Sri Lanka shares end down; capital gains tax, Brexit weigh

Reuters: Sri Lankan shares ended weaker on Tuesday, falling for the seventh straight session, as comments from a senior minister on the imposition of capital gains tax on equities dented sentiment while fresh woes after Brexit also weighed.

Sri Lanka intends to impose a capital gains tax on profits from equities, a senior government minister said late on Monday, as the government attempts to shore up its finances to qualify for an IMF loan.

The benchmark Colombo stock index ended 0.17 percent down at 6,307.40, after having risen early in the session.

"Market was gaining momentum after yesterday's drop. But once the news of capital gains tax on stocks broke, the index started to fall," said a stockbroker, asking not to be identified.

Brokers said global uncertainty after Britain's decision to leave the EU also weighed on the local market with continued foreign selling.

Overseas funds offloaded 9.7 million rupees ($65,785) worth of equities on Tuesday, extending the year-to-date net foreign outflow to 6.18 billion rupees worth of shares.

"With the news of capital gain tax, existing high interest rates, and other local negativity, the market will continue to be negative until we see some positive news," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Global stocks rose for the first time in three days and sterling and the euro climbed on Tuesday, as investors made a rush for Brexit-bashed assets hammered by some of the biggest falls since the 2008 collapse of Lehman Brothers.

Turnover stood at 640.3 million rupees, less than this year's daily average of around 746.3 million rupees.

Shares in Ceylon Tobacco Company Plc fell 3.50 percent while Lion Brewery Plc fell 3.72 percent. 

($1 = 147.4500 Sri Lankan rupees) 

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

Sri Lanka’s Lion Brewery falls below minimum public holding

(LBO) – The minimum public holding of Sri Lanka’s Lion Brewery has fallen below the stipulated float making it obligatory for the company to make an announcement.

As per the minimum public holding rules, there are two ways to get listed on the main board of the Colombo Stock Exchange.

One option is that a listed entity on the main board should maintain a minimum public holding of 20 percent of its total listed ordinary voting shares in the hands of a minimum of 750 public shareholders.

Second option is that a market capitalization of 5 billion rupees of its public holding in the hands of a minimum of 500 public shareholders while maintaining a minimum public holding of 10 percent.

On 17th May 2016, the Public Holding of Lion Brewery which falls under the above second option has fallen below the required market capitalization of 5 billion rupees.

The company’s market capitalization as at 24th June 2016 was 4.39 billion rupees and its public holding percentage was 13.92 percent represented by 1,174 public shareholders.

Issuing a non-compliance announcement the company said the number of shares held in the hands of the public shareholders as at 24th June 2016 was 11,134,825 ordinary shares.

Sri Lanka’s securities regulator however is reconsidering the minimum public float rule as the intention of introducing such rule was not met.

Few companies have already de-listed and several others have transferred to the secondary Diri Savi Board following the introduction of new rules.

Sri Lanka rejects bids for dollar bond auction

ECONOMYNEXT - Sri Lanka has rejected bids for a 250 million dollar auction of Sri Lanka Development Bond styled securities issued mostly to qualified resident investors, at an auction which closed on July 27, amid uncertainty in global markets.

The debt office said it had received 198.59 million dollars of bids for 1 year 7 month bonds, (no fixed rate bids), 12.21 million dollars of floating rate bids for 2 year 7 month bonds.

For 4-year bonds 0.12 million dollars of bids for fixed rate bonds and 2.30 million dollar of bids for floating rate bids were received.

Sri Lanka sells lower than offered volumes of bonds, yields drop

ECONOMYNEXT - Sri Lanka has sold lower than offered volumes 23.9 billion rupees of 2 to 8 year bonds at Monday's auction at around market rates, data from the state debt office showed, ahead of a coupon maturity on July 01. 

At an auction on June 27, 1.8 billion rupees of 2-year 10 month bonds maturing on 01.05.2019 were sold at 11.55 percent after offering 7.0 billion rupees, lower than the 11.90 levels the in the market. 

The debt office sold 12.14 billion rupees of 4-year bonds maturing on 15.12.2020 at an average yield of 11.93 percent, around the market rate of 12.00 percent. 12.1 billion rupees of bonds were sold after offering 7.0 billion rupees. S

ix year bonds maturing on 01.01.2022 sold to yield 12.03 percent. The debt office offered 7.0 billion rupees and sold a sharply lower 2.55 billion rupees. 

Nine year bonds maturing on 15.03.2025 were sold to yield 12.63 percent, a little higher than the market yield of around 12.45 percent for similar maturities. 

The debt office sold 7.4 billion rupees of bonds, after offering 6.0 billion rupees. The bond have to be settled on July 01. An estimated coupon maturity of over 40 billion rupees is due on July 01. 

