Sri Lankan shares close higher, Ceylon Tobacco leads

Feb 26 (Reuters) - Sri Lankan stocks closed firmer on Thursday, ending two straight sessions of losses, led by large caps such as Ceylon Tobacco Company Plc despite selling by foreign investors.

The main stock index ended 0.18 percent higher, or 12.83 points, at 7,317.44.

Shares in Ceylon Tobacco Company Plc rose 3.81 percent with 14,993 shares changing hands while Commercial Credit and Finance Plc rose 7.11 percent.

Turnover was 1.38 billion rupees ($10.38 million), less than this year's daily average of 1.41 billion rupees.

Foreign investors sold a net 326.3 million rupees worth shares on Thursday. They have bought 1.68 billion rupees worth shares so far this year.

The bourse saw net foreign inflow of 22.07 billion rupees in 2014.

($1 = 132.9000 Sri Lankan rupees) 

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

Malaysian Minister of Infrastructure at CSE Market Opening Ceremony

The Special Envoy (Ministerial Rank) to India and South Asia on Infrastructure, Prime Minister’s Department, Government of Malaysia Dato’ Seri Utama S. Samy Vellu rang the ceremonial opening bell at the start of trading today (26th). 

Deputy Minister of Policy Planning and Economic AffairsHon. (Dr.) Harsha De Silva and Chairman of the Securities and Exchange Commission Mr. Thilak Karunaratne, made their first visits to the CSE following their appointments. 

The Bell Ringing Ceremony, to signify the Opening of Trading for the Day at 09.30 am takes place from the purpose built platform on the trading floor. The CSE, in keeping with the tradition followed by many Exchanges globally, opens trading with the formal bell ringing ceremony on the first day of trading of a new listing or during the visit of notable persons to the Exchange. 

Chairman of the Colombo Stock Exchange Mr. Vajira Kulatilaka and Members of the Board of Directors of the Colombo Stock Exchange, Acting Director General/ Officer-in-Charge of the SEC Mr.Dhammika Perera and Chief Executive Officers of Member Firms and Trading Members of the CSE were also present at the event. 

“We as a government, want to create a country where we have a large middle class that owns shares - we hope to create an asset owning middle-class. We want people in the peripheries, the rural areas, to be able to trade in high value stocks as well and we want people to trade in corporate debt. Our objective is to broad base the activity of the Exchange, not just to Colombo but to the rural areas. The government is committed to create a highly competitive social-market-economy, this economy will be built on two pillars –firstly competition and secondly justice. When we say justice we mean economic, political and social justice,”Deputy Minister of Policy Planning and Economic Affairs Hon. (Dr.) Harsha De Silva said. 

“Our common objective is to see a well regulated capital market, where all the investors get a fair deal. We are now working on improving any weak areas and perhaps bring in more amendments to our act, which will give us more strength and teeth to correct any shortcomings, in the Capital Market and hope to work closely with the Colombo Stock Exchange,” Chairman of the Securities and Exchange Commission Mr. Thilak Karunaratne said. 

“We have a close relationship with the Malaysian Capital Market and we look forward to doing more with them, especially in terms of technology transfers with Bursa Malaysia. Currently our team of consultants on the Central Counter Party (CCP) system being developed, includes experts who were instrumental in the development of the CCP system at Bursa Malaysia.” Chairman of the CSE Mr. Vajira Kulatilaka said. 

The Special Envoy (Ministerial rank) to India and South Asia on Infrastructure, Prime Minister’s Department, Government of Malaysia Dato’ Seri Utama S. Samy Vellu, conveyed to a CSE Official that during his visit to Sri Lanka he had explored the possibilities for Malaysian companies engaged in infrastructure projects to invest in Sri Lanka. He went on to explain that the Sri Lankan Capital Market would benefit from large infrastructure projects, which would seek to raise capital through the Stock Exchange, similar to the experience of Bursa Malaysia. 

- CSE

Sri Lanka’s CSE to go for ‘Central Counterparty System’

Colombo Stock Exchange (CSE) is to set up a ‘Central Counterparty System’ (CCP) as a measure to safeguard both the investors as well as the stockbrokers. This is being done for the first time in Sri Lanka, CSE Chairman Vajira Kulatilaka said this morning (26 February).

