Sri Lankan stocks end at over 1-wk high; foreign buying boosts turnover

(Reuters) - Sri Lankan stocks ended a tad firmer at a more-than-one-week high on Tuesday, gaining for a fourth straight session with foreign buying boosting sentiment.

Sri Lanka's main stock index ended up 0.08 percent, or 6.04 points, to 7,227.12, its highest close since Oct. 17.

"Market is going slow these days with low retail participation," said Reshan Wediwardana, research analyst at First Capital Equities (Pvt) Ltd.

The market saw a net foreign inflow of 934.7 million rupees on Tuesday, extending the year-to-date net foreign inflow to 11.75 billion rupees worth of shares, exchange data showed.

Analysts said the poor retail participation was due to the lower-than-expected stimulus in the budget, while the market awaited further clarity on the 2015 budget announced by President Mahinda Rajapaksa last Friday.

Rajapaksa, also the country's finance minister, unveiled a budget that sought to trim value-added tax and cut the deficit while providing a range of handouts, mainly for rural communities.

The day's turnover was 1.66 billion rupees ($12.69 million), more than this year's daily average of 1.36 billion rupees.

The gains were led by thin-volume trade in Ceylon Tobacco Company Plc, which rose 1.13 percent to 1,150 rupees.

Shares in leading mobile operator Dialog Axiata Plc rose 0.82 percent to 12.30 rupees.

Stockbrokers said trading in local shares may be volatile in the near term due to the revised presidential poll schedule and a possible bottoming out of interest rates. 

(1 US dollar = 130.8500 Sri Lankan rupee) 

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

Sri Lanka to issue $500 mln sovereign bond next year - Cental Bank

Oct 27 (Reuters) - Sri Lanka will issue a 500 million dollar sovereign bond next year to roll over a maturing bond issued in 2009, a top central bank official said on Monday.

"There will be a sovereign bond issue next year. There is a bond maturing next year and we have to roll out," deputy central bank governor Nandalal Weerasinghe said at a Reuters post-budget forum in Colombo. 

(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Alison Williams)

Sri Lanka Telecom expects $30.6 mln profit in 2014 - Govt

* Profit to be $32.1 mln in 2015, $33.8 mln in 2016

* Govt owns majority shares in telco

Oct 28 (Reuters) - Sri Lanka's leading fixed line telephone operator Sri Lanka Telecom will post a net profit of 4 billion rupees ($30.58 million) in 2014 and 4.2 billion rupees next year, a document tabled in the country's parliament showed on Tuesday.

Sri Lanka Telecom, in which the government is the major stakeholder, is also expecting a net profit of 4.43 billion rupees in 2016, a document presented to parliament by the Ministry of Telecommunication and Information Technology showed.

It posted a 3.64-billion-rupee profit in the year ended 2013 and 3.25 billion rupees in 2012.

The document, tabled in parliament in response to questions raised by the opposition, also said the company's total short- to long-term borrowing was 7.84 billion rupees.

The company posted 1.32 billion in profit for the six months ended June 30, a 4 percent drop from the year ago period, stock exchange data showed.

Malaysia's Global Telecommunications Holdings NV, a subsidiary of Malaysia's Maxis, the second largest investor in the firm, holds 45 percent in the company.

Sri Lanka Telecom shares ended steady at 50 rupees on Tuesday.

($1 = 130.8000 Sri Lankan rupee)

(Reporting by Ranga Sirilal; Writing by Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lanka stocks close higher

Oct 28, 2014 (LBO) - Sri Lanka's stocks closed 0.08 percent higher with tobacco and beverage stocks gaining amid strong foreign buying into diversified holdings, brokers said.

The Colombo benchmark All Share Price Index closed 6.04 points higher at 7,227.12, up 0.08 percent. The S&P SL20 closed 6.12 points lower at 4,008.10, down 0.15 percent.

Turnover was 1.66 billion rupees, up from 986.45 million rupees a day earlier with 95 stocks closed positive against 97 negative.

John Keells Holdings closed 80 cents lower at 249.10 rupees with eight off market transactions of 481.76 million rupees contributing 29 percent of the turnover.

The aggregate value of all off-the-floor deals represented 44 percent of the daily turnover.

Bogala Graphite Lanka closed 6.70 rupees higher at 35.30 rupees and Watawala Plantations closed 20 cents higher at 20.20 rupees, attracting most number of trades during the day.

