Sri Lankan shares little changed amid political concerns

May 25 Sri Lankan shares were little changed on Monday as investors awaited clarity on the political front and the timing of a parliamentary election as concerns over political stability weighed on sentiment, stockbrokers said.

The main stock index ended down 0.05 percent at 7,284.76.

"There was some profit-taking in those counters which went up last week," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd. "Turnover is low as investors are awaiting the announcement of the parliamentary election."

Analysts said a new stable government after the parliament election with some strong economic policy measures would boost confidence.

Turnover was 763.3 million rupees ($5.71 million), below this year's daily average of about 1.13 billion rupees.

Foreign investors were net buyers on Monday, ending three straight sessions of outflows. They bought 77.5 million rupees worth of shares on Monday, extending the year-to-date net foreign inflow to 5.94 billion rupees.

Shares in biggest listed lender Commercial Bank of Ceylon Plc fell 2.02 percent, while shares in Distillers Sri Lanka Plc fell 3.11 percent.

Analysts expect banking and financial shares to gain due to rising private sector credit growth, which grew 13.9 percent on-year in March from 12.6 percent in February.

Political uncertainty due to the Prime Minister Ranil Wickremesinghe-led UNP not having a parliament majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

The index has gained 5.6 percent since the rate cut. 

($1 = 133.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Brand new SEC act in 2016

By Ishara Gamage

Ceylon Finance Today: Sri Lanka will introduce a totally new Securities and Exchange Commission (SEC) Act before the end of 2016, SEC Chairman Thilak Karunarathne told Ceylon FT yesterday.

This will totally replace the earlier amendments, which were scheduled to be incorporated in the SEC Act some years ago. "I have three major tasks at the moment. 

Firstly we have to replace our existing act to broad base our regulatory scope. Secondly, we are on the process of establishing a steering cooperation system to mitigate our market's systematic risks, at present, which is poorest in the region. We also have to expedite our market demutualization process, as well, which we hope to finish in 2016, he said. The SEC has also appointed two of its commission members to oversee the new SEC law amendments.

They are experts in Corporate Law and Securities Law, Karunaratne said.
Presently, we are studying the Securities and Exchange Commission Acts of other countries and we hope that the SEC staff could handle these amendments, he said.

The SEC has already appointed the Singapore based BT Consultancy to establish the process of establishing a steering cooperation system.
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Fuel pricing formula before Cabinet this week

By Ishara Gamage

Ceylon Finance Today: Minister of Power and Energy Champika Ranawaka will submit a special cabinet paper this week to re-introduce a cost reflective transparent energy pricing formula, based on international market prices.

Secretary to the Minister of Power and Energy Dr Suren Batagoda, while confirming that the Cabinet paper would be presented this week by the Minister, told the Ceylon FT that the new formula would benefit both the consumer and the utility, he said.

According to him, the accumulated and unrecovered losses of the Ceylon Petroleum Corporation over the last ten years, was around Rs. 200 billion.

Generally, the CPC's annual losses were around 70-80 billion. But now we are somehow managing those losses. So far this year, CPC's loss was only Rs. 4 billion from January till May 2015, he said.

With this proposed formula, consumers would be privy to the breakdown of various cost components such as cost of the product in the international market, freight and insurance costs, government taxes and marketing margins, this source said.

However, Ministry sources also revealed that there was some uncertainty within the government to get the approval of this Cabinet paper soon in the light of both Prime Minister Ranil Wickremesinghe and Minister Ranawaka both denying that there was to be an imminent price increase with the Parliamentary elections round the corner.

We are so close to a parliamentary election and during this transit period the scope of getting approval for this cabinet paper was very much limited, the sources said.
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PABC submits restructuring plan to CB

By Ishara Gamage

Ceylon Finance Today: Pan Asia Bank (PABC) has submitted its restructuring plan to regulators to request approval and the bank is also actively preparing for further reform and further capital injection, the bank and Central Bank sources confirmed to Ceylon FT .

Our plan is already with the Central bank, that's all we can say at the moment, the PABC CEO Dimantha Seneviratne told Ceylon FT.

Earlier, the Central Bank proposed that PABC merges with Sampath Bank under the previous government's Financial Sector Consolidation Process, but, Dhammika Perera related parties declined to respond to the proposal.

According to Central bank sources, the bank plans to fulfil their capital requirement with its natural growth and future profitability.

"They need an extra capital. They hope that they can fulfil that extra amount with existing shareholders, CB sources said.

Central Bank already restricted its major shareholder Dhammika Perera's voting rights up to 10%, even though he is having 29.99 % of voting shares.

Last Friday, Fitch Ratings Lanka has revised Sri Lanka-based Pan Asia Banking Corporation PLC's (PABC) Outlook to Negative from Stable.

Fitch sees a high risk that PABC will not meet the Central Bank of Sri Lanka's .minimum Tier 1 capital target of Rs 10 billion for licensed commercial banks by 1 January 2016. PABC's Tier 1 capital unadjusted for deductions stood at Rs 4.5 billion at end-March 2015.
The PABC is also expecting favourable response from central bank to fulfill that Tier 1 capital deadline targets, the sources said.

"Fitch will closely monitor how PABC positions itself to meet this requirement. The bank's Fitch core capital ratio declined to 8.6% as at end-1Q15 from 9.5% at end-2014 and 10.1% at end-2013." The Fitch report said.

PABC's asset quality remains significantly weaker than the industry average, with a reported gross non-performing loan ratio of 6.4% at end-1Q15 after a slight improvement to 5.7% at end-2014 from 8% at end-2013 as a result of lower exposure to pawning. Fitch is of the view that the bank's aggressive loan growth with greater exposure to retail and SME customer segments, which are more susceptible to economic conditions, could exert pressure on its asset quality, the report raveled.

"PABC's rating would remain at the current level if it is able to significantly and sustainably improve its capitalization, mostly likely through a timely capital infusion and slower growth in its loan book."

Failure to reverse the trend of capital erosion by end-2015 and to materially enhance its loss absorption buffers would lead to a downgrade. Fitch said. 

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Asian Alliance Insurance to subdivide shares

That the Board of Directors of Asian Alliance Insurance PLC have resolved, subject to shareholder approval, at a general meeting and any other regulatory approvals (if any) to subdivide its ordinary shares in the ration of One (01) existing ordinary share into Ten (10) subdivided ordinary shares so that the existing thirty seven million five hundred thousand (37,500,000) shares will be subdivided into three hundred seventy five million (375,000,000) new ordinary shares, there being no change to the stated capital of the company.

Article 62 of the Articles of Association of the Company specifically states that 'The company may, by ordinary resolution, sub-divide its shares.'

The increase in the number of ordinary shares by way of subdivision is subject to shareholder approval at a general meeting of the company.
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