Sri Lanka Stocks, Asia’s Best Performers, On High

30th December 2009, www.bloomberg.com, By Anusha Ondaatjie

Sri Lanka’s stocks, Asia’s best- performing in 2009, may extend gains as the end of a 26-year civil war and low interest rates help boost economic growth, the island’s biggest fund manager said.

The Colombo All-Share Index, which rose 0.9 percent to a record of 3,385.55 today, may climb to 3,500 in two months, said Bimanee Meepagala, an analyst at Eagle NDB Fund Management Co., the nation’s biggest non-state fund. The gauge has jumped 125 percent this year, the world’s second-best gainer after Russia.

“The market was re-rated on post-war optimism,” said Meepagala, who manages the equivalent of $236 million. “Strong economic growth and corporate earnings will help the market continue its upward momentum.”

Sri Lanka’s $41 billion economy is expected to grow as much as 6 percent next year from an estimated 3.5 percent expansion in 2009, the central bank said in October. President Mahinda Rajapaksa quashed an uprising by Tamil separatists in May and the island has drawn the interest from investors including Templeton Asset Management Ltd.’s Mark Mobius and Jim Rogers, author of books including “Adventure Capitalist.”

The central bank has cut lending rates five times this year to a five-year low as inflation plunged from a record high in June 2008. Rajapaksa has called a presidential election for Jan. 26, two years before his mandate expires, as he seeks to capitalize on the end of the war with the Liberation Tigers of Tamil Eelam in May.

Economic Growth

Gross domestic product expanded 4.2 percent in the third quarter from a year earlier, the fastest pace in 2009, after gaining 2.1 percent in the three months to June 30, the statistics department said Dec. 18. Sri Lanka’s exports in October declined 4.9 percent, the least this year, as orders increased for the South Asian island’s tea and rubber. Tourist arrivals in Sri Lanka have increased since June.

“There are still some big macroeconomic challenges but what we’ve seen at the end of the civil war was a fundamental shift in the circumstances,” said Peter Taylor, a fund manager at Aberdeen Asset Management Ltd. in Singapore, which overseas about $25 billion in Asian assets. “We still find some good value in the banking sector.”

Aberdeen holds shares of Commercial Bank of Ceylon Plc , the country’s biggest non-state lender, and John Keells Holdings Plc, which has the largest weighting on the benchmark index.

Selling by Raj Rajaratnam, the billionaire Galleon Group LLC founder accused of insider trading, won’t cause an “overhang” on the Colombo Stock Exchange “as there are plenty of buyers in the market,” Eagle NDB’s Meepagala said.

Mobius, Rogers

Mobius, chairman of Templeton Asset, said last month he’s seeking private equity or strategic investments in Sri Lanka after the end of the war. Rogers also said in August the nation’s stocks may offer better returns as the government is expected to spend more on infrastructure and agriculture.

The International Monetary Fund, which granted Sri Lanka a $2.6 billion loan in July, expects the island’s economic growth and credit demand to pick up.

John Keells Holdings, also Sri Lanka’s biggest diversified company, and Aitken Spence Plc, the island’s largest operator of resorts, are also likely to post gains in earnings next year, Meepagala said.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

CSE - Trading Friday: stocks Rebound, Galleon Sells Ceylon Leather

27th November 2009, www.lankabusinessonline.com

Sri Lankan shares made a strong recovery Friday while Raj Rajaratnam, the billionaire fund manager accused of insider dealing in the US, sold out of Ceylon Leather Products, brokers and analysts said.

The All Share Price Index closed at 2,878.96, up 1.01 percent (28.73 points) while the Milanka Price Index of more liquid stocks closed at 3,282.96, up 1.10 percent (35.74 points).

Turnover was 369 million rupees, according to provisional Colombo Stock Exchange statistics.

Brokers and analysts said the recent slide in share prices, into an apparent 'over-sold' position, had made some stock prices attractive enough to entice buyers back into the market.

"There was a strong rebound today," said Nikita Tissera, Manager Research at SC Securities.

"After the recent fall in the market, investors must be seeing some stock prices as cheap."

Company earnings were looking healthy after the latest crop of earnings for the September quarter.

"The fundamentals are fine. Selected companies have recorded very good earnings. And investment alternatives to equities are not very atteactive."

Sri Lankan interest rates have fallen steeply in recent months, along with inflation, with the government also putting pressure on banks to lower rates.

The day's biggest deal was the sale of a big stake in Ceylon Leather Products, the island's largest footwear manufacturer, by Galleon International Master Fund, owned by Raj Rajaratnam.

Brokers said 3, 626,000 shares of Ceylon Leather Products changed hands at 55 rupees a share, accounting for the bulk of the day's turnover. The stock closed at 56.50 rupees, up 1.50

Galleon was the single largest shareholder in the firm with a 30 percent stake or 3.7 million shares of Ceylon Leather Products, which owns the DI shoe brand.

It had bought the bigger part of the stake at 55 rupees a share in November 2007 when the main shareholder at the time, S A Perera & Company, sold out to Galleon and Lionhart Investment funds for 206 million rupees.

The buyer of the Galleon stake in Ceylon Leather was believed to be Lionhart, the firm's second biggest shareholder, and related parties, brokers and analysts said.

Rajaratnam, who had denied the insider delaing charges, is believed to be selling his holdings to raise cash to repay investors who have been withdrawing money from his fund after his arrest.