Capital Market to Contribute 50pct of Sri Lanka's GDP by 2016. Present Contribution is 30pct of GDP of $ 60bn

04th April 2013, www.dailynews.lk, By H DH Senewiratne

The capital market is expected to contribute US $ 50 billion for the country’s GDP by year 2016, therefore the Stock Brokers should be geared to handle the highest number of deposits in the future, Director General Security and Exchange Commission (SEC) Dr Nalaka Godahewa said.

“Sri Lanka’s GDP would be US $ 100 billion by 2016, out of which 50 percent should contribute from the capital market. Therefore, each stock broker should be geared to manage many retail accounts, “Dr Godahewa said at the launch of the Colombo Stock Brokers Association website and also introduced code of principles of best practices at the event.

He said that right now the country’s total GDP was US $ 60 billion and the capital market’s contribution to the GDP was only 30 percent.

There are more than 220,000, accounts in the Capital Depository System, he said.

“At present the country has 29 stock brokering companies, each company should be geared to manage at least 20,000 retail deposits. Therefore all stakeholders should work together to make a vibrant stock market to achieve that target.

To popularize the capital market education aspect plays a pivotal role because our present market is a speculative market than the research base market,” he said.

” When the foreign investors are investing in Sri Lanka they have little knowledge on few companies.

Therefore, research on companies would help to create a vibrant and strong market in the country.

“With the stability in the market, the debt market has performed well, better than we expected. Therefore, we have to find ways and means to face future challenges to make a vibrant market,” he said

The President of the Colombo Stock Brokers Association (CSBA) Dimuthu Abeysekera said that in developing a vibrant equity market, the role of stockbrokers is crucial and into this equation comes the tenets of transparency and enhancing effectiveness across the market.

He said that facilitating a customer centric solution in securities trading in Sri Lanka would be a primary objective for the stock broking community, while maximizing financial returns for the broader investor community by proving prudent timely information,” he said.

“Colombo Stock Exchange is showing stability at present and the development of the overall capital market by introducing Principles of Best Practice that would help to promote the professionalism to the market,” he said.

Related Info :

• Sri Lanka Stockbrokers Unveil Website & Ethics Code. 18 Months of Decline Ending with Stability Brought back to the Market

• Rs 45bn Raised in 2011 via IPO’s & Rights Issues by Sri Lankan Firms

• Regional Firms to List in Sri Lanka. Atlease 2 Firms from Maldives May List before Year End

Sri Lanka Stockbrokers Unveil Website & Ethics Code. 18 Months of Decline Ending with Stability Brought back to the Market

03rd April 2013, www.lankabusinessonline.com
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Sri Lanka's Colombo Stockbrokers Association launched a website and  a code of ethics which officials said would improve professional standards and investor confidence.


"By introducing these Principles of Best Practices, we are intent on promoting professional standards among our members," CSBA president and head of Asha Phillips Securities Dimuthu Abeysekera said.

"This will in turn enhance investor confidence prompting the industry to undoubtedly enjoy benefits of a vibrant market place."

Fundamental Research

The website www.colombostockbrokers.com will also have research for potential investors.

Chairman of Sri Lanka's Securities and Exchange Commission Nalaka Godahewa said more research was needed to educate investors.

Godahewa said the worst was over for the market with 18 months of decline ending.

"But I think all the problems we had at that time, the bad feeling, the bad publicity, the difficulties, accusing each other, mistrust excuses they are all now history," he said.

"We have brought back stability to the market. When we say we, all of us together."

The code was devised by a committee under Ravi Abeysuriya, of Heraymila Securities.

Head of Acuity Stockbrokers Deva Ellepola said even stockbrokers who were not members of the CSBA also contributed to the code and he hoped they would join the association again.

Several stockbrokers quit the association during the collapse of a stock market bubble as controversial measures were taken with some high net worth investors to counter credit rules and other action of the regulator amid allegations of widespread securities fraud.

Foreign investors who sold out during the bubble, are now coming back buying into several fundamentally strong companies with strong management whose valuations have improved with falling prices.

But small investors who bought fundamentally weak shares with margin credit which were also pumped up with margin credit in some cases, are in losses licking their wounds and are not active.

Sri Lanka's stock market bubble was fired by excess liquidity that built up in the banking system largely from inflows of foreign money, driving interest rates down amid euphoria from the end of a 30-year civil war.

Repeating History

Analysts say fraud and mischief always rocket up when lose money drive up stocks.

The world's first SEC in the US was also created after the collapse of a stock bubble in the late 1920s which was fired by excessive Federal Reserve money printing and margin credit.

One of the most well documented of such stock bubbles is one that occurred in France in the 1790s with the introduction of the Assignat paper fiat money.

Excessive printing of Assignats eventually led to the collapse of the French economy amid speculation, inflation, price controls and widespread corruption.

