Sri Lankan stocks hit 1-week high; large-cap shares lead

Feb 20 (Reuters) - Sri Lankan stocks edged up on Friday to hit one-week highs, led by large-cap shares such as Nestle Lanka Plc despite foreign investors exiting some risky assets.

The main stock index gained 0.12 percent, or 8.74 points, to 7,314.91, its highest close since Feb. 13.

Turnover was at 1.1 billion rupees ($8.28 million), less than this year's daily average of 1.45 billion rupees.

"The market will remain stable and investors are awaiting to see a clear direction who will win the next election and they are awaiting to see political stability," a stockbroker said on condition of anonymity.

The parliamentary election is expected to be held after April 23 and the new President Maithripala Sirisena's coalition government is still uncertain if it would contest under the same coalition or separately.

Shares in Nestle Lanka Plc, which on Thursday posted an 11.7 percent increase in its total comprehensive income for the December quarter, rose 2.32 percent.

Foreign investors were net sellers for the third straight session on Friday. They sold net 57.3 million rupees worth of shares on Friday extending the net foreign outflow for the last three straight sessions to 315.1 million rupees.

But they have been net buyers of 1.26 billion rupees worth of shares so far this year. The bourse saw net foreign inflows of 22.07 billion rupees in 2014. 

($1 = 132.9000 Sri Lankan rupees) 

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

Financial sector consolidation deferred till general elections

By Ravi Ladduwahetty

Ceylon Finance Today: The banking and financial sector consolidation which was brought about by the previous government has been deferred till the next Parliamentary elections.

The attention of the government has been dawn to the fact, that the evaluation of the banking and financial sector consolidation process needed time and that was very unlikely to take place within the 100 day programme of the new government, top sources told Ceylon FT.

They also said that the financial sector consolidation needed a longer term plan and that even the NDB Bank-DFCC Bank merger was also ending up as a stalemate.

They also said that special emphasis would also be laid for the troubled banks and finance companies, and Central Bank Governor Arjuna Mahendran had expressed his willingness to meet the depositors of the CIFL.

Earlier, the Ceylon FT reported in its Sunday edition of 25 January that bigwigs in the banking and the finance companies sector were scheduled to meet Deputy Minister of Policy Planning and Economic Affairs Dr. Harsha de Silva and Central Bank Governor Arjuna Mahendran, claiming that they were made to agree to the previous government's banking sector consolidation process under heavy duress.

The need for the bigwigs in the banking sector to meet Dr. de Silva and Cabraal and Mahendran comes in the wake of a reception hosted by the Central Bank and former Governor Ajit Nivard Cabraal, to 'celebrate' the success of the banking consolidation process of the former government.

CEOs allege that the consolidation process was hurriedly implemented even without informing the Colombo Stock Exchange, which also saw the rapid upward movement of the shares of the listed banks and the finance companies.

A finance company CEO, speaking on the basis of anonymity, said that they were summoned to periodic meetings after the Central Bank Road Map 2014, and that they were forced to agree with the mergers. "We did not want to disagree, being fully aware of the consequences of defying the government," he said.

They said that there were only two consolidations which were done by Commercial Bank, which bought Indra Finance and Hatton National Bank which brought 51% of Prime Grameen Bank. The previous government even cancelled the leasing licence of Koshiba Finance of Nittambuwa merely because they did not agree with the consolidation process, he said.

He also said that, the DFCC Bank-NDB Bank merger, which was the biggest in the sector, was still not finalized.
www.ceylontoday.lk

Nestlé Lanka ups 2014 profit by 14% to Rs. 3.8 b

Leading nutrition, health and wellness company Nestlé Lanka PLC said yesterday it has posted a revenue of Rs. 8 billion for Q4 with full year amount of Rs. 32.9 billion, up 6.4% over 2013.

The company posted a profit of Rs. 615 million for Q4 and a profit of Rs. 3.8 billion for the year ending 31 December 2014, an increase of 14.2% from the previous year, supported by efficient management of the portfolio and value chain optimisation.

The Board has approved a second interim dividend of Rs. 28.50 per share on 19 February and has proposed a final dividend of Rs. 28 per share for the year ended 31 December 2014, to be approved at the company’s Annual General Meeting to be held on 12 May.

“Despite prevailing market conditions posing significant challenges in 2014, the company continued to deliver a stable and consistent performance. We invested in enhancing the presence of our brands, and building the capabilities of our people. We continued on our mission to be a leader in nutrition, health and wellness in Sri Lanka by providing our consumers with tasty and balanced food and beverages through innovation and renovation, and creating awareness on the importance of an active lifestyle,” Nestle Lanka Plc Managing Director Shivani Hegde said.

