Sri Lanka index hits over 10-wk high; banks, large caps lead

May 12 Sri Lankan shares touched a more than 10-week high on Tuesday led by large caps and banks on hopes of better corporate earnings, while foreign investors exited from risky assets for a seventh straight session amid political uncertainty.

The main stock index closed 0.62 percent higher at 7,258.61, its highest since Feb.27. It has gained 5.2 percent since the central bank cut key rates on April 15, while yields on t-bills have fallen 44-57 basis points since then.

Earnings of 24 listed companies released so far have on average increased 12.4 percent year-on-year in the first quarter, a stockbroker said.

Net foreign outflow from equities stood at 183.7 million rupees ($1.38 million) on Tuesday, extending net outflows to 937.6 million rupees during the past seven straight sessions. Foreign investors, however, have bought a net 2.87 billion rupees worth of shares so far this year.

Turnover stood at 1.08 billion rupees, just above this year's daily average of around 1.06 billion rupees.

Investors are waiting for direction on the political front and cues from earnings, analysts said, adding the market could be dull in the medium term until the perception of political uncertainty is addressed.

Sri Lanka's parliament is expected to debate and pass some key reforms next week and President Maithripala Sirisena has promised to dissolve parliament after that.

Shares of Distilleries Company of Sri Lanka Plc ended 5.36 percent firmer, while Lanka ORIX Leasing Company Plc jumped 7.54 percent.

($1 = 133.5000 Sri Lankan rupees) 

(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Biju Dwarakanath)

Sri Lanka sells 4-year bonds at 8.15-pct

COLOMBO (EconomyNext) - Sri Lanka has sold 5.6 billion rupees of 4 year bonds to yield 8.15 percent, the state debt office said.

The debt office offered 5.0 billion rupees of bonds maturing on 01.07.2019 and received bids for 19.6 billion rupees.

Bids for 6-year bonds maturing on 01.08.2021 were rejected.

“Depositories are the backbone of the securities market” – CDS & CSE Chairman

 During the 17th Annual Cross Training Seminar of the Asia-Pacific Central Securities Depository Group (ACG), currently ongoing in Colombo the importance of Depositories for the functioning of Capital Markets was emphasised. 

“In the global capital market arena, on which we function, the efficient and robust functioning of central securities depositories is fundamental to the efficient functioning of securities markets. In fact it is the backbone of the securities market,” Chairman of the Colombo Stock Exchange (CSE) and Central Depository Systems (Pvt) Ltd (CDS) (a fully owned subsidiary of the CSE) Mr. Vajira Kulatilaka said today. 

“As a key pillar of the Capital market services infrastructure, central depositories are providing more than a supportive role to the global financial market; depositories now use innovative forms of technology to increase efficiency minimize risk and reduce costs in order to support investors and market intermediaries and is responsible for ensuring the safety of customer assets,” he added. 

The ACG Cross Training Seminar is being hosted by the CDS on the 12th and 13th of May in Colombo. This is the first time the CDS is hosting the Cross Training Seminar and the event saw the participation of 95 representatives from depositories across the region, the highest number of participants seen at an ACG event. 

“A Cross Training Seminar of this nature is a good opportunity for Depositories to learn from their regional peers, because most countries have a single depository therefore there is very little opportunity for cross-exposure,” Director General of the Securities and Exchange Commission (SEC) Mr. Vajira Wijegunawardene also spoke at the event. 

The event was attended by Members of the Board of Directors of the CSE; Mr. M.R. Prelis, Mrs. Jeeva Niriella, Mr. Lal Nanayakkara and Mr. Anton Godfrey. 

The ACG Cross Training Seminar is a yearly event hosted by an ACG Member, planned and managed by the host Member and the ACG Task Forces, with the intention of facilitating exchange of information among working level attendees of member institutions. 

In the two-day Conference, the Host Depository and Task Forces will have sessions on pertinent areas of interest. 

Currently, the ACG acts as a regional alliance and its membership structure includes 32 Depositories and Clearing organizations from 23 member countries across Asia. 

CDS obtained membership in the Asia-Pacific Central Securities Depository Group in 1998. The CDS is also a member of the Technical Task Force of the ACG and works closely with the National Securities Depository Ltd. of India, which is the convener of the Technical Task Force. 

Lanka Ashok Leyland posts Rs 331.7 m PAT

Lanka Ashok Leyland (LAL) ended the year with a profit after tax of Rs 331.7mn, a 102% increase from 2013.

The market leader for heavy commercial vehicles in Sri Lanka capped a stellar year with an impressive dividend of Rs 40.00 for financial year 2014. The dividend declared represents a 700% increase over last year’s dividend announcement and reflects the remarkable progress made over the past year.

Lanka Ashok Leyland CEO Umesh Gautam said the automotive sector has seen a bit of volatility over the past few years and our company is no exception. Having steered through some of the stormier waters this 700% increase in the dividend, despite a 102% increase in profit, reflects our sincere appreciation to our shareholders for their unwavering support and trust in us over these years. We consider ourselves very fortunate to have excellent stakeholders and partners who have placed their faith in us and this dividend is our way of giving back to those who continue to stand by us.”

“We take great pride in our relationship with our majority stakeholders (41.8% Government of Sri Lanka and 27.8% Ashok Leyland, India) and we look forward to building on this year’s success”

Gautam outlined an ambitious and exciting expansion plan that he hopes will help taper some of the revenue volatility seen in the commercial vehicle segment over the years. Lanka Ashok Leyland will expand its dealership over the next two years in the South and the East, with the opening of first new location in Embilipitiya which is ready for business.

The company is looking to aggressively compete in the light commercial vehicle segment by increasing sales and distribution in key locations in the interior of the country.
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Commercial Credit to raise Rs 1 b

Commercial Credit and Finance has decided to raise Rs 1 billion via a listed debenture issue.

