Indices close higher on retail participation

The week ending 5th of March 2010 saw active turnover, making the indices at the CSE close higher on retail participation. The ASPI, which tracks all the stocks in the Colombo market, gained 0.4% (16 points) to close at 3,824. The Milanka Price Index, which tracks the movements of the 25 most liquid stocks, gained 0.8 % (33 points) to close at 4,388. The higher pace of gain in the MPI stocks were due to mid cap stocks showing gains on retail interest. Market turnover for the week was Rs 6.4 billion with a daily average turnover of Rs 1.3 billion. For the week, the net foreign outflow was Rs 523 million, despite the inflow of Rs 857 million. The smaller foreign funds and investors have been selling out while the big time investors have taken a long term view of the country and the stock exchange. In the previous week, net foreign sales was at Rs 289 million.
On Thursday, Dhammika Perera, the current chairman of the Board of Investment of Sri Lanka and owner of the Vallibel Group of companies, sold his 19.3% stake in Asian Alliance Insurance to Fast Gain International. Fast Gain International is owned by controversial Malaysian investor Vijayeswaran Vijayaratnam. More popular for the Goldquest multilateral (or referral investment) scheme by the same name, Quest International and its related organizations have been investing in many strategic companies in the country. Vijayaratnam currently is the majority shareholder of Asian Capital, an investment bank which owns Asia Securities the stock broker. Stock brokering is a business regulated by the Securities Exchange Commission of Sri Lanka (SEC). Asia Capital and related parties own 44% of Asian Alliance. The 4.8 million share stake purchased by Fast Gain International was transacted at Rs 50.00 per share. Insurance is a regulated business in Sri Lanka under the purview of the Insurance Board of Sri Lanka, which is under the aegis of the SEC . Vijayaratnam’s popular investment scheme, GoldQuest, collapsed in 2006 when the Central Bank of Sri Lanka stepped in to enforce exchange and investment laws. Vijayaratnam and his board of directors were also briefly incarcerated in the Philippines for running unauthorized investment schemes, but subsequently released and cleared of all charges. His company’s attempt to takeover the NDB Banking group in Sri Lanka was also met with opposition and law suits. Asia Capital has been on the default board of the CSE for non submission of financial statements since March 2009 and the annual report since March 2008. Asian Alliance Insurance ended the week at Rs 59.00, while Asia Capital ended the week at Rs 12.00. Generating equal controversy was Environmental Resources Investment, which finally got the approval of the regulators to go ahead with its rights and warrants issue. The rights are to be issued at Rs 30.00 on the basis of one for every two held. The rights also carry two warrants each of three different maturities which entitle the holders to buy shares at Rs 33.00 (in 2012), Rs 36.00 (in 2014) and Rs 39.00 (in 2015). The three new warrants are also to be issued to holders of the 2010 and 2011 maturing warrants on the ratio of one for every one held. The company and its officials have come under regulatory scrutiny on a range of issues. The matters raised by regulators have been on source and origin of the funds that have entered the market, the purpose for which they have come. There is also a lack of transparency on the part of the management of ERI for a company of that size. ERI, which is the 10th largest business in terms of market capitalization, which stands at Rs 32 billion on the value of shares outstanding alone, has a relatively unknown board of directors and managers who very rarely make public pronouncements. The company is also to demonstrate the viability of its investment plans and the competence of the management in running an investment house or any of its investments. ERI shares ended the week at Rs 231.00 while is warrants closed the week at Rs 154.50 (2010) and Rs 154.75 (2011). The market cap of the warrants are over Rs 16 billion each. The shares and warrants become ex-rights from the 31st of March 2010.

Raising capital

On the more positive side, Raigam Wayamba Salterns announced its plans to raise Rs 200 million by way of an IPO. The company will issue 80 million shares to the public on at Rs 2.50 per share commencing on the 23rd of March and the prospectus will be available from the 11th of March. Vallibel Finance, a Dhammika Perera owned company, will issue its prospectus on the 17th March to raise Rs 114 million by issuing 5.2 million shares at Rs 22.00. The issue will open on the 31st of March.
On other corporate news, NDB Bank CEO Eran Wickramaratne has handed in his resignation effective the 26th of March as he is standing in as a nominated member of the United National Party at the forthcoming general elections. He is to be replaced by Russel de Mel. Seylan Merchant Bank announced that it will change its name to SMB Holdings. Asiri Hospitals group announced the purchase of a 40 bed hospital in Matara bringing its operational hospital count to 4. The group also hopes to complete its newest facility, The Central by the end of the year.
The week ended with blue chip companies having a mixed week. John Keells Holdings ended at Rs 168.50, up 25 cents, Aitken Spence at Rs 1,390.00, up Rs 90.00, Ceylon Theatres at Rs 56.50, up Rs 3.50. Carson Cumberbatch & Co lost Rs 14.25 to close at Rs 540.75, while Richard Pieris & Co lost Rs 3.50 to close at Rs 62.00. Hemas Holdings was down Rs 1.50 to close at Rs 122.00.
- Stock Market Correspondent