Sri Lanka Newspapers - 29/12/2011

Benchmark interest rates increase

Benchmark Treasury bill rates inched up yesterday (28) as liquidity tightening continued to put pressure on domestic interest rates as the Central Bank continues to defend the exchange rate. Overnight interbank interest rates eased further as the bank pumped in Rs. 9.43 billion to ease some pressure.

The Public Debt Department reissued maturing Treasury bills amounting to Rs. 8 billion on Wednesday which attracted bids amounting to Rs. 14.04 billion but only Rs. 2.23 billion was accepted as primary dealers’ attempts to bid-up rates resulted in many of the bids being rejected, dealers said.

The three-month Treasury bill saw its yield move up to 8.68 percent yesterday from 8.58 percent a week ago while the 12-month bill yield increased to 9.31 percent from 9.21 percent a week earlier.

The six-month bill yield moved to 8.71 percent this week with all bids for this tenure rejected at last week’s auction.

Dealers said rupee liquidity continues to be tight as the Central Bank sells dollars to maintain a stable exchange rate. The bank has been conducting reverse repurchase auctions since December 16 to infuse rupee liquidity into the system and yesterday it pumped in Rs. 9.43 billion at 8.016 percent.

This has eased overnight interbank lending rates further.

The weighted average call money interest rates for lending without collateral inched up marginally to 8.98 percent from 8.96 percent the previous day. The maximum rate quoted yesterday was 9.05 percent, down from 9.22 percent the previous day.

The average weighted money market repo rate for interbank lending backed by government securities fell to 8.02 percent from 8.18 percent the previous day.

The maximum rate quoted yesterday was 8.10 percent, down from 8.30 percent the previous day.

"Import demand continues to be severe and as the Central Bank sells dollars to stabilise the exchange rate, pressure on rupee interest rates are intensifying and the bank has to intervene again to ease this pressure. We are concerned how long this would continue as it would cost the economy. If the inflows expected by the Central Bank come through then there would ne nothing to worry about, but it is now taking too long," a dealer said.

Economists argue that it is impossible to maintain a fixed exchange rate, low inflation and low interest rates at the same time.

"The Central Bank is doing exactly this, but it cannot be sustained for long because this balancing act has a cost. Reserves are being sold and export earnings are hit by an artificial exchange rate, and as a result of this intervention, rupee liquidity in the banking system is being tightened as can be seen in the Treasury bill auctions of the past few weeks," another dealer said.

Fitch Ratings recently said Sri Lanka was one of the highest-risk financial systems in the Asia Pacific region. The International Monetary Fund has also criticised the move to keep the exchange rate stable amidst the severe import demand.

The rupee closed at Rs. 113.89/90 yesterday and dealers said the Central Bank had sold around US$ 30 million to keep the exchange rate steady. The bank has sold around US$ 635 million since the 3 percent devaluation of the rupee since November 22. During the three month period July to September, the bank had sold US$ 1.1 billion.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=42068

Com Bank hogs the limelight

Heavy trading in Commercial Bank continued yesterday on the Colombo bourse where turnover at Rs.550.4 million was down from the previous day’s Rs.995.9 million, with both indices moving up – the All Share by 78.30 points (1.30%) and the Milanka by 46.53 point (0.89%) with 159 gainers way ahead of 29 losers.

"Trading was dull with Commercial Bank continuing to hog the limelight. There were three crossings of the counter at Rs.100 per share accounting for a total of 1.9 million out of 2.1 million Commercials transacted yesterday," Prashan Fernando of Acuity Stockbrokers said.

Tuesdays large parcels of this counter were also done at the Rs. 100 price.

ComBank closed 20 cents down at Rs.100.90 with slightly over 2.1 million shares done between Rs.100 and Rs.101.40 contributing Rs.213.2 million to turnover.

Distilleries subsidiary, Melstacorp announced a mandatory offer to purchase all shares of Aitken Spence not owned by itself and parties acting in concert – Distilleries Company, Milford Exports, Stassen and Periceyl Limited which together owns slightly under 30% of Spence.

The mandatory offer was triggered by the purchase last Thursday of 61,000 shares by Melstacorp at a price of Rs.110, the price at which the mandatory offer is being made.

