Sri Lanka Newspapers Friday 27/04/2012

* Meeting not one sided lecture, but two-way discussion
* Speculation not the biggest issue, treasurers tell Central Bank
* Low limits, uncertainty main reasons for market volatility
* CB officials clarify: Will intervene when need arises, inflows will improve

The Central Bank yesterday summoned heads of treasury departments of commercial banks in a bid to contain speculative trades in the foreign exchange market which has seen the rupee fall against the dollar in recent times, contrary to official forecasts that the rupee would strengthen against the greenback.
The foreign exchange market had almost halted by mid morning yesterday as treasury officials converged to the Central Bank, expecting to be lectured to by the regulator.

The Island Financial Review learns the meeting was more a two-way discussion rather than a one-way lecture from the Central Bank, despite Governor Ajith Nivard Cabraal telling news wire services that banks were being probed for speculative trades, in an attempt to pin the blame for the rupee’s fall on commercial bank treasurers.

As Cabraal was in South Korea with the President, the meeting was chaired by Deputy Governor Mrs. C. Premaratna. International Operations Department Director H. A. Karunaratne and other senior officials of the Central Bank also took part in the meeting.

When the Central Bank had brought up the topic of speculation, commercial bank treasurers had pointed out that speculation was not the real problem.

Speculative trades are very small in Sri Lanka’s ‘shallow’ foreign exchange market, which does not give much room for large gains to be made through such trades.

The treasurers pointed out that the principle issue was the very low limits with which commercial banks had to operate with, which meant that even small trades caused volatile movements in the exchange rate. The continuous fall of the rupee had more to do with these low limits, called net open positions, prescribed by the Central Bank, and little to do with speculation.

Treasurers had also pointed out to the Central Bank officials that the current account deficit and Cabraal’s recent comments that the bank would not intervene to settle oil bills were also affecting sentiment in the foreign exchange market.

The Central Bank had then assured the treasurers that the Central Bank would always be there to provide the necessary dollars when the market was short, and absorb any excessive inflows.

Central Bank officials said the market had misinterpreted Cabraal’s comments regarding oil bill payments. What he had intended to say was that inflows would improve to such an extent by May, that the Central Bank would not have to intervene to supply dollars.

The Central Bank had assured the treasurers that inflows would improve significantly soon. Treasures had also expressed their confidence that this would be so, although there was some concern about the timing of these inflows.

The Central Bank had given the treasurers a patient hearing, but nothing was said about its future course of action.

The foreign exchange market was inactive yesterday with traders retreating to the sidelines.

"The rupee closed at Rs. 130/Rs. 131 against the dollar. There was no real activity in the market although a few quotes were made. The market took the time off with traders adopting a wait-and-see attitude after the rupee fell to its lowest on Wednesday," a currency dealer said.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50503

Turnover up slightly, indices point in opposite directions

The All Share Price Index on the Colombo bourse gained slightly yesterday while the Milanka was down on a turnover of Rs.391.4 million, up from the previous day’s Rs.288.6 million, with Carsons, JKH, Nestle and Commercial Bank being the main business generators.

The All Share Price Index closed 5 points (0.09) up while the Milanka was down 26.8 points (0.54%) with 77 gainers comfortably outpaced by 105 losers.

Brokers said that although there were some strategic movements in high value stocks like Carsons, JKH and Nestle, the market was relatively dull as it has been for the past several days.

Carsons which closed Rs.14.90 up at Rs.475 with 71,012 shares trading between Rs.460.10 and Rs.475 generated the day’s top turnover of Rs.33.4 million followed by JKH, down Rs.1.80 to Rs.203.50 on over 0.1 million shares traded between Rs.203 and Rs.204.50, and Nestle up Rs.64.60 to Rs.1,259 on 20,321 shares traded between Rs.1,200 and Rs.1,210.

