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Sri Lanka Newspapers Sunday 29/04/2012

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Kumar

Kumar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

Apr 28, 2012 (LBO) - Administrative controls imposed on Sri Lankan banks as part of a package of measures to combat a balance of payments crisis, were not among the preferred measures advocated by the International Monetary Fund, an official said.

"Most economists would say a price mechanism is a good way of matching demand," IMF's resident representative Koshy Mathai said.

"We probably would have relied more on interest rates rather than on credit ceilings."

He was questioned by a senior economist at an economic forum on whether the IMF supported an 18 percent credit ceiling imposed on banks for 2012.

Mathai said that that IMF was happy at the commitment shown by authorities to tackle the balance of payments crisis overall, which was the key need.

Detail
"If you ask me 'Is it better to do it through a price instrument or a credit ceiling that applies across the board to all banks in a way that may be, doesn't serve allocative efficiency as well as a price mechanism does?' Clearly we are not," Mathai said.

"The main issue was getting the balance of payments under control."

A bank that raises deposits from customers domestically and loans them to borrowers do not create any new demand in the economy. Such banks can grow their loans books at any rate without hurting the exchange rate.

Pressure on a pegged exchange rate comes when new reserves are injected into the banking system by a central bank to resist a contraction of the monetary base in the face of strong credit demand, (usually due to deficit spending) or capital flight or both.

A credit ceiling not only fails to discriminate between banks with stable loan to deposit ratios and those with deteriorating ones, but such controls also do not speed up deposit growth.

An interest rate on the other had will both cut loan demand and increase deposits, curb consumption, re-balance the credit system, and enable borrowers who have high return projects to continue to invest.

Small Mercies
But analysts say it could have been worse.

Some soft-pegged central banks that trigger balance of payments crises, arbitrarily decide that some sectors - such as manufacturing - are superior to others such as say property and impose administrative controls.

In this instance that liberty has been left to citizens and banks, though the Central Bank did at one time ask banks to limit loans to cars, which was reducing anyway as interest rates rose.

In the past Sri Lanka's central bank has also imposed exchange controls to counter exchange rate pressure, while printing money mainly to support deficit spending by rulers.

Exchange controls, which became ever more draconian, were imposed on citizens starting from 1952, barely two years after a money printing central bank was created.

Exchange control makes a criminal of a citizen who takes his own hard-earned money across a border without permission, even after paying taxes on the earnings. Modern exchange controls were started by Russia's Tsar Nicholas II in 1905.

In recent years however the central bank has relaxed many exchange controls, though some including forward trades, open positions and a Tsarist-type insistence on trade backed transactions have been revived.

During the current crisis an IMF report dated shortly before ordinary citizens were slapped with high taxes on cars prematurely praised the state for not imposing trade controls. Trade controls are an indirect form of exchange control.

Cars and petroleum are 'usual suspects' blamed for balance for currency pressure in Sri Lanka.
http://lbo.lk/fullstory.php?nid=380386028

2Sri Lanka Newspapers Sunday 29/04/2012 Empty Sri Lanka Newspapers Sunday 29/04/2012 Sat Apr 28, 2012 6:31 pm

CSE.SAS

CSE.SAS
Global Moderator

Colombo bourse sluggish for too long
Stockmarket Review
By Elton Ebert
The stock market has been mired under a cloud of depression for far too long a period. This is creating problems all round, for the stock brokerages, reduced income for the margin providers, and loss of revenue to the state. Paradoxically it is the retail segment who are the winners! Most of them suffered losses through forced selling earler, but since they do not invest now, they don’t lose.

There are some who were lured by the high priced IPOs but since they do not have funds they do not invest in IPOs now and therefore suffer no loss due to the IPOs trading below their issue price.
There are some retail players who have saved some money by not investing recently and could now invest their savings in fixed income securities earning good rates.

Moderate interest was evident in JKH, Commercial Bank and HNB while Keells Hotels came in for extra demand when almost four million shares were transacted. Nestle in which a massive final dividend is accruing until June 4 reached Rs.1249.80 but closed at Rs1170 on Friday. Swarnamahal Financial Services, Panasian Power and Textured Jersey were in the active slot. Shares in the plantations sector were unchanged but some prices at the auctions were interesting. However the situation in the Middle East creates an air of uncertainty which affects the prices here.

