Sri Lankan shares end at more-than-5-month high

Sri Lankan shares ended at their highest in more than five months on Thursday, as investors picked up risky assets on expectations of strong corporate earnings and political stability after the Aug. 17 parliamentary polls.

The main stock index ended up 0.25 percent at 7,332.05, its highest since Feb. 13.

Turnover was at 1.78 billion rupees ($13.33 million), more than this year's daily average of 1.09 billion rupees.

"The market ended the holiday-shortened week on a positive note with local investors topping the turnover charts. Institutional and high net worth activity was seen," TKS Securities said in a note to investors.

Gains were led by large-caps. Ceylon Tobacco Company Plc rose 0.98 percent after it reported a 16.6 percent rise in net profit for April-June, while Ceylon Cold Stores Plc gained 14.10 percent and Nestle Lanka Plc rose 0.53 percent.

Foreign investors, who have bought a net 955.9 million rupees worth of shares so far this year, were net sellers of 444.8 million rupees on Thursday.

Analysts expect local companies to post strong results for the April-June quarter.

Expectations of political stability after the Aug. 17 parliament elections also helped sentiment, they said.

Markets will be closed on Friday for a special Buddhist religious holiday. 

($1 = 133.5000 Sri Lankan rupees) 

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

NTB Bank posts Rs 1.25b PAT in first half

The Nations Trust Bank (NTB) closed the first six months ending June 30, 2015 with a post-tax profit of Rs.1,257 mn a growth of 9% over the corresponding period.

The results for the quarter were significantly better with post tax profits recording a commendable growth of 26%. Operating margins improved during the first six months as core revenue recorded a faster rate of growth than operating expenses. However, the improved operating margins did not translate to a similar bottom line growth owning to higher impairment charges.

Loans and advances recorded a steady growth of 5% for the first 6 months amidst high market liquidity and intense price competition.

Net interest income recorded a growth of 8% over the previous period with NIMs narrowing marginally.

The drop in interest expenses of 20% outweighed the drop in interest income of 6% thereby improving NII.

The challenges present in the current low interest rate operating environment was somewhat mitigated by timely re-pricing of assets and liabilities. Portfolios such as Corporate and Leasing in particular, felt the pinch of declining yields and narrowing NIMs.

The Bank continued its push for growth in low cost deposits which recorded a 6% growth with CASA improving to 31% of deposits.
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Bounties for whistleblowers under new SEC Act - Chairman

Shirajiv Sirimane

The Securities and Exchange Commission (SEC) is drafting a new Act to minimize manipulative actions in the corporate world, Securities and Exchange Commission Chairman,Tilak Karunaratne said.

Speaking at the Board Leadership Director Certification Programme conducted by the Sri Lanka Institute of Directors (SLID) last Tuesday he said this will help the SEC to take preemptive action.

“Complete security for employees and audit firms where their jobs and mandate are concerned and legal provisions protecting them being prosecuted for such affirmative action will be incorporated in the new Act.

“Where the whistleblowing employees are concerned if the allegations are true, will be rewarded with bounties,”he said.

Good governance is an expression in vogue today among emerging nations especially in Asia such as India, Indonesia, Sri Lanka and even China.”

“However implementation of the principals of good governance in a country will be a futile effort unless and until the principals of this ideology cascades to all units of the economy. In such a context one could not undermine the importance of Corporate Governance in organizations.”

“The Government or the regulator cannot foster Corporate Governance in isolation. It should be a joint initiative by all relevant stakeholders and I am pleased to note that several organizations have come forward to further this cause by offering various formal educational programmes.”

“It is disheartening to note how certain listed entities have not fully understood the importance of good governance. Negligence on their part not only exposes these companies towards greater risk but the effect also trickles down to the capital market.” The infamous NSB TFC share deal where a stock broker, perhaps acting in concert with sections of the top management of both NSB and TFC (the findings of the SEC investigation on the matter is still pending with the Attorney General for his opinion) sold 7.8 mn TFC shares at highly inflated price of Rs 50.00 to NSB.”