Foreign investors bought 1.16 billion rupees worth shares while selling 228.16 million rupees worth shares.

Ceylon Tobacco Company closed 12.90 rupees higher at 1,150.00 rupees and Ceylon Cold Stores closed 15.20 rupees higher at 264.60 rupees, contributing most to the index gain.

Lanka Orix Leasing Company closed 2.30 rupees higher at 87.20 rupees and Cargills Ceylon closed 2.50 rupees higher at 155.00 rupees.

Dialog Axiata closed 10 cents higher at 12.30 rupees.

Central Depository System frustrates shareholders

By J. Kurukulasuriya

Ceylon Finance Today: The Central Depositary System (CDS) of the Colombo Stock Exchange is mired in officialdom and over regulation according to reliable market sources. Shareholders whose parents or relatives have died leaving them as heirs to shares in companies listed on the stock exchange are being left in limbo.

One leading stock brokering firm told Ceylon FT that several of their clients have been unable to sell shares which they inherited, due to 'frivolous' objections by the CDS. For example, the CDS's own rules require an Administrator of a deceased person's Estate to submit copies of the letter of Administration with the 'consent to sell' signatures of the joint heirs, if any. In one instance where such documents were submitted, the CDS rejected them merely because the names of the joint heirs had been numbered as 1, 2, 3 in pencil. In another instance where two heirs jointly requested that the shares they inherited be transferred to their names as joint holders, the CDS refused. This was in spite of a load of paperwork being complied with. They now have no means by which they can dispose of their inheritance.

Evidence of shares languishing in the name of deceased persons can be seen by scrutinizing the lists of 'Top Twenty shareholders' which the listed companies are required to disclose in their Annual and quarterly reports. The 'Top Twenty' often include the names of many persons specified as deceased persons, represented by their Administrators or Executors. In many instances these are foreigners who find it doubly difficult to get through the CDS's red tape.

It is also frustrating for shareholders to identify the persons at the CDS making apparently high handed decisions because they do not disclose their names in correspondence, and make it a point to sign letters illegibly.

At a recent CDS investor's forum which lasted several days, and aimed at encouraging more ordinary investors to put their money into listed shares, the CDS top managers talked of its transparency and efficiency. This is not the reality for those dealing with the CDS.

In a move to back up recent claims by SEC Chairman Nalaka Godahewa, that shortcomings in the Colombo Stock Exchange are being rectified, the CSC and Securities and Exchange Commission (SEC) has commissioned an independent study of the stock exchange.

The purpose of the study — which is being conducted by Research Consultancy Bureau (Pvt) Ltd., an independent research group, is to "explore and understand the views of the local investors," and all CDS account holders have been contacted. After initial contact some months ago, the study has not proceeded.
www.ceylontoday.lk

LOLC goes for first-ever listed debenture issue to raise Rs. 5 billion

Lanka Orix Leasing Company Plc (LOLC) has announced a listed debenture issue to raise Rs. 5 billion.

The company said it will issue 50 million senior unsecured redeemable rated debentures at Rs. 100 each. The Colombo Stock Exchange has approved in principle an application for the listing of the debentures.

Debentures will be up for subscription from 7 November whilst the official opening is 18 November.

First Capital Ltd. is the manager to the issue.

The funds raised through the debentures will be utilised for the retirement of short-term debt of LOLC.

This is the first-ever listed debenture issue of LOLC. In 2011 it listed 7.5 million four (6.1 million) and five year (1.4 million) debentures of Rs. 100 each via an introduction. These debentures mature in 2015 and 2016 respectively.

The four-year debenture carried a coupon interest rate of 11.70% per annum and the five-year instrument carried 11.90% per annum. Allotments were made to qualified investors by way of a private placement.

As at 30 June 2014, LOLC at company level had Rs. 15.3 billion in interest bearing borrowings down from Rs. 21 billion from a year earlier but higher in comparison to Rs. 13.8 billion as at end FY14.

Assets amounted to Rs. 50 billion as at June 2014 and liabilities were Rs. 16 billion.