Mackwoods Energy which recently issued 25 million shares at Rs.14 through an IPO commenced trading on the Diri Savi Board on Wednesday, quickly falling into the casualty list. A mere 725,267 shares were transacted on Wednesday, closing at Rs.14.20,and continued to lose favour. It ended for the week at Rs,13.80, after dipping to Rs 13 earlier. Meanwhile Access Engineering was the other casualty closing at Rs 21.50.

There are reports that a few companies who were scheduled to come out with their IPOs are now in the process of reducing their issue prices while the others have put on hold their proposed IPOs expecting improved market sentiment. Echoing this sentiment a veteran player in the market said that if any new IPOs are to find favour with the investors it should be a company with a good track of earning good profits and at a sensible price. Further retail players say that they will not get trapped by grandiose advertising unlike earlier.

The fact that JKH and Central Finance have requested further time from the Central Bank to reduce their stake in Nations Trust Bank PLC (NTB) has drawn the curiosity of many investors. A few shareholders in NTB seem to think the bank may reduce these holdings after a share split is made. Another investor who collects only bank shares has got information that a group from the Middle East who was interested in these blocks backed off when the Colombo market slipped into reverse gear.

LOLC states that they have issued 7-year going concern, loss absorbent unsecured Subordinated unlisted debentures to Saakya Capital (Pvt) Ltd as follows; Rs.2 billion on February 23 and Rs 1 billion on February 27, 2012, who are now the sole debenture holders.

Changes in directorates: Citrus Leisure, Kalpitiya Beach Resorts Ltd & Waskaduwa Beach Resorts Ltd -- deleted Silva resigned as a director effective April 16 from all these companies. Turnover for the week of Rs.2 billion was just a shade better than last week when the figure was Rs. 1.8 billion. The All Share Price Index was 53.60 points or 1% higher than last week closing at 5429.59. while the Milanka ended 71.46 points or 1.10% lower than last week at 4853.53.
http://sundaytimes.lk/120429/BusinessTimes/bt26.html

CSE.SAS

CSE.SAS
Global Moderator

The most significant setback in Sri Lanka’s national construction development in the country is funding, according to Dr Rohan Karunaratne, Chairman, Ceylon Institute of Builders (CIOB).

Speaking at a press conference in Colombo this week to launch ‘Construction Expo 2012’, he said that even though the construction turnover in the country is in the range of Rs 500 billion, between 20 to 25% of this chunk is handled by foreign companies.

However he said that some constraints on the local construction industry would ease because, as a result of long negotiations with the government, the authorities have agreed to share about 30 to 40% of the projects with the local constructors. He said that now local banks also have started funding government projects.

R.W.P. Dayawansa, Assistant General Manager, Personal Financial Services, Hatton National Bank said that local banks now have access to borrow from overseas at a lesser rate of interest than that of local funds and this enables them to support local industry and they are now pumping funds for the development of construction industry as well as the infrastructure. He said that their bank has apportioned Rs 50 million for the development of construction industry.

The Construction Expo 2012 is scheduled for June 29-July 1 at the BMICH. It is jointly organized by CIOB and Lanka Exhibition and Conference Services (LECS) and would become a meeting place of all the major players in the construction industry both locally and internationally.

There would be an all inclusive Indian pavilion that would have the participation of the key players in the construction industry from Mumbai, Chennai, New Delhi, Bangalore, Kolkata and Gujarat. Participation from other countries like Japan, Singapore, China and Italy are also expected.
http://sundaytimes.lk/120429/BusinessTimes/bt13.html

4Sri Lanka Newspapers Sunday 29/04/2012 Empty Cheap teas: Killing ‘me’ softly Sat Apr 28, 2012 6:35 pm

CSE.SAS

CSE.SAS
Global Moderator

Earlier this week, a once progressive Sri Lankan entrepreneur walked into the Business Times with a worried look on his face. “If the government goes ahead with the tea hub, it would result in the death blow to the smallholders,” said Ratna Gamage, a man for all seasons.

Remember Gamage? In September 1999, he and six other tea factory owners walked into the World Bank office building in Washington and threatened to launch a hunger fast against unfair trading practices. “"We had to something since the Sri Lankan government wasn’t listening to us," Gamage, a then 33-year old economist who owned a tea factory in southern Sri Lanka, said at that time.