"For at the great metropolitan centers grew a luxurious, speculative, stock-gambling body, which, like a malignant tumor, absorbed into itself the strength of the nation and sent out its cancerous fibres to the remotest hamlets," Andrew Dickson White wrote in his iconic work Fiat Money Inflation in France

"At these city centers abundant wealth seemed to be piled up: in the country at large, there grew a dislike of steady labor and a contempt for moderate gains and simple living.

"Nor was this reckless and corrupt spirit confined to business men; it began to break out in official circles, and public men who, a few years before, had been thought above all possibility of taint, became luxurious, reckless, cynical and finally corrupt."

"It grew as naturally as a fungus on a muck heap. It was first felt in business operations, but soon began to be seen in the legislative body and in journalism," wrote White.

Many of those involved were later guillotined and France returned to the gold money again.

Sri Lanka's interest rates are now higher and inflation is falling, though the currency has also depreciated making everyone poorer and destroying the real value of investible savings in banks.

Related Info :

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• Listed Firms in CSE Issue Debentures to Raise Big Sums Following Budget 2013 Concessions on Corporate Debt

• CSE's Automated Surveillance System Helps Detect Breaches of Securities Law of the Colombo Bourse. System Supplied by Millanium IT

Listed Firms in CSE Issue Debentures to Raise Big Sums Following Budget 2013 Concessions on Corporate Debt

27th March 2013, www.dailymirror.lk

Many listed entities in the Colombo Stock Exchange were seen taking advantage of the concessions offered in the Budget 2013 with regard to corporate debt, as few companies have already raised big sums this year through debenture issues with a several more to follow.

On Monday, Fitch Ratings said Lion Brewery, a unit of Carson group and Softlogic Holdings were planning to Rs.3 billion and Rs.750 million respectively through debenture issues. The two issues have been assigned AA- and A-, respectively, by Fitch.

The Budget 2013 proposed to exempt withholding tax on interest income earned by investing in bonds and debentures listed in the Colombo Stock Exchange (CSE) with effect from this year in an attempt to create a more vibrant corporate debt market.

Being the first to take advantage of the new development, Seylan Bank PLC finished raising Rs.2 billion via a debenture issue in February that was oversubscribed in the opening day itself.

Merchant Bank of Sri Lanka, a unit of state owned banking giant, Bank of Ceylon also raised Rs.2 billion through a listed debenture.

According to analysts, companies seem to be using this window of opportunity to raise long-term capital, as the tax concessions offered in the Budget 2013 are applicable for the entire duration of the debt.

“So they can lock the moneys raised and keep it for future needs,” an analyst pointed out.

“It is encouraging to note that better managed companies are using the capital markets to raise debt on the strength of their own balance sheet.

This will reduce exposure to bank borrowings and raise medium to long-term capital, reducing interest rate risk. We hope more companies will take advantage of the tax break to issue rated longterm paper,” Fitch Rating Lanka said, responding to a Mirror Business inquiry.

According to market sources, a number of companies, including couple of big banks and several finance companies are also bracing to raise money via debenture issues in the near future.

Meanwhile Mirror Business learns that Colombo Stock Exchange is currently in the process of amending certain Listing Rules pertaining to the listing of debentures both in the main and the secondary boards.

Colombo Stock Exchange (CSE) Opens 6th Branch Office in Anuradhapura, North Central Sri Lanka

29th March 2013, www.island.lk

The Colombo Stock Exchange (CSE) opened its 6th Branch Office in Anuradhapura on the 28th of March 2013. The Branch is situated on the 2nd Floor, 488/8/2 Town Hall Place, Maithripala Senanayake Mawatha, Anuradhapura.

The Branch will provide investors from the North Central Province, education and investment opportunities in shares and corporate debt listed on the CSE. The Branch will conduct educational programmes and exhibitions for students from schools and higher educational institutions in the Province.

The CSE Branch Network commenced in 1999, with the opening of the Branch in Matara. This was followed by Branch Offices in Kandy (2003), Kurunegala (2005), Negombo (2007), Jaffna (2010) to Anuradhapura (2013).

The CSE Branches will continue to offer greater accessibility, education and awareness on investing in listed shares and corporate debt for the benefit of retail investors in the Provinces.

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Sri Lanka Allows Foreign Firms as Margin Providers to Provide credit to Investors in Colombo Stock Exchange

02nd February 2012, www.island.lk

The Central bank yesterday (Feb. 02) announced that it would permit foreign owned companies which are registered with the Securities and Exchange Commission of Sri Lanka as Margin Providers, to engage in the business of provision of credit to investors of the Colombo Stock Exchange.

"The Central Bank is of the view that this move would help develop the business of margin providing, and also increase market activity by improving the access to finance for investors," the Central Bank said.