LOLC Group pre-tax profit in the June quarter was Rs. 1.35 billion, up by 45%, whilst after tax profit grew by a similar percentage to Rs. 1 billion. Profit attributable to equity holders of the company was Rs. 926 million, up from Rs. 152 million in the first quarter of FY14. (SAA)
www.ft.lk

Fitch Downgrades Asian Alliance Insurance's National IFS Rating to 'BBB(lka)'

(The following statement was released by the rating agency) 

COLOMBO/HONG KONG, October 27 (Fitch) Fitch Ratings Lanka has downgraded Sri Lanka-based Asian Alliance Insurance PLC's (AAIP) National Insurer Financial Strength Rating and National Long-Term Rating to 'BBB(lka)' from 'BBB+(lka)'. The agency also affirmed AAIP's Insurer Financial Strength (IFS) Rating at 'B'. All ratings have been placed on Rating Watch Negative (RWN). 

KEY RATING DRIVERS 

The one-notch downgrade of AAIP's national ratings follows the significant deterioration of its ultimate parent Softlogic Holdings Plc's (SHL; BBB-(lka)/RWN) credit profile which is reflected by SHL's two-notch downgrade on 2 October 2014. SHL's weaker credit profile reduces its ability to provide AAIP with additional capital to support growth if required, and may also diminish the synergistic benefits the company derives from being a part of the group. 

AAIP is regulated by the Insurance Board of Sri Lanka and is subject to rules and regulations, including the maintenance of a minimum regulatory solvency of at least 1x for both life and non-life business. 

The minority shareholders of AAIP, including Deutsche Investitions- und Entwicklungsgesellschaft (DEG) and Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO, AAA/Stable/F1+) who hold 19% each of the company, are likely to act as a deterrent to excessive dividend payments. 

As such, AAIP's downgrade was limited to a single notch. The RWN reflects the potential drag of SHL's weakened liquidity profile on AAIP's credit profile, for example through high dividend payments to support SHL's capital and liquidity needs. 

SHL's ratings have been placed on Rating Watch Negative (RWN) to reflect concerns on its liquidity, capital structure and financial flexibility. AAIP's ratings also reflect its modest but growing market share and the pressure on its capitalisation from rapid top line growth. In additional, the ratings are supported by the synergistic benefits gained from being part of the Softlogic group based on SHL's controlling ownership in AAIP. The profile of AAIP has been boosted by DEG and FMO ownership of 19% each in the company. 

Established in 1999, AAIP is a composite (life and non-life) insurer accounting for less than 3% of industry assets at end-2013. AAIP has operational synergies with the group due to its presence in healthcare and financial services. The company also has access to the group's branches and retail outlets across the country. The company has over 50 branches. AAIP's combined (life and non-life) gross written premium for 1H14 was LKR2.27Bn, a 14% growth from 1H13. 

RATING SENSITIVITIES 

Rating Watch Negative will be resolved upon demonstration by AAIP of its ability to sustain its credit metrics without any drag from SHL's weakened liquidity position, and upon resolution of SHL's RWN without any further downgrade should the company sufficiently address its near-term refinancing requirements. The ratings may be downgraded if there is sustained weakening in AAIP's regulatory solvency ratios to below 1.5X for life or non-life, or if there is significant weakening in the credit profile of the controlling shareholders of AAIP. 

Contacts: 

Primary Analyst (International Ratings) Jeffrey Liew Senior Director +852 2263 9939 Fitch(Hong Kong) Limited 2801, Tower Two, Lippo Centre, 89 Queensway Hong Kong Secondary Analyst (International Ratings) Nayantara Bandaranayake Analyst +94 112541900 Primary Analyst (National Ratings) Nayantara Bandaranayake Analyst +94 112541900 Fitch Ratings Lanka Limited Level15-04, East Tower, World Trade Center Colombo 01, Sri Lanka Secondary Analyst (National Ratings) Jeffrey Liew Senior Director +852 2263 9939 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Bindu Menon, Mumbai, Tel: +91 22 4000 1727, Email: bindu.menon@fitchratings.com. 

Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(lka)' for National ratings in Sri Lanka. Specific letter grades are not therefore internationally comparable. 

Additional information is available at www.fitchratings.com Applicable criteria, 'Insurance Rating Methodology ', dated 4 September 2014, and 'National Scale Ratings Criteria', dated 19 January 2011, are available at www.fitchratings.com. 

Applicable Criteria and Related Research: Insurance Rating Methodology here 

National Scale Ratings Criteria here

Additional Disclosure Solicitation Status here 

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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