The Colombo Stock Exchange experienced rather volatile sessions during this week with modest investor participation. The market pulled back from its recent gains as profit taking by retailers was seen in most of the Blue-chips and Banking counters. The benchmark All Share Price Index (ASPI) closed at 2,892.05, dip of 47.39 points WoW and more sensitive Milanka Price Index (MPI) drop by 26.15 WoW to closed at 3,267.33.Average daily turnover for the week stood at Rs.692.67mn (-40.89% WoW) and average daily volume for the week was 29.12mn shares (-18.44%WoW). Foreign activities remained at relatively high levels during the first two days of the week and by the end of the week the foreign participation was 30.21% of the total market activity. Foreign investors were net buyers with net foreign inflow of Rs.212.00mn. The week on week dip of prices in blue chip counters like JKH (Rs.2.25), Commercial Bank (Rs.7.75), SLTL (Rs.2.25) and HNB (Rs.2.00) contributed adversely to the market performance.

Trading commenced for the new week on a negative note on Tuesday following the long holiday weekend. ASPI lost 28.90 points to stand at 2,910.54 and MPI plunged 13.23 points to close at 3,280.25. Turnover boosted to Rs.1.14bn which was mainly derived from heavy foreign activity. John Keells Holdings made the highest contribution to the turnover by adding Rs.483.35mn. Brown and Company, Pan Asia Bank, Ceylinco Finance and Keells Hotels were witnessed as actively traded counters for the day. On Wednesday, market demonstrated flat performance with main indices recording marginal gains. ASPI improved 2.34 points to stand at 2,912.88 while MPI jumped 1.64 points to close at 3,281.89.

Total market turnover was Rs.775.05mn with John Keells Holdings (Rs.221.20mn), Stafford Hotels (Rs.86.13mn) and Dialog Telekom (Rs.49.94mn) making the majority contribution. CW Mackie, Brown & Company and Lankem Ceylon actively contributed to the day’s turnover. Market ended in negative territory on Thursday, where the ASPI and MPI dropped 24.21 points and 33.78 points to end the day at 2,888.67 and 3,248.11 respectively. Turnover recorded Rs.419.08mn with majority contribution coming from Dialog Telekom (Rs.54.10mn), Ceylon Theatres (Rs.23.01mn) and Vallible Power (Rs.13.55). High trading activity was witnessed in counters such as Lankem Development, Lankem Ceylon and Keells Hotels.

Market indices showed volatility on Friday’s trade with ending on a flat note. The ASPI gained marginally by 3.38 points to close at 2,892.05 while the sensitive MPI increased 19.22 index points to stand at 3,267.33. The day’s total turnover amounted to Rs.436.26mn.Seylan Bank non-voting made the highest contribution to the turnover by adding Rs.90.25mn. Retail investors dominated the day’s activities as Seylan Bank non-voting, Ceylinco Finance, Seylan Merchant Bank, Blue Diamonds and Vallible Power actively contributed to the day’s turnover.In the week ahead we expect the market to respond sensitively to the macro economic conditions while periodic profit taking may introduce volatility to the indices. The further drop in money market interest rates will encourage the foreign and institutional investors to shift to the equity market in the coming period.


Intelligent Investing

By Indika Rajakaruna, Executive Investment, Unit Trust Management Company
Everyone in this world dreams of a happy life. According to economics, life is all about achieving dreams and goals of our lives through the limited resources available to us. But the problem is that our needs and wants progressively grow each and every day but not the resources available in our hand. Therefore, we see there is a gap between what we want and what we have. Some of our needs have to be addressed on a day today basis such as food and medicine while some require careful planning over a time period such as buying a car or house etc. Thus we tend to invest part of our wealth by not consuming in the present for future benefit. In order to get the maximum return to our wealth we should not only think about the return alone but also we need to diversify our wealth on different investment options based on our need patterns (liquidity) and also the riskiness of the investment options.

But one common misconception that most of our investors have is that they believe saving is literally equal to investing. Well basically, we invest what we save. So Investment generates from savings. But saving money is not investing. According to Keynes people need money for three purposes. For transaction purposes, precautionary purpose (such as for contingent purposes) and thirdly for speculative purposes that is to make profits out of buying and selling securities.