Commercial Bank was down 10 cents to Rs.105 on slightly over 0.2 million shares trading at Rs.105 while Seylan was up a rupee to close t Rs.62 on over 0.1 million shares traded at Rs.62.

JKH generated a turnover of Rs. 289.9 million, Nestle Rs. 25.4 million and Commercial Bank Rs. 22.1 million.

Swarnamahal Financial Services continued to show volume closing 40 cents up at Rs.8.70 on over 1.3 million shares traded between Rs.8.20 and Rs.8.80.

Printcare announced a final dividend of 40 cents per share for 2011/12 XD from May 9 and with payment on May 17.

Pegasus Hotels of Ceylon PLC said it has raised Rs. 110.9 million via a rights issue.

The Carsons Group managed hotel, issued 3.04 million shares to existing shareholders at a proportion of one share for every nine shares at Rs. 36.50 each, a stock exchange filing said. Funds from the rights issue will be used to settle borrowings made to buy 685,469 shares (or a 99.98 percent stake) in Equity Hotels Limited.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50504

Overseas Realty (Ceylon) PLC, the developers and managers of the iconic World Trade Centre (WTC) towers in the heart of Colombo, has reported a 32 percent increase in net profits amounting to Rs. 584 million for the year ended December 31, 2011, and the company is confident the buoyant macroeconomic environment would attract enough demand which would make it possible to achieve a higher rentals index this year.

"The property market is the biggest business enterprise in any leading city in the world. Thus our Company is a direct beneficiary of economic stability, growth and business confidence in the country. Whilst we have recorded significant operational growth in 2011 the Company will explore every property related opportunity available in order to maximize shareholder value," the company’s Chairman S. P. Tao told shareholders.

"In 2011 your Company was able to position itself as the premier property development, property management and property owning company in Sri Lanka as a result both of the environment in which we operate i.e. increased investor confidence in the country, pro-business policies of the Government and economic stability arising from peace and the high standards of quality and service that we are able to consistently maintain and deliver. This is reflected in the Group’s Profit after Tax (excluding fair value gains) of Rs. 584 Mn, a 32% increase compared to the previous year. The concomitant increase in demand for quality office space in the World Trade Center Colombo and residential apartments in Havelock City enabled the Group to record a Gross Revenue of Rs. 2,491 Mn, an increase of 47% compared to that achieved in 2010," he said.

Significant twin increases in occupancy (89% achieved in December 2011) and average rental rates in World Trade Centre Colombo contributed to a strong performance for the Company.

2011 saw strong growth in demand for commercial and office space as a result of a growing economy and positive business sentiments in the country. Revenue generated through leasing of space at the World Trade Centre (WTC) Colombo of Rs. 847 Mn saw significant growth of 21% over the previous year. Occupancy which was at 72% at the start of the year closed at 89% with committed occupancy being 95%. Additionally, the lack of quality commercial space in Colombo augurs well for the Company’s ability to demand higher rates and enhance its yields in the future, the company’s recently published annual report said.

2011 has been one of the best performing years in the Company’s history with occupancy at the WTC Colombo reaching 89% by December 2011 and committed occupancy being 95%.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50505

People’s Merchant PLC, in operations for over three decades, became a licensed finance company yesterday (26), subsequent to receiving the necessary approvals from the Central Bank.

A special function was held yesterday to mark the transformation at its head office at Navam Mawatha, Colombo.

People’s Merchant PLC, set up in 1983, was the first merchant banking institution in the country and has over the years consistently evolved to meet the emerging challenges and opportunities in the market and has diversified into leasing, hire purchase, term loans, pawning, real estate, margin lending, bill discounting and fixed deposits.

"People’s Merchant is also aspiring to further develop its merchant banking business by providing innovative merchant banking solutions," the company said.