An embarrassed President Chandrika Kumaratunga, Deputy Finance Minister G. L.Peiris and Central Bank Governor A.S. Jayawardene -- in the US for discussions with the Bank -- met the group and persuaded them to call off the protest, promising to consider their demands back in Colombo.

Gamage was leading a campaign on behalf of farmers struggling against cheap imports by transnational corporations. The victims included private tea factory owners like Gamage.

The former tea industry personality no more has a stake in tea, having sold his factory but his attention was drawn to reports last week on the revival of a more than 10-year old debate by tea exporters pushing for cheap tea imports and making Sri Lanka a tea hub.

“I have no stake but as a patriotic Sri Lankan I am concerned. This will hurt 350,000 smallholders and their dependants, a total of 1.5 million people,” he said, adding that most come from Galle and Matara and any threat to their livelihoods could ferment another JVP-revolution. Remember: Smallholders account for 70 % of tea production with the balance by plantation companies!

He says if imports are allowed for blending, cheap grades will come in ostensibly as main grades and certified as such from China or Vietnam. Some exporters will make a fast buck at the expense of the respected Pure Ceylon Tea brand, he says.

In 2000, Gamage went to the Human Rights Commission and the Supreme Court and won a court order banning the import of off-grade teas, such was the tenacity of the man to fight for the fundamental rights of a sector.

The chickens have now come to roost with the revival of the cheap tea imports’ debate. The Tea Exporters Association in proposals submitted in August 2011 say allowing imports will help grow Sri Lanka's share of the world tea market significantly from its current but declining level of 8% to at least 12%; increase the export of Sri Lankan-owned tea brands from Sri Lanka, and establish Sri Lanka as a tea hub.

Opponents say this is aimed at facilitating packing of multi-origin (read: cheap) foreign brands at the cost of developing premium Sri Lankan brands that has a proven market. Without a doubt it poses a grave threat to tea growers and their communities, global consumer awareness of Ceylon Tea and the development of genuine Sri Lankan tea brands. It is also at cross-purposes with the impending global Ceylon Tea promotion campaign, funded by the export levy, producers say.

Veteran tea industry personality Merrill J Fernando’s no-holds-barred views on this subject are well-known over the past decade. Among many issues, he says the quality of Ceylon tea and its image as the world¹s finest tea will be “irreparably tarnished if free importation of black tea is permitted.’ Changing the policy also goes against the grain of current government thinking in developing a robust local industry and reducing dependency on imports.

Producers say they have no objection to imports of green tea and speciality teas not grown here, subject to strict regulation, which is another bone of contention. “The ‘Tea Export Industry’ is without doubt one of the key drivers in the growth of the Sri Lankan economy,” says the tea exporters in their proposal, a claim which doesn’t hold water and borders on the ridiculous.

For, what about growers, producers, smallholders and plantations? Without a product, there is no exporter/no trader. A producer on the other can sell and market independently without intermediaries. A trader buys the produce here and/or abroad, blends, packs and sells – very much like the garment industry in the early 1980s before this sector became more innovative and is slowly getting into branding.

Regulation and its’ implementation is the keyword and the crux of the issue. In Gamage’s own words, “Anyone can walk into any state institution and get things done, circumventing the rules. We may bring the most stringent rules in imports but – mark my words - the cheap, rubbishy teas will come in and be re-exported as Pure Ceylon Tea in multi-origin packs”.

Even now some packers of well known brands are using the words ‘Pure Ceylon Tea” on multi-origin teas, violating Sri Lanka Tea Board laws. Blended tea with some Ceylon Tea input is only entitled to use the words ‘Packed in Sri Lanka.”While the de-merits undoubtedly outweigh the merits of cheap imports, a more fundamental issue is that tea is the only 100 % local origin export that has stood the test of time for over a century.

Furthermore it is a national asset, a culture and a way of life that must be preserved. Imagine an era where cheap imports flood the market resulting in the tea packed and exported having just a marginal component of Ceylon Tea? What happens then to our plantations which are also now becoming a niche market tourism product with quaint tea bungalows, etc?

