under President Maithripala Sirisena.

Weerakkody has been a key strategist of the main Opposition UNP for a long period. He was an Advisor to the Prime Minister of Sri Lanka from 2002-2004 and has served in many Cabinet sub-committees and national level committees on Economic Affairs, International Affairs and Labour Management.

He was also the Chairman/CEO of the Employees’ Trust Fund Board under the previous UNP regime. Until last year he served as the Chairman of Commercial Bank Plc whilst at present he serves on the Boards of several listed and unlisted companies.
www.ft.lk

Cargills goes for compulsory offer on Kotmale to buy remaining 2.74% stake

The Cargills (Ceylon) Group has announced a “compulsory” offer to buy the remaining 2.74% stake at large of Kotmale Holdings Plc (KHPLC).

A decision to this effect was made by the Cargills Board last week. The compulsory offer is priced at Rs. 62.50 per KHPLC share. The stock last traded at Rs. 63.

The compulsory offer follows the conclusion of a voluntary offer made in October at Rs. 62.50. During the voluntary offer Cargills secured only responses from shareholders owning around 301,000 shares of below 1%.

As at September 2014, net assets per share at company level was Rs. 9.82, up from Rs. 8.37 a year ago and at group level it was Rs. 29.41, up from Rs. 26 in November 2013.

As of end 2014, the Cargills Group held 97.26% stake, up from 94.07% as at end September.

Cargills’ and related parties’ stake comprises Cargills Quality Foods (94.07%), Cargills (Ceylon) Plc and Cargills Quality Dairies Ltd.

As at 31 March 2014, KHL had 1, 372 shareholders comprising 1,334 individuals holding 4.71% and 38 institutions owning 95.26% stake. Individuals amounting to 1,126 held between 1 and 1,000 shares or collectively 1% stake and a further 215 individuals held 2.25% with shares amounting to 1,001 and 10,000.

Cargills said that it will deposit the aggregate consideration for the outstanding shareholding of KHPLC with company secretaries which will forward such consideration due to all remaining shareholders of shares acquired by CCPLC.

Cargills will merge the operations of KHPLC with Cargills Quality Dairies Ltd., the wholly-owned subsidiary and create a unified entity focusing on carrying out the dairy operations of the group.
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