Sri Lanka shares slip to near 3-week closing low in dull trade

Reuters: Sri Lankan shares fell slightly to a near three-week closing low on Monday as investors sold manufacturing and banking stocks in dull trade, and the rupee hit a fresh low in its record-setting spree.

The Colombo stock index ended 0.05 percent weaker at 6,028.49, its lowest close since Aug. 28. It lost 1.4 percent last week, its first weekly drop in four.

Turnover was 440.4 million rupees ($2.67 million) on Monday, less than this year’s daily average of 797.1 million rupees.

Foreign investors, who have been net sellers of 4.6 billion rupees worth of shares so far this year, bought a net 162.4 million rupees worth of equities on Monday.

Trading was dull as investors waited to see the direction of economy, said Atchuthan Srirangan, assistant manager - research, First Capital Holdings Plc.

“Rupee depreciation is good for export-oriented companies, but manufacturing and other companies will feel the pain and also the overall economy, it will impact negatively. So, investors are waiting to see the direction and real impact,” he said.

Analysts said the fuel price hike also hurt investor confidence as it could hit corporate earnings.

Fuel retailers raised gasoline and diesel prices for a third time in four months last Tuesday due to higher global oil prices and a weaker rupee.

Investors are also awaiting cues from the national budget which the government is set to unveil in November.

Shares of Distilleries Company of Sri Lanka Plc fell 1.7 percent, Lion Brewery (Ceylon) Plc ended 2.3 percent down, Chevron Lubricants Lanka Plc closed 6.6 percent weaker and Hatton National Bank Plc lost 1.1 percent. 

($1 = 164.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Janashakthi acquires 31% stake of Dunamis Capital for Rs. 1.4 bn

In one of the largest related party deals in the Colombo Stock Exchange, Janashakthi PLC, the investment arm of Sri Lanka’s Schaffter family controlled businesses yesterday bought 31.14 percent stake in Dunamis Capital PLC, another firm controlled by the same family for Rs.1.4 billion as the group is bringing its different businesses under one umbrella.

Janashakthi PLC bought a total of 38.3 million shares of Dunamis Capital from Next Ventures Limited and Dinesh Schaffter who held 19.2 million and 19.05 million shares respectively at Rs.36.60 a share.

It appears that the deal has gone at a substantial premium to the trading price of the Dunamis share.

Dunamis Capital share ended at Rs.35.10 at yesterday’s close which was Rs.16.60 or 89.73 percent higher.

With the acquisition of shares, Janashakthi PLC now holds 50.6 million shares or 41.14 percent stake in Dunamis Capital.

Even after the yesterday’s deal, Dinesh Schaffter still has 26.25 percent stake in Dunamis Capital being the second largest shareholder in the company after Janashakthi PLC.

Hinting on possible mergers and acquisitions in the future, Janashakthi PLC Chief Executive Officer, Ramesh Schaffter said the deal would become a good springboard for a range of other strategic alliances in the future.

“The transaction will function as a launch pad for a range of strategic partnerships in future, which the company is confident it will attract, given its current structure and growth prospects”, he said in a statement issued after the deal.

In a separate disclosure, Janashakthi PLC said the company would make a mandatory offer to purchase the remaining shares of the company as yesterday’s acquisition of shares breached the single shareholder limit of 29.9 percent one party could hold without offering to buy the remaining shares.

Janashakthi PLC said they are looking at absolute control over Dunamis Capital with over 90 percent stake in the latter after the end of the mandatory offer period.
They expect Dinesh Schaffter and Manjula Mathews who together controls another 47.85 percent in Dunamis Capital will accept the mandatory offer.

Dunamis Capital controls its two subsidiaries, First Capital PLC, a fully fledged investment bank and Kelsey Developments PLC, a property developer.

After the mandatory offer, Dunamis Capital will become a subsidiary of Janashakthi PLC and the First Capital and Kelsey Development will become sub-subsidiaries.

For the quarter ended in June 30, 2018, Dunamis Capital reported a net loss of Rs.201.1 million compared to the net profit of Rs.163.7 million in the same period in 2017.