Spence yesterday moved up Rs.4.60 to close at Rs.118 on 25,000 shares traded between Rs.115 and Rs.124 while Distilleries, the biggest shareholder of Spence within the offering consortium, edged up 50 cents to close at Rs.147 on 4,000 shares traded between Rs.145.50 and Rs.148.

A Stock Exchange filing revealed that LB Finance controlled by Mr. Dhammika Perera has purchased a building at Dharmapala Mawatha, Colombo from Perera at a consideration of Rs.788.8 million to house its head office.

The 65,000 sq. ft. building stands on 1 rood 12.82 perches had been purchased to facilitate expansion of LB Finance, the filing said. LB’s head office is presently located at Prof. Stanley Wijesundera Mawatha.

Other counters that contributed to yesterday’s turnover on the CSE included Colombo Land, up Rs.2 to close at Rs.55.10 on nearly 0.7 million shares done between Rs.52.70 and Rs.55.30 and Nestle Lanka where 30,000 shares were crossed at Rs.916. Nestle closed Rs.9.90 down at Rs.870.10 on 100 shares done on the trading floor.

Some retail interest was seen in HVA Foods and SMB Leasing as well as voting and non-voting shares of Blue Diamonds.

Analysts said that the indices had moved up on thin trades in a number of counters and outside the big deals in Commbank where there is foreign selling, the market was generally dull.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=42069

By Ravi Ladduwahetty

Government owned and managed Litro Gas ( Pvt) Ltd, successors to the once Shell Gas Lanka PLC, will shortly go in for a Rs. 600 million expansion where not only the Kerawalapitiya production facility will be expanded but moves are afoot to handle the Southern and Eastern distribution which will be handled through the Hambantota tank farm.

The Rs. 600 million expansion of both the factory and Southern distribution, will be sourced from internally generated funds.

"The sales of the 12.5 kilo gas cylinders have shown an increase of 11% since we took over from the former Shell Gas and we will be going in for an expansion of the Kerawalapitiya production facility," Litro Gas Managing Director / CEO Piyadasa Kudabalage told The Island Financial Review yesterday.

He also said that tenders have been called for the supply of two filling machinery plants and that there have been quotations from Malaysia, Germany and Denmark which are being evaluated. The expanded production, which will be after the installation of the new machinery, will take place around April 2012.

The production facility once expanded would be increased from the current 8,000 tonnes which is the maximum at present, by 50% to 12,000 tonnes.

The state owned company would soon be moving to the LPG section of the Hambantota tank farm which will mean that operation would be handling the LPG distribution of the southern and eastern provinces in a bid to slash transit costs.

When asked about what percentage of the market the company had in relation to the sole competitor- Laugfs Gas, he said that the company had not evaluated that at present. However, he said that the company had the 12.5 kilogram cylinder as the largest sale of the gas cylinders and conceded that the sale of this category had increased from a daily volume of 20,000 cylinders at the time of the takeover to 28,000 cylinders as of now.

He also said that there were no moves at this stage to go in for a public listing. That might happen at a later stage and when we decide what percentage should be vested in the public, the Managing Director said.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=42071

Fitch Ratings Lanka has downgraded Hayleys PLC’s National Long-Term rating to ‘A+(lka)’ from ‘AA-(lka)’, the outlook is negative, the ratings agency announced yesterday (28).

"The downgrade reflects Hayleys’ increased appetite for financial leverage at the holding company (HoldCo), as reflected in the company’s heightened use of borrowings in 2010 and 2011 to fund its three large acquisitions that have protracted payback periods," Fitch said in a statement.

"Hayleys’ rating also factors in the heightened risk to the group’s cash flows stemming from the weak economic outlook in its key export markets, the European Union and North America (50% of FY11 (end-March 2011) revenue). However, Fitch expects better performance in Hayleys’ consumer, agriculture, power, transport, and leisure segments domestically to help offset export-oriented risks to an extent.

"The rating also factors in Fitch’s view that Hayleys may need to extend financial support to its textile company - Hayleys MGT Knitting Mills PLC (HMGT, ‘BBB(lka)’/Negative, 57% direct-ownership), as the latter is undergoing a restructuring process.

