Several IPOs slated for CSE next year

(LBO) – Sri Lanka can expect three to four new IPOs on the Colombo Stock Exchange by the first quarter of next year, a CSE official told Lanka Business Online.

“There are few IPOs in the pipeline,” he said.

The CSE recently approved the IPO of People’s Insurance, a fully owned subsidiary of People’s Leasing and Finance for 50 million shares at 15 rupees each valuing the issue at 750 million rupees.

The People’s Insurance IPO will open on 16 December.

Sri Lankan shares post 4-1/2 month closing low on budget worries

Reuters: Sri Lankan shares closed at their lowest in four-and-a-half months on Thursday on worries earnings of financial firms would fall after the new budget proposals announced last week were implemented.

The main stock index ended 0.67 percent, or 46.62 points, weaker at 6,963.37, its lowest close since July 9, and below its psychological barrier of 7,000.

"Selling pressure continues after the budget, especially on the banking shares, and it will gradually settle," said a stockbroker asking not to be named.

"Heading for the December holiday season, we are not expecting big activities."

Rating agency Fitch said on Tuesday that Sri Lanka's 2016 budget provides no clear plan for fiscal consolidation over the medium term and the absence of such a framework will put more pressure on the fiscal deficit.

"Fitch believes there are risks to government being able to meet its fiscal deficit target, especially considering the trend in revenues in recent years," the rating agency said.

The government on Friday announced a raft of steps, including the removal of a 0.3 percent share transaction levy, to stimulate trading in the share market and increase liquidity.

Shares of conglomerate John Keells Holdings Plc fell 1.33 percent, while Ceylon Cold Stores Plc dropped 3.34 percent.

Turnover was 620.2 million rupees ($4.34 million), lower than this year's daily average of 1.1 billion rupees.

Foreign investors, who have been net sellers of 3.78 billion rupees worth of equities so far this year, bought shares worth a net 108.6 million rupees on Thursday.

Fitch said on Monday that it maintained a negative outlook on the telecom sector based on uncertainty over proposals to increase taxes, which are likely to lower profitability and increase leverage, if implemented.

Sri Lanka's stock and foreign exchange markets were closed on Wednesday for a Buddhist religious holiday. 

($1 = 142.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

Exemption on share trading capital gains to continue

A senior Treasury official yesterday confirmed that the existing exemption on capital gains on sale of shares would continue to remain in force.

“The status quo will remain unchanged even though the Share Transaction Levy was abolished as per the 2016 Budget presented in Parliament by Finance Minister Ravi Karunanayake,” Deputy Secretary to the Treasury S.R. Attygalle told the Daily FT.

At present a 0.3% levy is collected by the relevant stockbroker, stock dealer or custodian bank which is responsible for the settlement of the share transaction. The 2016 Budget proposed the removal of the levy from 1 January 2016.

The move was welcomed by capital markets but there was a concern whether capital gains tax would come into force with the removal. The view was unless specifically exempt trading profit from the sale of shares in the stock exchange becomes taxable.

However the assurance and clarification by Attygalle should lay such concerns to rest. The levy used to bring about Rs. 2.4 billion revenue.

A host of capital market favourable as well as business friendly proposals saw the Colombo stock market gain on Monday but the improvement was short-lived as the Bourse went back to negative mode on Tuesday.

“The removal of the Share Transaction Levy from both the buyer and seller on each transaction is likely to increase market activity,” CT CLSA said in its analysis of 2016 Budget.
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Blanket guarantee for Finance Companies questionable: Theagarajah

(LBO) – Sri Lanka’s Finance Ministry is to provide a blanket guarantee for finance companies which needs to be reconsidered, Chief Executive Officer of NDB, Rajendra Theagarajah said.

Finance minister delivering the budget speech said the Central Bank will provide a 100 percent guarantee on all deposits for all registered finance companies by end January 2016.