The company continued to enhance the nutritional profile of its products through micronutrient fortification and drove focused communication conveying the importance of a balanced diet and healthy lifestyle, through initiatives like the Nestlé Mobile Wellness Unit, which actively interacted with over 40,000 consumers island-wide. Significantly, Nestlé Lanka was recognised as a leading nutrition, health and wellness company in Sri Lanka by consumers as per ‘The Corporate Brand Equity Monitor’ survey.

Nestlé Lanka also celebrated 30 years of empowering Sri Lankan dairy farmers with the felicitation of 1,200 of its farmers for their outstanding contribution to local dairy development. This coincided with the celebration of the 30-year anniversary of the Nestlé Lanka manufacturing facility in Pannala, Kurunegala.

The company continued its commitment towards local rural development by way of procuring raw material, primarily fresh milk and coconuts for its products from over 23,000 farmers, marking a contribution of over Rs. 5 billion in 2014. 
www.ft.lk

China’s Largest Sri Lanka Investment Fails to Win Tax Breaks

China’s $1.4 billion plan to build a city on reclaimed land near Colombo port faces its first tangible setback since new Sri Lankan President Maithripala Sirisena took power last month.

Lawmakers failed to approve a 25-year tax holiday proposed by the previous administration for the Colombo Port City before a deadline on Tuesday, said Eran Wickramaratne, deputy investment promotion minister. The process must now be restarted if the project is to continue, he said.

“Within three months you have to get it approved in parliament,” Wickramaratne said in an interview on Wednesday. “Three months ended yesterday. They have to talk again.”

Sirisena’s government started an investigation into the project as it looks to increase transparency and rebalance ties away from China. The president this week visited India on his first overseas trip since he surprisingly ended Mahinda Rajapaksa’s decade-long rule in Jan. 8 elections.

China had become Sri Lanka’s largest investor, top government lender and second-biggest trading partner under Rajapaksa, and the Port City is Sri Lanka’s biggest foreign-funded investment.

Although the project will be delayed, it’s unlikely to be killed altogether, according to Bimanee Meepagala, an analyst at NDB Wealth Management Ltd. in Colombo.

“Sri Lanka can’t undermine the magnitude of the project and the sensitivity of the relationship with China,” she said.

Sirisena plans to travel to China in March, about a month before he’s due to call parliamentary polls. His first budget last month included populist measures such as a one-off windfall tax on company profits, and a failure to secure investment could hurt his chances of winning more seats.

Not Transparent

Chinese President Xi Jinping in September inaugurated construction of the Port City, which is being built by a unit of state-controlled China Communications Construction Co. on an area slightly larger than Monaco. Plans include offices, hotels, and shopping centers on 233 hectares (576 acres) of reclaimed land, which the company had said will attract about $13 billion of foreign investment.

Sri Lanka was to own rights to 125 hectares, 20 hectares was to be held by China Communications, and the remaining leased to CHEC Colombo Port City Ltd. for 99 years. Rajapaksa proposed a 25-year tax holiday with main contractor China Harbour Engineering Co. offered an eight-year tax break. Inputs were also to be exempted from import duties and value-added tax.

The project wasn’t transparent and agreements had been signed by Rajapaksa’s government without cabinet approval, Prime Minister Ranil Wickremesinghe said in parliament on Wednesday. A probe is on and a final decision will be taken on the project based on the findings, he said.

‘Three Pairs’

Chiranthi Balapatabendi, public relations manager at CHEC Port City said officials authorized to comment weren’t available due to the Chinese New Year holidays.

Sirisena had pledged to reduce Sri Lanka’s dependence on China during his election campaign. He accused Rajapaksa of amassing wealth for Rajapaksa’s family while leaning more on China to finance large projects as the U.S. and its allies expressed concern over alleged human rights abuses during a 26-year civil war that ended in 2009.

During his Feb. 15-18 India visit, Sirisena signed a deal to receive training for his country’s civilian nuclear program. Officials under Rajapaksa had rankled India by suggesting that Pakistan — whose reactors have mostly been built by Chinese companies — may help Sri Lanka build nuclear power plants.

China welcomes the “constant growth” of relations between Sri Lanka and India, Sri Lanka’s government said on its website this week, citing Chinese Foreign Ministry spokeswoman Hua Chunying. “If the three pairs of relations can promote each other through sound interactions, it will benefit regional peace, stability and development,” Hua said.

Bloomberg