Yesterday’s deal plus the sale of the general insurance arm of the Janashakthi Insurance in a blockbuster deal in February this year mark the attempts by the Schaffter family to build a leading financial services conglomerate under the umbrella of Janashakthi PLC consisting of insurance, investment banking, asset management, stock brokering and non-banking finance companies.

In February 2018 Janashakthi Insurance sold its fully owned general insurance subsidiary, Janashakthi General Insurance Limited to the local unit of the German insurer, Allianz S.E. for a mammoth Rs.16.4 billion with a gain of Rs.7.08 billion to the group.
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Sri Lanka shares mark over-2-wk closing low on foreign selling

Reuters: Sri Lankan shares fell to a more-than-two-week closing low on Friday as investors sold beverage and banking shares, even as foreign investors continued to trim their equity exposure for a third straight day.

Analysts said foreign investors sold a net 340.7 million rupees worth of equities on Friday, extending the year-to-date net foreign outflow to 4.8 billion rupees worth of shares.

Sentiment was also weighed down by the local currency hitting a fresh low for the third straight session.

The Colombo stock index ended 0.49 percent weaker at 6,031.26, its lowest close since Aug. 28. It lost 1.4 percent this week, falling for the fist time in four weeks.

The day’s turnover was 786.1 million rupees ($4.81 million), less than this year’s daily average of 799.1 million rupees.

“Market is down dominated by foreign selling, fear of rupee depreciation and also fuelled by the Nomura report,” said Reshan Kurukulasuriya, chief operating officer, Richard Pieris Securities (Pvt) Ltd.

Japanese bank Nomura Holdings ranked Sri Lanka among seven emerging market economies that were at risk of an exchange rate crisis. However, the Central Bank in a statement said Nomura Holdings has made a serious computational error with regard to Sri Lanka’s external vulnerability and its short-term external debt is nowhere near the $160 billion figure that Nomura analysts quoted.

Nomura later corrected the figure to $7.5 billion, but said its analysts have used the same figure to calculate the country’s Damocles score for the analysis and thus it is unchanged.

Investors have been raising concerns over consistency in the government’s policy after it changed some budget policies announced last year.

Analysts said the fuel price increase also hurt investor confidence as it could hurt earnings of companies.

Sri Lankan fuel retailers raised gasoline and diesel prices for a third time in four months on Tuesday due to higher global oil prices and a weaker rupee.

Investors are also awaiting cues from the national budget which the government is set to unveil in November.

Shares of market heavy weight Ceylon Tobacco Company Plc fell 5.7 percent while top mobile phone operator Dialog Axiata ended 1.6 percent weaker, Sampath Bank Plc closed 1.8 percent down and biggest listed lender Commercial Bank of Ceylon Plc lost 0.9 percent. 

($1 = 163.6000 Sri Lankan rupees) 

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

Sri Lankan shares end flat; Dunamis Capital nearly doubles in heavy trade

Reuters: Sri Lankan shares closed flat near a two-week closing low on Thursday in heavy trading led by Dunamis Capital Plc which nearly doubled in value, even as foreign investors continued to trim their equity exposure for a second straight day.

The Colombo stock index edged 0.03 percent higher to 6,060.68, settling near its lowest close since August 29. It had risen 0.6 percent last week in its third straight weekly gain.

Shares of investment company Dunamis Capital, up 90 percent, accounted for 85 percent of the day’s turnover of 1.69 billion rupees ($10.38 million), more than double this year’s daily average of 800 million rupees.

The company, in a disclosure to the bourse said insurance firm Janashckthi Plc purchased a 31.14 percent stake or 38.3 million shares in it at 36.60 rupees apiece.

“Investors are waiting for some kind of trigger. If the government can maintain policy consistency, we will be able to see positive sentiment,” said Prashan Fernando, CEO at Acuity Stockbrokers, adding that the day’s turnover got a boost from heavy activity in Dunamis Capital.

Investors have been raising concerns over consistency in the government’s policy after it changed some budget policies announced last year.

Analysts said foreign investors, who sold a net 41.9 million rupees worth of shares on Thursday, have been a worried lot after Nomura Holdings on Monday ranked Sri Lanka among seven emerging market economies that were at risk of an exchange rate crisis.

“The increase in fuel prices also weighed on the market,” traders said.

