Srilanka Newspapers Thursday 05/04/2012

Big trades in Central Finance keeps market buoyant
* Turnover tops billion but indices down

The Colombo bourse yesterday posted a turnover of Rs.1.13 billion, down from the previous day’s Rs.1.52 billion, with both indices continuing to edge down. But business volumes were sustained by larges trades in Central Finance, and crossings of Fortress, Hayleys and JKH as well as Swarnamahal.

The All Share Price Index was down 8.34 points (0.15%) while the Milanka lost 4.62 points (0.09%) with 64 gainers trailing 112 losers.

"There was a block of 1.7 million Central Finance done on the trading floor at Rs.170. That generated the day’s top turnover of Rs.298.2 million," a broker said. "We also saw 13.6 million Fortress crossed at Rs.18, nearly 0.4 million Hayleys crossed at Rs.370 and nearly 0.3 million JKH crossed at Rs.208."

Central Finance closed flat at Rs.170 with seven trades covering nearly 1.8 million shares done between Rs.169.10 and Rs.170.90.

Apart from the JKH crossing, over 0.4 million shares traded on the floor between Rs.208 and Rs.209.50 closing flat at Rs.209 generating a turnover of Rs. 34.5 million. Hayleys too closed flat at Rs.360 on the trading floor with nearly 0.4 million shares traded (apart from the crossing) between Rs.360 and Rs.370.

Brokers noted that heavy activity in Swarnamahal where 5.2 million shares were traded closing 30 cents down at Rs.8.70 including some foreign activity. This stock has been seeing heavy volumes recently with retail participation evident.

JKH closed 20 cents up at Rs.209.20 on slightly over 85,000 shares done on the floor.

Brokers said dividend driven stocks like Ceylon Tobacco and Nestle saw some play with Tobacco closing Rs.9.70 up at Rs.585.30 trading between Rs.590 and Rs.600 while Nestle closed Rs.11.50 up at Rs.935 on 15,100 shares done between Rs.925 and Rs.935.

Chevron announced a first interim dividend of Rs.3 per share for 2012 XD from Apr. 18 and with payment on Apr. 27.
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* Rupee strengthens against the dollar

With the IMF preferring to see monetary policy adjustments to contain credit growth, currency dealers are expecting a policy rate hike today after Treasury Secretary Dr. P. B. Jayasundera made a public statement that another 50 basis points increase to key rates could stabilise the economy, but some believe rates would be left unchanged by the Central Bank.

Some dealers are expecting policy interest rates to increase by as much as 100 basis points when the Central Bank announces its Monetary Policy stance today ahead of the long weekend.

"Considering where the 12-month Treasury bill rate is at the moment, and the fixed deposit rates offered by commercial banks, there is space for the

Central Bank to increase policy rates by 200 basis points, so a 100 basis points increase would be a conservative guess. However, Dr. P. B. Jayasundera’s comments to Reuters has created expectations for a 50 basis points increase," a currency dealer said.

"Since we have already raised policy rates by half a percent (in February), maybe another 50 basis points upward revision could stabilise the whole macro economic environment," Dr. Jayasundera had told Reuters.

"Right now is not the time. We must wait for the April data and look at the adjustments that have taken place, and then take a policy decision that will maintain the compatibility of the interest rate and the exchange rate." Preliminary figures for April should be available to policymakers by early May.

Some currency dealers however, read into this Reuters report differently, and expect no changes to monetary policy rates today.

The IMF earlier this week said it preferred to see some monetary policy adjustments, rather than tax increases to curb import growth to contain a balance of payments issue.

Meanwhile, the rupee continued to gain against the dollar, closing at Rs. 125.40/50 yesterday from an opening of Rs. 126.15/30.
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Loss making national carrier SriLankan Airlines is suspending flights in its European route network in a bid to contain escalating costs.

The airline suffered a Rs. 19.5 billion loss in 2011. It recorded a loss of Rs. 6.27 billion in 2010, which was down 49 percent from the previous year.

SriLankan Airlines announced certain capacity adjustments to its European route network, "taking into consideration the rise in fuel and operational costs and economic indicators in the EU region".

"According to the World Travel and Tourism Council (WTTC), a decline in travel and tourism of 0.3% is expected across the European Union in 2012, although it will be propped up by the growth in newer emerging economies in the eastern bloc as well as Russia. As austerity measures are introduced in some countries, consumer spending is expected to reduce," the airline said in a statement.

Taking current travel trends into consideration, the airline will cancel flights to Zurich, Switzerland during the off-peak from May 01 to June 26 and operate from June 27 until August 31, 2012.

Similarly, SriLankan’s Rome and Milan services will be cancelled during off-peak from May 05 to June 26, and will operate from June 27 until September 09, 2012.

"Changes are being gradually introduced in view of the commitments already made to passengers during the peak period and to facilitate the airline’s trade partners to adjust to the changes.

