Sri Lanka Newspapers 05/02/2012

Colombo bourse under a cloud
By Elton P. Ebert

Despite global stock markets coming under strain, Facebook is venturing out with a US$5 billion IPO much in contrast to our share market which is still languishing in despair, aggravated by the spate of holidays.

On Friday when trading closed at 12 noon the turnover was a paltry Rs 420 million, the dull sentiment attributed to the holiday fever. Some clients were informed that many brokers and Fund Managers are utilising the holidays (if one day's leave is taken on Monday, it becomes a 4-day weekend) to go out of Colombo. The IPOs that were on the agenda have been placed on the backburner as a result of the depression at the Colombo bourse and the fact that the prices of last year IPOs like Textured Jersey are now at Rs 8.10, Expolanka at Rs.6.90, Browns Investments at Rs 3.60 and Softlogic Holdings at Rs.14.60.

These losses and the margin calls are detrimental to the current market. This sentiment has been prevalent for the past few months, interpolated by sudden jerks of a few days of upward movement just like what was evident last week with the foreign buying of JKK. A segment in the market expects some improvement to be visible following the Central Bank's ruling allowing foreign owned firms to do margin providing.

Most companies have reported nourishing growth numbers. Ceylon Tobacco has reported a profit after tax of Rs.6.6 billion for the last year of which an astonishing Rs.6 billion went to the state! This was an increase of Rs.9.5 billion over the figure last year.

The price of this share has been hovering around Rs.500. In response to the healthy earnings released by NDB Bank, around 2.8 million shares were transacted on Monday with a moderate price improvement seen, but that proved to be temporary. It closed for the week at Rs.126.

Haycarb and Keells Hotels also released good figures, the closing price for the former being Rs.139.80. In an exercise depicting future growth, Chemcel Ltd, a subsidiary of Chemanex which is under the CIC Holdings umbrella had a soft opening of the company's Carboxy Methylated Starch extrusion plant on January 28 at Mirigama in the EPZ using patented technology from US firm Archer Daniels Midland. Chemanex shares are rarely traded, unlike CIC Voting and Non-voting. CIC Voting shares were at Rs 98.90. Asia Asset Finance continued to remain in the active list for another week, although on a reduced scale, its closing level being Rs. 5.90. Regnis Lanka came into the picture after a long absence with a gradual price improvement reaching Rs. 353 and cooling off to Rs. 339.80 on Friday.

A high volume of around 27 million shares were transacted in Acme Printing for four days of the week, with a daily price improvement until Thursday when it reached Rs. 34.50, but suddenly veered down to Rs 23.70 surprising many. Commercial Bank Voting and Non-voting shares were moderately active. Analysts expect favourable earnings figures.

Environmental Resources Investments Warrants W 00002 came in for a hefty transaction during the week. A continuous rise was noticed in Swarnamahal Financial Services and the stock was Rs. 157.50 at close.

Changes in Directorates: Vallibel Power Erathna - S. Shanmuganathan was appointed a Non-Executive Director from 25th January; Swarnamahal Financial Services - Ms Soma Edirisinghe resigned as Chairperson and her son, Jeewaka Edirisinghe appointed to this position on 31; Sampath Bank - D. Sooriyaarachchi was appointed alternate Director to Prof. K A Malik Kumar Ranasinghe; Hayleys MGT Knitting Mills - Dr Emerick Fernando was appointed as Executive Director, and Haresh Somsahantha and Nandajith Somaratne as Non-Executive Directors.

The weekly turnover was Rs.4.9 billion, much lower than the Rs. 6.7 billion registered last week. Both indices were also disappointing, the All share Price Index losing 139.34 points or 0.125% to end at 5586.10 while the Milanka was 108.78 points or 1% lower at 4813.03.

Next attraction for Chinese tourists in Sri Lanka: Zheng He
By Sunimalee Dias

State plans are underway to attract more tourists from China by promoting China’s efforts in re-writing world history with the focus on Admiral Zheng, considered the first to sail around the globe.
In this regard, Sri Lanka Tourism together with AIESEC, an international grouping of undergraduate students, organized an oration on the Mongolian Admiral Zheng He who set sail from China with a group of 300 ships during which he is recorded to have visited Sri Lanka as well, according to SLT Chairman Dr. Nalaka Godahewa.

He noted that in a bid to encourage increased tourist arrivals from China the government hopes to establish a memorial chamber in the Maritime Museum in Galle, adding that this is likely to be a key tourist attraction as it would be only one hour’s drive from Colombo.

One of the items on display would be a carved stone discovered in 1911 in Sri Lanka that had been covering a culvert near Cripps Road in Galle. The finder, provincial engineer H.G. Tomalin, had it removed to safety and it was found to have inscriptions detailing the gifts made by Zheng He to a Buddhist Temple on the Mountains of Sri Lanka, which is believed to be that of Adams Peak, Dr. Godahewa said.