Rs 45bn Raised in 2011 via IPO’s & Rights Issues by Sri Lankan Firms

04th January 2012, www.news360.lk

Sri Lankan firms has raised Rs. 45 billion via IPO’s and Rights issues conducted through the Colombo Stock Exchange, during the year 2011, announced the Central Bank.

According to the Bank, Rs. 19 billion has been raised via 13 IPO’s and Rs. 26 billion has been raised via 22 rights issues.

The Colombo Stock Exchange has also seen the listing of 26 firms in the bourse during the year 2011 thus taking the total listed firms to 267.

The net foreign outflow of the market during the year 2011 has recorded a figure of Rs. 19 billion, which is 0.9% of the market capitalization of Rs. 2,214 billion.

Central Bank figures show that the total value of foreign holdings of the CSE at end 2011 stood at Rs. 437 billion thus representing 20% of the total market capitalization.

Related Info :

• Regional Firms to List in Sri Lanka. Atlease 2 Firms from Maldives May List before Year End

Regional Firms to List in Sri Lanka. Atlease 2 Firms from Maldives May List before Year End

08th July 2011, www.lankabusinessonline.com

Regional firms are expressing interest in listing Sri Lanka, and at least two firms with operations in the Maldives may be listed before the end of the year, director general of the island's Securities Exchange Commission Malik Cader said.

Sri Lanka is now allowing foreign firms to list in the country by incorporating a holding company in the island with at least two resident directors.

"Two or three firms may come through that route this year," Cader said.

The local firm will be the beneficial owner of the foreign assets and will be subject to Sri Lanka accounting and other laws.

Cader said firms with leisure assets in the Maldives have expressed interest and are likely to be among the first to be listed.

The firm could then be cross listed in Maldives if necessary he said.

Sri Lanka's market has more liquidity than the Maldives's fledging bourse at the moment.

Sri Lanka itself is chasing and alliance with the London Stock Exchange through its 'international board' project.

Related Info :

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CSE's Automated Surveillance System Helps Detect Breaches of Securities Law of the Colombo Bourse. System Supplied by Millanium IT

28th June 2011, www.news360.lk

Securities and Exchange Commission says the “Automated Surveillance System” currently up and running in the CSE has helped the surveillance activities of the bourse.

According to the Director Surveillance of the Securities & Exchange Commission Chandu Epitawala, so far the system has helped to identify about 15 possible breaches of “securities law” taken place in the CSE during this year.

SEC says the system formally started operating from the 1st quarter of this year, but was under testing for nearly 6 months since the last quarter of 2010.

The system provides SEC with an analytic platform that supports and accelerates investigations and research functions.

A product of Millanium IT, a member of the London Stock Exchange, the system is also linked to several data bases of insiders of listed companies, their related parties and market intermediaries.

This situation according market regulator accommodates speedy detection of insider dealing.

Epitawala also said the Rs. 20 million worth state of the art system is installed in the London Stock Exchange and the Egyptian Stock Exchanges.

The SEC in its 2010 annual report said it has detected nearly 30 cases which are suspected to have breached the “Securities Law”.

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• Sri Lanka Banks' Exposure to Stocks to be Limited for Banking Sector Stability

Several Global Players Respond to Sri Lanka Commodity Exchange

20th May 2011, www.lankabusinessonline.com

Sri Lanka's securities regulator has got responses from several 'big global players' for a request for proposal to set up an exchange to trade spot and futures contracts in commodities and other assets, an official said.

"The response is very encouraging and it reflects the growth potential of the country and the interest some of the big global players," Malik Cader, director general of Sri Lanka's Securities and Exchange Commission told LBO.

Cader said there were "over half a dozen" response from big foreign players from several regions but declined to name individual parties as a process of selection involving a technical evaluation and tender board was under way.

The deadline for proposals to set up 'multi-asset' class exchange ended in April 29 and the egulator has also called for applications for a consultant to assist in evaluating proposals with a closing date of May 27.

Sri Lanka already has a stock exchange which also deals in listed debt.

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• Colombo Stock Exchange to Start Gold ETF Trading in 2011

Colombo Stock Market Emerging as a Funding Option for Hotels as Tourist Arrivals in Sri Lanka Hit Record Levels in 2010

04th May 2011, www.lankabusinessonline.com

Sri Lanka's hotels, enjoying a boom after the end of a war, can seek expansion funds from the stock market, with banks having difficult history of lending to the sector, a report said.

However, unlisted firms which form the bulk of the hotels, may face difficulties in using
the stock market, RAM Ratings (Lanka) said in a report on the island's hotel sector.

Tourist arrivals hit record levels in 2010 after the island's 30-year ethnic war ended in May 2009 but most hotels face funding constraints in upgrading and expanding to cater to growing demand, it said.

"Banks have been unwilling to lend to the industry because of its dismal performance during the civil war, coupled with the segment's acute susceptibility to adverse macroeconomic conditions and external shocks," the rating agency said.