The Company is listed on the main board of the Colombo Stock Exchange and has the People’s Bank Group as its major shareholder and the Capital Trust Group as its second largest shareholder.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50508

* BRS capital market workshop in Embilipitiya today

Bartleet Religare Securities (BRS) completed their second workshop on Capital Markets on the 30th of March, at Chamber of Commerce Auditorium, Galle , targeting the ever enthusiastic investors in the southern region. The workshop is a series of presentations that will be conducted throughout the country this year. The work shop was conducted with the objective of creating awareness about the investing process and creating an open forum where investors could engage in healthy dialogue with BRS Analysts and Investment Advisors. The topics covered at this discussion were; portfolio management, fundamentals of investing and technical trading.

The participation was heartening with a full house, and the audience showed much interest through interactive participation, resulting in the workshop progressing well over the scheduled time. This signals the need for such forums in today’s investment climate and the speakers were well equipped to provide the audience with experienced and honest content on the principles of investing, BRS said in a statement.

BRS believes that the Colombo Stock Market is going through a period of consolidation, and that this is a normal cycle which would provide an opportunity for investors to enter the market. This seminar is organized as part of the responsibility rests on the BRS to educate investors how to battle the markets and make the best of bearish times.

The next presentation will be held in Embillipiyta today (27) at Sarathchandra Restaurant, Embilipitiya 2.30 p.m. onwards.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50511

MUMBAI (Reuters): Global natural rubber output in the first quarter fell by a sharper-than-expected 9.5 per cent as farmers in Thailand and Malaysia trimmed tapping on a steep drop in prices, promoting an industry body to cut its production forecast for 2012.

The Association of Natural Rubber Producing Countries (ANRPC) revised down its total production estimate in 2012 for member countries to 10.297 million tons from 10.42 million tons estimated earlier.

Output may fall below the revised estimate if prices continue to drop, it said in a report on Thursday.

The average price of rubber in Thailand, the world’s top producer, fell 30 per cent in the first quarter of 2012 from a year ago, the group said, on subdued demand and a decline in crude oil prices.

Rubber prices normally track crude oil trends due to possible substitution between natural rubber and petroleum-derived synthetic rubber.

“The current global economic situation and short-term economic outlook do not support the possibility of a faster growth in natural rubber demand in the second quarter,” Jom Jacob, senior economist at ANRPC wrote in the report.

Natural rubber prices will remain under pressure in short-term, the report said.

“Currently all these exogenous factors are moving slightly unfavourable to natural rubber and there is no reason to expect a reversal of the trend in the short-term,” it said.

Exports from member countries in first quarter fell 6.6 percent on year, but are likely to recover in second quarter of the year as tyre makers in China are expected to replenish their inventory.

The ANRPC members include Thailand, Indonesia, Malaysia, Vietnam, Cambodia and Sri Lanka. Member countries account for more than 90 per cent of global output and exports.
http://www.ft.lk/2012/04/27/2012-global-rubber-output-forecast-cut-after-q1-fall/

The historic $ 500 million five year bond of the Bank of Ceylon (BOC) which opened yesterday had drawn good early demand, according to analysts.

Sources said that all Sri Lankan sovereign bonds so far had been quickly snapped up and the same appetite was likely for the BOC’s issue, which is also the country’s biggest-ever corporate bond.

Rated B1 by Moody’s and BB- by Fitch, on par with Sri Lanka sovereign, the five-year bond’s price guidance is 7.125% area, which analysts and economists said was better than expected.

Sri Lanka’s five-year bond is trading at around 5% and expectations are that BOC paper will be slightly above as the rate looks more generous versus other emerging markets.

The joint book runners are Bank of America Merrill Lynch, Citigroup, and HSBC. Bank of Ceylon is rated B1
Stable by Moody’s and BB- Stable by Fitch as well.

Analysts anticipate the bond to be snapped up at a range of 6-7% depending on the degree of demand. deleted MP Dr. Harsha de Silva on Wednesday said that a higher rate on BOC bond may push up the cost for a future fund raising exercise by the Government, whose 10-year bond matures later this year and a rollover was likely.