Sri Lankan fuel retailers raised gasoline and diesel prices for a third time in four months on Tuesday due to higher global oil prices and a weaker rupee.

Meanwhile, investors are also awaiting cues from the national budget which the government is set to unveil in November.

Shares of top mobile phone operator Dialog Axiata rose 1.6 percent while Asiri Hospital Holdings gained 2.2 percent.

($1 = 162.7500 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Vyas Mohan)

Sri Lanka's 01-yr Treasury yield rises to 9.05-pct

ECONOMYNEXT - Sri Lanka's Treasury Bill yields recovered at an auction Wednesday with the 12-month bill yield up 08 percentage points to 9.05 percent, data from the state debt office showed.

The debt office, a unit of the central bank, accepted 12.5 billion rupees of 12-month bills, the same amount offered, having received bids worth 21 billion rupees.

The 3-month bill yield rose 07 basis points to 8.07 percent, with 4.0 billion rupees of bills, sold, the same amount offered.

Six-month bills were not offered.

Sri Lanka sells 4-year dollar bonds for 5.75-pct

ECONOMYNEXT - Sri Lanka has sold 77.85 million dollars of dollar denominated 'Sri Lanka Development Bonds' styled securities by auction, the state debt office said.

The debt office sold 54.4 million dollars of 1 year 9 month bonds for a fixed rate of 5.0 percent, after getting bids of 55.9 million dollars.

The debt office also sold 25.46 million dollars of 3-year 8-month bonds for 5.75 percent.

The settlement date is September 17, 2018. (Colombo/Sept11/2018)

Millennium to invest Rs5bn in Sri Lanka affordable housing, luxury apartment

ECONOMYNEXT - Sri Lanka's Millennium Housing Developers Plc, a publicly traded company said it was investing 5 billion rupees to develop luxury apartments and affordable housing to meet growing demand, despite fears of a bubble.

Sri Lanka's land and apartment prices started to rise rapidly from 2015, with the central bank printing money but interest rates have since risen, slowing the market.

However chronic currency depreciation from inconsistent central bank policy is killing consumer demand and purchasing power, which may be hitting a small recovery, critics say.

Millennium Housing said concerns have been raised about a property bubble bursting in 2020 -2022 by some.

"With demand for luxury apartments and condominiums going up and supply at times overtaking demand, the bubble certainly seems like a possibility," the firm said.

"However, supply of affordable housing is estimated to be below demand as yet."

There was a demand for housing from people migrating from rural to urban areas, particularly to Greater Colombo townships.

"This shift in the urban landscape is predominantly influenced by location and convenience factors related to employment and business proximities," Chairman HarshithDharmadasa said.

"At the higher end of the spectrum, investments by Sri Lankans who are living abroad are notable and will continue to surge if and when greater political stability is evident."

Dharmadasa noted that people were seen favouring smaller apartments.

"The propensity of demand for vertical properties offered by apartment complexes is particularly favoured due to the availability of multiple facilities and the perception of household security," he said.

Millennium Housing Development reported revenues of 1.7 billion rupees in the year to end March 2018, up 31 percent from a year ago. Profits grew 25 percent to 185.5 million rupees.

Earlier this year, Millennium completed its 64-unit The Heights – Edmonton and launched three new projects to be completed in two years.

Millennium Housing Development began as a developer of housing estates under its 'Millennium City' brand. It has developed 3,000 houses with a combined floor area of three million square feet across ten housing estate projects.

The company now has plans to build up to 400 houses at three new locations over the next two years.

Over the next few years, real estate growth is expected to be driven by increased demand for affordable residential and retail property by wealthy residents, and local and international corporates, the company said.

Nearly 55 percent of all tenants spend more than 30 percent of their income on housing, and about 30 percent of tenants paid more than half their income on rent.

High rents were affecting the incomes of every income group in Colombo.

"The demand for affordable housing is illustrated by the response to new housing lotteries," the firm said.

"Since 2015, our advertisements for apartments have attracted roughly 100 applications per housing unit," it said.

A key reason for Sri Lanka's unaffordable housing is excessively high cost of building materials kept high import duties to give profits to so-called oligarchs who have close connection to politicians and are opposing free trade for the poor. Steel for house building in particular is heavily taxed.