Although several countries have deposit guarantee schemes, they have been controversial for the problem of moral hazard and unbalanced taking of risk.

“As at today I don’t think any financial services industry in the world has blanket 100 percent guarantee,” Theagarajah said.

“How will you differentiate between institutions which are well managed and stable due to good governance and sound balance sheet and somebody who has just fallen back on a third-party guarantee,” he asked.

Theagarajah was speaking at the 2016 Budget Seminar organized by the Institute of Chartered Accountants.

“So that should be looked at. It must be first principle of survival of the fittest or encouragement of failure will be defeated.”

The 2016 budget has also proposed that banks should cease in engaging in leasing business from 01 June, 2016.

However, Theagarajah said it is yet to quantify the impact of providing such a guarantee as well as the real impact or the competition of it for the banking sector.

Finance minister in his budget speech said the guarantee scheme will provide the depositors with a sense of comfort and security for their deposits in the finance companies.

“To prevent undue concentration of deposits in the non-bank financial sector, I propose to impose a cap on the interest rates offered by the Finance Companies,” he said.

Even though certain state banks currently have state guarantee, it is evident that private banks are also carrying out their business activities well without such state backed guarantees.

Apart from the guarantee, a Financial Institution Restructuring Agency will also be established to help failing finance companies be recapitalized.

Troubled assets are to be taken over by this agency for purposes of restructuring and the Central Bank will be entrusted to undertake strict supervision on this restructured finance companies.

The government is to provide initial capital of 10 million rupees as equity and also issue a Treasury bond to the value of 25 billion rupees with a tenure of 5 years for the Agency.

Finance companies have been most vulnerable in the recent past and government had to provide relief to the Golden Key Depositors at a heavy cost.

Sri Lanka to expropriate money in dormant bank accounts

ECONOMYNEXT - Sri Lanka's budget for 2016 had proposed the expropriation of money lying in dormant bank accounts from January 2016.

"…I propose that the monies lying in dormant accounts of commercial banks to be remitted to the Consolidated Fund, by 1 January, 2016," the text of a budget speech for 2016.

The budget did not specify how accounts that had been dormant for how many years would be taken over by the state.

The ousted Rajapaksa administration came under fire when the Central Bank took over dormant accounts.

The Central Bank however said the money would be available to any claimants.

CFA Society SL welcomes local investment professionals

CFA Society Sri Lanka, is the local member of the CFA Institute, the global association of investment professionals that sets the highest standards of ethics, education, and professional excellence.

CFA Society Sri Lanka welcomed twenty local investment professionals who have earned the title of CFA (Chartered Financial Analyst) at its Annual Oration and Awards Ceremony recently.

Welcoming the Charter holders, President of CFA Society Sri Lanka Sanjay Kulatunga said, "This year we have added yet another sevenpassed finalists and 20 charter holders to the growing roster of CFAs within the capital market industry, and I dare say even the wider corporate sectors of our country. I would like to congratulate all of Charter recipients and passed finalists in having reached the culmination of a rigorous program of study over three years."

Orator for the evening, Director of Tata Sons Ramabadran Gopalakrishnan was inspiring with his examples of life lessons, including realizing personal potential and achieving work-life balance. Instilling the importance of ethics by sharing a real life story, he showed extraordinary human accomplishments that have questioned the relationship between fact and opinion. "As you strive in your career for accomplishment, recognition and advancement, remember there is no better yardstick than what you have set in your own mind. It is important for all of us to take pride from our accomplishments, rather than expend mental energy to be one up on our peer."

To earn the CFA charter, candidates must sequentially pass three six-hour examinations which are widely considered to be the most rigorous in the investment profession.

The CFA curriculum includes ethical and professional standards, financial reporting and analysis, corporate finance, economics, quantitative methods, equity, fixed income, alternative investments, derivatives, portfolio management and wealth planning. Currently, more than 120,000 investment professionals in 149 nations and territories hold the CFA charter.

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