Morning Notes - Lanka Securities (Pvt)

Morning Notes
17 March 2015
Market Diary
ASI Outlook (based on charts)
Royal Ceramics Lanka - Dividend payment date (LKR 2.00 per share)
Union Assurance - Dividend payment date (LKR 6.50 per share)
United Motors Lanka - Dividend payment date (LKR 2.00 per share)
Asiri Surgical Hospital - XD date (LKR 0.40 per share)
Asiri Hospital Holdings - XD date (LKR 0.50 per share)
Trans Asia Hotels - XD date (LKR 1.50 per share)
Corporate Announcements
Vallibel Finance – Debenture Issue of LKR 1bn:
Rated, guaranteed (capital and two interest installments) subordinated, redeemable
debentures for an issue of 7.5mn debentures with an option to issue up to a further
2.5mn at an issue price of LKR 100.00 each.
Date of opening of the subscription list – 26th March 2015
Date on which prospectus would be delivered – 17th March 2015
Dealings by Directors
Nation Lanka
People’s Leasing &
Lake House
Laugfs Gas
A. Senaviratne
10-11 Mar
Goodhope Asia
13 Mar
Price (LKR)
10-12 Mar
09 Mar
16 Mar
Local Business News
Economy slows down to 6.4% in Q4 2014, annual growth 7.4%: The country’s
economy slowed down in the fourth quarter of last year significantly from the growth in
previous three months while the annual economic growth ended at 7.4%. Sri Lanka’s
economic output as measured by Gross Domestic Product for the Q4 from OctoberDecember of 2014 slowed to 6.4% year-on-year, data released by the Census and Statistics
Department today shows. The main industrial sector, which includes textiles and garments,
construction and manufacturing, grew 8.5% in the fourth quarter of 2014, compared to
10.7% recorded in the same quarter of the previous year. The 6.7% growth in services
sector, which includes tourism, telecommunications, ports and transport, in Q4 was
marginally higher than the 6.5% recorded in the same quarter of 2013. However, the growth
in the agriculture sector which was affected by the heavy floods in late November and
December, declined 3.3% in the 2014 fourth quarter compared to the growth of 10.4% in the
same period last year. The services sector contributed 58.0 % to the GDP and the industry
sector provided 33.9 % of income while agriculture sector contributed only 8.2%. (DFT)
United Motors signs tri-party deal with Ideal Chery Automobiles, ENERMO
Corporation for Valvoline: United Motors Lanka PLC, the sole distributor for Valvoline
and Eagle One in Sri Lanka, has partnered with IDEAL Chery Automobiles Ltd., the sole
distributor for Chery Automobiles in Sri Lanka through ENERMO Corporation Ltd. The brand
ENERMO stands for Explore Non-conventional Energy Resources and Major Oils, which is a
representative of its business activity. The partnership agreement will recommend and
promote Valvoline lubricants and Eagle One car care range with the franchise of the rapidlygrowing Chery brand. (DFT)
CIC to make syringes here: For the first time in the Sri Lankan medical history, CIC
Pharmaceuticals will be manufacturing medical syringes in Sri Lanka. Government hospitals
spend around Rs. 600 million annually to import syringes and CIC hopes to rake around 15%
market share from this CIC, Divisional Director Healthcare and Consumer Division,
Weyhenage. “We hope to come to a forward buying agreement with the government for this
operation,” he said. Speaking to Daily News Business he said that that in addition they will
also look at manufacturing other medical devices mainly targeting the export market. “We
already have a facility at Ekala and we are looking at building a factory there to manufacture
these medical devices and syringes.” He said that the company had acquired Ceylinco
Pharmaceuticals in 2012 and have reinvested and re branded as CIC Lifesciences Ltd to
manufacture 15 varieties of drugs to the local market. “We are now looking at investing US$
2.5 million and increase production. CIC may look at a joint venture in this regard.” (DN)
Comments (short term trend): ASI is trading near the lower
Bollinger. Several other technical indicators suggest an uptrend
in the near term.
ASI - Pivot Points
Previous day’s close
Pivot Point
ASI - Moving Averages
07 day
14 day
21 day
50 day
100 day
200 day
Short-term Technical Indicators
The MACD line has crossed the signal
line from above.