Ceylon Tea, also much due to the efforts of the Dilmah Group and its pioneering single origin concept competing against powerful multinational brands, is not only a global brand but provides instant recognition of the country. Foreigners who have not visited Sri Lanka at one time thought it was part of India but were quick to recognize ‘Ceylon Tea’, more than the country itself!

Long term ramifications instead of short term gains are what we need to look at (the bane of our policymakers in whatever we do). What is required is for more Sri Lankan brands to emerge using creative and innovative ways to capture the market similar to how legendary French wines are on tables across the world.

Tea is a culture, a way of life. It is not merely a business and ways of making quick money. It is the only product that (as we said earlier) is known abroad more than the country itself! Permitting large scale multi-origin tea blending in Sri Lanka will potentially lead to a situation where most tea packed in Sri Lanka would contain less than 20 % of Ceylon Tea, with labels however providing emphasis on “Ceylon Tea” inclusion, not only cheating the consumer but also leading to the ruination of an industry, a culture and the natural beauty of Sri Lanka’s carpeted green gardens.

Those involved in the tea industry need to look inwards and resolve more pressing issues like the need for replanting, reducing cost of production, increasing yields and providing government support to create more and more local brands with single-origin tea. The government needs to also consider proposals to extend the plantation leases which end in 30 years, as the replanting gestation period takes 15-plus years.

Ceylon Tea is considered as the best tea in the world. Allowing cheap, uncontrollable tea imports for re-export as multi-origin tea for short-term economic gains will not only fritter away painstaking decades of building the Ceylon Tea brand (first by the British followed by innovative Sri Lankans) but also destroy a lifestyle, a heritage and an integral part of society.

In the national interest, that shouldn’t be allowed to happen.
http://sundaytimes.lk/120429/BusinessTimes/bt08.html

5Sri Lanka Newspapers Sunday 29/04/2012 Empty In defence of capitalism Sat Apr 28, 2012 6:37 pm

CSE.SAS

CSE.SAS
Global Moderator

The global election cycle has begun. France is in limbo. The Dutch have sent their "austerity is king" government packing. The US remains in suspended animation until they find out if they get Barack Obama version 2, or Mitt Romney version 1. Australia's incumbent Labour government continues to suffer from the absence of common sense and Japan is well, Japan. India's Congress Party is breaking a sweat after a long time. Meanwhile in Sri Lanka there are worrying signs of a rebirth in left-wing, centralised economic policies.

One owes this marked shift in political alignment and difficulties in governance to what has been dubbed the "Great Recession" in western economies. There is a sense that democratic capitalism is now failing to deliver the goods, at least in Europe and the United States. Living standards are falling for the middle and lower classes. Unemployment remains stubbornly high. Perceived "mal-distributions" of wealth are causing protests and riots throughout the West, and this is just the beginning of what will happen as overstretched welfare-state governments start to renege on their promises to an ageing population of unaffordable pension and medical benefits.

Developing countries are held up as the golden geese that will help get the West out of this mess. Unfortunately, they too have their own problems. The biggest gripe stems from mal-distribution and inequality. Associated with inequality is high impact corruption and cronyism. While it is currently unfashionable to pose "big" questions such as the nature of an ideal social system, the need to do so has arguably never been greater. What might an ideal political economy consists of? How does today's form of democratic capitalism compare with such an ideal? Does it deserve its tarnished reputation? At a more fundamental level, what properties do people truly value and seek from their economic and political systems? Is the capitalist norm of economic "efficiency" enough, as an economics textbook might well suggest? Or are there other norms? In particular, is there room for justice and fair sharing of the pie along with economic efficiency? Finally, what about privacy and freedom, especially for a country like ours going through these difficult times? Can these be accommodated as well?

The answer to the last question is an overwhelming "yes". All these norms can be accommodated side by side. True capitalism, properly understood represents one of the great institutional innovations and successes of history. It is the bastardisation of capitalism through cronyism and 'thugocracy' practised by decrepit governments that have caused both a global and local backlash. For those unfamiliar with the phrase, a thugocracy is a state where hand picked elements within a democratic framework is put to action by thugs or vested interests (be it lobby groups or activists parading various causes). Not only does crony capitalism aggravate inequality, it also diminishes justice and fairplay, the bedrock of capitalism as envisaged by Adam Smith in his seminal works, Wealth of Nations of 1776. One has to read his predecessor treatise ‘A Theory of Moral Sentiments’ to fully grasp the foundations of proper capitalism.