"SriLankan will continue to review its operations to Switzerland and Italy and directed by forecasts, travel trends and developments in the Eurozone, to identify commercial viability, so that flights can be recommenced in these markets, at an opportune time.

The airline continues to serve its traditional gateways of London, Paris and Frankfurt which serve a large clientele that fly direct and beyond to several destinations in Europe and the Americas," the airline said.
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The government has been successful in containing its expenditure within budgeted estimates in 2011, but revenue estimates proved to be overestimated with the actual revenue deficit expanding a marginal 2.77 percent from the original estimate.

The Treasury announced that the total actual government expenditure for 2011 amounted to Rs. 1,961,053 million in 2011, well within the original estimate of Rs. 1,968,031 million.

However, actual revenue receipts, including grants, for the year, amounting to Rs. 974,297 million was below the original estimate of Rs. 1,007,885 million.

The actual revenue deficit amounted to Rs. 986,756 million, expanding 2.77 percent from the original estimate of Rs. 960,146 million.

"The government Annual Accounts for the year 2011 was prepared and forwarded to the Auditor General by the General Treasury on April 03, 2012," the Ministry of Finance and Planning announced.

"According to the Department of State Accounts, the government was able to maintain the overall expenditure within the limits approved by Parliament.

"Accordingly, the total actual expenditure in terms of government accounts is Rs. 1,961,053 million which consist of Rs. 1,020,197 million recurrent expenditure and Rs. 398,519 million capital expenditure. The total debt repayment is Rs. 542,337 million under the period of review. The original total estimated expenditure for 2011, including debt repayments was Rs.1, 968,031 million. However the total receipt of revenue and grants in the year is 974,297 million, while the estimated revenue was Rs. 1,007,885 million," it said.

Treasury Secretary Dr. P. B. Jayasundera last month said the government was committed to containing budget deficits within limits set out in the budget, which also form part of the indicative targets under US$ 2.6 billion standby arrangement with the IMF.

Analyst said the recent policy measures taken by the government to arrest a balance of payments crisis could pressurise its revenue streams this year.

In the past, governments had always underestimated expenditure and overestimated revenue resulting in bloated budget deficits. This persistent fiscal indiscipline was called by the bane of macroeconomic stability. Since the end of the war, the government has begun to show more fiscal discipline.

IMF Resident Representative Dr. Koshy Mathai said last Tuesday that the budget deficit would slightly exceed the 6.8 percent of GDP target for 2011, but the IMF was more concerned about how the deficit was financed, with end-December targets being met.
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Ceylon Continental Hotel takes centre stage this April season in Nuwara Eliya with, "Heist on the Hills". This has been inspired by the most recent endeavour – Continental Outdoors, the new outdoor catering unit. Along with its state of the art equipment, expertise in the culinary field and a passion to provide an exemplary service has brought upon the vision of a new outdoor catering trend.

From the 7th to the 22nd of April, "Heist on the Hills", will entertain a plethora of personalities from around the world including Colombo’s finest to Nuwara-Eliya. The crisp cold air and the sun streaming over the mountains will set a charming scene of poise with a mix of fine food incorporating a wide variety of international favourites, beverages and an eclectic selection of lounge music. The dress code for this afternoon’s soirée will be preppy, which is appropriate for the great outdoors. Exciting activities such as target shooting, flying fox, wall climbing and other adventure sports organised by Academy of Adventure, along with a wide variety of activities will provide a thrilling experience for all. As dusk falls, a different level of energy has been planned. The atmosphere is set to intensify and gradually morph into a soft party ambience. Dinner will add to the excitement with a variety of dishes from barbeque to delicious Asian cuisine. The music of a deleted and band, D-zone, will complete the entertainment for the event.

As the hotel awaits the completion of its major refurbishment, to elevate itself to its iconic standing, most of the hotels’ employees along with its award winning team of chefs led by the hotel’s senior executive chef Tilak Senarathne are the heart of this event. The team incorporates an array of skills and talent which will provide you with none other than the best for this season. In addition to that, the Restaurant and Bar Manager Katherin Ballarin from Germany and Indian Restaurant Manager, Muneesh Sharma along with Keerthi Rewatha -Beverage Manager will also be on call to spoil you.

Keep your calendar free for this fabulous outdoor experience, and join the Ceylon Continental Hotel at "Heist on the Hills" in Nuwara- Eliya this season.

The Ceylon Continental Hotel is owned and managed by Hayleys Group.
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By Steve A. Morrell

John Keels Holdings ( JKH) Weekly Tea Market report said because of extremely hot and humid conditions, plantations are experiencing dwindling intakes. Currently intake levels are about 25 % below last year’s March crop. March crop 2011 was 33.2 million kilos, one of the best on record they said. Attributable reasons blamed global climate changes for the expected Ceylon Tea debacle.