“The share price of TFC was around Rs 30.00 at that time. After the deal went through the then Chairman of TFC told the media that the deal was completely value driven and an investment for the future of both corporate entities breaking all codes of good governance. On July 27, 2015, the share price of TFC was Rs 14.00 and according to the latest Annual Report the Net Assets value per Share was Rs (51.44). The SEC was able to reverse this deal which saved NSB Rs 390 m then.”

“Such phenomenon is not limited to Sri Lanka. At times even world famous companies in developed economies could fall short of good corporate governance,” he said.

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Public, private listings key to GDP growth: CSE CEO

The capital markets are expected to play a key role in the next chapter of Sri Lanka’s growth story, the CEO of the Colombo Stock Exchange (CSE) Rajeeva Bandaranaike has said.

Speaking during an interview he gave to the global publishing, research and consultancy firm Oxford Business Group (OBG), Bandaranaike said that raising funds by getting both State-owned enterprises and larger capitalised private sector companies to list would be “essential” in meeting the Government’s targets for GDP growth.

The CSE is targeting $ 50 b market capitalisation as part of an ambitious development strategy. “We estimate that 25-30% of future funding requirements will come from the capital market through both debt and equity,” Bandaranaike told OBG. “We see particular potential – both for debt and equity listings – in insurance, ports, industry, infrastructure and banking.”

Bandaranaike said companies had much to gain from listing. “Over time, this will increase the accountability and transparency of these institutions, as well as make them more productive and efficient,” he commented. He also stated that should the Government decide to list public sector enterprises, using employer share option schemes, this would not amount to privatisation.

The full interview with Rajeeva Bandaranaike will appear in The Report: Sri Lanka 2016, OBG’s first report on the country’s economy. The landmark publication will contain a detailed, sector-by-sector guide for investors, alongside contributions from leading representatives.

In the interview, Bandaranaike highlighted the key part that the reworking of the Securities and Exchange Commission Act will play in setting the scene for new product lines to be introduced on the CSE. The overhaul is expected to be finalised in 2016.

“This will fill the gaps that currently exist in the market, addressing the need for new products as well as establishing a framework for the demutualisation of the CSE and the addressing systemic risk in the market,” he told OBG.

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Asia, Middle East, Africa and Latin America and the Caribbean. Through its range of print and online products, OBG offers comprehensive and accurate analysis of macroeconomic and sectoral developments, including banking, capital markets, insurance, energy, transport, industry and telecoms.

The critically-acclaimed economic and business reports have become the leading source of business intelligence on developing countries in the regions they cover. OBG’s online economic briefings provide up-to-date in-depth analysis on the issues that matter for tens of thousands of subscribers worldwide. OBG’s consultancy arm offers tailor-made market intelligence and advice to firms currently operating in these markets and those looking to enter them.
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Japan’s Mitsui Sumitomo enters with 6% stake in Ceylinco Insurance for Rs. 1.9 b

* First-ever investment by a Japanese insurance company in Sri Lanka

Mitsui Sumitomo Insurance Co Ltd., the largest insurance company in Japan, yesterday bought 1.2 million shares amounting to 6% of CIESOT, the employee share ownership trust ofCeylinco Insurance PLC.

The shares were sold at Rs. 1,602 per share and the total transaction amounted to Rs. 1.92 billion (JPY 1.7 billion).

Ceylinco Insurance said that they were quite pleased with Mitsui Sumitomo Insurance Ltd. 
(MSI) entering the local market through Ceylinco Insurance. MSI is considered as the largest insurance company in Asia and holds an A+ rating.

Further, the Ceylinco Insurance maintained a strong business relationship with MSI forover 20 years fostering mutual trust and that Ceylinco Insurance will be able to offer an exemplary service with very competitive pricing particularly to the Japanese investors and projects here in Sri Lanka as well as others. Ceylinco Insurance is confident that this synergy will add further value and bring in more expertise to its activities and operations.

This is the first-ever investment by a Japanese insurance company in Sri Lanka and MSIisin the process of enhancing its business network in the South Asian region.

MSI said that they will promote Ceylinco Insurance to increase penetration in Sri Lanka and that they will be able to work more closely with the Japanese corporates operating in Sri Lanka.

Ceylinco Insurance also added that Sri Lanka is attracting much attention from Japanese investors after the visit of Japanese Prime Minister ShinzoAbe, last September.
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