The links between capitalist economics and moral philosophy are deep and abiding.
Proper capitalism has to be defended and promoted if we are to succeed as a mature nation. The alternative is the pits of centralised government distribution which we all endured in the 70's. This is not only economical ruinous, but socially destructive in not allowing people to live their lives according to reasons and values that are important to them. The next stop on that slippery slope is fascism of the scale in the south during the 70's and north since the 70's.

What exactly do we need to protect and foster a capitalist economic system that seeks to maximise public good?

The rule of law: For free markets to function correctly, the rule of law must prevail. Citizens must befit from the sanctity of contracts, "nonbribable" judges, transparency in commercial relations, and the protection of intellectual property rights. Without such protection, capitalism morphs into what we have today; cronyism in which deference to the concept of "free markets" is hot air at best.

Perfect competition - in particular the absence of any bargaining power by any group whatsoever whether cartels, labour unions, or oligopolies. It is the role of government to ensure that the above assumption remains so and passes legislation to keep it so. Unfortunately, all the above are thriving all around us.
Regulation - Governments need to have the freedom and tools to regulate both the business cycle and financial crises via appropriate fiscal and momentary policies.

Distributive justice - Governments need to address any issue of distributive justice that arise within the economic system and cannot be wished away. Once the need for public goods arises (e.g. an army must exist, sewers must be built), a decision must be made by government as to who should be taxed and how much to pay for it. Thus issues of taxation that are fair inexorably arise within capitalist theory.
This concept of the public good provides a yardstick against which any nation can ascertain how far it is from the ideal, and can determine how to improve upon the status quo given the political will to do so. Be sure to note how far this ideal lies from today's presumption that capitalism is all about the unfettered play of free markets. It is not, and never was, even though the healthy functioning of markets is indeed central to its success.

(Kajanga is an Investment Specialist based in Sydney, Australia. You can write to him at kajangak@gmail.com)
http://sundaytimes.lk/120429/BusinessTimes/bt10.html

6Sri Lanka Newspapers Sunday 29/04/2012 Empty NSB pays top price to acquire 12% of TFC Sat Apr 28, 2012 8:26 pm

CSE.SAS

CSE.SAS
Global Moderator

The National Savings Bank Friday acquired nearly 12 per cent of The Finance Company PLC (TFC), the country’s first established finance company, paying slightly over Rs. 357 million at a price of Rs. 50 per share – Rs. 20 a share above the prevailing market, to acquire some large blocks from four shareholders in the company’s top twenty list.

The sellers are believed to be Dinal Wijemanne, CEO of Taprobane Securities, a Colombo stockbroking firm, Rayynor Silva, the brother of deleted Silva, MP, of ABC Radio and two smaller shareholders, Messrs. N Perera and A.A.Y. Perera.

Wijemanne and Silva each owned 2.9 million shares ( 4.8% of TFC) while the two Pereras owned 669,700 shares each (1.11%).

According to the last published unaudited financials of the company for the period ended Dec. 31, 2011, TFC had accumulated losses Rs. 9.4 billion in its books and negative net assets per share of Rs. 23.57, a slight improvement from minus 23.65 a year earlier.

The company had posted a small profit of Rs. 15.85 million for the nine months to Dec. 31, 2011, up from a loss of Rs. 1.6 billion during the comparative period the previous year. This translated to a profit of 10 cents a share against a loss Rs. 78.78 a year earlier.

Analysts noted that TFC which took a heavy blow from the Golden Key collapse had total assets as at Dec. 31, 2011, of Rs. 21 billion and liabilities Rs. 24.23 billion.

Dr. T. Senthilverl through three accounts is the top shareholder of the company with nearly 20.7% while Ceylinco Investments held 11.04%. Mr. Lalith Kotelawela has a personal stake of 0.87% and is the 16th largest shareholder.

The state sector is also in the top twenty shareholders’ list through the EPF (8.43%) and Bank of Ceylon/Ceybank Unit Trust (5.19%).

Some analysts said that TFC owns a valuable land bank and the knock-on effect of the Golden Key collapse is wearing off. However the premium the NSB paid for the shares have raised eyebrows.