The inscription is said to be in the three languages in which trading took place at the time namely Persian, Tamil and Chinese. Currently, it is placed in the National Museum in Colombo with a replica made available at the Maritime Museum in Galle.

Dr. Godahewa speaking further explained how the Admiral had visited the country 100 years before the Portuguese, 233 years before the Dutch and 397 years before the British. China is right now working on archeological evidence, of ship wrecks belonging to Zheng He’s large entourage that traveled with him, indicating the Admiral’s travels around the globe long before other well-known travellers.

Two major conglomerates in the fray to buy Golden Key Hospital
By Bandula Sirimanna

Two major Sri Lankan groups are in the fray for a tender called to sell the 11-story, state-of -the art, Golden Key Eye & ENT Hospital in Rajagiriya to pay off desperate Golden Key depositors, top officials of the two companies confirmed.

Tenders to sell the Golden Key Eye & ENT Hospital were closed on the 23rd of January and there was only a single bid from Richard Pieris Company which had quoted a price of Rs.730 million to acquire the property, official sources said.

Then Softlogic Group, a diversified conglomerate, also made an offer of Rs. 780 million after the closing date of the bids and it was accepted by the Committee of Charted Accountants appointed by the Supreme Court to handle the affairs of the defunct company, sources revealed. Chairperson - Golden Key Depositors Society (GKDS), Anusha Emmert told the Business Times that the offers made by the two companies to acquire the property are lower than the commercial value of the land with the building alone estimated at Rs.3 billion.

It is not sufficient to pay even Rs. 50,000 each for 7,200 disgruntled depositors, she added. "Therefore we depositors, cannot approve the two offers made by Softlogic and Richard Pieris. We request the authorities to sell the property to a buyer who is willing to pay at least its commercial value," she said.
According to the valuation of PricewaterhouseCoopers Lanka (Pvt) Ltd who conducted a comprehensive audit on GK assets on the directions of the Committee of Chartered Accountants, the Golden Key Eye & ENT Hospital is worth around Rs.1.25 billion. The Government valuation was Rs.750 million The Golden Key Group of Ceylinco Consolidated had made an investment of Rs.950 million for the setting up of Sri Lanka's first specialty eye and ENT hospital.

The two bids were Rs. 200 million lower than the initial investment. In September 2010, the Supreme Court endorsed the sale of the Golden Key Eye Hospital accepting the offer made by a Singapore businessmen H.O. Soo Fong at price of US$ 12.1 million (Rs.1.3 billion) subject to a bank guarantee of US$ 100,000. However the US$ 100,000 bank guarantee was not furnished by the stipulated date and the deal was off. When asked to comment on the present deal of Golden Key Eye & ENT Hospital, Head of the Accountants Committee Lakshman R. Watawala who is also a director of Arpico said that he was not involved in the tender process. The other two members Nelson Nagasinghe and Mahendra Panditha have been entrusted with the task of handling the tender. He said that he is aware about the Arpico offer but he has nothing to do with the deal.

A Central Bank official said a satellite earth station valued at Rs 500 million on a 2-acre land, a teak plantation and a tea factory owned by Golden Key would also be advertised for sale. On a previous occasion too the hospital was offered for sale and there were many offers but no finality was reached at the time.

Thanks cseguide.
Please provide links.
Here are the links.
http://www.sundaytimes.lk/120205/BusinessTimes/bt36.html
http://www.sundaytimes.lk/120205/BusinessTimes/bt37.html
http://www.sundaytimes.lk/120205/BusinessTimes/bt01.html

By Duruthu Edirimuni Chandrasekra
India-based CRISIL, a rating and research agency, has sent a proposal to the Central Bank (CB) on the setting up of an index similar to the stock market indices as a way to measure the performance of Treasury Bills (TB) and bonds, CB officials said.

"They sent a proposal recently and we are looking at it," a CB official told the Business Times. He said that setting up such indices calls for funding and the CB is analysing the cost structures.
This follows a visit by a team from CRISIL, a subsidiary of Standard and Poor, had with NDB AVIVA Wealth Management last month. "We had discussions with both the CB and the Securities and Exchange Commission (SEC) and we would like to work with them to create indices for fixed income securities in the island," Mukesh Agarwal, Senior Director of CRISIL Research told the Business Times at the time.

He noted that they have analyzed data from the Sri Lankan government's security market and have proposed structuring four indices covering Treasury Bills and Bonds and that these securities are quite similar to those in India.

A SEC source said that such an index on the bonds and TB are needed now that the local fixed income securities are set to take off.