Loans granted to the tourism sector by licensed commercial banks had almost doubled during the first half of 2010 from the previous year.

But their total exposure to the sector only came up to less than three percent or 30.54 billion rupees of the commercial banking system’s entire loan portfolio as of end-June 2010.

"This is also reflected in the relatively low gearing ratios of hotel operators," RAM Ratings said.

"Large, established hotel operators with their holding companies’ support may be in a position to obtain bank funding on favourable terms while the small and medium-sized establishments face difficulties."

The rating agency said the booming Colombo bourse, among Asia's best performing stock markets in the last two years, could be an alternative to bank borrowing.

"Raising capital via the stock market is now an attractive option given the buoyancy of the Colombo Stock Exchange (CSE) and the near-euphoria buoying the tourism sector," the report said.

"However, this is a viable option only for listed entities, which account for less than five percent of Sri Lanka’s hotels."

Smaller, unlisted hotels face their own problems in trying to raise capital through the stock market.

"We believe that entities may be reluctant to raise capital via initial public offerings due to their lack of procedural infrastructure and the requisite level of transparency required by the CSE’s listing criteria," RAM Ratings said.

With the slump in tourist arrivals during the war, the hotel sector had been operating under "extremely challenging conditions", the report said, noting that upgrading facilities and infrastructure to international standards had been neglected.

"Many Asian neighbours have progressed significantly in terms of the quality of their offerings relative to Sri Lanka’s.

"Unless there is substantial investment in the refurbishment/upgrading of hotel rooms, particularly for mid- and low-end properties, and amenities, the industry will not find it easy to capitalise on the opportunities arising from the country’s post-war development," RAM Ratings said.

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40pct Growth in Earnings of Listed Companies in the Colombo Stock Exchange Forecast in 2010 Compared to 18 to 22pct in Regional Countries

28th April 2011, www.dailynews.lk, By Charumini De Silva

The CSE has been able to capture more attention and interest in foreign investments compared to the regional markets.

There will be a 40 percent growth in the earnings of listed companies in the Colombo Stock Exchange (CSE) whereas the listed companies in the regional countries will record a growth of around 18 to 22 percent for this year.

Speaking to the Daily News Business Richard Pieris Securities CEO Jayantha Perera said the country indicates a positive economic outlook with the low interest rate regime encouraging tax system. “The growth momentum will continue,” he said.

The listed companies and investors will benefit remarkably while contributing immensely to enhance the economy.

The expected earnings in the market are trading currently at a price earning multiply of around 14 times.

“Investors are coming back and little collections on certain counters such as banking, food and beverage and retail sectors are noticed. Since the commodity prices have increased these counters have attracted an impressive number of investors. The overall market will re-bound fully at the beginning of May. Currently, there are a flock of buyers, but not enough sellers. This generates a lower daily turnover in the market,” he said.

There will be a number of upcoming Initial Public Offerings (IPOs) in the next few months and those who will not enter the capital market within the next couple of months will definitely regret.

The existing companies and the investors are harnessing high returns on their investments. There will be around four IPOs lined up for the next three months and this indicates the confidence level of both foreign and local investors over the CSE.

Related Info :


• Sri Lanka IPOs To Triple after Colombo Stock Index Posted the Biggest Gain in Asia

• Colombo Stock Exchange Earnings Soared 126pct Year on Year to Rs121.1bn in 2010. This year to Mirror the Same

• Colombo Stock Exchange All Time High. All Share Price Index Closed at 7,193.10

• Colombo Stock Exchange to Double Market Cap to $20bn by 2012

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Expolanka IPO to Raise Rs2.4bn Opens on May 12

27th April 2011, www.dailynews.lk By Indunil Hewage

Taking a leap from a family run business to a public quoted company, Expolanka Holdings Limited announced the launch of their Initial Public Offering (IPO) to list the company on the main board of the Colombo Stock Exchange to raise Rs 2.4 billion yesterday.

The company will issue 172 million ordinary voting shares at an offer price of Rs 14.

Post IPO issued shares would be 1.95 billion shares.

The opening date of the issue will be on May 12 and will close on June 2.

The main objective of the issue will be to increase the working capital by Rs 1 billion.

The company will go for an expansion of existing warehouse capacity to supplement the group’s expansion into local transport and logistics sector which is the core business of the company with Rs 500 million.

In addition the reduction of long term debt outstanding would be one of the objectives of the issue.

Expolanka Group CEO Hanif Yusoof invited all to explore opportunities in a Sri Lankan company spreading its wings in the globe.

“We are on the look out to expand our presence in the fields of travel and tourism with market expansions in China and India, tertiary education, business process outsourcing, agriculture, commodity trading, tea, herbal pharmaceuticals and others,” he said.