"It’s a 60% premium and the deal was struck at the Rs. 50 price when the market was at Rs. 30,’’ one analyst said.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50684

CSE.SAS

CSE.SAS
Global Moderator

Investor sentiment on the Colombo Stock Market was dull last week with concerns on the volatile rupee and thin trading volumes continuing to influence activity, Acuity Stockbrokers said in a research report.

It said that investors remained on the sidelines awaiting some signs of stability in the rupee which had fluctuated sharply dropping, to a record low of Rs.133.60 to the US dollar by mid-week.

Concerns over further depreciation was expressed should the Central Bank stop supplying dollars for oil imports and induce higher importer dollar demand.

"Moral suasion by the Central Bank however declined further sharp falls and the rupee strengthened marginally by 2.2% by end week," the report noted.

But volumes remained thin on the stock market with average daily turnover at Rs.0.3 billion with the highest recorded volume on a single day being Friday’s Rs.0.8 billion.

"The net foreign position on the bourse meanwhile – albeit declining – remained positive for the seventh consecutive week," the report said. "Similar market sentiment should prevail in the week ahead."

Both indices declined week-on-week with the All Share Price Index down 16.61 points (0.30%) while the Milanka was down 16.17 points (1.34%).

The Finance Company (TFC), mainly aided by large block trades which took place on Friday, led turnover for the week contributing 19.59% to total market turnover.

JKH accounted for 11.38% (Rs.229.6 million) while CIC contributed 5.01% amounting to Rs.101.2 million.

The week’s turnover value was up 7.4% to Rs.2.02 billion averaging Rs.403.7 million per market day. This compared to the previous week’s average of Rs.375.9 million.

"Market capitalization however declined 0.24% to Rs.2,024.84 billion over the week," the report said.

Banking and financial sector shares continued to dominate the week’s turnover value amounting for 38.21% of the total contributing Rs.771.32 million to business volumes.

Foreign investors closed the week in a net buying position although 69.85% down from the previous week’s position with net purchases of Rs.43.06 million against Rs.142.83 million a week earlier, Acuity said.

The report noted that foreign interest was focused on Commercial Bank and Overseas Realty in terms of share volume with Dialog and PC House leading foreign sales. In terms of value, however, Commercial Bank’s voting and non-voting shares led the list of foreign purchase transactions for the week.

John Keells Stockbrokers said in its Stock Market Weekly that the Milanka was down one percent week-on-week while the All Share Price Index had dipped only marginally in a week where market activity remained subdued.

The Finance, JKH, CIC and Commercial Bank were the most traded stocks with institutions and high net worth investors trading in them. Foreign inflow for the week was Rs.43 million.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50693

CSE.SAS

CSE.SAS
Global Moderator

Nestlé’s much loved and internationally acclaimed KIT KAT brand has made its way back to the local market amidst great anticipation from chocolate fans in Sri Lanka, announcing that the world’s favourite Nestlé chocolate now comes to local consumers ‘Extra Crispy, Extra Creamy’.

"As one of the world’s leading chocolate companies, it is with great pride that we at Nestlé Lanka re-introduce a globally acclaimed product such as KIT KAT to our Sri Lankan consumers, who have been waiting in great anticipation for the return of their beloved chocolate brand. We’re very excited about re-entering the confectionary category in Sri Lanka with one of the world’s most celebrated, iconic chocolates and look forward to delighting our local consumers by putting ‘a smile in their break’ with KIT KAT" said Alois Hofbauer, Managing Director of Nestlé Lanka PLC.

A crispy light wafer coated with delicious Nestlé chocolate, KIT KAT is a top favorite amongst consumers across the world, making it Nestlé’s No. 1 global chocolate brand. The universally celebrated product is renowned for its great taste and superior quality and is famed for its popular tagline ‘Have a break, have a KIT KAT’.

"KIT KAT is a brand of iconic status and holds a rich and successful heritage in the global confectionary market. 150 bars of Nestlé KIT KAT are consumed every second across the world – a testament to the immense success and popularity of the product. Nestlé is a leading F&B player in the local market and we are confident that that this latest addition to our product portfolio will further strengthen our dominant position in the country," said Muhammed Hamza, Senior Vice President – Commercial at Nestlé Lanka PLC.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50699

sriranga

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Associated Motorways (Pvt) Ltd (AMW) offered savings to customers still reeling from the sudden shock of the tax increase imposed on motor vehicles by the authorities from April 1, by absorbing a significant part of the tax increase that customers would have paid normally.