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
% Change
Global Business News
Saudi Arabia Will Need More Oil to Feed Local Refinery
Expansion: Saudi Arabia’s plans to expand local refineries while
maintaining its share of the global crude market point to one thing:
higher production. The world’s largest oil exporter will probably
increase output this year to feed new refineries, deepening a global
supply glut, according to analysts at Societe Generale SA and DNB
ASA. (Bloomberg)
BOJ Keeps Record Stimulus Steady in Face of Slowing
Inflation: The Bank of Japan kept its record stimulus unchanged,
as Governor Haruhiko Kuroda gauges how much backing his
reflation effort will get from pay increases after spring wage talks
between companies and labor unions. The BOJ maintained a pledge
to expand the monetary base at an annual pace of 80 trillion yen
($660 billion), as forecast by all 34 economists in a Bloomberg
News survey. (Bloomberg)
India Should Play Bigger Role in South China Sea, Says
Singapore: Singapore said it wants India to play a bigger role in
the South China Sea as China hastens land reclamation in the
disputed waters that carry some of the world’s busiest shipping
lanes. Singapore has been a strong supporter of India’s increased
engagement in the region through security forums, Defense
Minister Ng Eng Hen said in an interview on Monday after a
meeting with Southeast Asian counterparts in Langkawi, an island
in Malaysia. (Bloomberg)
China’s Rate Swaps Retreat as PBOC Cuts Yield on Reverse
Repos: China’s interest-rate swaps retreated after the central bank
cut a short-term lending rate for the second time this month,
adding to a wave of monetary easing in the world’s second-largest
economy. The People’s Bank of China said it conducted seven-day
reverse-repurchase agreements at 3.65 percent at an auction,
down from 3.75 percent last week. (Bloomberg)
Morning Notes
Local Business News
Sri Lanka’s traders not sensitive enough to respect rights of consumers: CAA: Sri
Lanka’s business community and traders are not sensitive enough to respect the rights of the
consumers and their safety, a senior official said. “Monitoring mechanisms of the regulatory
authorities are not sufficient to eliminate the malpractices perpetrated through the supply
chain,” Chandrika Thilakarathne, director, consumer affairs and information, Consumer Affairs
Authority said. “The surveillance mechanism is not powerful enough to cover the entire
country.” Most business, she says think only of short term profit and lack concern on a better
customer service. “Business community has poor respect towards consumer rights.” (LBO)
Hilton mulls third hotel in Digana: The Hilton Group is looking at expanding their global
foot print and is looking at a third hotel in Sri Lanka. An official from Sri Lanka Tourism told
Daily News Business in Berlin ITB that enquiries have been made by the group to manage a
second hotel in Digana, Kandy. "This will be a smaller hotel than Colombo Hilton and it would
be from a new brand under the Hilton family," the official said. (DN)
President instructs cancellation of 349 liquor licenses: President Sirisena has ordered
the Excise Commissioner to cancel with immediate effect the liquor licenses issued to 349
liquor shops/bars for running them illegally, violating the rules and regulations of the Excise
Act. The law prohibits the running of liquor shops within 500 metres, of temples, other
religious sites and schools. The President has ordered the closure of the said liquor bars
having received sufficient complaints regarding their operations. (DN)
Defence HQ constructions halted: Construction work on the Defence Headquarters
Complex in Battaramulla has come to a halt due to non-availability of funds, and Finance
Minister Ravi saying funds will not be released until the exact cost estimation of the project is
clarified. Minister said that the necessary funds were available but it would not be released
until a conclusion was reached on the amount of finances the project would involve. “What
exactly is the cost of the entire project? Where is the cabinet approval for the costing? The
exact costing of the project is not mentioned in any of the documents available on the project.
In one document it states a portion of 2.5% off the total cost which is Rs. 50 billion is
commissioned to the architectural firm involved with it. These figures need probing - these are
questions that need to be answered before the funds are released,” he said. (DM)
Gazette on 19th Amendment published - Govt Printer: The Gazette notification on the
19th Amendment to the Constitution has been printed and published, the Government Printer
said. Cabinet approval was granted for the draft bill on Sunday. According to the Government
Information Department, the term of the Executive President is due to be reduced from six
years to five. Powers vested with the President to dissolve parliament will be now granted to
parliament itself. Another Constitutional Amendment is a President’s term being restricted to
merely two terms. Cabinet will be vested with the power of appointing secretaries of
ministries while the Cabinet of Ministers will be appointed by the President following
consultations with the Prime Minister. The number of Cabinet Ministers will be restricted to
30 through Constitutional Amendments. The Presidential immunity from being sued over
matters conducted during his period of office is to also be removed under the proposed
reforms. (CFT)
Outright land ownership to China at Port City dangerous, points out maritime
sector veteran: A veteran in the maritime sector warns that the outright ownership of land
to China within the Colombo Port City complex would invariable cause long term problems to
Sri Lanka. Shippers’ Academy Colombo (SAC), Chief Executive Officer Mohan Masakorala
pointed this out during a special interview with us. He also added that though the Hambantota
harbour is a project that could be salvaged, the Mattala airport is a complete white elephant.