“We need to raise our working capital to support revenue growth of the company and are going for bridging finance.

“We do not want to go for an overtrading situation and has managed to control the growth over a period. Sizeable free float of the issue will also assist Sri Lankan based investors exposure to a fast growth regional business,” Expolanka Holdings Chief Finance Officer Mushtaq Ahamed said.

Under the future strategies of the company, the company expects to go for a branch expansion plan in the Southern province to facilitate increased business potential from new infrastructure in the Colombo and Hambantota ports.

In the international trading sector, the company plans to increase production capacity to meet the demand for export produce whilst strengthening the network for packed tea both locally and globally.

The company will also move into new regions in waste paper market activities and is also positioned to develop a metal trading service in the local market.

Iamge: Expolanka officials announcing the IPO at the press conference. Picture by Rukmal Gamage

Related Info :

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Sri Lanka IPOs To Triple after Colombo Stock Index Posted the Biggest Gain in Asia

26th April 2011, www.bloomberg.com

Sri Lanka initial public offerings may more than triple to a record this year after the nation’s stock index posted the biggest gain in Asia, according to managers of three of the five share sales since Jan. 1.

The number of IPOs may jump to as many as 25 from seven in 2010, according to investment firms Acuity Partners (Pvt) Ltd and John Keells Capital, which led three sales that accounted for 69 percent of the $28.9 million total raised in 2011.

Companies are lining up to sell stock after the Colombo All-Share Index soared more than threefold since the end of a 26-year civil war in May 2009 and climbed 11 percent so far this year. With the Securities and Exchange Commission predicting market capitalization could climb by 27 percent to about 3 trillion rupees ($27 billion) this year, the IPOs may weigh on share prices, according to John Keells Capital, the investment arm of Sri Lanka’s largest listed company.

“There might be a little bit of a reallocation of funds and resources from existing stocks to IPOs,” Chinthaka Ranasinghe, assistant vice president at John Keells Capital, said in a phone interview from Colombo. “You might see a little bit of a correction.”

John Keells Capital and brokerage Taprobane Securities (Pvt) Ltd. managed the $13.6 million offering for tea and rubber producer Free Lanka Capital Holding Ltd., the country’s biggest IPO this year. The 180 initial share sales in Asia Pacific emerging markets have raised $20.1 billion so far in 2011, while the 519 deals worldwide have raised $68.9 billion, according to data compiled by Bloomberg.

‘Strong Bite’

Stocks in the Sri Lankan index were valued at an average of 26.6 times reported earnings as of the week ended April 21, according data on the Colombo Stock Exchange website. That’s the highest valuation in the Asia Pacific region apart from the 27.4 price-earnings ratio for New Zealand’s NZX 50 Index. Equities in the MSCI Emerging Markets Index are valued at 13.4 times earnings, while the MSCI World Index is at 14.8 times.

“It’s very expensive,” said Acuity Partners’ Group Chief Executive Officer Ray Abeywardena. “A global investor has a wide market to select from, so a new stock coming out at 12 to 13 times multiples will be a strong bite.”

The eight IPOs priced in Sri Lanka last year raised a total of $36.5 million, according to Bloomberg data. Laugfs Gas Ltd. was the largest, raising $22.6 million for the sale of voting and non-voting shares. The voting stock has climbed 52 percent since the company started trading on Dec. 8.

‘Huge Appetite’

“There’s a huge appetite,” Abeywardena said. “People are very hungry for the right one. But it will be determined by valuations.”

New listings with higher valuations may still attract investors, according to Vajira Kulatilaka, chief executive of National Development Bank Plc’s investment banking division.

“Some stocks may come at higher PEs because there’s a growth story happening here,” said Kulatilaka, whose firm managed the IPO for Dialog Axiata Ltd., the Sri Lankan unit of Southeast Asia’s second-largest mobile-phone provider Axiata Group Bhd.

Dialog was valued at 21 times earnings when it first started trading in 2005, Kulatilaka said. The company’s share sale raised $85.4 million, the most among all of the country’s new listings since 2003.

Investment Plans

Sri Lanka’s economy expanded 8 percent in 2010, the most since 1978, the statistics department said on March 29. It grew 3.5 percent in 2009 after President Mahinda Rajapaksa’s government ended the Liberation Tigers of Tamil Eelam’s quest for a separate homeland, prompting companies including Shangri- La Asia Ltd. and Nestle Lanka Plc to announce investment plans in the country.

The All-Share Index surged 96 percent in 2010, the world’s best performance apart from Mongolia, and extended the rally this year in Asia’s best performance.

External factors including higher oil prices increased the risk of “corrections” and “some kind of tapering off,” said Dinal Wijemanne, managing director of Taprobane Securities. The brokerage is aiming to manage as many as six more share sales this year, in addition to the Free Lanka Capital Holding deal.

