Colombo Stock Exchange Market Review – 03rd Jan 2017

(Click here)

Colombo Stock Exchange Trade Summary 03-Jan-2017

Colombo Bourse extended losses on Tuesday with both indices closing on negative territory for the third straight session. ASI lost 33.75 index points or 0.5% to close at 6,159.12 while S&P SL 20 index edged 34.10 index points (-1.0%) lower to close at 3,438.40. The bearish sentiments were seen across the board with losers outweighing gainers 93 to 30. 71 shares remained unchanged.

John Keells Holdings dominated days’ trading, contributing nearly 71% of the turnover. The counter hit a low of LKR 138.10 but managed to close at LKR 139.00 (-0.7%). Among other blue-chips, Melstacorp (LKR 55.00, -5.2%), Hemas Holdings (LKR 96.20, -3.8%) and Aitken Spence (LKR 64.00, -6.6%) led losers while Carsons Cumberbatch (LKR 190.00, +9.3%) and Bukit Darah (LKR 289.90, +3.5%) closed higher on thin volume.

Market turnover was LKR 354mn. Top contribution of LKR 250mn came from John Keells Holdings which saw 1.2mn shares trading hands at LKR 138.50-139.00 per share. The next best contributions came from Sampath Bank (LKR 10mn) and Teejay Lanka (LKR 9mn).

Melstacorp extended its losing streak to the third day with share closing at LKR 55.00 down by 5.2%. During its first three-days of trading the counter has lost 20% from the indicative price of LKR 69.00. Further, Chevron Lubricants (LKR 155.50, -1.0%), Teejay Lanka (LKR 42.00, -1.2%) and Ceylon Grain Elevators (LKR 80.00, -2.4%) lost ground today amid relatively high level of trading activity.

Foreign investors were net sellers with a net foreign outflow of LKR 44mn. Top net outflows were seen in John Keells Holdings (LKR 52mn), Seylan Bank (LKR 5mn) and Teejay Lanka (LKR 2mn) while top net inflow was mainly seen in Sampath Bank (LKR 7mn). Foreign investor activity accounted for 24% of the market turnover.
Source: LSL

Sri Lanka shares end at 9-month low; Keells down

Reuters: Sri Lankan shares fell for a third straight session on Tuesday, hitting a nine-month closing low, as investors sold shares of market heavyweight John Keells Holdings Plc amid worries over a weakening rupee and rising interest rates.

The Colombo stock index ended down 0.54 percent at 6,159.12, its lowest close since April 5. The bourse fell 9.7 percent in 2016, its second straight annual decline.

The bourse dipped into oversold territory on Tuesday with the 14-day relative strength index at 29.238 points versus Monday's 33.320, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

"Keells selling brought the market down. A high net worth investor is selling Keells and that keeps market worried," said Reshan Kurukulasuriya, chief operating officer, Richard Pieris Securities (Pvt) Ltd.

Shares in John Keells Holdings ended 0.71 percent lower.

In dollar terms, Sri Lanka's stock market fell 13 percent in 2016, performing worse than emerging markets like Malaysia , Thailand, Indonesia and Singapore .

Stockbrokers said Sri Lanka's failure to attract foreign direct investment and lack of investor confidence due to a reversal in some budget policies weighed on the market and on the rupee, which fell 3.9 percent in 2016 and continues to be weak.

Turnover stood at 353.9 million rupees ($2.36 million).

Foreign investors sold a net 43.5 million rupees of equities on Tuesday, extending the net foreign outflow in the first two days of the year to 69.9 million rupees.

Shares in Hemas Holdings Plc dropped 3.8 percent while Aitken Spence Plc fell 6.57 percent.

($1 = 149.8000 Sri Lankan rupees) 

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

Taxes hit - CTC announces 20% layoff of employees

In the backdrop of the sharp decline in sales volumes, Ceylon Tobacco Company PLC (CTC) said in a statement yesterday it has been compelled to change its manufacturing operation in Colombo from three shifts to two.

This latest move by the company comes in the wake of the 45% reduction in sales during the last quarter of the year as a result of the excise hike on 4 October, and the imposition of 15% VAT on 1 November.

The reduction in the number of shifts means that CTC will face a 20% headcount cut in its factory, a measure its Managing Director and Chief Executive Officer Michael Koest said it has been forced to take to ensure the future sustainability of the company.

