Sri Lankan shares close at more than 1-wk high on bargain hunting

(Reuters) - Sri Lankan shares rose for a third straight session on Thursday, marking their highest close in more than a week on bargain-hunting in beaten-down stocks, after the index posted its biggest monthly drop since October 2012 in March.

The index ended up 0.46 percent, or 32.06 points, at 6,948.14 on Thursday, its highest close since March 25. It has gained 2.44 percent in the past three sessions through Thursday.

"Yesterday's momentum continued in moderate turnover levels. We have seen some bargain hunting also coming into the market," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

The main stock index lost 6.6 percent last month as investors offloaded their holdings to settle margin trading amid concerns about political stability and a rise in interest rates.

The market's 14-day Relative Strength Index (RSI) had fallen below 30 on March 30, Thomson Reuters data showed. A level of 30 or lower indicates the market is oversold. On Thursday, it rose to 39.977 from Wednesday's 36.148.

Analysts expect trading to stay thin through mid-April ahead of a long traditional Sinhala-Tamil New Year holiday and amid political uncertainty.

Access Engineering rose for a third session and closed higher 7.40 percent. The infrastructure company had lost 26.61 percent though Monday after the new government cancelled an $85-million airport runway project awarded by the previous government on March 19.

Shares in DFCC bank Plc rose 1.71 percent.

The day's turnover was 729 million rupees ($5.49 million), more than half of this year's daily average of 1.17 billion rupees.

Both stock and currency markets are closed on Friday for a Buddhist and Catholic religious holiday. Normal trading will resume on Monday. 

($1 = 132.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Cairn pulls out of Sri Lanka gas field as prices slump

COLOMBO (EconomyNext) - Cairn India has withdrawn from Mannar Basin natural gas exploration following the global petroleum price slump, and Sri Lanka is to look for other oil companies to drill deposits found by the firm.

Cairn made known their stance on the Mannar Basin gas during talks with the government in Colombo last month, industry sources said.

"Cairn had indicated they are pulling back from exploration worldwide and want to focus on enhancing oil production from their field in Rajasthan, India," an industry source said.

"Because of the current pressure the oil industry is under, Mannar Basin gas production is not a priority for them."

Oil prices have slumped in recent months prompting oil and gas multi nationals to scale back exploration efforts and postpone investments.

The industry sources said the government was still keen on commercialising the natural gas deposits found by Cairn and had in fact included it in the new 10-year national energy plan of the Ministry of Power and Energy.

"But for us it's a priority and the Sri Lankan government is exploring ways to make that happen," an industry source said.

The government is holding talks with other oil companies to produce gas from the Mannar Basin.

Cairn India itself has offered to help the government find another producer.

In this case it will be able to recover the money it has spent so far on exploration. If not that spending will likely be considered a write-off by the company.

Renuka Organics invests in Kandy Plantations

Renuka Organics Private Limited, a subsidiary of Renuka Agri Foods PLC has subscribed to 9,899,985 shares at Rs. 20 each of Kandy Plantations Limited on 31 March 2015.

The value of the shares is Rs. 197,999,700 which is equivalent to 93.6 per cent issued shares of Kandy Plantations Limited.

Renuka Organics Private Limited has also invested in 1,600,000 issued shares in Renuka Consumer Foods Ltd. at Rs. 206 per share.
www.adaderana.lk

Colombo rubber prices hit lowest levels since 2009

Price floor gives relief only to smallholders By Chandeepa Wettasinghe Rubber prices at the Colombo auction have hit the lowest levels since 2009, and appears to continue to slip for the foreseeable future, while production may fall, having already reduced to the lowest since 2004, heralding a dark age for the industry. 

“Today I bought a batch of RSS1 for Rs.212. The prices are the lowest since July 2009 and the national production has fallen to 98,514 tonnes in 2014,” Colombo Rubber Traders Association Chairman M. S. Rahim told Mirror Business. 

