Sri Lankan stocks hit 3-wk closing high in holiday-thinned trading

Reuters: Sri Lankan shares touched a near three-week closing high on Wednesday as investors waited for clues from the central bank’s monetary policy review later in the week, with trading muted by the holidays after Christmas.

Sri Lanka’s central bank is expected to keep its key interest rates unchanged this week, a Reuters poll showed, as policymakers focus on supporting the slowing South Asian economy while remaining vigilant to still high inflationary pressures.

The Colombo Stock Index ended 0.14 percent firmer at 6,359.06, its highest since Dec. 8.

“Trading blue chip counters moved up slightly helping the index to end positive but the market is very dull as most of the brokers and investors are on holiday,” said Dimantha Mathew, head of research at First Capital Holdings.

Shares in Peoples Leasing Plc rose 0.6 percent, while Overseas Realty Plc ended 2.9 percent higher and Hemas Holdings Plc gained 0.8 percent.

Turnover stood at 263.3 million rupees ($1.73 million), just above a quarter of this year’s daily average of 920.5 million rupees.

Foreign investors sold 130.1 million rupees net worth of shares on Wednesday, but they have bought 18.2 billion rupees net worth equities so far this year. 

($1 = 152.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)

LOLC Finance goes for Rs. 5.88 b Rights to merge with group microcredit arm

LOLC Finance has received approval from the Central Bank to acquire 100% of LOLC Micro Credit Ltd., and to merge the two entities as part of consolidation with a move to enhance capital via a Rs. 5.88 b Rights Issue.

Post-merger, LOLC’s finance directors expect significant growth in assets as the synergies are expected to unlock new market opportunities. LOMC is 80%-owned by Lanka Orix Leasing Company Plc and 20% by FMO (Nederlandse Financierings - Maatschappij Voor Ontwikkerlingslanden NV). LOLC is the controlling shareholder of LOFC.

The increase in the asset base immediate upon the merger and the subsequent expected business growth in the merged entity will require additional capital to comply with the capital adequacy requirements stipulated by the Central Bank. For this the LOLC finance directors have approved a Rs. 5.88 billion Rights Issue on the basis of one for two at Rs. 4.20 each involving the issuance of 1.4 billion shares.

The current stated capital of LOLC Finance is Rs. 2 billion represented by 2.8 billion shares. Post-Rights, the stated capital will increase to Rs. 7.88 billion represented by 4.2 billion shares.

Funds raised via Rights Issue will be used to raise additional capital to ensure compliance with the Central Bank Risk Weighted Capital Adequacy Ratio and enhance the Tier 1 Capital base of the company and meet future business growth.

The Rights is subject to regulatory and shareholder approvals.

Net asset per share of LOLC Finance was Rs. 4.21 as of 30 September 2017. It had assets worth Rs. 134.85 billion, up from Rs. 122.6 billion as at 31 March 2017. Liabilities were Rs. 123 billion, up from Rs. 111.6 billion.

In the six months ended 30 September 2017, the total income of LOLC Finance was Rs. 

5.28 billion, up by 23% from a year earlier. After-tax profit was Rs. 620.6 million, down by 13%.

The public shareholding of LOLC Finance is 9.88%, held by 2,615 shareholders.
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Sri Lankan stocks hit near 2-wk closing high

Reuters: Sri Lankan shares touched a near two-week closing high on Tuesday, as investors picked up banking and diversified stocks, with muted trading as investors went on holiday in the Christmas week.

Investors were also waiting for direction on interest rates when the central bank unveils its monetary policy later this week, analysts said.

The Colombo Stock Index ended 0.42 percent firmer at 6,350.30, its highest since Dec. 15.

“The overall uptrend is due to some window-dressing in some of the blue chip counters,” said Dimantha Mathew, head of research at First Capital Holdings.

“Overall investor interest is very low and it’s a very weak market with most of the broker community also on holiday.”

Shares in conglomerate John Keells Holdings Plc gained 1.1 percent, while Sri Lanka Telecom Plc ended 4.1 percent higher and Hatton National Bank Plc rose 0.2 percent.

Turnover stood at 153.8 million rupees ($1.01 million), below this year’s daily average of 923.2 million rupees.

Foreign investors net sold 4.1 million rupees worth of shares on Tuesday, but they have net bought 18.4 billion rupees worth equities so far this year.

The currency and stock markets were closed on Monday for Christmas. 

($1 = 152.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Biju Dwarakanath)

Retail demand to absorb entirety of LVL Energy Fund IPO

The recently oversubscribed IPO of LVL Energy Fund Ltd. had attracted 749 retail applications.

The value of their applications is Rs. 1.36 billion whilst the IPO was worth Rs. 1.2 billion offering 120 million shares at Rs. 10 each.

The IPO had drawn three applications worth Rs. 60 million with payment made by bank guarantees.

In total the IPO drew 752 applications requesting Rs. 1.42 billion shares.

The financial advisor and manager to the IPO was Acuity Partners.