The CCP is a fund which would safeguard both parties in a CSE transaction, according to Kulatilaka. Currently, if a stockbroker/investor faces a problem after a transaction he has no assurances for relief. The Central Counterparty System will be a mechanism to provide this relief.

Vajira Kulatilaka added that most Stock Exchanges in other countries have this Central Counterparty System. Even Bangladesh has this fund and in that way it is ahead of Sri Lanka.

“The Securities & Exchange Commission, the Colombo Stock Exchange and the Central Bank of Sri Lanka are discussing the details to establish the Central Counterparty System. A Malaysian consultant is advising them on this issue.

“Presently there is a Settlement Guarantee Fund, with a Rs. 600 million capital in hand from where investors/stockbrokers could obtain relief. This fund will be transferred to the Central Counterparty System. From there, those dealing in the stock market could contribute towards this,” explained the CSE Chairman.

The ‘Central Counterparty System’ (CCP)The Investopedia defines a CCP as ‘an organization that exists in various countries that helps facilitate trading done in derivatives and equities markets. These clearing houses are often operated by the major banks in the country. The house’s prime responsibility is to provide efficiency and stability to the financial markets that they operate in.

There are two main processes that are carried out by CCPs: clearing and settlement of market transactions. Clearing relates to identifying the obligations of both parties on either side of a transaction. Settlement occurs when the final transfer of securities and funds occur.

CCPs benefit both parties in a transaction because they bear most of the credit risk. If two individuals deal with one another, the buyer bears the credit risk of the seller, and vice versa. When a CCP is used the credit risk that is held against both buyer and seller is coming from the CCP, which in all likelihood is much less than in the previous situation.

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Special Interest Scheme for Senior Citizens

The Government of Sri Lanka has now finalised the procedure for implementation of the Special Interest Scheme for Senior Citizens announced in the Interim Budget 2015 with effect from 01.02.2015. 

Accordingly, the Central Bank of Sri Lanka issued the necessary Operating Instructions on behalf of the Government to all banks today. Key features of the Scheme are as follows: 

* Senior Citizens eligible for the Scheme: 

(a) Senior citizens above 60 years of age who held rupee fixed deposits not exceeding Rupees one million in aggregate in all banks as at 31.01.2015. 

(b) Senior citizens who reach 60 years of age after 31.01.2015 and hold rupee fixed deposits not exceeding Rupees one million in aggregate in all banks. 

(c) Senior citizens who opened fixed deposits of up to Rupees 2.5 million, prior to 16.01.2015 under the previous scheme. 

* Interest rate payable in the Scheme: 

(a) 15% per annum for (a) and (b) above 

(b) 12% per annum for (c) above 

Accordingly, Operating Instructions dated 30.12.2014 on the special interest scheme for senior citizens over 60 years of age have been revoked.

30 year old T-bond on offer

By Paneetha Ameresekere

Ceylon Finance Today: The Central Bank of Sri Lanka (CBSL) for the first time after more than 10 years, will be issuing a 30 year old (2045) maturing Treasury (T) bond to the market tomorrow (Friday). The value of this tenure is Rs 1billion.

The last time such a tenure was offered was when Ranil Wickremesinghe's UNP/UNF government was in power during the period December 2001 to April 2004.

The coupon rate prescribed for tomorrow's tenure is 12.5% per annum. But market sources told Ceylon FT that the yield expected to be fetched for the 30 year old tenure would be more than 12.5%.

However, what was being traded in the market yesterday were those of four, six and seven year tenures, that is, those of 2019 maturities which fetched yields of between 7.40-7.50%, 2021 maturity (7.65-75%) and 2022 maturity (7.85%) respectively.

While those of the 2019 and 2021 maturities saw their yields increase by three basis points (bps) each, yields of 2022 maturities increased by five bps at yesterday's trading, market sources told Ceylon FT. Those increases were caused primarily due to trading, they said.

Nevertheless, sources expected market's appetite to be for those three tenures, namely the 2019, 2021 and 2022...maturities to continue and not be desirous of the 2045 maturity that would be offered to the market tomorrow.