However, successful conclusion will help ease pressure on the exchange rate, which has been volatile during the past two days.

Analysts said if proceeds are used to settle off immediate outstanding oil bills instead of boosting reserves and liquidity in the market, the pressure on the exchange rate may remain though moderately. The Central Bank however has been insistent that recent volatility was unwarranted and reserves were comfortable with more inflows expected including the $ 500 m bond of the BOC.

A Reuters report said the BOC bond would be the benchmark for Sri Lanka’s other corporates, which are expected to opt for similar fund raisings in the future.

The Sri Lanka Ports Authority has plans for a $ 500 million, 10-year bond in mid-2012.

Founded in 1939, BOC is the leading commercial bank in Sri Lanka in terms of total asset size, branch and
ATM network size and total revenues. The bank has been wholly-owned since 1961 by the Government and has a significant role in providing credit for the economic development of Sri Lanka.

The bank has the largest market share in loans and advances to customers, customer deposits, inward remittances and Treasury operations. BOC is also the 17th strongest bank in Asia as per the Asian Banker magazine.

According to the joint book runners, among credit considerations for prospective investors of the BOC bond is BOC’s leading market position and strong franchise.

As of 31 December 2011, the bank was the largest licensed commercial bank in Sri Lanka in terms of total assets, loans and advances to customers and customer deposits, accounting for 22.8%, 21.3% and 21.2%, respectively, of the entire Sri Lankan banking sector. The bank is also a leader in inward remittances. As of 31 December 2011, the bank had a 43.5% market share of all worker remittances to Sri Lanka.

Another is the strong Governmental support and professional management: BOC has been wholly-owned by the Government since 1961. The bank has benefited from strong Governmental support over the past years, obtaining and retaining significant business, including deposits, from the Government and Government agencies and institutions.

The bank’s strong relationship with the Government is also evidenced by the key role it plays in development of the Sri Lankan economy as the Government regularly consults the bank as an advisor.

Book runners also emphasised the good asset quality of BOC: As reflected in its conservative risk management, the NPA ratio of 2.2% and has a loan loss provisioning and had an NPL coverage ratio of 59.3% as of 31 December 2011. 10% of overall loans portfolio attributed to the Government; 23% attributed to State-Owned Enterprises (on commercial terms) and 67% to retail and corporate clients.

Among other positives are: Good liquidity and stable funding sources – due to its large network and strong franchise and deposits accounts for a significant part of its funding needs; good operating performance – ROEE and ROAA in steady and strong growth; and sound capitalisation – the Group’s Tier 1 capital adequacy ratio and total capital adequacy ratio stood at 9.3% and 12.8%, respectively.

Among risks are BOC’s concentration of loans to Government and Government-related companies, which constitute about 32.7% of its total loans, and 21.9% of its total assets and larger portion of deposits are less than one year maturities.
http://www.ft.lk/2012/04/27/good-early-demand-for-bocs-historic-500-m-bond/

Sri Lanka’s tea exports in 2011 reached an all time in US Dollar terms as well, according to Ceylon Tea Brokers Plc.

“Based on the weighted average rupee value for US$ 1 in 2011 and 2010 as obtained from the website of the Central Bank of Sri Lanka, equivalent US$ export earnings in 2011 amounted to approximately US$ 1.49 billion as against 1.44 billion in 2010,” the broking firm said yesterday.

“Although the volume of total exports of 2011 including re-exports with imported tea has recorded a decline compared with 2010, export earnings both in rupee terms and dollar equivalent in 2011 are both all time high,” Ceylon Tea Brokers added.

It said total quantity of tea exported for 2011 excluding re-exports with imported tea amounted to 303.16 m/kg, a slight decline of 2.59 m/kg (-0.85%) when compared with the year 2010. However, with the increase in FOB price per kg from Rs. 494.59 to Rs. KR 500.64, total export value for the period showed a marginal increase of Rs. 0.55 billion (+0.37%) as against the same period last year.