The LVL Energy Fund IPO was the biggest in four years. LEF is a subsidiary of Lanka Ventures Plc and was incorporated in 2006 for the purpose of consolidating LVEN’s energy sector investments. LEF has invested jointly with reputed project developers to develop and operate power generation projects (installed capacity of operational projects amounts to 136.6 MW). LEF will be using IPO funds to retire some debt and retire some preference shares to be invested in three new hydropower projects.

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Trading of BASEL III compliant debentures limited to qualified investors

Trading of BASEL III compliant-debt securities issued by banks will be limited to qualified investors as recommended by the Securities and Exchange Commission.

The CSE said that the SEC has approved the amendments to the Automated Trading System Rules which facilitate the trading of BASEL III-compliant debt securities issued by commercial banks and specialised banks licensed by the Central Bank.

Those specified by the SEC as qualified investors are a commercial bank, specialised bank, a mutual fund, pension fund, employee provident fund or any other similar pooled fund, a venture capital fund or company and private equity company, a finance company licensed by the Central Bank, a company licensed by the Central Bank to carry out finance leasing business, a company licensed by the Insurance Board of Sri Lanka to carry on an insurance business, a corporate (listed or unlisted) which does not fall under the above categories and is incorporated under the Companies Act, an investment trust or investment company, a non-resident institutional investor and an individual with an investment of Rs. 5 million.

As per the amended ATS rules, any trade executed on BASEL III-compliant debt securities where the buyer is not a qualified investor will be cancelled by the CSE and the buying broker firm must pay the CSE a trade cancellation administration fee of Rs. 10,000 or 0.005% of the total value of the transaction, whichever is higher, subject to a maximum of Rs. 25,000.

CSE said broker firms are required to take necessary measures to restrict investors from placing orders for BASEL III-compliant debt securities using an internet trading facility. Only qualified investors should be allowed to place orders for BASEL III-compliant debt securities through the internet trading facility.

Broker firms are required to flag ‘Qualified Investors’ in their respective Broker Back Office System and Order Management System in order to restrict the order submission to BASEL III securities “qualified investors”.

Secondary trading should also be restricted to and between qualified investors.

The amended ATS rules to facilitate trading of BASEL III-compliant debt securities are available on the CSE website www.cse.lk.
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Two big investors apply for over half of Jetwing Symphony IPO

Family-owned Jetwing Sympony Ltd. has attracted 346 applications for its Rs. 750 million IPO.

From the responses, two applications with a payment made by bank guarantee had accounted for over half of the IPO value of Rs. 451.7 million. The balance 344 applications are, at a retail level, requesting Rs. 336.4 million shares. A total of 346 applications have requested Rs. 788.2 million shares.

Jetwing Symphony is the investment arm of the Jetwing leisure and travel group. The IPO of 10% stake was based on a formal book-building process with a price band ranging from Rs. 15-18.

The IPO funds will be utilised to complete Jetwing Symphony’s projects in the pipeline and settle debt payments.

Capital Alliance Partners is the manager to the issue.
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Fitch affirms 9 Sri Lankan banks: Revises DFCC outlook to Stable

LBO - Fitch Ratings has revised the Outlook on DFCC Bank Plc (DFCC) to Stable from Negative.

It has also affirmed the Long-Term Issuer Default Ratings (IDR) of the following Sri Lanka-based banks:

– National Savings Bank (NSB) at ‘B+’; Outlook Stable

– Bank of Ceylon (BOC) at ‘B+’; Outlook Stable

– DFCC at ‘B+’; Outlook revised to Stable from Negative

Fitch has also affirmed the National Long-Term Ratings of the following banks:

– NSB at ‘AAA(lka)’; Outlook Stable

– BOC at ‘AA+(lka)’; Outlook Stable

– DFCC at ‘AA-(lka)’; Outlook revised to Stable from Negative

– People’s Bank (Sri Lanka) (People’s Bank) at ‘AA+(lka)’; Outlook Stable

– Commercial Bank of Ceylon Plc (CB) at ‘AA(lka)’; Outlook Stable

– Hatton National Bank Plc (HNB) at ‘AA-(lka)’; Outlook Stable

– National Development Bank Plc (NDB) at ‘A+(lka); Outlook Stable

– Sampath Bank Plc (Sampath) at ‘A+(lka)’; Outlook Negative

– Seylan Bank Plc (Seylan) at ‘A-(lka)’; Outlook Stable

The rating action follows Fitch’s periodic review of the large bank peer group. Fitch has maintained the negative outlook on Sri Lanka’s banking sector as it expects challenging operating conditions to persist into 2018.

The sector outlook is sensitive to trends in the operating environment. Bank credit profiles should broadly remain intact, but there could be modest pressure on the ratings of some banks if sufficient loss-absorption buffers are not maintained.

Capitalisation remains a key issue facing the sector. There was some capital-raising among banks in 2017 and Fitch expects this to continue into 2018. Sri Lankan banks are required to phase in higher capital buffers to meet Basel III regulations that come into effect on 1 January 2019.

In addition, Fitch believes there could be a significant impact on banks’ capitalisation through the adoption of Sri Lanka Financial Reporting Standards (SLFRS) 9 in 2018, although the effect of this on regulatory capital ratios could be spread out.