Sri Lanka Softlogic Capital's stated capital reduced

Mar 06, 2015 (LBO) - Sri Lanka's Softlogic Capital on Friday obtained the shareholder approval to reduce its stated capital, a statement said.

The decision has been made at an extraordinary general meeting which eventually intends to reduce the accumulated losses of the company.

According to a previous statement issued by the company, the amount of reduction of the stated capital is 618.46 million rupees and the new stated capital is 2.88 billion rupees.

"The number of ordinary shares in issue would remain unchanged." the company said in a stock exchange filing released in January.

Govt. justifies Treasury bond issuance

* Reveals Rs. 15 b additional funding required on an urgent basis to fund the recommencement of highways and road construction projects

* Previous regime hadn’t settled Rs. 44 b outstanding for land acquisition

* Says change in policy and procedures relating to setting of interest rates was in good faith and will result in several benefits to Govt. and economy

* Statement silent on allegations of a primary dealer unfairly profiteering

The Ministry of Policy Planning and Economic Affairs yesterday issued a statement on the Government’s Treasury bond issue in March which spiked rates in debt market causing widespread concern as well as led to allegations of a primary dealer unfairly profiteering.

The statement however was silent on the allegations but explained the background why interest rates rose.The Government also pointed a finger at the President Mahinda Rajapaksa regime for several irregularities of the past.

Here is the full text of the statement:
At a meeting held on 26 February 2015 to ascertain the Government expenditure projections attended by the Minister of Finance, Minister of Highways, Investment Promotion and Higher Education, Secretary to the Treasury and the Governor of the Central Bank of Sri Lanka, it was decided that the Government needs additional funding of approx. Rs. 15 billion on an urgent basis to fund the recommencement of highways and road construction projects.

The previous regime had not settled money owing to contractors and had not paid for lands acquired for road projects. The outstanding amount to be paid for land acquisition alone is Rs. 44 billion.

To complete the balance road construction work the Government needed Rs. 12 billion as counterpart funds. Most of the loan agreements for these projects have already been signed. Although the Government will be renegotiating prices, it will continue with these projects. The Government’s immediate needs for cash to make payments for the bills in hand and to complete incomplete projects were to be met through the Treasury bond issues in March 2015.

The latest bond issue was opened on 27February 2015. The amount offered was Rs. 1 billion. Thirty-six offers were received amounting to Rs. 20 billion in bids. This enabled the Governor of the Central Bank of Sri Lanka to accept Rs. 10 billion in accordance with the above decision.

Around September 2014, when it became clear that the previous Government would hold presidential elections in early 2015, the then management of the Central Bank of Sri Lanka decided to reduce interest rates and yields on Sri Lanka Government bonds.

As a consequence, the yield on the 10-year Sri Lanka Government bond declined from 9.23% in July 2014 to 7.88% in January 2015.Similarly, the yield on the Sri Lanka Government 30-year bond fell from 11.75% in May 2014 to 11.73% in February, 2015.

The foreign exchange reserves of Sri Lanka have been falling sequentially since interest rates were lowered in September 2014.From a level of $ 9.2 billion from June 2014 they have come down to $ 7 billion in February, 2015.As a result, the exchange rate of the Sri Lanka Rupee which has been under pressure depreciated by 1.2% in January 2015.

The acceptance of Rs. 10 billion worth of bonds has also resulted in raising the interest rate on the 30-year bond to 11.5% which is where it stood in June 2014 before interest rates were reduced. Furthermore, the Central Bank of Sri Lanka has also scrapped the three-day rule restriction that allowed banks to park their funds in the Central Bank at the 6.5% base rate on three days a month and get 5% in all other days, a practice implemented in September 2014.

The Government also decided that as far as possible all bonds should be through public auction. Private placement at pre-agreed rates only helped favoured investors.

It’s a well-known fact that during the last decade the intersection of finance and business was controlled by a few people with nexus to the Rajapaksa regime. They had access to vital information on transactions, which they used to earn undue profits. There were prearranged transactions with state owned institutions instead of public auctions open to stock brokers and large investors.

Many stakeholders were adversely affected due to manipulations in the stock market. Two chairpersons of the SEC lost their jobs trying to enforce the existing regulations. The Government is inquiring into these prior malpractices and will also investigate the alleged malpractices which are taking place at the Public Debt Department during bond auctions and private placements.

Finally, the above change in policy and procedures relating to setting of interest rates was done in good faith and will result in several benefits to the Government and economy of Sri Lanka such as;

(a) the maintenance of a stable currency

(b) the maintenance of a clear and stable monetary policy conforming to international standards

(c) creating a liquid yield curve to enable the market to price risk.

(d) the transparent conduct in the sale of Government securities to the markets without pandering to vested interests

(e) the adoption of an appropriate monetary policy stance keeping with the current state of the finances of the Government of Sri Lanka; and

(f) ensuring sufficient funding for the Government in the next six months which will ensure no interruption to the implementation of policies announced in the Budget and the 100-day program.
www.ft.lk

Sri Lankan stocks hit 1-mth closing low on rising rates

(Reuters) - Sri Lankan stocks closed at a one-month low on Friday in a five-session losing streak as investors pulled back amid rising interest rates and political uncertainty ahead of parliamentary elections.

The central bank removed a penalty rate of 5 percent on its repo rate with effect from Monday. The bank has used the measure to discourage commercial banks from parking money with it at an interest rate of 6.5 percent.

The scrapping of the penalty resulted in a rise in t-bill yields of between 86 basis points and 91 basis points on Tuesday.

The main stock index fell 0.26 percent, or 18.70 points, to 7,183.50, its lowest close since Feb. 6, declining 1.86 percent in the last five sessions through Friday.