Category wise analysis is not possible for tea in bulk and tea in packets due to the classification differences between 2010 and 2011. Despite the decline in volume of tea bags exported the total earnings have increased due to a fairly sharp increase in the FOB price per kg from Rs. 792.91 to Rs. 912.47. Similarly FOB values of instant tea and green tea have recorded increases in 2011 when compared to the previous year.

Total quantity of tea exported for the year 2011 including re-exports with imported tea amounted to 322.56 m/kg as against 324.36 m/kg in 2010. Nevertheless, with the increase in FOB price per kg from Rs. 501.88 to Rs. 511.08 total export earnings in 2011 amounted to Rs. 164.85 billion, an increase of Rs. 2.06 billion (+1.27%) as against the same period last year.

Country wise analysis of exports shows that the CIS countries (including Russia) continue as the largest export destination from Sri Lanka. Iran, Syria, Iraq and UAE follow in that order in 2011. Significantly UAE with exports of 32 m/kg in 2010 has dropped to 22.53 m/kg in 2011.

On the other hand Iraq has recorded an almost 10 m/kg increase in 2011 as against 2010. However, cumulative tea exports to Libya, Jordon and Kuwait declined by (-34.38%), (-58.67%), and (-22.28%) respectively.
http://www.ft.lk/2012/04/27/2011-tea-exports-a-record-in-dollar-terms-too/

Jayantha DE SILVA
Dialog has joined hands with Cisco Systems to bring Cisco WebEx, the world's leading platform for Rich Media conferencing and collaboration. The venture will help Dialog customers to streamline and expand their reach in business communications.

Cisco WebEx provides on-demand collaboration,online meeting, web conferencing and video conferencing applications for medium to large scale organisations, helping to fulfil B2B (Business to Business) and B2C (Business to Consumer) communication needs of companies.

Dialog Axiata PLC will be the exclusive telecommunications service provider in Sri Lanka to offer this service, over the next two years.

"In present context, the technological landscape has increased in volume. This is evident by data processing which is in Terra Bites,"said Nalaka Wijebandara,Head Enterprise Development, Dialog Enterprise. "Clout is there to stay." He emphasized on enterprise mobility which has taken an upswing."Brand loyalty to manage time lines is a new challenge," he observed, adding that Sri Lankans work for USA entities which they have not seen.

"We are excited to collaborate with Dialog Axiata to bring enterprise services to customers in Sri Lanka. With an industry leading portfolio of technology solutions and services, Cisco will work to enhance its relationship with Dialog to bring a wider set of managed services to the market, in the future," said Sanjay Rohatgi, Senior Vice President and Head - Service Provider business, Cisco India and SAARC.

Sandeep Mehra,Vice President, Cisco WebEx said, "This is a significant opportunity for businesses in Sri Lanka looking to address the changing needs of workspace collaboration as well as to enhance interaction and collaboration with their customers and partners. Through Dialog, customers will have access to the world's most preferred Rich Media Conferencing Application, enhancing productivity and reducing costs associated with lost cycles, deferred decisions, and unnecessary travel."

"We are pleased to collaborate with Cisco, a global leader in networking and communications technology. Cisco WebEx will enable Dialog to offer emerging communications strategies and solutions to Sri Lankan businesses; giving them the edge to compete not only domestically but also globally," said Jeremy Huxtable,Chief Officer Dialog Enterprise.

Dialog Axiata is Sri Lanka's largest mobile service provider with the greatest number of subscribers and a growing base of over 2,000 GSM and 1,200 3G base stations.

Dialog Axiata PLC, a subsidiary of Axiata Group Berhad (Axiata), operates Sri Lanka's largest and fastest growing mobile telecommunications network. The company is also one of the largest listed companies on the Colombo Stock Exchange in terms of market capitalization.
http://www.dailynews.lk/2012/04/27/bus32.asp