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Morning Notes
12 January 2015
Market Diary
ASI Outlook (based on charts)
Today:
Blue Diamonds Jewellery Worldwide - Right Issue – Renunciation date
MTD Walkers - Right Issue – Trading commencement date
Serendib Engineering Group - Sub-Division of shares – Allotment date
Tomorrow:
Blue Diamonds Jewellery Worldwide - Right Issue – Last date of acceptance & Payment
Ceylon Tobacco Company - XD date (LKR 4.40 per share)
Corporate Announcements
First Capital Treasuries Limited – Debenture Issue of LKR 500mn:
5mn rated, subordinated, unsecured, redeemable debentures at an issue price of LKR
100.00 each.
Date of opening of the subscription list – 27th January 2015
Date on which the prospectus would be delivered – 16th January 2015
Arpico Insurance Limited – Initial Public Offering – Offer for subscription:
The shares of the above company would be listed on the Diri Savi Board of the CSE and
will be classified under the banks finance and insurance sector.
Type
Security code
ISIN
Ordinary voting
shares
AINS-N-0000
LK0434N00007
Dealings by Directors
Company
Director
Purchase
The Lighthouse
Jetwing Hotels
Hotel
Management
Vallibel Finance
S.B.Rangamuwa
Indo-Malay
Goodhope Asia
Holdings
Hayleys
K.D.D.Perera
Sale
Total no. of
shares to be
listed
To be listed with
effect from
66,230,407
Date
16th January 2015
Quantity
Price (LKR)
07 Jan
10,870
60.00
08 Jan
08 Jan
15,134
1,560
48.00-48.10
1,660.00
09 Jan
1,000,000
340.00
Local Business News
Nivard Cabraal, Nalaka Godahewa relinquish offices: With Maithripala Sirisena
becoming the new President with a clear majority, Ajith Nivard Cabraal who was the
Governor of the Sri Lanka Central Bank has resigned from his post. Meanwhile, Sri Lanka’s
Securities and Exchange Commission (SEC) Chairman Dr.Nalaka Godahewa has also
tendered his resignation. These resignations have been enable the new President to appoint
new heads to these government institutions. (ADB)
Dinesh Weerakkody to be CB Governor?: Speculation was rife that top professional
Dinesh Weerakkody is likely to be appointed as the Governor of the Central Bank for the
100-day period of the new national Government under President Maithripala Sirisena.
Weerakkody has been a key strategist of the main Opposition UNP for a long period. He was
an Advisor to the Prime Minister of Sri Lanka from 2002-2004 and has served in many
Cabinet sub-committees and national level committees on Economic Affairs, International
Affairs and Labour Management. He was also the Chairman/CEO of the Employees’ Trust
Fund Board under the previous UNP regime. Until last year he served as the Chairman of
Commercial Bank Plc whilst at present he serves on the Boards of several listed and unlisted
companies. (DFT)
MBSL completes merger: Merchant Bank of Sri Lanka PLC (MBSL), the pioneer merchant
banking arm of the financial power house, the Bank of Ceylon, marked the New Year dawn
with the announcement of consolidating its finance company status after merging with two
subsidiaries, MCSL Financial Services Ltd and MBSL Savings Bank. The announcement was
made by M. R. Shah, the Chairman of MBSL during the New Year Celebration which was held
at Merchant Tower building. The merger of MBSL marks the first successful merger under
the financial sector consolidation plan adopted by the Central Bank of Sri Lanka (CBSL).
Both, MCSL Financial Services Ltd and MBSL Savings Bank will cease their operations and
will continue business under the brand name “Merchant Bank of Sri Lanka”. This will also
overcome the capital adequacy shortfalls of the MBSL Savings Bank, which was a challenge
over the past couple of years. (DN)
Arjuna Mahendran new Treasury Secretary: Senior economist and financial services
expert as well as one time Director General of the BOI, Arjuna Mahendran is to be appointed
as the Secretary to the Ministry of Finance. Arjuna’s recent position was the Chief Investment
30
Officer-Wealth
Management division at Emirates NBD. Prior to joining Emirates NBD,
Mahendran was the Managing Director and Chief Investment Strategist-Asia at HSBC Private
Bank. (DFT)
Comments (short term trend): ASI is trading near lower
Bollinger level. Several other technical indicators suggest a
possible uptrend in the near term.
ASI - Pivot Points
Previous day’s close
7,605.79
Pivot Point
7,579.68
R1
7,643.13 S1
R2
7,677.63 S2
ASI - Moving Averages
07 day
7,414.80 50 day
14 day
7,338.30 100 day
21 day
7,301.98 200 day
7,545.18
7,481.73
7,322.80
7,239.67
6,793.57
Short-term Technical Indicators
RSI
79
MACD
The MACD line has crossed the signal
line from below.