Bond markets in Sri Lanka are being dominated by government securities with comparatively low retail investor participation, analysts observed, noting that with fixed income securities it can be difficult for investors to understand their risk - return. If there's a benchmark such as an index, investors can understand the risks," Mr. Agarwal added.
http://www.sundaytimes.lk/120205/BusinessTimes/bt28.html

Experts of varying persuasions are lining up to explain the misfortunes of the local stock market. Everyone is long on commentary and suggestions, but short on practicality. Failed experiments have included firing unpalatable regulators (in the eyes of brokers) and easing credit to revamp animal spirits. The failure is as much one of imagination as it is of misdiagnosis.

The domestic market had two stellar years prior to the last. Shares are expected to return 9-12% per annum (including dividends) when measured over a meaningful period of time. The above figure comes from the longest running data set collected on shares spanning two centuries across 25 countries by Professor Elroy Dimson and his team at the London Business School. Given the strength of share price growth in 2009 and 2010, they’re now well and truly in line for a correction and possibly a bear market.

The mental barriers to effective decision-making in bear markets are as many and varied as those that plague rationality during bull markets. However, in bear markets the primary role of emotion is particularly pronounced as the resulting fear and shock short-circuit more logical analysis. Experiments have shown that those that can’t feel fear behave more rationally in the face of loss than those who can. Perhaps many of the extremes we experience during our moments of both euphoria and revulsion could be avoided if only we understood human psychology better.

It is a cliché that markets are driven by fear and greed. However, it is also disturbingly close to the truth. Having spent the middle part of last decade exploring the psychology of bull markets, it makes a refreshing change to examine the drivers of bear market behaviour. Fear seems to lie at the heart of the psychology of bear markets. The bad news for us humans is that within the brain emotion appears to have primacy over cognitive functions.

Our brains consist of two different (although interconnected) systems. One is a fast and dirty decision-maker (System 1), the other is more logical but slower (System 2). System 1 (fast thinking) is the mental state in which you probably drive a car or buy groceries. It relies heavily on intuition and is amazingly capable of misleading and also of being misled. The slow-thinking System 2 is the mental state that understands how System 1 might be misled and steps in to try to prevent it from happening. The most important quality of System 2 is that it is lazy; the most important quality of System 1 is that it can’t be turned off. We pass through this life on the receiving end of a steady signal of partially reliable information that we only occasionally, and under duress, evaluate thoroughly.

System 1’s output is often unchecked (or at least checked only too late) by System 2. For instance, if I were to place a glass box containing a snake on the table in front of you, and asked you to move as close as you could to the box, if the snake reared up, you would jump backwards – even if you aren’t afraid of snakes. The reason for this is that System 1 ‘recognised’ a threat and forced the body to react, all of which was done before the System 2 had a chance to point out the protection offered by the glass box. Effectively from an evolutionary standpoint a rapid response to fear carried a very low cost to a false positive, relative to the potentially fatal cost of a false negative. Whilst such an approach may have kept us alive, it doesn’t necessarily work in our favour when thinking about financial markets.

In a fascinating experiment Professor Baba Shiv and colleagues show that when taking risk is rewarded over the long-term, players who can’t feel fear (due to a very specific form of brain damage) perform much better than the rest of us. Prof. Shiv also show that the longer the game goes on, the worse people's performance becomes. The parallels of Prof Shiv’s game with bear markets are (I hope) obvious. The evidence suggests that it is outright fear that drives people to ignore bargains when they are available in the market, if they have previously suffered a loss. The longer they find themselves in this position the worse their decision-making appears to come.

This is in no way to suggest local shares are a bargain at the moment. Given how far markets have gone up, it’s fair to assume that global macro events will dictate another subdued 2012. Given our inclination to herd it is possible that individual bargains may start to appear in the event of a complete stampede out of local shares.

Investors should consider the Buddhist approach to time. That is to say, the past is history and the future is a mystery, and so we must focus on the present. The decision to invest or not should be a function of the current situation (the value on offer) and not governed by prior experiences (or indeed our future hopes). Perhaps we would all do well to remember the sage words of King Solomon’s advisors when charged to find an expression that would be true and appropriate in all times and situations, that ‘This too, shall pass’. Buddhists believe that ‘all things must come to an end’. That goes for both bull markets and bear markets in equal measure.

(Kajanga, an Investment Specialist based in Sydney, Australia, and is the Business Times’ regular columnist on investment issues. You can write to him at kajangak@gmail.com).
http://www.sundaytimes.lk/120205/BusinessTimes/bt07.html

Banking sector buoyant for 2012
By Duruthu Edirimuni Chandrasekera

With the strong earnings outlook, increase in expected credit growth, the banking sector for 2012 remains buoyant, according to industry analysts. “The increase in expected credit growth is more than 20% and the average gross nonperforming loan ratio is down to about 4.5%. There are healthy capitalization levels and a return on equity of nearly 18% - all of which makes this sector attractive," Danushka Samarasinghe, Director Research TKS Securities noted. He said that the negative market sentiment, the banking sector counters which have shed ground currently appear very attractive at the current price levels.