Meanwhile, yesterday's T-bill primary auction saw the weighted average yields of 91 day (three months), 182 day (six months) and 364 day (one year) maturities increasing by four, six and one bp to 5.98%, 6.09% and 6.13% respectively, week on week.

The reason for the yields increase is because excess liquidity is in the hands of only a few banks, sources said. The majority of Sri Lanka's over 20 commercial banks have a problem as far as their excess liquidity positions are concerned, they said. In related developments, Rs 66.4 billion maturing repos will realize tomorrow. Market's excess liquidity on Tuesday was Rs 16.8 billion.
www.ceylontoday.lk

Serves two masters, CBSL, management - Dilemma of FX market

By Paneetha Ameresekere

Ceylon Finance Today: The foreign exchange (FX) market has to serve two masters, Central Bank of Sri Lanka (CBSL) and its management, that is its dilemma, market sources told Ceylon FT yesterday (25 February).

While CBSL released the cap on forwards premia on Tuesday (24 February), however, it is keeping a watch over prices by moral suasion, by allowing the exchange rate (ER) to trade only within a band ranging from Rs 133.20-133.50 to the US dollar up to one week's forwards in interbank trading, they said.

CBSL is not allowing prices to go beyond that, sources said.

Nevertheless, the 'spot' is capped at Rs 132.90, they said. Till Tuesday, forwards premia too were capped at two Sri Lanka cents (SLc) per day, nevertheless, though this cap was removed by CBSL, CBSL's moral suasion, like the Sword of Damocles, hangs over banks' heads, by not allowing forwards to trade beyond the aforesaid range of Rs 133.20-133.50, sources said.

The previous Governor Ajith Nivard Cabraal may have had a million faults, but at least as far as the FX market was concerned he had a direction, they said. However, in the case of the present regime, nobody in authority wants to take a decision.

"As a result, we are being squeezed by the management to show profits, but at the same time when we try to get more rupees for dollars, we are pulled up by CBSL," they said.

Pressure on the rupee to depreciate is caused by the twin effects of import demand and Government of Sri Lanka's foreign debt servicing commitments. Sri Lanka runs a deficit in its current account caused chiefly by carrying a negative trade balance.
www.ceylontoday.lk

End to market manipulation

Indunil Hewage indunil.hewage@gmail.com

The Colombo Stock Market will not be used for ulterior motives in the future, Finance Minister Ravi Karunanayake said.

He made this remark addressing a seminar held in Colombo on Interim Budget Highlights 2015-Tax proposals and impact on Business, organized by the Institute of Certified Management Accountants of Sri Lanka.

Responding to a question raised at the seminar about market manipulation and insider trading, Karunanayake stressed that stern action would be taken against those trying to dump an account. “When we did a trend analysis of certain people, it was found that 98% of the market is held by 3 to 4% individuals. We will not allow these people to dominate the market in the future.

There are compounded cases, almost 30 that have been closed.

We ensure the those corrupt measures will be re-looked at.

The Minister called upon the private sector, government servants, chambers and foreigners to bring forward innovative ideas and solutions to address the pressing needs of the economy.

“We want to walk the talk. The government needs to listen to these problems. We’re willing to learn from them. If you have ideas that are helpful to the economy, please come forward. The private sector was maintaining a wait and see policy, why don’t you get involved, the Minister queried.

“This was the main reason that the government imposed a one time supergain tax. I appreciate the response with happiness as almost 99% of the companies that are called upon have accepted this in a correct way,” the Minister said.

The government will also publish the exact figures of the Sri Lankan economy to reveal the exact status of the economy within a month. We will put the real figures out, so that we can share exact figures with openness and share this with all multilateral agencies, rating agencies.

Commenting on taxation on hybrid vehicles, the Minister said that the prime objective of this move is to collect revenue from the people who can afford.

“Only the traders are having a problem here. We have given them some subsidies and exemptions and my question is why can’t they add that and sell it to the customers.

The Minister while commending CMA’s role in the accounting sphere berated some associations that haven’t done what is expected of these associations. “We want professionals to be professionals and not to be trying to curry favour with the government. As accountants, we need to show the world that we stand up to what’s right. I don’t think they played the role they are expected to play. We saw how some of the private sector individuals and organizations reacted in the past which basically distorted the country’s economy,” he said .
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