"The rating will remain constrained over the medium-term due to Hayleys’ higher appetite for financial leverage, the uncertainty stemming from weak demand in the company’s key export markets, and the uncertainty surrounding the final outcome of HMGT’s restructuring process.

"The Negative Outlook indicates that a further downgrade may occur if the company fails to reduce financial leverage (net debt/EBITDA) at HoldCo to below 3.5x in the near-term (as indicated by the management) from 9.1x at end-September 2011, based on annualized dividend inflows. Negative rating pressure may also occur if financial leverage at Hayleys’ key operating subsidiaries increases on a sustained basis, due to weaker-than-expected performance in end-markets, cost overruns in refurbishments, or higher debt-funded dividend payouts or acquisitions, among other factors.

"As a holding company, Hayleys’ rating factors in the business strength of, and diverse dividend income from, its key operating subsidiaries. Hayleys exercises control over its key subsidiaries, reducing the structural subordination of HoldCo creditors to an extent. Hayleys’ group operating cash flows are also more susceptible to commodity prices fluctuations, weather patterns, and foreign currency risks. At FY11, 63% of group revenues were derived from exports, while most of its production is based in Sri Lanka.

"The group’s revenue grew by +43% yoy to LKR54.2bn in FY11, and by +37% yoy when new acquisitions in construction and leisure are excluded, as most segments’ revenues rebounded post the global credit crisis. However, the group’s operating EBITDAR margin contracted to 7.4% from 10.6% during the same period, mainly due to HMGT’s weaker performance, lower profitability of some of its new acquisitions, and higher prices paid for, and supply shortages of, key production inputs in other key segments. Fitch expects demand pressures from key export markets to constrain profitability, at least through 2012. Hayleys’ liquidity position within most key operating subsidiaries is adequate, with largely manageable near-term debt maturities covered by healthy operating cash flows or strong access to local banks. The latter along with managements’ near-term measures to reduce financial leverage supports the weak liquidity at HoldCo, which is evidenced by its near-term maturities of LKR2.3bn at end-September 2011, compared with LKR25m in cash reserves and LKR1bn of unutilised credit lines," Fitch said.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=42072

By Nishan WIMALACHANDRA- Corporate Trainer, Lecturer

For those living in Sri Lanka, investment scams, Pyramid type or Ponzi type financial get rich quick scams are not new. But our focus is now on internet based fraudsters who lure innocent people into getting into financial investment scams due to their mere ignorance. Today the internet has become a very useful tool for many thieves who are IT savvy to fool anyone including the ones who are educated.

This write up comprises genuine stories and incidents where people are constantly abused by these fraudsters on regular basis. There are numerous scams, starting from marriage proposals, investments, bank transfers, donations, lost baggages, green card lottery, hidden treasures and the list goes on.

There is an enormous amount of internet sites which bring investors and entrepreneurs together in various forms. The purpose of these sites is to bring a genuine link among investors and businessmen thereby helping them in certain third party matters and thereby charging a commission etc. But to the dismay of most of those, these forums are mainly abused by fraudsters who may con even the skilled businessman in a subtle manner, and once conned by them, there is no turning back.

Entrepreneurs' must keep in mind that such fraudsters have hosted websites with supposedly very genuine information and registrations. They display their contact details and addresses and the activities they are doing in a very public manner, so that even to the suspecting mind this looks very genuine.

They deal in millions of dollars, and their rate of interest is always lesser than that of secular financial investors. These fraudsters are often well educated in economics, management and marketing and know very well of the countries laws pertaining to their fraudulent activities. They are equipped with legal practitioners, fiduciary agents, logistics providers, bankers who seem to be very genuine and helpful to get these transactions across to the unsuspecting business persons. They constantly communicate through email or phone and build trust with the entrepreneurs. Very often, they send signed legal documents with watermarks of their courts or legal practitioners' contact details and registration numbers, which further add to their masquerade.