“The last two years’ performance is not sustainable, with the number of IPOs coming in this year,” Wijemanne said. “Maybe local investors got a bit spoiled by the kind of returns we experienced, but it’s just not possible to maintain that.”

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

Shariah Compliant Share List from Sri Lankan Stock Broker Lanka Securities

23rd March 2011, www.lankabusinessonline.com

Sri Lankan stock broker Lanka Securities has introduced a 'Shariah' compliant share list to meet the requirements of both local and foreign Islamic investors on the Colombo Stock Exchange.

The screening methodology for stocks is designed to ensure compliance with the Shariah laws and principles of Islamic finance, a statement said.

Lanka Securities, a joint venture between Pakistan's First Capital Securities Corporation, Bank of Ceylon and Merchant Bank of Sri Lanka, said the list will be reviewed on a weekly basis to capture the impact of the price movements of the equities.

"LSL Shariah Compliant Securities List has been designed and developed to be used as a basis of Shariah complaint equity investments at the CSE," it said.

Shariah forbids interest and making ‘money from money’ and encourages that wealth be generated through legitimate trade.

While Shariah compliant investment avenues are now becoming available in most countries, Sri Lanka has not seen large-scale development, the statement said.

Companies involved in several activities will be filtered out as non Shariah-complaint, Lanka Securities said.

These are conventional banking, insurance, financial services, or any other interest-related activity, alcohol, pork-related products and non-halal food production, packaging and processing or any other activity related to pork and non-halal food.

Entertainment like casinos, gambling and pornography, tobacco, weapons, arms and defense manufacturing are also excluded.

Lanka Securities said the remaining companies are then further screened on a financial basis.

It identified several financial ratios that must be met for companies to be considered Shariah-complaint.

Total interest and income from non-compliant activities should not exceed 5.0 percent of the total revenue and interest bearing debt must be less than 30 percent of the market capitalisation.

Also, interest earning deposits must be less than 30 percent of the market capitalisation, and accounts receivable, prepayments and cash must be less than 50 percent of the total assets.

New firms listed in the CSE it will be added to the list if they meet the criteria.

The financial data on which the list is based on will be updated quarterly when the companies release the interim financials.

Lanka Securities said the business and financial screeners have been identified looking at the industry best practices along with the guidance set by the Accounting and Auditing Organisation for Islamic Financial Institutions.

Colombo Stock Exchange Earnings Soared 126pct Year on Year to Rs121.1bn in 2010. This year to Mirror the Same

20th March 2011, www.sundaytimes.lk, By Duruthu Edirimuni Chandrasekera

Colombo bourse corporate earnings have soared 126% year on year to Rs121.1 billion in 2010 and it will mirror this year as well, analysts say, adding that it would regain its buoyancy after April.

When sampling 221 listed firms out of 247 in the Colombo Stock Exchange (CSE), analysts say that the banking, finance and insurance sector (in this sample) contributed roughly 27% last year to the overall corporate profits of the CSE.

“The conglomerates contributed 18% to this,” Danushka Samarasinghe, Director TKS Securities told the Business Times.

He said that the highest net profit growth rates were witnessed amongst the hotel, motors and plantation sectors. Further since the end of war quarterly corporate earnings have grown at 28% Compound Annual Growth Rate (CAGR) during last year.

”This was mainly driven from domestic consumption ahead of any benefits from the recently started investments and we will see this happening this year as well,” Mr. Samarasinghe added. Last year’s net profit has increased 81% year on year to Rs 9.4 billion in the fourth quarter of 2010.

Mr. Samarasinghe noted that the market has edged down to 18.6 times multiples in current earnings by end 2010 down from the 20 times level which is widely believed is the sustainable multiple for the re-rated market since the end of war.

“But the mid cap retail drive had swiftly taken up the market multiple to 20.2 times in 2011 before the market experienced some correction during the days after March 7,” he said.

Nadun Jayatilake, CEO SMB Securities said that the March price to earnings ratio in the CSE is at 15 and that it is showing a ‘huge’ buying side. “The hotel, motors and plantation sectors and also the banking sector will see growth by at least 50%,” he added.

Mr. Samarasinghe noted that the banking, finance and the insurance sectoral earnings were up 70% year on year in the last quarter of 2010 and up 87% during 2010 which was broadly backed by the favourable macro economic situation and the monetary policy adopted by the Central Bank.

“Last year’s fourth quarter at Commercial Bank, Sampath Bank, and NDB Bank led the banking sector earnings backed by loan book expansion, improving asset quality and reducing funding costs. This year too we can expect a repeat performance,” he said.

Last year, the insurance sector earnings were driven by Ceylinco Insurance, AVIVA NDB Insurance and Janashakthi Insurance.