"A proper direction is lacking. Investors are waiting to see some sort of direction in interest rates and (on the) political front," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.

Elections to Sri Lanka's 225-member parliament are expected to be announced after April 23 and it is unclear whether the ruling coalition led by President Maithripala Sirisena would contest unitedly or go to the polls separately.

Political analysts expect a hung parliament if Sirisena's coalition members contest separately in the polls.

Shares in Ceylon Tobacco Company Plc fell 1.4 percent while Ceylon Theatres fell 6.6 percent.

Turnover was 1.36 billion rupees ($10.23 million), in line with this year's daily average of 1.37 billion rupees.

Foreign investors were net buyers of 311.8 million rupees worth of shares, extending the year-to-date foreign inflow to 2.16 billion rupees.

($1 = 132.9000 Sri Lankan rupees) 

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

Market misconduct investigations to restart: Thilak

Capital market regulator, the Securities and Exchange Commission (SEC) will revive the investigations against the alleged capital market offenders involved in pumping and dumping of shares, leaving thousands of innocent retail investors destitute during 2010 and 2011, the re-appointed Chairman, Thilak Karunaratne said.

“We are reviewing some of these cases again and trying to do justice to those who have got played out,” Karunaratne said addressing the Sri Lanka Legal Summit 2015, yesterday.

He said the new SEC Act will have to be redrafted with certain amendments to adequately enhance the regulator’s power in curbing fraudulent acts.
However, he said at least 18 months will take for the new draft to become legislation.

Some of the investor protections contemplated by the draft will prevent serious market misconduct just being settled with a fine; disallow market offenders to serve on boards of the Public Limited Companies (PLCs) etc. 

www.dailymirror.lk

New Risk Management Dept. to oversee EPF fund management

A new risk management unit has been set up by the Central Bank to outline proper rules and regulations that would ensure risks are minimized in the process of managing the Employees’Provident Fund (EPF).The unit has been established on the instructions of Central Bank Governor, Arjuna Mahendran in a bid to avoid explicit conflict of interest, when the EPF invests in banks’ shares, which are regulated by the Central Bank. 

“One way of addressing this issue (conflict of interest)in managing debt or the EPF is establishing rules and ways of conducting business that would ensure risk in its broader sense is managed effectively. 

I have recently opened up a new department in the bank – Department of Risk Management,” Mahendran said.Speaking at the Sri Lanka Legal Summit held yesterday at the Cinnamon Grand hotel Colombo, he further said the Central Bank is currently working with institutions in the United States and other developed countries on knowledge transfers to enhance risk management functions of the bank. 

The newly appointed Governor is of the belief that such a system will enable the Central Bank to alleviate some of the issues and allegations of mismanagement and conflicts of interest surrounding the bank, in managing the country’s single largest pension fund, particularly due to its controversial investments in certain listed shares. 

According to Mahendran, the new unit will not just oversee the EPF but will also apply its expertise to all other agency functions such as public debt management and fiscal advisory role to the government, official depository and financial advisor and administration of Exchange Control Act. 

The observation made by Central Bank Governor yesterday on the future course of action on EPF is however in contradiction with what he said a month ago. “I wouldn’t want to jump the gun and divest these (shares of listed banks) immediately, though it is desirable, because we have to have more liquidity in public markets for these bank shares, and indeed all the other shares which have been acquired by the government through the EPF in the last few years,” Mahendran told a post-budget seminar organized by Ceylon Chamber of Commerce. 

Under the previous regime, the Central Bank had been accumulating shares of banks and other nonbank finance institutions (and other listed entities) through the EPF— up to the single shareholder limit of 10 percent in certain cases, and appointed directors to their boards, virtually nationalizing private sector banks in the country in order to fund state projects, if otherwise would not get funded. 

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AIA Sri Lanka posts Rs 352 m PAT

The Board of Directors of AIA Insurance Lanka PLC announcing the financial results of the Company and its subsidiaries for the year ended December, 31 2014.

The execution of clear strategic priorities lead to the sustained growth of Gross Written Premium (GWP) by 7.1 per cent to Rs 10,213 million compared with Rs 9,536 million in 2013.

Investment income,including gains,grew by 6.8 per cent to Rs 4,707 million, mainly due to the increase in market values of equity securities Life insurance GWP grewby 5.9 per cent to Rs 7,267 million General insurance GWP increased by 10 per cent to Rs 2,946 million Solid performance with significant investment in countrywide expansion.

Consolidated profit after tax was lower at Rs 352 million,including a significant investment in expanding our branch network to deliver long-term,sustainable growth and lower investment income from a reduction in interest rates. A life surplus of Rs 100 million was declared

AIA Sri Lanka CEO Shah Rouf said: "In 2014 we continued our focus on delivering quality growth through the execution of our strategic priorities. During the year, we successfully expanded our footprint across Sri Lanka by increasing our branch network to 123 locations and growing our number of Wealth Planners to over 5,000.

"Our customers are at the heart of what we do and our investment in expanding our business will enable us to meet the substantial and evolving needs of our customers, while delivering the best possible customer experience.
www.dailynews.lk

Browns buys into FLC JV

Browns Investments PLC has acquired 50,000,000 shares of F L C Joint Venture Company (Pvt) Ltd, which is 50% of the stated capital of the Company, from Perpetual Holdings Limited on March 3, 2015 for Rs. 651,200,000.

FLC Joint Venture Company (Pvt) Ltd was a joint venture between Browns Investment PLC and Perpetual Holdings Limited. FLC Joint Venture Company (Pvt) Ltd holds 747,600,000 shares amounting to 54.65% in FLC Holdings PLC.

Subsequent to the said acquisition Browns Investments PLC will be the sole shareholder of F L C Joint Venture Company (Pvt) Ltd.
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