One such genuine incident is a response received from Ghana for an advert posted by a Sri Lankan looking for an investor to set up an international school in Sri Lanka. The communication was well received by the Sri Lankan businessman, and the initial proposal was emailed, and after a few days comes another communication that the profit share will be as follows and the investor needs to be able to take away the investment after ten years. Now this is an investment exceeding few millions of dollars, enabling the businessman to have a stake of 40% for the setting up and running the show which makes this even more attractive. The investor then agrees to visit Sri Lanka to inspect the proposed site of construction etc. At this juncture, the relationship among the investor in this case a Reverend Peter Sogbe of RainbowOrphanages (www.rainboworphanages.org) and the businessman becomes very close where the Reverend starts praying to God that the business will work out fine and invoking blessings on the family of the businessman. Now the relationship is at a higher level of trust and loyalty.

At this time, the investor disappears for a week or so without any communication which makes the businessman rather confused and wanting to talk to the Reverend more.

But at the opportune time the investor calls back from a long trip away from his motherland Ghana for a serious banking issue relating to the fund transfer and apologizes for the inconvenience caused by his absence. He then assures that no matter what happens the fund transfer of millions of dollars will take place within the following weeks, and requests identity documents and other related documents such as copies of business registration documents from the businessman to finalize the fund transfer along with bank details.

All is well, the businessman is eagerly waiting for a response for the next few weeks, and nothing happens to his disappointment, and when inquired, the investor replies that they must open a bank account in Ghana in the businessman's name so that it will be easier for things to carry on, as due to the magnitude of funds, they may need multiple accounts, and assures that somehow on a particular day he will transfer the funds to the Sri Lankan's account which is supposed to be opened.

The day of the transfer comes, and suddenly a call from the Reverend reveals that a transfer of US $ 3,000 is needed from Sri Lanka to open the bank account and that it has to be done using Western Union, and he says that due to the exigency of the situation, a bank draft, Telegraphic transfer will be complicated, and that if the Sri Lankan businessman wants the funds to be transferred the only way is to send him US $ 3,000 through Western Union. Nothing could be done about this, no matter the excuses given, he needs funds to be transferred only through Western Union and explains how urgent it is. So comparing the magnitude of millions of dollars, the businessman agrees to send the money. And once the funds are sent, the investor disappears forever. No fund transfers, or no investments, no calls. And the businessman loses the money, and gets nothing in return.

A similar story was heard by another Sri Lankan who had advertised in a foreign magazine to sell his property in Sri Lanka worth millions of dollars who had been contacted by a similar party from the UK. Now the story is the same, but different names, and different phone numbers. We are in a situation that just because a foreign company has hosted a classy website, along with contact numbers to believe that they are genuine. Very few people who use the internet know how to identify fraudsters from their websites and contact numbers. Today technology is developed largely that most online activity could be monitored. And any firm which hosts a website could be tracked without any difficulty using tools such as http://www.namecheap.com/domains/whois.aspx where entering the website could give most information about the registrant of that domain and thereby track fraudster in seconds. If the fraudster uses telephone numbers, they could be tracked with so many other scams linked online, sometimes the names of fraudsters change, but their phone numbers remain unchanged. If their phone numbers are typed on a search engine, anyone will find these numbers with different names in different locations.

Last not the least story was from a chef who got a job offer from the UK based job agency as he applied for job listings for chefs in the UK online. This is an experienced chef with several years of experience in Europe. To his surprise and misfortune, he got a fabulous job offer from this restaurant in London for a larger salary. After a thorough telephone interview, he was sent his contract papers to be signed along with a letter to be forwarded to the British High Commission in Sri Lanka. All documentation looked genuine, he even talked to the head chef of the restaurant few times for clarifications on his job offer, all was clear. At this time the job agency sent him confirmation of employment with the restaurant with a duplicate set of the documents sent from the restaurant saying that since he was selected, and that his salary was some 18,000 GBP, to now pay 2000 GBP as processing fee for finalizing some legal documentation to confirm his work permit. So the Sri Lankan chef delightedly agrees to pay the money and is asked to send it through Western Union. Chapter closed, no job was ever offered to him and to his dismay, that restaurant was never in existence in London and all documents he received from the restaurant and the tele-interview done was all a hoax well staged by the same party who advertised for the job vacancy in the UK. If you are someone who had been contacted by such fraudsters, it's best not to encourage communication. They may not be able to get any money from you if you were smart enough. But they may steal your identity along with your real details, and may pose as you in another country to con people. It is best that we familiarize with the internet and how things work online. Just because most of us are good at posting comments such as 'OMG', 'Lovely pix' on social networks, it's time we learnt how fraudsters could take away our hard earned money. The best way to deal with such investment proposals are to ask as much questions as possible and get advice from local financial institutions on the viability of the information as well as how practical such fund transfers are. For those who apply for foreign employment on the internet, one caution must be made, that is to beware of many fraudsters posing as employment agencies online.