Customers can enjoy from a minimum saving on tax increase of 46 percent ascending to a maximum of 58 percent savings on some models. A spokesperson for AMW said the offer is valid till May 15 only.

The company has extended to existing Suzuki Maruti customers comprising about 50,000 owners a special trade-in facility. "Since these customers are already aware of the brand's exceptional value, its high fuel efficiency and performance, backed by a reliable after sales service and island wide network, we believe they would be the first to take up this offer" said the AMW spokesperson
http://www.sundayobserver.lk/2012/04/29/fin09.asp

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10Sri Lanka Newspapers Sunday 29/04/2012 Empty High T Bill Stock Unhealthy Sun Apr 29, 2012 3:10 am

CSE.SAS

CSE.SAS
Global Moderator

Treasury (T) Bills’ weighted average yields (WAYs) at last week’s weekly auction rose by 20 basis points (bps) each for 91, 182 and 364 day tenures to 11.93%, 12.05% and 12.16% respectively week on week (WoW) in line with market expectations, except for the slight distortion that all three WAYs rose by a uniformed 20 bps each. With liquidity drying up, it’s not peculiar that WAYs are deepening, a market source told this newspaper. As it’s, in order to attract liquidity, some commercial banks have raised their one year deposit rates by as much as 14%, he said.

And with Central Bank of Sri Lanka’s (CBSL’s) T Bill stock at an inflated figure of Rs. 243 billion as at Thursday*, the market expects yields to go up further, the source said.
An increase in CBSL’s T Bill stock is an indication as to how much of newly printed money has had entered the economy, thereby raising the possibility of the occurrence of demand side inflationary pressure. A year ago CBSL’s T Bill holdings were a mere Rs. three billion.

By compressing its T Bill holdings, such as by selling the same to the market, it may however be able to reduce inflationary expectations in the economy, ipso facto, also lending rates as a result.
As long as CBSL’s T Bill holdings continue to remain high, rates too would go up in tandem, the source predicted.

*CBSL through its repo mechanism (the repo auction and the repo window) drained out excess liquidity totalling Rs. 6.3 billion from the market on Friday, translating to the fact that at least that figure too should be added on to CBSL’s stock of T Bill holdings.
http://www.thesundayleader.lk/2012/04/29/high-t-bill-stock-unhealthy/

11Sri Lanka Newspapers Sunday 29/04/2012 Empty CBSL Cautions Banks On Pawning Loans Sun Apr 29, 2012 3:11 am

CSE.SAS

CSE.SAS
Global Moderator

With the sharp decline in gold prices in the international market from a high of US$ ($) 1,900 to $ 1,600 an ounce (a 16% decrease) currently, Central Bank of Sri Lanka (CBSL) has recently advised commercial banks to go slow in regard to expanding their pawning loan portfolio.

“Some banks have given credit amounting to as much as 90% of the pawned gold. Under the circumstances if the value of gold falls steeply, the debtor is more likely to renege on his loan, leaving an asset which is far lower than the value of the loan granted, therefore we have asked banks to go slow on their gold pawning loans,” a CBSL official told this newspaper.

He said that those were not written directions but moral suasion used by CBSL in their regular meetings with bank CEOs.

“Currently pawning loans average about 60% of the value of the asset and not 90% as had been the case in certain instances previously,” the source alleged. The danger in giving “higher” loans is that in the event of a default, it may cause a risk in regard to that bank’s stability, the source said. At the peak, certain financial institutions, not necessarily banks, were offering loans as high as Rs. 59,000 for an ounce of gold, the source said. “Our advise was extended to banks and not to non banking financial institutions,” he added.
Of the banks’ Rs. 2.1 trillion credit portfolio termed as “credit to the private sector,” 10% of it comprises pawning loans. Last year CBSL had witnessed a rise in pawning loans and a decrease in domestic savings, giving rise to the belief that the consumer was finding it difficult to make ends meet.
http://www.thesundayleader.lk/2012/04/29/cbsl-cautions-banks-on-pawning-loans/

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