Industry analysts note that despite the pressure created on interest margins in a declining interest rate environment, banking sector achieved a remarkable growth during 2010 registering a 18% year on year growth in total asset base to stand at Rs 3,548 billion as at 31 December 2010 and it will do the same this year as well. During 2010 declining interest rates stimulated the business volumes of the banking sector with loans and advances growing by 23% year on year to reach Rs 1,959 billion.

Slashing interest rates in 2011 saw credit growth accelerate with private sector credit growth reaching a 16 year high of 34.4% year on year in June 2011 driven by high economic activity. Analysts said that to ensure the sustainability of the financial system, it is anticipated that the interest rates would rise by 150 to 250 basis points this year. “Even though in general the rising interest rates slowed down the economic activity, Sri Lanka managed to secure satisfactory growth levels amidst the higher interest rate environment during the past years. Therefore the country would still be able to accept this level of rise in the rates,” Mr. Samarasinghe said.


source
http://www.sundaytimes.lk/120205/BusinessTimes/bt18.html

http://www.sundayobserver.lk/2012/02/05/fin01.asp

The IMF welcomed the increase of policy interest rates and other measures recorded by the Central Bank to contain credit growth.Commenting on $ 800 million last tranch of the $ 2.6 billion IMF standby agreement facility, Dr.Aitken said that after the conclusion of this mission, the money will be available and whether we take it or not is upto the government of Sri Lanka. Our rates are between 1-3 percent. While urging more flexibility, the IMF welcomes monetory and exchange rate policy adjustments , the IMF stressed that Sri Lanka’s monetory, fiscal and exchange rate policies should be flexible and Sri Lanka needs to take advantage of all policy instruments to re-balance the external sector of the economy.

The Sri Lankan economy is growing and inflation is under control. However, one thing we see widening is the trade deficit. We hope to see a slowdown in credit growth.

We want to see the government’s strategy on dressing up the situation, after concluding the IMF staff mission Dr.Brian Aitken told the media in Colombo on Friday. He said that a flexible exchange rate is important and the 3 percent depreciation of the rupee in the Budget was welcome and more flexibility in the exchange rate policy is vital at this moment.

We want to go further and our position is the same.

The Government singled that it is going to curtail credit growth, he said.

Dr.Aitken said that the widening trade deficit is a byproduct of strong growth and boosts the confidence in the economy.

As a result, consumer spending and imports surge. Responding to queries of journalists, he said that Sri Lanka has been successful in raising funds from international capital markets and all its Euro bonds were oversubscribed.

However, today the situation is more challenging due to the debt crisis in the Euro zone and other economies.

He said that Sri Lanka’s foreign reserve level has declined and today it is below the reserves level we agreed on our technical Memorandum of Understanding. Today, Sri Lanka has more space to adjust and in 2009 due to the global crisis and capital outflow there was limited space.

Our discussions focused on the government’s strategy to address the external imbalance that emerged in the second half of 2011 and ensure that the economy’s recovery continued without disruption.

There was broad agreement that a decisive policy response was needed to put the economy on a sound macroeconomic footing, especially given the current uncertain global environment.

In this context, we are encouraged by the recent adjustments in the monetory and the exchange rate policy stance, as well as the strong commitment of the government to further reduce the Budget deficit to 6.2 percent of GDP in 2012 and address the losses of key state owned enterprises, he said.

will govt take this?

yes of cause. I will bet on that. IMF don't know about SL politicians.They doing opposite to what they saying

sometimes it could give a little boost to the market sentiments.

thanks for sharing

IMF came forward to arrange this facility that is very difficult time for Sri Lanka in 2009. It is positive to see this will end successfully

I merged couple of threads which should come under Sri Lanka Newspapers 2012-02-05 created by cseguide.
Please read the following instuctions made by admin.

Quibit wrote:Dear Members

After careful consideration of the requests made by the members, we have decided to allow submission of the news articles appearing in printed newspapers to the forum only on the following basis.

* There should be only one thread per day in the 'News" Section relating to News articles appearing in the Printed Newspapers.
The Title of the thread should be as follows:
Sri Lanka Newspapers - Date (Eg; 25/12/2011)

* Members can post all news articles appearing in the Printed Newspapers on that particular day under this thread by way of messages/replies.

* Full articles should be posted (Links without contents will not be allowed). Link and the authors name should appear at the end of the content.

* This applies only in respect of the articles appear in the affiliated websites of the Local Printed Newspapers.

* Moderators reserve the right to post any article as a new thread in any section of the forum, if they believe that the respective article is beneficials to members and/or will have a significant impact to the stock market, that may warrant member discussions and comments.

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