Global Equity Indices
S&P 500 (USA)
FTSE 100 (UK)
NIKKEI 225 (Japan)
Shanghai Comp (China)
BSE Sensex (India)
KSE All (Pakistan)
MSCI frontier markets
MSCI emerging markets
Index
2,044.81
6,501.14
17,197.73
3,259.21
27,458.38
33,324.82
590.76
958.83
Change
-17.33
-68.82
+30.63
-26.20
+183.67
+207.35
+2.91
+17.65
% Change
-0.84
-1.05
+0.18
-0.80
+0.67
+0.63
+0.50
+1.88
Global Business News
Oil Falls as Goldman Cuts Outlook While Venezuela Seeks
Recovery: Oil extended losses from the lowest level in more than
5 1/2 years as Goldman Sachs Group Inc. reduced its price
forecasts and Venezuela called on OPEC producers to work
together to spur a recovery. Futures slid as much as 2.1 percent in
London after a seventh weekly drop. Crude has to “stay lower for
longer” if investment in shale is to be curtailed to re-balance the
global market, according to Goldman analysts. Prices need to
return to $100 a barrel for economic equilibrium, Venezuelan
President Nicolas Maduro said in Iran during a tour of Middle East
members of the Organization of Petroleum Exporting Countries.
(Bloomberg)
Gold Extends Gain to One-Month High as U.S. Wages Stall
Dollar: Gold rose to the highest level in a month after a report on
U.S. wages raised concern that the economy may not be strong
enough for the Federal Reserve to start increasing interest rates,
hurting the dollar for a second day. Bullion for immediate delivery
advanced as much as 0.3 percent to $1,226.95 an ounce, the highest
price since Dec. 12, and traded at $1,226.94 at 9:20 a.m. in
Singapore, according to Bloomberg generic pricing. The metal
climbed 1.2 percent on Jan. 9 to cap the biggest weekly gain since
June as assets in the SPDR Gold Trust, the world’s largest exchangetraded product backed by bullion, rose the most since July.
(Bloomberg)
Copper Holds Losses Near Five-Year Low on Demand
Growth Concern: Copper in London held losses near the weakest
in more than five years on speculation demand growth my falter
amid signs of uneven economic growth in the U.S., Germany and
China, the largest metals consumers. Copper was little changed
after ending last week at the lowest since October 2009. The
biggest drop in U.S. hourly wages since records began in 2006
overshadowed a steeper-than-forecast payrolls increase, while
German industrial production in November unexpectedly fell for
the first time in three months, data showed Jan. 9. (Bloomberg)
Morning Notes
Local Business News
Cargills goes for compulsory offer on Kotmale to buy remaining 2.74% stake: The
Cargills (Ceylon) Group has announced a “compulsory” offer to buy the remaining 2.74% stake
at large of Kotmale Holdings Plc (KHPLC). A decision to this effect was made by the Cargills
Board last week. The compulsory offer is priced at Rs. 62.50 per KHPLC share. The stock last
traded at Rs. 63. The compulsory offer follows the conclusion of a voluntary offer made in
October at Rs. 62.50. During the voluntary offer Cargills secured only responses from
shareholders owning around 301,000 shares of below 1%. As at September 2014, net assets
per share at company level was Rs. 9.82, up from Rs. 8.37 a year ago and at group level it was
Rs. 29.41, up from Rs. 26 in November 2013. As of end 2014, the Cargills Group held 97.26%
stake, up from 94.07% as at end September. Cargills’ and related parties’ stake comprises
Cargills Quality Foods (94.07%), Cargills (Ceylon) Plc and Cargills Quality Dairies Ltd. (DFT)
12 January 2015
Global Business News
US jobless claims dip; 2014 layoffs lowest in 17 years: The
number of Americans filing new claims for unemployment benefits
fell last week and job cuts declined sharply in December,
suggesting the labour market is tightening.Thursday’s reports
support views of faster growth this year, driven by consumer
spending, despite a faltering global economy.“Labour market
conditions continue to improve, providing support for consumers
and contributing to a virtuous cycle for the economy,” said Jim
Baird, chief investment officer at Plante Moran Financial Advisors
in Kalamazoo, Michigan. Initial claims for state unemployment
benefits slipped by 4,000 to a seasonally adjusted 294,000 for the
week ended 3 January, the Labour Department said. (DFT)
Bond prices tumble during the week on political uncertainties: Considerable selling
interest across the yield curve saw secondary market bond yields increase (bond prices dip as
yields increase) throughout the week ending 09th January, reflecting a parallel shift upwards
of the overall yield curve. In money markets, overnight call money and repo rates decreased to
average 6.08% and 5.45% respectively for the week, as average surplus liquidity increased to
Rs. 36.91 billion against its previous week’s average of Rs.26.61 billion. An amount of Rs.