(The author could be reached via nishan@consultant.com)

http://www.dailynews.lk/2011/12/29/bus35.asp

By Indunil HEWAGE
Kalpitiya is gearing up for a tourism revival with high profile international and local investors showing keen interest in investing in the Kalpitiya integrated tourism resort project.

The Kalpitiya integrated tourism resort project which consist of two phases has 31 islands altogether in Kalpitiya and Puttalam Lagoon areas.

This has been a major attraction for Sri Lankan, Indian and other investors.

Speaking to Daily News Business, Kalpitiya tourism project architect Pradeep Fernando said a significant number of Qatar investors are eyeing the Kalpitiya integrated tourism resort project and the Indian based Delta group is in talks with local authorities to develop tourism in the Kalpitiya area.

The Kalpitiya project spans 5,000 acres of land and is targeted to put up 5,000 hotel rooms.

Accordingly there will be one hotel room for one acre.

“We are following the Maldivian model to promote the concept of “island tourism” in the Kalpitiya area and also expect to promote whale, dolphin and bird watching and non polluting water sports as well,” Fernando said. The preferred investors will have to follow certain guidelines issued by the Sri Lankan Tourism Development Authority and it is compulsory for investors to make a responsible commitment for the well-being of the community as well as for the environment in the Kalpitiya area.

Sri Lanka tourism also achieved another remarkable milestone in the country’s booming tourism industry, when it passed 800,000 arrivals.

This was the first time ever; the tourism industry has received arrivals exceeding 800,000 in any given year, making it a ground breaking figure in tourism records. There will be an increase in the foreign exchange earnings from US$ 500 million in 2010 to USD 2.75 billion by 2016 where the government is targeting 2.5 million visitors.

A huge increase is expected in the tourism related employment from 125,000 in 2010 to 500,000 by 2016.

During this five year period the country targets to attract US$ 3,000 million worth Foreign Direct investment (FDI) from tourism sector most of which will be invested in tourism infrastructure development.
http://www.dailynews.lk/2011/12/29/bus01.asp

Dec 29, 2011 (LBO) - Sri Lanka's earnings from information communications technology (ICT) services and products grew strongly this year after rising sharply last year, officials said.

ICT and BPO (business process outsourcing) exports shot up 47 percent to 310 million US dollars in 2010-11 from the year before and will remain strong, a new survey by PricewaterhouseCoopers has found.
The sector has 175 firms employing 16,000 people, which is expected to grow as more foreign investment comes in, said Janaka Ratnayake, chairman of the Export Development Board.

The growth rate should enable the ICT and ITES (information technology enabled services) sector to reach a billion dollars in export earnings before 2015, he told a news conference.

Mano Sekaram, chairman of the EDB's advisory committee for the ICT and BPO sectors, said the PwC survey of 175 firms was needed to find out how the sector was performing.

"This industry is a new industry," said Sekaram, who is also general secretary of the industry body, SLASSCOM, Sri Lanka Association of Software and Services Companies.

"Transactions happen over the Internet and there's no customs declaration of exports out of the country because you send software and services over the wire - there's no physical transaction."

The PwC survey report said the IT export industry earned 250 million dollars while BPOs earned 60 million dollars in 2010-11, up from 161 million dollars and 48 million dollars the year before.
The main markets for ICT exports are Europe, USA, and south Asia while the main markets for BPOs are the US, Europe, Canada and mature Asian countries.

The officials said the industry expects to maintain the growth momentum although economic crises in key markets might reduce the growth rates from existing high levels.

