All Share Price Index has declined by 0.6% WoW to close the
holiday shortened trading week at 2,635.7 points whilst Milanka
Price Index decreased to 3,235.3 points (down 1.5%). Indices
dipped on account of the downturn in prices that was witnessed
in Walker and Greig (-7.7% WoW), Sierra Cables (-5.9% WoW),
Ceylon Glass (-4.0% WoW), East West Properties (-4.0% WoW),
Dankotuwa Porcelain (-3.8% WoW), Ceylinco Seylan Development
(-2.8% WoW) whilst blue chip losses were led by Lanka Milk Foods
(-1.4% WoW) and John Keells Holdings (-0.8% WoW)
Average daily turnover decreased significantly by 81.3% WoW to
LKR198.4 mn, on account of the high value strategic transactions
that took place in selected counters last week. The market
remained somewhat dull during the current week with renewed
buying interest in the plantation sector, particularly in
counters such as Balangoda Plantations and Agalawatta
Plantations. Retail led buying interest materialised in Walker
and Greig, Lanka Milk Foods, Lanka Cement, and Ceylon Hotels
Corporation whilst crossings were witnessed in John Keells
Holdings and Colombo Dockyard. Further, strategic transfers
materialised in Ceylon Tobacco and Haycarb.
Buying interest in Walker and Greig was on account of the
proposed rights issue being defeated at the extraordinary
general meeting held. Retail interest was witnessed in Lanka
Milk Foods in anticipation of strong corporate earnings to be
posted whilst speculative led buying interest materialised in
Lanka Cement subsequent to the possible re-opening of its cement
factory in Kankasanthurai. Additionally, plantation sector
counters such as Balangoda Plantations, Agalawatte Plantations
and Kegalle Plantations continued to display interest in
anticipation of healthy earnings.
Foreigners remained net buyers primarily in John Keells Holdings
and Distilleries whilst contributing closer to 50% to the total
IMF admits that monetary
expansion caused less than 16% of Inflation
response to the clarifications made by the Central Bank of Sri
Lanka (CBSL) on the scientific grounds on the validity of the
findings in the recent IMF working paper on Pass-through of
External Shocks to Inflation in Sri Lanka, Mr. David Burton, the
Director of Asia and Pacific Department of the IMF has now
issued an explanation to the media.
The Central Bank in a mews release said that during the
discussion with the bank officials, the IMF admitted that money
supply and output gap were the two variables that represent
monetary and fiscal stimulus in the model used. The IMF has
further clarified that monetary and fiscal expansion explains
only 16 per cent of the variation in inflation, not 75 per cent
as interpreted earlier. Accordingly, the IMF explanation implies
that the impact of monetary and fiscal expansion on current
inflation would be even lower than the 16 per cent captured by
the study and that the impact of food and energy prices could be
even higher now as food and energy prices rose sharply and
monetary and fiscal policies were tightened further since July
The CBSL is thankful to the IMF for issuing an explanation in
this regard as it would provide a more clear interpretation of
the results of the Working Paper.
The statement issued by the IMF through David Burton, Director
Asia and Pacific Department of the International Monetary Fund
is given below.
Our recent IMF Working Paper “Pass-Through of External Shocks to
Inflation in Sri Lanka” has attracted a lot of attention in Sri
Lanka and we felt it would be useful to clarify some of the
points raised by this discussion.
The Working Paper examined the causes of inflation in Sri Lanka
and used statistical analysis to investigate how much external
shocks—events beyond the government’s control—contributed to
inflation. The analysis indicated that such shocks explained
about 25 percent of the variation in Sri Lanka’s consumer price
inflation between January 2003-July 2007, while 16 percent was
explained by monetary growth and excess demand, and the rest by
other factors, such as changes in government subsidies and
volatile domestic food prices. Based on these findings, the
paper concluded that domestic policies play a very important
role in containing inflation—a view that is consistent with
those of the IMF’s 2007 Article IV report on Sri Lanka and with
the experience of other countries.
In this context, it is important to note that the staff study
only looks at data up to July 2007, and that it does not take
account of the surge in world commodity prices that has been a
big cause of the run up in headline inflation in Sri Lanka from
13.5 percent in July 2007 to 25 percent in April 2008.