However in Rupee values, with devaluation now at about Rs. 130. to the Dollar, The small holder sector said ‘We make sufficient to pay the rent . That’s all.’ But the formal plantation sector continue to ‘Chew their fingers’. They said continuous labour unrest, and low productivity plagued the Plantation sector. More so their debt to Banks doubled over the past two months.

Losses in the Plantation sector compounded an already hopeless situation. High yielding Estates in the Bogowantalawa Valley too have been snared into the loss triangle. Labour have refused to increase plucking norms. The 12 kilo norm has not changed said a Brokering source. Pluckers bring in averages of at least 25 to 30 kilos per day, and they are paid Rs. 20. Per kilo for every kilo over the norm. That means each plucker earns in addition to her wage of around Rs.500. per day, the extra amount in over kilos gives her additional income of about Rs. 600. Her take home wage (per day) is about Rs.1100. Assuming she works the mandatory 27 days her wages per month tops about Rs. 29,700.

Add ons also accountable include EPF,ETF, and other sundries all amounting to about Rs. 35,000. Per month. With a wages bill of that magnitude the Plantations sector would need serious examination to seek an escape bung to emerge from an incessant down syndrome these sources said.

Mid grown Tea production contributed positively to overall production results to end February this year. Low growns were at reduced crop levels. High growns barely at plus returns had crop increases of about 400,000 kilos.

Irrespective of their ‘favoured’, status, low grown crop returns were disappointing. ‘ Favoured’, because assistance packages extended to this sector comprising mostly small holders were treated with deference; more so they had state patronage for most of their routine functions. Small holders did not deliver.

It was further confirmed by the Tea factory Owners Association, that small holder performance will progressively reduce, and the phenomenon of decreases will have to be expected. Reasons for this disturbing trend was that the small holder sector did not have a planned replanting programme. Most of their Tea stock was now over 30 years old; consequently such crop declines had to be expected.

‘What of the mid growns? How did this elevation show positive results? Mid grown plusses were that such plots mainly in the low country, supplied their leaf to mid – grown factories. Leaf was registered at these factories which explained reasons for crop increases . For instance Small holders in Kitulgala, registered as low grown producers send their leaf to Factories in Nawalapitiya; a Mid –grown location.

These results cannot be sustained, this source said.

John Keels Holdings , Tea factory Owners Association, CEO, Anil Perera, said JKH Small holder plots selling leaf to their factories, collectively owned about 225,000 hectares. The company’s extension services included fertilizer at subsidized prices, irrespective of the Government subsidy. Additionally the company had extension services facilitating soft loans to their leaf suppliers.

According to Brokers Tea reports last week, they said prices were good. But there was no real elation that such prices would translate to working profits.
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China has almost tripled the amount foreigners can invest in stocks, bonds and bank deposits to $80bn (£50m), as the government shifts its growth model from exports to domestic consumption.

The China Securities Regulatory Commission increased the quotas for qualified foreign institutional investors from $30bn to $80bn, according to a statement on its website.

Offshore investors will also be allowed to pump an extra 50bn yuan (£4.9bn) of local currency into the country, up from 20bn yuan.

The announcement came as Premier Wen Jiabao told national radio that the country’s state banks make money "too easily" and their monopoly on financial services has to be broken if cash-starved private enterprises are to get access to capital when they need it.

"Frankly, our banks make profits far too easily. Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital," China National Radio quoted Mr Wen as telling local businesses at a round-table discussion.

"That’s why right now, as we’re dealing with the issue of getting private capital into the finance sector, essentially, that means we have to break up their monopoly," the radio news service reported Mr Wen as saying on its website.

China, the world’s second-biggest economy, has pledged this year to free up control of the yuan and liberalise interest rates as the government deepens reforms to revive growth and offset slowing exports and a cooling housing market.

China needs to rely more on markets and the private sector as its export-oriented model isn’t sustainable, World Bank President Robert Zoellick said in February.

© Telegraph Media Group Limited 2012
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High networth and highly networked investor D_ilith Jayaweera yesterday joined the bandwagon of those who are blaming the Treasury for current economic ills claiming that investors were getting frustrated due to inconsistent policies all-round.

He said that there had been an unprecedented degree of policy inconsistency of late thereby preventing a conducive and cohesive environment which is key. This he blamed on Treasury and claimed has increasingly frustrated investors both existing and prospective.

D_ilith’s outburst is surprising as he has been a champion of positivism and can do attitude especially after the Government and forces defeated terrorism that plagued the country for near 30 years.

He also qualifies to be in the top 10 league of individual as well as emerging corporate investors in post-war Sri Lanka for his investments and acquisitions both within and outside the Colombo stock market.

The private sector and the Opposition have increasingly faulted not only the Treasury but also the Central Bank for mismanaging the economy. Drawing references from the famous book “Confessions of an Economic Hit Man” by John Perkins, some even have adduced that certain officials could be having an outside agenda.
http://www.ft.lk/2012/04/05/deleted-says-investors-getting-frustrated-casts-blame-on-treasury/