Related Info :

• Colombo Stock Exchange Becomes Best Performing Capital Market in the World Recording 111.14pct Growth

• CSE 100% Gain Year to Date Makes Sri Lankan Bourse an Attractive Investment Hub

• Sri Lanka's CSE Market Cap Reaches Rs 2 Trillion

Six Senses to List Regional Business Unit on Colombo Stock Exchange. 30pct Stake Worth $30mn Offered via IPO

16th March 2011, www.ft.lk

In what is likely to be one of the biggest boosts to Sri Lanka’s investment profile globally, the world-renowned leisure brand Six Senses is to list its regional business unit on the Colombo Stock Exchange (CSE).

Six Senses, of top Thai hotelier of Indian origin Sonu Shivdasani, has two resorts in the Maldives whilst the first in Sri Lanka is under way in partnership with the Aitken Spence Group. The third resort in the Maldives is slated to open soon whilst the Six Senses brand is also being rolled out in India in addition to scouting for prospects in Nepal.

In a deal involving reverse acquisition, Six Senses is to make Sri Lanka its headquarters, owning and overseeing its leisure assets in the South Asia region.

Daily FT learns that the process for the listing of this entity is already underway.
According to market sources, a valuation of the business and the entity is pending but around 30% stake of the venture is expected to be offered via the IPO.

Some estimate the value of the IPO to be between US$ 30 and $ 40 million.
Analysts pointed out that the Colombo stock market remains attractive for issuers whilst the post-war boom in tourism and double digit growth forecast along with Sri Lanka positioning itself as a regional hub were other magnets for Six Senses.

When listed it will be the first of its kind on the Colombo bourse and analysts noted that success would provide an excellent window of opportunity for Sri Lanka to lure more international or regional companies to consider listing apart from setting up headquarters in Colombo.

Sonu, during a trip to Sri Lanka late last year, was quoted by local media as saying: “Over time tourism will become a dominant part of the economy in Sri Lanka, so it makes sense for us to operate in a country like that.”

“Since the return of peace I see Sri Lanka becoming an important regional hub,” he had told Lanka Business Online.

Six Senses is a resort and spa management and development company with properties in six countries including the Maldives, Thailand, Vietnam, Oman, Jordan and Spain.

Its properties in the Maldives are branded as Soneva by Six Senses with the two properties being Soneva Fushi, Maldives and Soneva Gili, Maldives, whilst the third one, Six Senses Laamu, will be opening next month. Six Senses Laamu is the only resort on the virtually uncharted Laamu Atoll, 150km from the equator.The other brand is Evason.

The Group has has seven resorts in Thailand, three in Vietnam, one each in Oman and Jordan, with another opening soon in Spain.

Sonu is also making his debut in India with spas, resorts and fine dining restaurants along with boutique hotels to tap high end travellers, according to Indian media reports.

The first Six Senses Spa across 7,000 sq mt will start functioning next month at the Jaypee Greens Golf and Spa Resort at Noida on the outskirts of Delhi.

The Six Senses Spa at Noida will occupy a three-story building.

Related Info :

• Thai Six Senses Spas makes Sri Lanka a Regional Hub to Manage Leisure Assets in Indian Ocean

• Six Senses Pulls Out of Dutch Bay Resort in Kalpitiya. Goes Ahead with Aitken Spence on a Project near Galle, Sri Lanka

IPOs on CSE Must Allocate 40pct Shares to Retail Investors, Sri Lanka's Markets Regulator Decides. 10pct Offer to be Made to Unit Trust Funds

10th March 2011, www.lankabusinessonline.com

Sri Lanka's markets regulator said companies planning initial public offerings in future will have to allocate a minimum of 40 percent of shares initially to retail individual investors.

The Securities and Exchange Commission (SEC) said the move is aimed at helping broad base share ownership in the country.

The new rules will be effective from March 15, 2011.

"The SEC has observed that the recent IPOs were heavily oversubscribed due to investors using the bank guarantee option to submit IPO applications for a very large quantity of shares," the statement said.

"This has resulted in a majority of retail investors being allotted a small portion of the shares applied and has not created a level playing field in the primary market thereby hindering the process of broad basing share ownership in the country."

The SEC said a minimum of 40 percent of the offered shares for a particular share class in a public offer must be initially made available for allotment to retail individual investors.

A ‘retail individual investor’ is as an individual investor who applies for up to a maximum of 3,000 shares or for a value of not more than 100,000 rupees, whichever is higher.

Applicants submitting applications under other investor categories shall not make applications under the retail individual investor category, the statement said.

The SEC also said a minimum of 10 percent of the offered shares in an IPO must be initially made available for allotment to Sri Lankan growth or balanced unit trust funds comprising of not less than 500 unit holders resident in Sri Lanka making up of at least half of the fund.

If there is an under-subscription in the unit trust investor category and an over-subscription in other investor categories, the oversubscription in the retail individual investor category shall be given first priority in allotment of under-subscribed shares, the SEC said.