“The recent moves by the Government to increase taxes on legal cigarettes has directly impacted our operations in Sri Lanka. It places the sustainability of a business that has been legally operating in Sri Lanka for over a century in jeopardy,” said Koest. This is the first headcount reduction by the company since 2007.

Commenting further on the impact of the tax hikes, Koest said: “The high prices of legal cigarettes have driven smokers to products such as beedi or smuggled cigarettes while putting severe pressure on our volumes. So clearly smokers are substituting legal cigarettes with cheaper and illegal alternatives. As a result, the Government has lost over 10 billion in revenue during the last quarter of 2016. This defeats some of the Government’s major objectives such as improving public health and increasing revenue.”

Over the years CTC has been recognised for its productivity standards and one of the few companies in Sri Lanka that boasts of a lean and efficient operation. Koest explained that any further increases in taxes on cigarettes will therefore have far flung consequences that would impact the livelihoods supported across the company’s value chain.

“Currently CTC directly and indirectly employs over 46,000 persons and over 300,000 livelihoods are dependent on our industry at various stages of operations from farming to distribution and sales. Tobacco leaf is sourced in Sri Lanka from over 20,000 farmers. Cigarettes are processed in our factories and finished goods are distributed by 16 distributors via over 72,000 retailers islandwide. We infuse over Rs. 8 b to the rural economy annually through our farming and retailing activities,” he elaborated.

Only recently the company announced that it had plans to shut down four leaf depots.

www.ft.lk

Sri Lanka’s Tourist arrivals in 2016 top 2 million

By Charumini de Silva

Tourism Development Minister John Amaratunga yesterday confirmed that Sri Lanka had exceeded a tourist arrival target of two million for 2016.

“Sri Lanka’s tourist arrivals hit a record high in 2016 by surpassing two million,” said the Minister, who is remaining upbeat over the industry’s progress, which is expecting revenue of over $ 3.5 billion and 2.2 million tourist arrivals. He said the official figures would be released during the course of this week. The Minister said the industry would record an income of $ 4.5 billion this year with 2.5 million tourist arrivals as Sri Lanka gains much attention from tourists globally as the most popular and safest tourist destination in South Asia. “Tourism is progressing and within the next three years the sector will be the top foreign exchange earner,” Amaratunga added.

According to Sri Lanka Tourism Development Authority data, tourist arrivals to Sri Lanka in November rose by 16% to 167,217 persons, bringing the total for 11 months to 1.82 million, up by 15%. 

www.ft.lk

Colombo Stock Exchange Market Review – 02nd Jan 2017

(Click here)

Colombo Stock Exchange Trade Summary 02-Jan-2017

ASI suffered its worst start to a year since 2002 as the index shed 35.39 points (-0.6%) to close at 6,192.87. S&P SL 20 index slid 23.94 points (-0.7%) to close at 3,472.50. 

John Keells Holdings dipped 3.5% to LKR 140.00 amid selling pressure from the foreign investors. Further Trans Asia Hotels (closed at LKR 82.60, -12.1%) and Sri Lanka Telecom (closed at LKR 35.00, -2.8%) lost ground in today’s session dragging the index to the negative territory. Overall market sentiments remained bearish with 42 gainers and 62 losers. 74 stocks remained unchanged. 

Market turnover was LKR 329mn. John Keells Holdings contributed 68% of the turnover supported by the only crossings of the day where 0.3mn shares changed hands at LKR 140.00. Apart from John Keells Holdings (LKR 222mn), Hemas Holdings managed to contribute LKR 49mn while other stocks did not managed to surpass LKR 5mn. 

Market activity was most concentrated on John Keells Holdings while Melstacorp and Property Developers managed to gain some attention of the retail investors. Melstacorp lost further ground on its second day of trading and the share closed at LKR 58.00 down 2.2%. On the other hand, Property Developers retained its positive momentum and it closed 3.9% higher at LKR 108.60. Property Developers declared an interim dividend of LKR 15.00 per share last Thursday. 

Foreign investors were net sellers of LKR 26mn worth of shares. Foreign participation was 23%. Top net outflows were seen in John Keells Holdings (LKR 78mn) and Tess Agro (LKR 1mn) while top net inflows were seen in Hemas Holdings (LKR 48mn) and Hatton National Bank (LKR 4mn).