Sri Lanka based Abans Finance to raise Rs276mn for share placement

ECONOMYNEXT - Sri Lanka's Abans Finance Plc, a licensed non-bank lender said it would sell 11 million share to a private investment company to raise 276 million rupees and boost its capital.

Ironwood Investment Holdings (Pvt) Ltd, a Colombo-based company will buy 11.067 million shares at 25 rupees each in a private placement, the Abans Finance said in a stock exchange filing.

Abans Finance now had 44.40 million shares in issue and a state capital of 567 million rupees.

The decision by the Board, is subject to shareholder and stock exchange approval.

Sri Lanka to impose capital gains tax on stocks - minister

COLOMBO, June 28 (Reuters) - Sri Lanka intends to impose a capital gains tax on profits from equities, a senior government minister said late on Monday, as the government attempts to shore up its finances to qualify for an IMF loan.

Sri Lanka's cabinet approved reintroducing a capital gains tax on land early this month, but has not said whether it would be imposed on profits from buying and selling equities.

"We don't know the details of it right now, but there will definitely be a capital gains tax on land transactions plus the stock exchange," Patali Champika Ranawaka, a development minister, told a Foreign Correspondents' Association forum.

The government is in the process of drafting new legislation for a capital gains tax with technical inputs from the International Monetary Fund.

Reimposing such a tax would be part of government moves to raise revenue, which it has promised the IMF to do in return for a $1.5 billion, three-year loan to support its economic reform agenda.

The capital gains tax could be around 10 percent and was likely to be imposed before the 2017 budget presentation in November this year, Ranawaka said.

Stockbrokers expect the capital gains tax to hit share transactions and discourage new small investors from entering the market.

Since Prime Minister Ranil Wickremesinghe announced the plan to reimpose capital gains tax on March 8, foreign investors have sold a net 5 billion rupees ($33.78 million) worth of shares.

Wickremesinghe abolished a 25 percent capital gain tax on land in 2002, which had been reduced from as high as 45 percent in 1978.

Mercantile Investments posts Rs. 505 mn profit

Mercantile Investments and Finance (MI) has recorded commendable core business growth posting robust profitability levels for the concluded financial year 2015/16.

MI’s pre-tax profit and post- tax profits stood at Rs 803 million and Rs 505 million respectively, though dropping by 12% and 20% respectively from last financial year.

“The rising interest rates and the resultant re pricing effect continued to impact the LFC sector including MI, in terms of increasing funding cost and exerting pressure on core margins enjoyed. MI to a great degree was able to maintain acceptable core margins by optimizing its attractive diverse lending product mix, moreover focusing its strategy on building its core business of lending,”Managing Director Gerard Ondaatjies aid.

Despite the vehicle sales market witnessing somewhat challenging conditions mainly due to the high import duty structure, MI’s lease finance business picked up creditably by 83% year-on-year. The expansion of MI’s branch network by further five locations, bringing total tally to thirty one, supported the company’s efforts in generating higher lending volumes particularly to boost its term based lending products such as personal and corporate lending and also its budding micro finance operation. As a result of this, MI’s lending book grew handsomely by 29% with its total lending portfolio exceeding Rs 25 billion by the end of March 2016.

In the midst of a20% total assets expansion, importantly the company managed to safeguard its asset quality, reflective from the decline in MI’s non-performing lending ratio which stood at 3.39% compared to 4.19% recorded previous financial year end. Deposit moblisation too remained steady with the deposit base growing by 15% year-on-year despite the stiff competition among the financial services sector in mobilising savings of people.
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Amana Takaful Life announces IPO of Rs. 75 mn

Amana Takaful Life Limited (ATLL), a fully-owned subsidiary of Amana Takaful PLC, has announced an Initial Public Offering (IPO), via an Offer for Sale of LKR 75 million, thereby becoming the first segregated life insurer in Sri Lanka to do so following the mandatory segregation of Life and General insurance companies on 1st February 2015.

Listing on the Diri Savi Board of the Colombo Stock Exchange (CSE), the company is offering 50 million ordinary voting shares at a price of LKR 1.50 per share, which represents a 10% stake in the company.

The issue will open on 21st July 2016 and the Prospectus (which can be referred to for more information on the IPO) and application forms will be available from July 4, 2016.

The minimum subscription has been set at 1,000 shares and multiples thereof.

The Financial Advisor and Manager to the offering is Acuity Partners (Pvt) Limited and Amana Bank is the Banker to the issue.

“This Initial Public Offering, while further strengthening the company, will offer an opportunity for members of the public to become part of Amana Takaful Life’s growth story,” Amana Takaful Life Limited (ATLL), Chairman, Tyeab Akbarally said.
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