Tiles and sanitaryware importers say budget’s good

The Tiles & Sanitaryware Importers Association (TSIA), a decades-old importers chamber, said it was appreciative with the Budget 2016 which provided support to tile and sanitary ware consumers all over the country.

The Government has maintained, this time round, the duty and cess reduction for the import of tiles and sanitary ware and members of the TSIA “have been very contented and expressed their gratitude to Finance Minister Ravi Karunanayake and his officials for their professional and tolerant approach in supporting the import of these products”, the association said in a media release.

“There are a lot of threats in the market that the industry is facing. Therefore, we wanted to come out as a team and sustain an input mechanism. As an organisation, we are of the view that there should be fairplay. We no doubt respect local manufacturers and their stand in the industry. Tile and sanitary ware importers too play a vital role in catering to various other demands in the industry. With the recent budget hearing and through Minister Karunanayake’s continuous intervention, importers can once again make available these products at a reasonable price,” Tiles and Sanitary ware Importers Association, President, Kamil Hussain said.

Tiles and sanitary ware today, has become a commodity that has defined itself as a basic need. These entities are no longer considered luxurious and utilising these products does not always have to do with the aspect of aesthetics but is meant to assist towards maintaining a hygienic and sanitary lifestyle. And with the current trajectory focusing on growth in the construction and real estate sector, this only means that demand would grow, especially when it comes to foreign funded mixed development and condominium projects, the release said.

“In Sri Lanka, the cost of energy is exorbitantly high and this would of course affect the product cost. Initially, the imposed duty and cess levy was placed at 160 per cent and this meant increased prices for consumers. With the Government’s policy to incentivize and boost the construction industry in Sri Lanka, they had also looked at reducing the costs of construction and provide the public with an option for affordability and a chance for them to improve their lifestyles. This also means that now, even architects and interior designers who have had felt restricted in terms of creativity, need not worry about the cost of acquiring elements of beautification,” Mr. Hussain added.

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Stock broking licence ‘cold storage’ to happen soon

The Colombo Stock Exchange (CSE) has made a proposal to the Securities and Exchange Commission (SEC) for struggling stock brokers to ‘cold storage’ their licences following new rules in capital adequacy.

The SEC on the recommendation of the CSE directed the implementation of a risk based Capital Adequacy Requirement (CAR) of 1.2 times the risk requirement of stockbrokers subject to a minimum liquid capital requirement of Rs 35 million. The CAR Rules are applicable to all stockbroker firms excluding those licensed to deal only in debt SEC with effect from 1 March next year.

Rajeeva Bandaranaike, CEO, CSE told the Business Times that the CSE made a proposal to the SEC on ‘cold storage’ which is when a stock broker can hold on to their licenses but not trade. “The SEC is perusing it favourably,” he added.

The current rules on minimum Net Capital applicable to stockbroker firms do not address the different risks these firms are exposed to. In the light of the foregoing limitations of the present rules and in keeping with international standards a dire need to establish stock brokers a risk-based capital adequacy requirement was felt. Having considered the capitalisation of stockbroker firms, their current activities and CAR regimes implemented in regional markets, the CSE together with the SEC developed the methodology for the rules.

The International Organisation of Securities Commissions (IOSCO), which is the global standard setter for the Securities Sector sets out Principles of Securities regulation and its members including SEC Sri Lanka, is expected to implement these principles in order to achieve the objectives of securities regulation i.e. protect investors, ensure that markets are fair, efficient and transparent and reduce systemic risk.

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Claridge Stockbrokers’ licence in the balance

Sri Lanka’s stock market regulator is to take action against Claridge Stockbrokers, part of Mackwoods Group over non-compliance with the broker’s licence now hanging in the balance, informed sources said.

This drama started when Claridge brokered the sale of a 60.8 per cent stake in Agalawatte Plantations PLC owned by Mackwoods Plantations Pvt Ltd to Browns and transferred the sale money to the latter despite the Securities and Exchange Commission (SEC) issuing a directive suspending this particular sale.

The SEC after the investigation had decided to get tough with Claridge, the sources said. They told the Business Times Claridge’s licence was up for renewal in October and since this investigation wasn’t completed at the time, SEC decided to extend it at the last SEC meeting by another month. Now it’s at a stage that this licence will be suspended, they added. “This will be coming up at this week’s SEC meeting,” a source said.

In the midst of a family feud over ownership of the Mackwoods Group between its Chairman Chris Nonis and related parties and his sister Nirmalie Samaratunga and connected parties, SEC was very critical of Claridge at the start of this dram. It said in a public statement that the sale of the controlling stake in Agalawatte Plantations (to the Browns Group) was in violation “of the written instructions issued to Claridge” and contrary to a directive issued by the SEC is a serious breach of discipline and a matter on which the SEC takes very serious cognizance. “Your conduct is aggravated by the fact that Claridge Stockbrokers Pvt Ltd is a company in which Dr. Chrishantha Nonis has an interest,” the statement said.

Meanwhile Dr. Nonis has retaliated for a second time on this issue with the SEC. The source added that he has sent a ‘stinker’ to the SEC saying that they have done wrong by him. It remains to be seen how the SEC will perceive this as it’s now all-out war between the regulator and Mackwoods.

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SEC,CSE to meet Treasury on EPF and ETF funds

By Duruthu Edirimuni Chandrasekera

The Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF)’s suspension of investments in the Colombo Stock Exchange (CSE) a year ago in the wake of the pump and dump era 3-4 years ago, has forced authorities to lobby the Treasury for both agencies to return to a lacklustre market.