Source: LSL

Sri Lankan shares fall as Keells draws selling

Reuters: Sri Lankan shares fell on the first trading day of 2017 as investors sold market heavyweight John Keells Holdings Plc and other blue chips amid worries over a weakening rupee and rising interest rates.

Conglomerate John Keells Holdings Plc fell 3.5 percent and accounted for 67.6 percent of Monday's turnover of 329.2 million rupees ($2.2 million).

The Colombo stock index closed down 0.6 percent at 6,192.87. The bourse fell 9.7 percent in 2016, its second straight annual decline.

"Investors are selling Keells because a high net worth investor sold large quantities. So investors sold the shares on speculation that Keells will fall further," a stockbroker said, asking not to be named.

"There has been some foreign selling in Keells in the last month as well."

In dollar terms, Sri Lanka's stock market fell 13 percent in 2016, making it a worse performer than emerging Asian markets like Malaysia, Thailand, Indonesia and Singapore.

Stockbrokers said Sri Lanka's failure to attract foreign direct investments and lack of investor confidence due to a reversal in some budget policies weighed on the market and on the rupee, which fell 3.9 percent in 2016 and remains weak.

The central bank on Friday kept its benchmark interest rates steady for a fifth straight month as expected, saying credit growth was responding to earlier tightening measures. Government borrowing costs, however, are rising as the recent increase in U.S interest rates raises the risk of capital outflows from emerging markets such as Sri Lanka, adding pressure on the rupee.

Foreign investors sold a net 26.4 million rupees of equities on Monday.

Shares in Trans Asia Hotel Plc dropped 12.1 percent while Sri Lanka Telecom Plc fell 2.8 percent and shares in Commercial Bank of Ceylon Plc slipped 1.2 percent. 

($1 = 149.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Susan Fenton)

CSE hopeful about 2017 as foreign inflow gathers pace

• Total foreign investor contribution records 42.5% in 2016 compared to 34.4% in 2015

• Around 7 IPOs in pipeline with few non-strategic enterprises expected in Q1

• SME and dollar denominated boards to be launched before first half of the year

• Lack of proper valuation for stocks a major roadblock to attracting new firms to be listed on CSE 

By Charumini de Silva

Despite the overall adverse performance of the Colombo Stock Exchange (CSE) last year due to a multitude of reasons, the country’s capital market could still be hopeful that the positive trend of foreign investor interest will continue with sizable investments lined up to take off during this year.

The total foreign investor contribution to market turnover recorded 42.5% compared to 34.4% in 2015, while recording a total net foreign flow of Rs. 633.5 million last year compared to the Rs. 5.4 billion in foreign outflow in 2015.

“Although both indices in 2016 have been negative, the flipside we have seen is that there is a foreign net inflow this year. This means that foreigners are still selectively looking at stocks, which I feel provides a good opportunity for the accumulation of stocks because it offers good value right now. I think investors should really make use of this opportunity,” CSE Chief Executive Officer Rajeeva Bandaranaike told the Daily FT.

He assured that the market would see around six to seven initial public offerings (IPOs) during this year, with few non-strategic enterprises in the pipeline to be listed in the first quarter adding that the CSE is ready to facilitate those enterprises. He believes the entry of non-strategic enterprises will infuse more activity and life into the market.

In addition, Bandaranaike said the SME board and dollar denominated board initiatives would be implemented before the end of first half of 2017. “We expect to launch the dollar denominated board within the first half and the SME board within the first quarter. Already we have received a favourable number of inquiries for the dollar denominated board, which will help the CSE to achieve hub status in the region,” he added.

Noting that liquidity has been an issue, he emphasised that the CSE had been constantly pushing to get more companies with a larger public float to the market but a lack of proper valuation for stocks had been a major roadblock to attracting new firms to get listed.

“The future potential is huge with many companies in both the state and private sector waiting for the right time to enter the market. The country needs to have an economic boon for this as only then will they realise that the internal funds are not adequate for their growth. That is the time they will reach the capital market and that is the time you will really see the capital markets surging,” he explained.

However, Bandaranaike stressed that it was important to improve market sentiments such as exchange rate, foreign inflows, FDIs and interest rates along with the infrastructure development for the capital market to gather pace during the year.
www.ft.lk