Stocks advance amid volatility

The week ending on the 28th of January was one of the shortest on record with just two and half working days, but it saw healthy turnover and the indices moved up to end higher. Tuesday was half a day and Wednesday a holiday due to the Presidential elections. The ASI index of all the shares in the Colombo Stock Exchange ended the week at 3,636 points, gaining 105 points or 3%. The more sensitive Milanka Price Index of 25 shares gained 137 points, or 3.3%, to end the week at 4,182 points. Turnover for the week was Rs 4.3 billion, a daily average of Rs 1.4 billion, while in the previous week it was Rs 1.2 billion. The week saw foreign investors sell Rs 1.4 billion worth of shares and buy Rs 443 million, resulting in a net negative flow of Rs 1 billion, on the back of Rs 1 billion sold in the previous week. For the month of January, foreign inflow of Rs 8 billion helped counter the outflow of Rs 11 billion, resulting in a net outflow of only Rs 3 billion. The month of January witnessed four consecutive weeks of outflow, one of the longest such stretches for a long time. Despite the net foreign sales, the ASI gained 7.4% for the month while the MPI gained 8.6%.
In corporate activities, Environmental Resources Investments, the former Walker and Greg, disclosed details of the use of funds that the company raised through its rights issues. The company in a statement said that it had invested Rs 344 million in acquiring 49.8% of Ceylon Leather Products, Rs 99 million in acquiring 10% of People’s Merchant Bank, Rs 75 million in NAMAL-Acuity Value Fund, Rs 156 million for the 100% stake in the stock brokering company DNH Financial (Pvt) Ltd, Rs 738 million in Environmental Resources Ltd (100% stake), which in turn owns a platinum mine and Rs 1.02 billion in government securities. Earlier in the month (January 2010), the company announced plans to raise a further Rs 2.1 billion by way of a rights issue and issue further warrants to raise cash in the future from 2010 to 2015.
City Housing and Real Estate, the former Ceylinco Housing and Real Estate, issued a statement that it would reimburse the costs incurred by the rights holders, following the cancellation of the issue in compliance with a court order.
The company cancelled a planned rights issue, in keeping with court directives that have been issued on the assets of all Ceylinco group companies, following the collapse of many of its deposit taking institutions. The more infamous of them was the Golden Key Credit Card Company, which took down with it over 9,000 depositors and Rs 26 billion in deposits in late December 2008.

To prevent a run on the other group’s deposit taking institutions, the government of Sri Lanka used many state-owned institutions such as the Bank of Ceylon, Merchant Bank of Sri Lanka and the Lankaputhra Bank. Since then, though there has been no run in the rescued companies’ deposits, The Finance, Nation Lanka Finance (formerly known as Ceylinco Finance), Finance and Guarantee (F&G) and Ceylinco Shriram Asset Management amongst a few others, are yet to make payments to deposit holders. Since of late, many companies under the management of MBSL, have been embroiled in fresh controversy over the actions of their chairman. He stands accused of using his powers and influence to buy into Ceylinco group assets at knockdown prices at the cost of the shareholders and aggrieved deposit holders. He is also the chairman of City Housing and Real Estate. The company has not disclosed its liability to the rights holders, but has said it will meet them by realizing company held real estate, which it claims is its stock in trade. Whether this latest move is in compliance with the court order or if there exists a mechanism to transparently transact in the said land bank is a moot point.
Lanka Cement Company, in a rare disclosure, revealed that it had commenced operations on a Cement Silo with a capacity of 10,000 metric tons in collaboration with AMI Products Ltd of UK. This too was revealed following a newspaper article on the January 24. Who AMI Products are, what is their expertise, who are the main shareholders, what was the process of selection followed...these questions are yet to be answered by the company. But then again the market players did not bother with these trivialities as they drove up the share by Rs 8.00 to Rs 29.75. The company is on the default board for non submission of accounts from 2006.
Of the large cap companies, John Keells Holdings closed the week at Rs 176.50, up Rs 2.75 for the week, while Aitken Spence & Co; closed up Rs 135.25 to Rs 1,386.25, Carson Cumberbatch & Co closed up by Rs 46.25 to Rs 549.50. Ceylon Theatres closed at Rs 55.00, up a rupee, Richard Pieris & Co closed up by Rs 8.75 to Rs 53.00 and Hayley’s closed up by Rs 4.00 to Rs 190.25. Hemas Holdings was down by 50 cents to Rs 123.25. In the telecommunication sector, Dialog Telekom closed unchanged at Rs 6.75 while Sri Lanka Telecom closed down a rupee to Rs 42.00. In the banking sector, Commercial Bank voting shares closed at Rs 190.25, up Rs 5.25, while the non voting share closed at Rs 128.75, up Rs 2.75. Hatton National Bank voting and nonvoting shares closed at Rs 177.00 and Rs 115.25 respectively, gaining Rs 5.25 and Rs 2.00. Sampath Bank ended the week at Rs 220.00, up Rs 3.00 and Seylan Bank voting shares closed at Rs 46.50, up Rs 8.00. Seylan Bank nonvoting shares closed at Rs 20.00, up Rs 2.50.