Accordingly, the company will issue 10,000,000 subordinated, Guaranteed, Redeemable debentures at an issue price of Rs 100 each.

The subscription list of the issue will open on May 21. First Capital Limited is the managers to the issue.
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‘Best performing Fixed Income Unit Trust for second consecutive year in SL’

First Capital Asset Management Limited, Managers of the First Capital Wealth Fund,announced a dividend of Rs. 140 per unit. The First Capital Wealth Fund has been recognized as Sri Lanka’s best performing Fixed Income Unit Trust for 2014 and 2013, as per statistics issued by the Unit Trust Association.

With an annualized yield of 15.48% (as of 31st March 2015) the First Capital Wealth Fund, which invests in debt and government securities, declared dividend representing 95.9% of net profit after tax for 11 months ending 28February 2015.

The First Capital Money Market Fund launched in September 2014 similarly displayed a remarkable performance with an annualized yield of 7.09% (as of 31st March 2015). The fund declared a dividend of Rs. 18.50 per unit. The fund invests in short term fixed income instruments with a maturity for less than a year and paid a dividend representing 95.7% of net profit after tax for six months ended 28 February 2015.

"The successful growth of the unit trust funds under our management is attributed to a tripartite combination of prudent management, an astute assessment of market opportunities and leveraging on interest rate fluctuations," said Dilshan Wirasekara, Chief Executive Officer of First Capital Holdings PLC.

"As a fully-fledged Investment Bank specializing in debt market services and leading non-bank primary dealer in Sri Lanka, we will continue to work closely with our stakeholders to maintain a conducive investment environment and provide competitive returns for our investors. With specialized knowledge and industry expertise garnered through our position and experience in the market, we are confident that the unit trusts managed by First Capital Asset Management Limited will continue to reap the rewards of timely, well-informed investments," concluded Wirasekara. - First Capital Asset Management Limited
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‘Sri Lanka showing low investor participation in stock market’

By Ifham Nizam

Sri Lanka has one of the lowest participation rates of domestic investors in the capital market, although there are some 765,000 CDS accounts here, a renowned chartered financial analyst said.

"The number is around 583,000 if you exclude duplication due to joint accounts. A recent study reveals around 350,000 are plantation worker accounts and another 100,000 are students’ accounts that are dormant. So in fact active trading happens in only about 25,000 CDS accounts, said chartered financial analyst Ravi Abeysuriya who is the Group Chief Officer/ Director Candor Equities.

He said a government policy change is required with regard to building the capital market. "We have to get Sri Lanka into the MSCI Emerging Market Index, which could be a major catalyst to attract foreign investors to our capital market. This can be achieved by listing two large profitable state institutions and establishing a public float of over 20 per cent.

"USD 9.5 trillion in assets are estimated to be benchmarked to MSCI indexes. When Sri Lanka is in the index, MSCI Emerging Market Index tracker funds will be required to invest in Sri Lanka as they need to replicate the index, he said.

Abeysuriya explained what people in Sri Lanka miss out by demonstrating the "The Power of investing." He said Rs.10,000 invested by a risk adverse investor in the NSB savings account in 1985 will be worth only Rs.2,379 in 2015 even after compound interest due to loss of purchasing power from inflation. Whereas, the same Rs.10,000 invested in the ASPI by a risk taker would have given him or her the ability to buy Rs.35,421 worth of goods or services in 2015 after inflation, that is 3.5 times more.

However, he cautioned on the risk of investing without a long term perspective as stock markets "go up" as well as "down" and therefore require the staying power to wait until the markets recover over time.

Abeysuriya also said the potential for a prudent investor who invests in a portfolio of fundamentally sound stocks taking advice from a professional investment advisor who has the client’s interest at heart, will have returns which will be several times more.

Speaking at a seminar titled ‘Stock Market: Regulatory Framework and Investment Challenges’organised by the Ceylon Chamber of Commerce, last Friday, he said the industry had lost investor trust, which he terms largely due to lack of investor confidence and trust in Sri Lanka’s capital market.

He stressed: "To restore investor confidence and trust and attract more long term savers to the capital market we need a paradigm shift in the way our investment advisors treat their clients."

Abeusuriya said in the investor trust study carried out in 2013 and in 2014 it was found the financial services industry is the least trusted.

"I encourage SEC (Security Exchange Commission) or CSE (Colombo Stock Exchange) to carry out a similar market study to find out the level of confidence domestic investor have in our stock market, he added.

He also said that of the financial services industry, asset management was found to be the least trusted, adding asset managers don’t yet have this level of respect and trust from society.

Abeysuriya strongly believes that everyone should become financially literate and make use of the power of investing to transform their lives.

Answering questions on the sidelines of the seminar, he said for most people the capital market is the means to participate as an owner in the growth of the companies that make up the Sri Lankan economy.

He said what makes it powerful is that companies are motivated to grow their businesses over time.

"Stock ownership is the way for individuals to participate in that growth. Of course, investing requires optimism about the future opportunities. It requires investing wisely, taking a reasonable amount of risk and a long term view and most importantly, getting professional help, he added.

He said that pension reform will increase long term saving and "institution capital".

Sri Lanka, he added, is the gateway to India. India will become world’s largest economy and will have the largest population. Foreign investors will continue to surge to India as reforms by Prime Minister Narendra Modi take hold and investors search for growth. (India stock up more than 20 per cent last year)

"The magnitude of the impact depends on the commitment to reform by all stake holders, Abeysuriya added.

CCC secretary general/CEO Mangala Yapa, SEC deputy director general Dhammika Perera and CSE Head of Research Nishantha Hewawitharana also spoke.
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