The Sri Lanka authorities have taken important steps to address
this latest challenge. The government took a bold—in the sense
of economically correct and politically difficult—step of
allowing these price rises to pass through by phasing out food
and fuel subsidies during the second half of 2007, and the CBSL
has taken welcome steps to tighten monetary policy to combat
The authorities are right to be concerned about the level of
headline inflation, and the IMF supports their goal of bringing
it down to single digits. This is why the 2007 Article IV report
backed continued efforts to tighten monetary policy and to
reduce the budget deficit.
experience on re-structuring at CMA conference
“When the going is good, organisations accumulate a lot of fat”,
was the basis of the concept discussed at the recently
concluded CMA Conference on April 21, 2008, at the Cinnamon
Grand. The theme of the conference was “Restructuring the
MTI Consulting, which is one of the fastest growing
international management consultancies, this year, presented
Re-structuring in Sri Lanka Process & Experiences, at the CMA
conference. Speaking at the conference was MTI’s International
Consultants, Director, Senior Consultant, MTI Consulting, Sri
Lanka & Bangladesh, Sanjeev Abeynayake and Director, Senior
Consultant, MTI Consulting, Sri Lanka & Pakistan, Suraj Deen.
For most companies, Restructuring is associated with bad times.
Restructuring has been considered synonymous with losses,
down-sizing, retrenchments and plant shutdowns. MTI Consulting’s
Research and Experiences have seen that companies still use
conventional restructuring as emergency surgery before the last
breath is drawn!
MTI’s Research and Experience in over 33 countries, shows that
fast growing organisations become prime candidates to put on
‘unproductive fat’ and acquire inefficient processes and
practices, gradually making the company uncompetitive. MTI’s
Experience also shows that smart companies recognise such
pitfalls and the need to continuously ask the hard questions,
even in the face of continued business success
Presenting at the conference, MTI’s Consultant Sanjeev
Abeynayake stated examples on how MTI’s globally acclaimed RSRS®
restructuring model was applied. MTI’s Restructuring based on
Restrategising Model (RSRS) is a strategy based structuring
process that conceptually leaves aside the current structure and
employs the Value Adding Flow to build the structure. He further
stated that, at this point, we put aside all the current jobs,
designations and layers and then re-look how to rebuild business
afresh. It is what we call a Ground Zero approach, where the
entire corporate structure is razed –with nothing left but the
franchise, customers and brands.
Further speaking at the conference Suraj Deen stated that
companies need to base their structure on business strategy.
Some companies tend to consider their structures more permanent
than their buildings. Thus companies do not perceive the need to
change these structures to suit the times. He further stated
that the structure has to be a means to an end, which is to
achieve the business strategy.
WTC at Fort to reach 100% occupancy this year
World Trade Center in Colombo Fort which reached an occupancy
level of 90% in 2006 and 2007 is poised to reach 100% occupancy
this year predicts Bartleet Mallory Stockbrokers in its
BMS report says that OSEA is the Sri Lankan member of World
Trade Centers Association which owns and manages the twin towers
of World Trade Center (WTC) at Echelon Square, Colombo. Further
OSEA is also the prestigious owner and the developer of
Havelockcity, one of the largest condominium construction
projects in Sri Lanka.
It points out that a closer look at OSEA’s revenue structure
depicts that 63% of the total revenue stems exclusively from the
rental income of WTC. Moreover WTC being situated at a prime
business location, the demand for floor space is very high as
the occupancy levels reached the highest of 90% in both 2006 and
2007. OSEA is hoping to extend the occupancy levels closer to
100% in 2008.
Some of the key tenants include Colombo Stock Exchange,
Securities and Exchange Commission, BOI, local and international
banks, international air line companies and travel agents etc.
The multi complex Havelockcity project comprises residential
apartments as well as commercial buildings which eventually
builds an inner city at the completion of the project. The
Havelockcity project is planned to complete by 2010 and will
operate in three phases. Currently, the first phase of
constructing 226 apartments is about to be completed by August
The revenue from the sale of apartments is recognized once 25%
total value is received and in 2007 the sale of apartments
amounted to 34% of total revenue. Further for 2008 it is
expected to increase the contribution from sale of apartments on
the back of the completion of its first phase in August 2008.
In FY 2007 OSEA reached Rs.1.13Bn revenue mark depicting a
growth of 23% YoY. The bottom line also visualized an annual
growth of 9% to attribute Rs.2.2Bn, which consists of a massive
Rs.1.8Bn being fair value gain on investment property.
The corresponding figure for FY 2006 was Rs.1.68Bn. Earnings per
stands at Rs.3.80 with a growth of 4% YoY, where the company has
a P/E multiple of 3.29 times compared to the Land & Property
sector P/E multiple of 5.30 times. On 02nd of May the counter
closed at Rs.12.50 with a net asset value per share of Rs.17.51.