33.18 billion was drained out on Friday by way of a seven day repo auction at a weighted
average of 5.98%. The rupee on spot next and spot next-next contracts was seen losing ground
during the week to close the week ending 09th January at Rs 132.70/90 and Rs.132.80/00
respectively on the back of importer demand as market participants were seen refraining
from trading on spot contracts . The daily USD/LKR average traded volume for the first three
days of the week stood at US $ 51.73 million. (DFT)
Foreigners exiting from Govt. securities market transitionary European investors
once more line up to invest: The economy may face a few hiccups with the election of a
new regime vis-à-vis the new President Maithripala Sirisena coming to power last week, in the
form of foreign investors exiting from the government securities market, but such exits are
transitionary, foreign banking sources said. As a result of such exits, the yield of the 2024
maturing Treasury Bond increased by 25 basis points to 8.35% and the exchange rate
weakened to Rs 133 to the US dollar in 'spot next' interbank trading and to Rs 133.10 in 'spot
next next' trades on Friday (9 January). "It's the uncertainty as to how a coalition government
would handle the economy that is causing these foreign investor exits," they said. But once
they know that the economy is on terra firma they will return, probably in a short space of
another three months’ time," sources said. "Investors will be looking at 'who's who' are in the
new Cabinet, that is critical," they said. Nevertheless, European investors have once more
lined up to invest in Sri Lanka, sources added. (CFT)
Fitch affirms HNB Assurance; assigns rating to HNB General Insurance: Fitch Ratings
Lanka has affirmed HNB Assurance PLC's (HNBA) National Insurer Financial Strength Rating
and National Long-Term rating at 'A(lka)'. Fitch has also assigned HNBA's subsidiary HNB
General Insurance Ltd (HNB GI) a National Insurer Financial Strength Rating and National
Long-Term rating of 'A(lka)'. All ratings have a Stable Outlook. The ratings reflect the Sri
Lanka-based Insurance group's comfortable capitalization in terms of regulatory solvency, its
prudent policy towards investment and modest market share. The ratings also reflect Fitch's
expectation that HNBA will receive distributional synergies from parent, Hatton National Bank
PLC (HNB, AA-(lka)/Stable), due to HNBA's importance to the bank in providing additional
bancassurance products and HNB's 60% ownership of the insurance group. (CFT)
ComBank fetes UAE business partners: Strong growth in transaction volumes in the
United Arab Emirates (UAE), particularly in remittances, was acknowledged by the
Commercial Bank of Ceylon recently when it felicitated its business partners, ex-staff and
customers in the Emirate. United Arab Emirates is a key market for remittances to Sri Lanka.
The Commercial Bank has 21 agents and four Business Promotion officers in the UAE,
covering the four Emirates, Dubai, Abu Dhabi, Sharjah and Ajman. The Bank is one of the most
active players in Sri Lanka in the field of remittances, offering customers a range of options
including the Bank's own e-Exchange platform, a highly secure, low cost money transfer
facility which is available to remitters via a network of agents in over 50 countries. Remitters
can send money even without having an account in the Bank. Besides its own e-Exchange
remittance platform, Commercial Bank offers customers around the world the facility of
transferring funds via MoneyGram, Xpress Money and Ria Financial Services. (SO)
New Sri Lankan president expected to kill James Packer’s casino plans: Billionaire
James Packer is expected to walk away from a plan to build a $US400 million ($496 million)
casino and hotel in Sri Lanka after the island nation elected a new president, Maithripala
Sirisena, who has promised to block the project. Mr Sirisena, who is described as a social
conservative, defected from the ruling party in November after previously serving under
former president Mahinda Rajapaksa as health minister. The manifesto released by his new
party, the New Democratic Front, promised to “disallow” licences for casinos proposed by Mr
Packer’s Crown Resorts and local developer John Keells Holdings. Crown’s plans progressed
rapidly throughout 2013, but stalled in the past year because of opposition from Buddhist
leaders, backlash against tax concessions proposed for the project and the recent election
campaign. One analyst, who declined to be named, said such a scenario would have been
extremely risky for Crown. (ADB)
Lanka Securities Research
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purposes of information do not purport to be complete description of the
subject matter referred to herein. In preparing this report care has been
exercised to collect information from sources which we believe to be reliable
although we do not guarantee the accuracy and completeness thereof. Lanka
Securities (Pvt) Ltd. and/or its affiliates and/or its directors, officers and
employees shall not in any way be responsible or liable for loss or damage
which any person or party may sustain or incur by relying on the contents of
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