However, IT sector export earnings were on track to reach the target of a billion dollars by 2015, Ratnayake said.
http://lbo.lk/fullstory.php?nid=770324816

Dec 29, 2011 (LBO) - Non-conventional renewable energy use has grown sharply this year, accounting for the fastest growth among the different sources of energy in the island, according to latest central bank data.

Non-conventional renewable energy generation rose 56.8 percent or by 40.9 Gwh (gigawatt hours) to 112.9 Gwh in January - October 2011 from 72 Gwh in the same period the year before.
Total electricity generation rose 7.6 percent or 680 Gwh to 9,582 Gwh during the period with thermal energy showing the second biggest rise - by 55.7 percent or 698 Gwh to 1,951 Gwh.

The central bank data showed there had been a slight decrease in wind energy generation - by 10.7 percent to 2.5 Gwh during the period to October 2011 from the previous year.


Non-conventional renewable energy mainly consists of hydro- , wind, solar and biomass.
Most non-conventional hydro-power in Sri Lanka comes from small scale, grid connected hydro resources that were not tapped conventionally, according to the Sri Lanka Sustainable Energy Authority.

Small hydro power has contributed the bulk of the growth in the non-conventional renewable energy industry in the past 15 years.

The Sri Lanka government has said it aims to have non-conventional renewable energy contribute 10 percent to the national grid by the end of 2015.http://www.lbo.lk/fullstory.php?nid=265391312

A promotional seminar on ‘Sri Lanka Expo’ was recently held at the Embassy of Sri Lanka in Tokyo with the participation of over 50 importers in Japan.
Ambassador Admiral Wasantha Karannagoda in his opening remarks stated that the ‘Sri Lanka Expo’ would be an ideal opportunity for the Japanese business community to expand their businesses with Sri Lanka not only in the trade of goods, but also in areas such as investment and service sectors such as tourism. The Ambassador further stated that Sri Lanka has the best products to offer the world, being tea, apparel, gemstones, spices and natural rubber. The Seminar included a presentation by M. Somasena, First Secretary (Commercial) of the Embassy. Many participants showed keen interest in visiting Sri Lanka with a view to sourcing products which include tea, spices, fish (tuna) and fisheries products, fruit and dried fruit, vegetables, processed food, gem and jewellery and coir products from Sri Lanka.
‘Sri Lanka Expo’ is being promoted in Japan through many other promotional events being held in the country.
Another promotional seminar is due to be held in January 2012.http://www.ft.lk/2011/12/29/sri-lanka-expo-2012-promoted-in-japan/#more-63054

DUBAI (Reuters): Qatar has completed procedures to list government debt instruments for trade on its securities exchange, aiming to stimulate investment in them by commercial banks and other institutions, the Central Bank said on Monday.
Trade in short-term Qatari Treasury bills will begin on the Qatar Exchange this Thursday, central bank governor Sheikh Abdullah bin Saud al-Thani said in a statement, with trade in government bonds and sukuk (Islamic bonds) to start “at a later stage”. Listing Qatari government bills and bonds on an exchange, rather than limiting trade to opaque over-the-counter dealings between banks, could make their secondary market prices more transparent and stable, increasing trading activity. A more active debt market could in turn encourage companies to issue more bonds, reducing their reliance on bank lending, which has been hurt even in the wealthy Gulf region by jitters over the euro zone debt crisis. “The secondary market in bonds will encourage companies to issue debt instruments and will boost liquidity on the stock market of Qatar,” the Central Bank statement said. Since May the Central Bank in Qatar, the world’s largest natural gas exporter, has been issuing about 2 billion riyals ($550 million) worth of T-bills monthly with maturities ranging from three to nine months, to drain excess funds from the banking system and help create a domestic yield curve.
Qatari banks held about 8 billion riyals of T-bills at the end of September.
Qatar has been preparing steps to deepen its debt market for many months, but has proceeded cautiously.
In March, the Qatar Exchange’s Chief Executive Andre Went said the bourse was considering whether to allow trading of bonds by the second quarter of this year, and would start with trading of government debt before slowly moving to corporate bonds.http://www.ft.lk/2011/12/29/qatar-t-bills-to-start-trading-on-exchange/