Gravitas 2008 to hit
Colombo in style
Hoteliers’ Ball, Gravitas 2008, will take place on Saturday, 31
May 2008 at the Grand Ballroom, Water’s Edge. Organised by the
Ceylon Hotel School’s Graduates Association (CHSGA), the event
promises to be outstanding in that it will feature the cream of
the industry, both locally and internationally.
Commenting on the event, President of the Association and
Director, Water’s Edge, Sarath Fernando, said, “I’m sure many
people would wonder ‘Why Gravitas’? The rationale behind the
branding is that this event is going to be the centre of gravity
– the occasion that will attract the best possible individuals
and elements of the industry – creating an unparalleled
experience for all who are a part of it.”
The star attraction at the event would be Douglas Ankara, the
world-renowned mixologist from the UK, who will showcase his
talents, ably assisted by the best mixologists and bartenders in
Sri Lanka. Compering the event would be the international
compere, Rebecca Wicken, who would add that extra sparkle to
make the evening glitter that much more. The menu is yet another
treat to anticipate – not just for the taste buds, but also for
the senses – as Sri Lanka’s top executive chefs from the Colombo
hotels join forces to create a sumptuous dinner! Providing the
musical accompaniment to this excellent fare would be Misty and
Legacy. Undoubtedly, Gravitas 2008 will be a night to remember!
CEO Forum on opportunities in India and China
The CIMA Sri Lanka CEO forum will be held on the
13th May at Cinnamon Grand. The forum will feature a
presentation Mr. V Thyagarajan - Senior Vice President &
Regional Director, Asia Pacific GlaxoSmithKline, who is
responsible for GlaxoSmithKline operations in Asia Pacific and
is based at the Company’s Headquarters in Singapore. Mr.
Thyagarajan will speak on ‘Globalization and opportunities it
present to Asia”. He will also share his experience on how India
and China are gaining from Globalization paying special emphasis
on the Singapore Model within the Globalization context and its
relevance to Sri Lanka.
The Forum will conclude with an interesting panel discussion on
opportunities and challenges of doing business in the region.
The session would be moderated by Mr. Prakash Schaffter,
Managing Director, Janashakthi Insurance Co. Ltd and comprises;
top business leaders Mr. Nihal Fonseka, Chairman, Colombo Stock
Exchange & Chief Executive, DFCC Bank, Jeremy Huxtable, Chief
Executive Officer, Suntel Limited, Mr. Keith Modder, Managing
Director, Virtusa (Pvt) Ltd. Mr. Dave Ranasinghe, Managing
Director, Bodyline (Pvt) Ltd and Mr. Mourad Mankarios, former
Chairman/CEO Philips Electronics Singapore
The CEO breakfast meetings are organized as part of CIMA’s
continuing endeavour to update the business community on
emerging developments in the field of finance and management.
India, Iran agree to push
for deal on gas pipeline pact
- Iran said Tuesday it hoped to finalise a gas pipeline deal
with fuel-starved India “in the near future”, stressing the
much-delayed project was more than just a commercial agreement.
Iranian President Mahmoud Ahmadinejad said he held detailed
talks with Indian Prime Minister Manmohan Singh including
“positive” discussions on the petroleum natural gas project.
“The talks were positive and we hope that in the near future we
will finalise the project,” Ahmadinejad, speaking through an
interpreter, told a news conference after a one-day visit to New
He said the 7.5-billion-dollar project, which aims to transport
natural gas from Iranian oilfields to Pakistan and India, was
not just a commercial deal as India and Iran “shared common
roots and had deep historic and cultural ties.”
“This is a very important, very immense project -- not only the
pipeline but the very issues involved in this programme have
social, economic and political ramifications for both our
countries,” he after visiting South Asian neighbours Pakistan
and Sri Lanka this week.
The project was mooted in 1994 but stalled by disputes over
prices and transit fees.
Indian foreign secretary Shiv Shankar Menon sounded upbeat after
the meetings. “Its doable,” he told reporters in a separate
“We not only need to treat it as a commercial deal because it is
much more than a commercial deal,” the top Indian diplomat said.
“I think we need to see it also in terms of its potential as a
confidence-building measure between the three countries and
therefore we need to do things, find ways of assuring supply,”
“This is a pipeline that will hopefully last for 40 years...
Price is only a small part of this,” he added in an apparent
reference to issues of transit costs and pricing.