The contributing factors to the price drop were the oversupply by the top producing countries leading to imports into Sri Lanka, and the fall in synthetic rubber prices with the oil glut. Forbes & Walkers Commodity Brokers Director-Rubber Damitha Perera said that the prices are now starting to bottom out. 

“We are now starting to level with the world prices, though in some countries it’s still lower,” he said. 

For the rest of the year, Singapore rubber futures showed a kilogramme at around US$1.43 (Rs. 192.53), while Tokyo futures stood at around 206 Yen (Rs. 232). To counter the falling prices, both the previous and the new regime have offered minimum prices for a kilogramme of rubber. 

Former President Mahinda Rajapaksa had offered Rs.300 per kilogramme in the November Budget, with votes from rubber growing areas favouring him, while during the Interim Budget, Finance Minister Ravi Karunanayake offered a minimum price of Rs.350 for RSS1 and RSS2, and Rs. 300 for RSS3 and RSS4. However, the state is now saying that only smallholders will be reaping the benefit. 

Rahim said that smallholders only produce about 1 percent of the RSS1 supply. “They have created utter confusion. Putting prices like this is bad. Exporters and manufacturers don’t really know any smallholders,” he said. 

There are 127,000 smallholders operating in 79,000 hectares of the total 133,000 hecatares in cultivation. Rahim said that 30 percent of the smallholder trees are over 25 years old, being extremely unproductive, while most individuals own areas less than 1 acre. In comparison, the estates which have been producing the highest quality rubber, in addition to tea, have been cumulatively losing around Rs. 2 billion a year. 

Meanwhile, Perera said that the quantity reaching the auction has been low in the past 2 months. “The growers are keeping their stock, thinking that the government will pay Rs.350. The mechanism was not announced till 2 weeks ago, so people kept them. But before the New Year they will have to cash in,” he said. 

Smallholders are supposed to sell their produce at the low prices and show the receipt to the Rubber Development Department and claim the difference. 

“But half the people won’t claim it. They cultivate half an acre in far places, and they don’t like to fill forms. They won’t come to Colombo to claim it,” Perera said. 

Plantation Industries Minister Lakshman Kiriella said that the programme has been implemented with Rs. 3 billion being allocated by the Treasury, contrary to the Rs. 3.6 billion stipulated in the Interim Budget. Perera also said that the growers in Sri Lanka are now starting to follow the trends of their peers in Vietnam and Thailand. “They’re finding it hard with the world prices. They’re cutting their trees and selling for income till they convert into dragon fruit or oil palm or find something else,” he said. 

He projected that production would fall by a further 10-15 percent this year, while prices may start to pick up in mid-2016. 

Recently, NDB Securities (Pvt) Ltd. too gave the rubber industry an overall negative long-term outlook. 

According to government statistics, rubber production had been booming till 2011, when it hit 158,000 tonnes. Then it continued to fall each year to 152,000 tonnes in 2012, 130,000 tonnes in 2013 to the 98,000 tonnes last year. However, Rahim showed some skepticism regarding the higher production statistics in the recent years.
www.dailymirror.lk/

JKH Waterfront Project to continue

Hiran H. Senewiratne

John Keells Holdings (JKH) will continue the Waterfront Properties project as planned despite the new government's amendment to restrict the ability to rent space for gaming activities, JKH Chairman Susantha Ratnayake said.

"The project is progressing well and it has only released out the space reserved for the casino parlour under new government's ruling,"Ratnayake told the Daily News business.

Prime Minister Ranil Wickremesinghe announced in Parliament that the agreements entered into with Waterfront Properties (Private) Limited under the Strategic Development Act will be amended to restrict the ability to rent space for gaming activities.

Ratnayake said these proposed amendments will not constrain project and will be completed on schedule in 2018. "Whilst the proposed amendment will constrain the ability to command premium rental on this component of the project, the multi-faceted nature of this development gives your board the confidence that the project will still be viable given its diverse portfolio of revenue streams and iconic design which we believe will transform the landscape of Colombo," JKH said in a statement.