Official sources said the reason for the pullout was believed to be because the EPF had incurred losses through the purchase of stocks in companies with artificially inflated share prices. The Treasury’s stance is that EPF is not the private fund of a few people who decide on its investments; particularly questionable transactions in the CSE where allegations of ‘pump and dump’ have been made. Now that the new plan of the present government is to set up a public trust to independently manage these agencies by amalgamating them to create a new national pension fund that will have a combined worth of Rs. 1.7 trillion, the Securities and Exchange Commission (SEC) and the CSE will be meeting the Treasury next week seeking a revision of last year’s decision, the sources said. Treasury officials also confirmed this saying that amongst the number of matters that are to be discussed, the EPF/ETF issue will be top of the agenda.

“We will be looking at it favourably,” a Treasury official told the Business Times.

The capital market in Sri Lanka is largely dominated by domestic investors versus its emerging market peers. Only 6.5 per cent of the Rs. 3.1 trillion market capitalisation of the CSE is controlled by institutional institutions such as EPF, ETF, insurance companies and Unit Trusts.

For a long time analysts have been trying to lobby the Treasury to raise this. The troubles in the CSE during the last regime made the Treasury stop the two agencies from investing in shares. “The absence of a professionally managed non captive large institutional investor base in Sri Lanka is an enormous challenge. The main long term superannuation funds are largely captive and are saddled with conflict of interest,” an analyst said expressing hope that the meeting with the higher authorities will be positive.

The officials are also slated to discuss developing financial derivatives such as repos and swaps, as well as asset-backed securities markets, etc.

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Colombo Stock Exchange Market Review – 09th Dec 2016

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Colombo Stock Exchange Trade Summary 09-Dec-2016

Colombo Bourse closed lower in choppy trading on Friday as both indices closing in negative territory. ASI lost 13.72 index points or 0.22% to close at 6,324.10 while the S&P SL 20 index slightly dip by 0.89 index points (+0.03%) to close at 3,555.02.

Among the blue-chips, shares of Dialog Axiata (closed at LKR 10.70, +1.9), Commercial Bank (closed at LKR 144.50, +0.8) and Lion Brewery (closed at LKR 500.00, +1.0%) gained grounds while Ceylon Tobacco (closed at LKR 861.00, -2.7%) John Keells Holdings (closed at LKR 154.00, -0.7) and Nestle Lanka (closed at LKR 2,030.00, -1.0%) edged lower. The investor sentiment remained divided with losers outweighing gainers 57 to 45.

Market turnover fell back to LKR 622mn after the yesterday’s eventful session. Crossings in Commercial Bank (1.1mn shares at LKR 145.00), Dunamis Capital (4.1mn shares at LKR 25.00), Tokyo Cement – voting (0.6mn share at LKR 60.00) and Tokyo Cement – nonvoting (0.7mn shares at LKR 53.00) contributed 53% of the turnover. Accordingly, Commercial Bank (LKR 170) headed the top turnover list along with Dunamis Capital (LKR 101mn), John Keells Holdings (LKR 92mn) and Tokyo Cement non-voting (LKR 57mn).

Commercial Credit continued to be the retail investor favorite on the aftermath of the strategic transaction yesterday. The share closed lower at LKR 60.20 (-0.7%). Moreover, relatively high investor activities were seen in Textured Jersey, John Keells Holdings and Alumex. Lanka IOC fell 2.1% in today’s session as investors treaded cautiously amid the rise in crude oil prices.

Foreign investors were net buyers of LKR 29mn worth of shares and accounted for 55% of the market activity. Top net inflows were seen in Tokyo Cement non-voting (LKR 53mn), Lion Brewery (LKR 22mn) and Commercial Bank (LKR 10mn) while top net outflow was seen in Tokyo Cement (LKR 37mn).

Please note that Colombo Stock Exchange will be closed on Monday (12th December 2016) & Tuesday (12th December 2016) due to public holidays.

Source: LSL

Sri Lankan shares hit over one-week closing low; blue chips fall

Reuters: Sri Lankan shares closed at their lowest in more than a week on Friday as investors sold large-cap shares such as Ceylon Tobacco Company Plc and Conglomerate John Keells Holdings Plc amid subdued sentiment.

The Colombo stock index ended down 0.2 percent at 6,324.10, its lowest close since Dec. 1. The index was largely flat for the week after recording a 1.2-percent gain last week, its first weekly gain in four.

Turnover was 622.1 million rupees ($4.18 million), compared with this year's daily average of 748.3 million rupees.

Foreign investors bought a net 29.3 million rupees worth of shares on Friday, raising the year-to-date net foreign inflow to 1.03 billion rupees in shares.

Investors continue to be concerned that proposed increases in various taxes and fees would reduce disposable income and challenge consumption-led growth.

"Overall market came down with some selling pressure on the blue chips," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"We continue to see volatility with continued uncertainty, no clear direction and uncertainty over budget proposals. We don't expect market to turn around as most of people will be going on leave from next week," Mathew said.

Sri Lankan markets will be closed on Monday and Tuesday for a holiday and will resume trading on Wednesday.

The government aims to boost its 2017 tax revenue by 27 percent to 1.82 trillion rupees year-on-year to meet a commitment given to the International Monetary Fund in return for a $1.5 billion loan in May.

Brokers said investors were concerned about the sustainability of rates after the central bank on Tuesday kept key rates unchanged.

Shares of John Keells Holdings Plc fell 0.7 percent while the Ceylon Tobacco Company Plc fell 2.7 percent.

($1 = 148.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)