Asiri eyes govt stake in Lanka Hospitals

ECONOMYNEXT – Sri Lanka’s Asiri Hospitals Holdings, part of the Softlogic group, said it would like to buy a government stake that’s to be up for sale in Lanka Hospitals, which rival Hemas Holdings is also eyeing.

A stock exchange filing said Asiri was interested in the opportunity of buying the stake in Lanka Hospitals which the government said it would like to dispose of.

Last week, Hemas Holdings said it would like to buy into Lanka Hospitals Corporation if the government sells its stake, as it wants to expand is health business.

Sri Lankan shares end at more than 8-month low

Reuters: Sri Lankan shares closed at their lowest in more than eight months on Monday on worries that the new budget proposals would hit earnings of financial firms.

Sri Lankan police detained a former chairman of the country's stock market regulator on Monday amid an investigation into financial misappropriation, days after detaining another top regulatory official.

The International Monetary Fund on Monday said Sri Lanka's 2016 budget raises questions about its ambitious revenue and capital expenditure targets as the government is falling far short of steps needed to improve the tax system.

Investor sentiment was also dented after Prime Minister Ranil Wickremesinghe's warning last week of lower economic growth in 2016 due to the global slowdown.

The main stock index ended 0.16 percent weaker at 6,858.63, its lowest level since March 31.

The index fell into oversold territory with the 14-day Relative Strength Index at 29.402 versus Friday's 30.523, Reuters data showed. A level between 70 and 30 indicates the market is neutral while a level of 30 or below indicates the market is oversold.

"It was another very thin trading day," said Yohan Samarakkody, head of research at SC Securities (Pvt) Ltd.

"The foreign participation is low, expecting a federal rate hike, while local participation was low due to the festive season and the ongoing investigations," he said.

Local institutions and retail investors remained on the sidelines, analysts said.

Foreign investors were net sellers of 3.43 billion rupees worth of equities so far this year, but they bought a net 55.5 million rupees worth of shares on Monday.

Turnover was 388.9 million rupees, well below this year's daily average of 1.1 billion rupees.

Shares of Sri Lanka Telecom Plc dropped 1.90 percent while Cargills (Ceylon) Plc fell 2.43 percent.

The government on Nov. 20 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.

Rating agency Fitch on Nov. 24 said 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. 

($1 = 143.2000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Sunil Nair)

Sri Lanka’s CSE eyes more global investors through new CCP

(LBO) – Sri Lanka’s Colombo Stock Exchange (CSE) is aiming for more international investors by introducing a new risk management system through establishing a Central Counter Party (CCP) system, a senior official said.

“We need to manage the risk of the CSE – this is an area that we are lacking in,” Vajira Kulathilake, chairman Colombo Stock Exchange said.

“We are in the process of implementing a CCP which will reduce risk drastically and once we get this more global investors will be coming here.”

Effective risk management practices render stability to the financial markets and its participants by ensuring proper and timely settlement of trades.

The Colombo Stock Exchange (CSE) signed an agreement with BTA Consulting (BTA) of the United Kingdom to provide Consultancy and Project Management services to set up a Clearing House which will act as a Central Counterparty (CCP) for settlement of securities, including shares, corporate debt and other financial market instruments transacted in Sri Lanka.

This is a joint initiative between the Central Bank of Sri Lanka (CBSL), the Securities and Exchange Commission of Sri Lanka (SEC) and the Colombo Stock Exchange (CSE). The project was launched in January 2015. The Clearing House is expected to be set up within a two year period.

Kulathilake says that the proposed Securities and Exchange Commission act will be the legal back bone for the CSE while the proposed demutualization process would help with the governance side.

“The SEC act will be the legal back bone of the all the things that we are proposing to do, not only criminal but also civil proceedings,” he said.

“We will start the demutualization process soon and this will help the governance side.”

Analysts say that the present SEC Act was introduced in 1987 and though there were three amendments thereafter, an overall review of the provisions to align it to the global market trends has not been done.

CSE sets mandatory rules on Related Party Transactions

(LBO) – The Colombo Stock exchange has mandated the rules relating to Related Party Transactions by all Listed Companies from 01 January 2016.

Accordingly, section 9 of the CSE Listing Rules set out the relevant rules applicable in the event a listed entity enters into a related party transaction.

The salient features of the said Rules:

Definition of a “Related Party Transaction” (RPT)

A Related Party Transaction (RPT) is a transfer of resources, services or obligations between Related Parties regardless of whether a price is charged.

Related Party Transactions Review Committee (RPT Committee)

The listed entity should appoint a RPT Committee. The Rules relevant to such Committee are stated under Rule 9.2 of the CSE Listing Rules.

Requirement for shareholder approval

In respect of certain RPTs the company should obtain shareholder approval via a special resolution (Rule 9.1 of the CSE Listing Rules).

Immediate Market Disclosures

Some RPTs trigger an Immediate Market Disclosure (Rule 9.3 of the CSE Listing Rules).

Disclosure in the Annual Report

Listed companies should disclose details on the RPTs in the Annual Report (Rule 9.3.2 of the CSE Listing Rules).

Exempted Related Party Transactions

Certain identified RPTs do not fall within the ambit of section 9

Applicable only to equity listed companies

The Rules set out under Section 9, shall only be applicable in the event the company has shares listed at the CSE

Former Sri Lanka Securities and Exchange Commission chief arrested

ECONOMYNEXT – Sri Lanka’s former Securities and Exchange Commission chairman Nalaka Godahewa was arrested for criminal breach of trust and misappropriation of state property, police spokesman Ruwan Gunasekera said.

Godahewa will be produced in the Colombo Fort Magistrates’ Court today, he added.

Godahewa was wanted for questioning by the Police Financial Crimes Investigation Division (FCID) for alleged fraudulent use of SEC funds.

The FCID is probing allegations Godahewa was involved in transferring five million rupees from the SEC to the ‘Tharunyata Hetak’, a youth organization connected to ex-President Mahinda Rajapaksa's son Namal Rajapaksa.

Police have also arrested former deputy director of the SEC, Dammika Perera and Ronnie Ibrahim, a director of the Carlton Sports Club, also connected to the Rajapaksa family, which conducted rugby tournaments.

Dhammika tops 50% of Hayleys

Business tycoon Dhammika Perera, 47, the non-executive Co-Chairman of the Hayleys conglomerate, has together with related parties taken a controlling interest of 50.15% of Hayleys PLC, Hayleys said in a Stock Exchange filing last week.

Perera and connected parties previously owned 49.71% of Hayleys. Purchases of 0.28% and 0.16% of the company in mid-November had taken up his holding to over 50%.

In addition to Hayleys and its subsidiaries, Perera is on the board of a string of listed companies in financial services (LB Finance, Vallibel Finance), tile and sanitary-ware manufacturing (Royal Ceramics, Lanka Walltiles, Lanka Tiles) and leisure.

He was Secretary to the Ministry of Transport of the Mahinda Rajapaksa Government.

He is one of the country’s major casino operators and was once named the richest man in Sri Lanka by a Rich List 2013 sometime ago.

According to Hayleys’ September financials, Perera personally held 46.6% of the company and a further 2.91 through Vallibel One PLC.

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