The conglomerate said the overall brand architecture for the "Waterfront Project" has now been finalized and the project will be branded as "Cinnamon Life". He said that demand for both the residential and commercial spaces continues to remain. The government banned the setting up of new casinos and other gaming facilities in projects that come under the Strategic Development Act.
www.dailynews.lk

EPF brought to heel!

By Ravi Ladduwahetty

Ceylon Finance Today: The government will soon ban the Employees Provident Fund from investing in listed banks and finance companies. "The government, through the Central Bank will bring in new guidelines where EPF Funds will be prohibited from investing in Colombo Stock Exchange listed banks and financial institutions, Deputy Minister of Policy Planning and Economic Affairs Dr. Harsha de Silva told Ceylon FT yesterday.

He was responding to a question from this newspaper whether the EPF Funds would be continued to be invested in the Colombo Stock Exchange, a practice that Dr. de Silva and the UNP was so vociferously critical of, while in the Opposition.

He explained that the Central Bank always had regulations preventing EPF investments in listed banks and finance companies due to the conflicts of interests, but they were changed by former Governor Ajit Nivard Cabraal.

New regulations would be brought where EPF Funds would not be invested not only in listed banks and finance companies, but also in non- blue chip stocks as well.

"We will be making a full study of all these implications and this would be done soon after we give the appropriate guidelines soon, he said.

Responding to a question about what he thinks of the alacrity of the systems change with the Central Bank itself having a serious crisis with Governor Arjuna Mahendran also under leave due to the Treasury Bond inquiry, he said that the inquiry and the amendments to the EPF investments would go simultaneously.
www.ceylontoday.lk

Bourse slowdown due to ‘unpulled’policy levers

Trading activities of the Colombo Stock Exchange (CSE) have slowed down as policy levers that stimulate market activity are yet to be pulled, The Island Financial Review learnt yesterday.

Vajira Kulatilaka, chairman of the Board of Directors of the Colombo Stock Exchange (CSE) told the media, "As you can see, the market performance is not up to desirable levels as there are policy uncertainties which inhibit the market. This is understandable as the country is still in an ‘election mode’. We expect that things will get back on the right track once the general election is over and the policy regime is made clear."

Kulatilaka said so after the market opening ceremony held on the Trading Floor of the Colombo Stock Exchange where John Keells Holdings PLC., as the company with the highest market capitalization was invited to ring the bell and signal the start of the trading day.

The ceremony begins with the tradition of having the opening bell rung by companies within the S&P20, on the first day of trading each month.

It was attended by JKH chairman Susantha Ratnayake, Board Directors Ajith Gunawardene, Ronnie Peiris, Krishan Balendra and CSE officials, including newly appointed director Anton Godfrey.

Speaking further Kulatilaka said, "Even though the policy goal is yet to be established, a strategy for further improving the efficiency of the CSE is in progress. For instance, we’re going to have a Central Counterparty Clearing system in place. This will be completed between 18-24 months. It will create a process by which financial transactions in equities are cleared by a single (central) counterparty. This will reduce the cycle time for completing the transactions.

"The CSE would like to have a continued productive relationship with our corporate entities. The JKH has helped the CSE in many ways. Their support given to us during past Road Shows was tremendous and valuable. While this facilitates its growth plans via the CSE, it has always maintained a good relationship with their investors in good times and bad times. That’s a useful lesson we can all learn from.We look forward to JKH's support in our future Road Shows as well.

"The CSE will see a lot of positive changes in the next two years which will elevate it to be world-class, Kulatilaka said.

First Capital Research Manager Dimantha Mathew when contacted by The Island Financial Review via telephone said,"Overall, company earnings and profits have shown good results which indicate a positive outlook. But as there are political uncertainties which obscure the fiscal policy tools, everybody is adopting a ‘wait and see’ approach and this has slowed down trade activity." www.island.lk