Preethi Kumara Gallage is Merchant Bank’s new Chairman: The Merchant Bank of Sri
Lanka Limited has appointed Ruwan Prithi Kumara Gallage as its Chairman and Non-Executive
Independent Director. He is a Fellow of the Chartered Institute of Accountants (UK) and who
was a Director of Prime Grameen Micro Finance Ltd., and Audit Committee Chairman.
Furthermore, Attorney at Law Sandun Sudaththa Gamage has been appointed a Non-Executive
Director while Asia Securities Head of Treasury Ajit Hiran Samarasundera has been appointed
Non-Executive Independent Director. (ADB)
Secondary bond market activity dries up ahead of Treasury bond auctions: Activity
in secondary bond markets dried up yesterday as yields edged up marginally with two-way
quotes mainly seen on the liquid three 2018 maturities (i.e. 01.04.2018, 01.06.2018 and
15.08.2018), the 01.07.2022 and the 01.09.2023 maturities at levels of 8.45/55, 8.77/80,
8.50/70, 9.05/15 and 9.65/68 respectively. This was mainly due to a patient approach by
most market participants ahead of two Treasury bond auctions due today and the monetary
policy announcement for the month of March due on 18 March. In money markets, the Central
Bank’s Open Market Operations (OMO) Department was seen mopping up excess liquidity by
way of five auctions for outright sales of Treasury bills. (DFT)
17 March 2015
Global Business News
Saudi Arabia Wooing Fired U.S. Shale Workers to ‘Join Our
Team’: Workers fired from U.S. shale fields after the collapse in oil
prices could soon have a new boss: the nation some blame for
driving that decline. The state-owned Saudi Arabian Oil Co., also
known as Saudi Aramco, is posting new job ads online aiming to
snap up experts in extracting oil from shale as the country seeks to
become a leader in that rapidly expanding effort. (Bloomberg)
Holcim calls a halt to Lafarge deal to revisit terms: Holcim
called a halt on Monday to its merger with Lafarge, pressing the
French company to renegotiate the deal terms and putting their
plan to create the world’s biggest cement maker at risk. The deal
announced in April 2014 was supposed to combine the firms on an
equal basis. But since then, diverging results, share prices and a
surge in the Swiss franc against the euro have strengthened
Holcim’s position and led its largest shareholder to press publicly
for a revision of the agreement. “The Holcim board of directors has
concluded that the combination agreement can no longer be
pursued in its present form,” Holcim said in a statement, saying it
was ready to talk about both the share exchange ratio and
“governance issues”. Lafarge said in a separate statement it was
willing to consider revising the share exchange ratio but not other
aspects of the deal, which was unveiled as “a merger of equals”.
Asian shares edge up ahead of Fed meeting: Asian shares
drifted higher on Monday after a downbeat session on Wall Street
kept sentiment in check, while the euro recovered from a fresh 12year low touched on the divergent monetary policy paths between
the United States and the euro zone. Financial spreadbetters
expected a stronger day ahead in Europe, with Britain’s FTSE 100
seen opening 26 points higher, or up 0.4%; Germany’s DAX likely
to open 61 to 63 points higher, or up 0.5%; and France’s CAC 40
called opening 15 to 20 points higher, or up 0.4%. “European
markets, with the exception of the FTSE100, continued to be juiced
by the European Central Bank’s easy monetary policy, which
started last Monday, with bond yields continuing to decline to
record lows,” Michael Hewson, chief market analyst at CMC
Markets, said in a note. Oil prices continued to tumble, with US
crude dropping more than 2% at one point to a six-year low amid
oversupply fears. The International Energy Agency said on Friday
that the global supply glut is growing and US production shows no
sign of slowing. (DFT)
Morning Notes
17 March 2015
Local Business News
Rupee forwards fall on importer dollar demand: Rupee forwards ended weaker on
Monday on importer dollar demand, but moral suasion by the central bank prevented a
sharper fall as the market waited for cues on interest rates, which have been rising since last
month. Actively-traded two-week rupee forwards fell to 134.00 before the Central Bank
prevented it trading below that level, and ended at 133.85/95 per dollar, down from Friday’s
close of 133.75/85, dealers said. “The Central Bank prevented the fall of the two-week
forwards and a state bank sold dollars in the market,” a currency dealer said. The Central Bank
also prevented a fall in the spot rupee and one-week forwards amid importer dollar demand,
while exporters looked for cues from market interest rates, which have been rising due to
sustained government borrowing. (DFT)
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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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Lanka Securities Research