Sri Lankan shares end at 1-1/2-year lows

Reuters: Sri Lankan shares fell for a sixth straight session, to mark their lowest close in 1-1/2 years, led by declines in diversified and banking stocks due to local and global concerns, brokers said.

Fears over investors shifting to risk-free assets such as government securities due to rising yields in government securities dented sentiment.

The main stock index ended 1.13 percent or 75.96 points down at 6,650.32, the lowest close since July 9, 2014. The index fell as much as 1.4 percent, posting its biggest fall since Aug. 25, 2015.

The bourse dipped further into an over sold territory on Monday with the 14-day relative strength index at 22.844 points versus Friday's 28.357, Reuters data showed. A level between 30 and 70 indicates the market is neutral.

"Market is down with a lot of negativity. Local and global concerns weighed with no positive news," said Danushka Samarasinghe, research head at Softlogic Stockbrokers in Colombo.

The day's turnover was at 991.2 million rupees ($6.90 million), its highest since Jan. 6.

Foreign investors were net sellers of 138.86 million rupees ($965,982.61) worth of equities on Monday extending the year to date net foreign outflow to 1.68 billion rupees worth of equities, as compared with 4.43 billion rupees outflow in 2015.

World stocks fell to near 2-1/2 year lows on Monday as a fresh pounding for Chinese markets left Asia at a four-year trough and sent oil and commodity markets sprawling again.

Local investors are worried of more monetary tightening after the central bank raised commercial banks' statutory reserve ratio by 150 basis points with effect from Jan. 16.

Following the central bank's move, the yield on 91-day t-bill rose 14 basis points to an over-two-month high of 6.59 percent at a weekly auction on Wednesday.

Analysts expect more investors to shift from risky assets to fixed assets with higher interest rates and shrinking of global investments in Sri Lanka.

Shares in conglomerate John Keells Holdings Plc fell 1.6 percent and Cargills (Ceylon) Plc slipped 6.9 percent, dragging the overall index. Biggest listed lender Commercial Bank of Ceylon Plc fell 1.2 percent. 

($1 = 143.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

Sri Lanka tax-payers fork out Rs600mn for state plantations

ECONOMYNEXT - Sri Lanka's tax payers have forked out 600 million rupees through the Treasury last year to cover unpaid employee provident funds of state plantations, where billions more are unpaid, a legislator has said.

The Treasury has paid 600 million rupees in 2015 to settle part of the EPF and ETF dues of Janatha Estate Development Board (JEDB), State Plantations Corporation (SPC) and Elkaduwa Plantations Limited, legislator Velu Kumar has told parliament.

There are 1,931 million rupees of pension and gratuity payments in arrears to workers, he said.

Sri Lanka privatized many state plantation in the mid-1990s reducing their burdens on the people.

Privatized plantations are now paying annual leases for the land to the state and especially during commodity booms, they also pay profit tax.

At the moment private plantations are also suffering from low tea and rubber prices. State enterprises are one of the biggest burdens on the people.

Sri Lanka stock regulator warns broker over agent

ECONOMYNEXT - Sri Lanka's Securities and Exchange Commission has warned, TKS Securities (Pvt) Ltd, a regulated stock broker, over the activities of an agent.

SEC in letter to TKS said directed it to halt the investment advisory functions of Investor Eye (Pvt) Ltd.

Under Sri Lanka's rules, agents are not expected to give investment advice to clients and have to bring them to the brokerage to trade and be given advice if any.

Investor Eye had been providing research to its clients at time when some brokers are not giving any research to clients. The SEC has not specifically expressed an opinion about the quality or otherwise of the research.

However SEC had said that TKS will be held responsible for any violations of Colombo Stock Exchange and SEC rules by its agent.

Market sources say there has been some concern over advertisements run by the agent, over fears that it may tend to understate the risks of equity investments.

There are also concerns that virtual stock broking offices may start through agents without the same guidelines, rules or regulatory oversight becoming applicable to them, which will lead to a breakdown of the regulatory framework.

Some analysts say the case may merit some re-thinking of the role of agents and their oversight.

Some say if agents are capable of providing services to clients which are useful and they are innovating new business models, the rules governing agents may be clarified to bring them to the same governance framework and a mechanism for the principle to have more oversight over agents, clearly defined.

The agent has also advertised training programs for clients for a fee. Some observers say training may also be useful to people, provided authorities are satisfied that course content is not mis-leading and risks and rewards are adequately explained.

Brokers usually also do not charge fees for research, which however cost money to generate.

It is possible also for people to get a fund manager license and be within the regulatory framework. Some foreign investors have built relationships with fund managers who are not brokers themselves as they provide better more personalised service.