If there is an under-subscription in the retail individual investor category and an over-subscription in other investor categories, over-subscription in the unit trust investor category shall be given first priority in the allotment of under-subscribed shares.

The new rules come after talks with the Colombo Stock Exchange, Colombo Stock Brokers Association and IPO managers.

The rules were mooted after increasing concern that big investors using bank guarantees to apply for large volumes of IPO shares were edging out small investors.

Stock market analysts have said new IPOs are coming at increasingly higher valuations.

A flood of IPOs is expected this year as companies move to raise cash in a market which has been hitting record highs in recent months, although it has fallen this week.

Related Info :

• Sri Lanka Securities Watchdog Eases Rules on Price Cap & Private Placements

• Sri Lanka to See app 50 IPO's in 2011 with atleast Two over Rs5bn by April

• Sri Lanka’s Equity & Capital Market Sees $459mn Net Inflow in 2010 from Total Inflow of $1.91bn

Sri Lanka Securities Watchdog Eases Rules on Price Cap & Private Placements

24th February 2011, www.lankabusinessonline.com

Sri Lanka securities watchdog has eased rules on volatile shares under price caps, trimming the period and also lifting a requirement for a 50 percent up front deposit prior to purchase, an official said.

"The period of the price band has been reduced to 10 days from 15," Securities and Exchange Commission chairperson Indrani Sugathadasa said.

"The requirement for a 50 percent up front deposit has also been lifted."

SEC director general Malik Cader said the rules will take effect from March 01.

The regulator brought in the rules in August 2010 after illiquid stocks in particular started to fluctuate widely.

Sugathadasa said the rules had brought stability to the market and turnover levels remained high dispelling fears that the rules will result in a market crash.

In 2010 the stock exchange had a turnover of 507 billion rupees. But till February 23, a period of less than two months, turnover was 127.7 billion rupees.

The regulator said a one-year lock-in period slapped on private placements will apply to shares allotted after February 07.

SEC said in February that investors who buy stocks in a private placement will not be allowed to sell out after a listing up to a year after the placement.

The lock in period will now be one year from February 07, when the rule was brought in.

The decision followed appeals from investors who bought shares in recent placements before the rule was introduced.

The rule will apply to private placements where investors were allotted shares from February 08 onwards.

Sri Lanka to See app 50 IPO's in 2011 with atleast Two over Rs5bn by April

24th February 2011, www.lankabusinessonline.com

Sri Lanka will see around 50 initial public offerings in 2011, with at least two issues over five billion rupees (50 million US dollars) by April, securities exchange commission director general Malik Cader said.

"We expect about 10 IPOs to come by March-April this year," Cader told reporters. "About two of them will raise over 5.0 billion rupees each from the market."

Cader said a number of state firms were also slated to come to the market.

The regulator is also looking at current rules on IPO subscriptions where large investors are using bank guarantees to apply for stocks. Small investor have complained that it gives an unfair advantage to large players.

"But there is a view that the market has to have high net worth as well as small investors," SEC chairperson Indrani Sugathadasa said.

"We are looking at the rule and will soon make a decision."

Under current rules generally preference is given to small investors with a larger proportion of their applications being filled.

Usually applications for minimum subscriptions are fully filled.

Sri Lanka's Richard Pieris Securities Talks to Foreign Funds to Attract Investment to CSE

07th February 2011, www.lankabusinessonline.com

Sri Lanka's Richard Pieris Securities is in talks with big foreign funds to attract more investments to the Colombo bourse and plans a separate unit to lend money for trading, an official said.

The firm, a subsidiary of the Richard Pieris & Co group, has just got its stock broking license from the regulator, the newest broker in Colombo's booming bourse.

Richard Pieris Securities chief executive Jayantha Perera said more foreign funds were needed in the market which is now dominated by retail traders.

"Now the market is driven mostly by retailers," he said in an interview with Lanka Business Report, our sister news television show and website, at the official launch of the company.

"We need to get more foreign funds, big ticket players in the international arena, to come to Sri Lanka.

"We've already spoken to three funds from three different countries."

Colombo's small bourse was Asia's second-best performing stock market last year and is also one of the best-performing so far this year.

The market began a bull run soon after the island's 30-year ethnic war ended in May 2009 with corporate earnings and economic growth increasingly sharply.

Perera also said a new subsidiary will be set up under the Richard Pieris group to lend money to retail traders in the stock market as stock brokers themselves are not allowed to do so.

"We're going to set up separate sister company, Richard Pieris Financial Services, to provide margin trading facilities for clients, to support day traders."

Related Info :
• NDB structures First Ever Credit Card Securitization in Sri Lanka for Richard Pieris Distributors

• Richard Pieris to Build a Luxury Hotel in Colombo. Aims to Achieve Rs2.5bn Profit by Year End