According to the writer’s view saving is a short-term phenomenon. It basically means conserving money. The objective of the saver is the capital preservation and not the growth in the capital. Therefore, savers should undertake low risk instruments. Due to low risk the savers are compensated with lower return. So, if one is planning their investments, the savings should represent the short and medium term needs. Therefore, we invest for long term not for short term. The problem that we have seen lately in Sri Lanka was that the improper diversifying of the assets by investors without understanding the risks associated with it, led some investors to lose their life time savings.

Investment basically in my view refers to “Planting of money, leaving the money to grow over a period of time.” According to Benjamin Graham who is known as the Father of Value Investing, Investment is “an operation as one which upon thorough analysis promises safety of principle and adequate return”. In other words an investment is a voyage of seeking value by taking into consideration of the calculated risks. Since in Investments the investor is seeking a higher return at the expense of undertaking a risk, it has to be taken with a long term view.

However, the problem that the investors encounter in the act of investing is that they tend to check their fortunes in the short run. Of course an investor can make short term gains by trading in securities by identifying the undervalued securities as a result of the inefficiencies that exist in the asset markets, which tend to prevail in the short run. However, the investors should differentiate Investment with Speculation. Speculation is committing money in a venture, based on hearsay without checking its credentials. In speculation the chances of winning in the long run is very low and does not generate any long term return.
What makes the investment to generate a reasonable return to you in the long run is due to the effects of compounding. Albert Einstein once quoted “The most powerful force in the universe is compound interest”. The compound interest would work for you when you invest while it would work against you when you borrow. The effects of compounding can be illustrated by using the following chart.

Rule 72

The Rule 72 is a method that lets you know how much time horizon is required for an investor to double his initial investment. Higher the rate of return, lesser the time required to double your wealth. The calculation of the doubling period is as follows:

Before committing money into an investment venture, the investor should always do some homework about the investment vehicle. Be it a stock or a debenture or a deposit, the investor should be mindful as to how sound the features of the security and the organisation that issues it, (i.e. what is the nature of the business of the issuer and management), the risk associated with it and the returns provided is adequately compensate for risk, liquidity etc.

In the coming series of articles we will discuss how to plan your investment decision and what are the investment options left for individual investors.

(Readers can reach the writer through indika.rajakaruna @yahoo.com)


Carson’s oil palm company on an expansion drive

“Indo-Malay PLC has an investment in two Oil Palm Plantation projects in Indonesia, viz, PT Agro Indomas (PTAI) and PT Agro Bukit (PTAB) through investments made by Shalimar Developments Sdn Bhd (SDSB)”, the company last Friday said in a stock exchange filing.
SDSB is a group subsidiary of Goodhope Asia Holdings Ltd (GAHL), which is an Oil Palm Plantation holding Company incorporated in Singapore.

The filing also said that GAHL has negotiated with Standard Chartered Bank Singapore (SCB) to refinance the existing term loan facility outstanding of US$ 81 mn obtained by PTAI and PTAB, a revolving credit facility of US$ 10 mn and a further term loan facility of US$ 109 mn for further expansion of the current plantation projects.

This Facility would be made inter available for all such plantation projects undertaken by the GAHL group, with a part of the facility being drawn down by PTAI and PTAB.
The above credit line from SCB has been secured by GAHL together with its group plantation companies incorporated in Indonesia and in Malaysia, the filing said.

”In addition to the above securities being provided, SCB has requested for additional securities from The Company and Selinsing PLC by mortgaging their respective properties in Malaysia, the contingent liability on the security to be so provided would be limited to the value of the properties charged by the above two companies”

Further, as an internal arrangement to ensure equitability amongst the four Malaysian Plantation Companies, The Company along with the other Malaysian Plantation Companies would be counter guaranteeing the combined liability that would crystalise in the event of a claim on the properties being mortgaged by Selinsing PLC and The Company, in a manner that the ultimate net liability to be incurred would be equally shared between the 4 Malaysian Plantation Companies.


Kariyapperuma re-elected as Vice Chairman of CTO

Priyantha Kariyapperuma, Director General of the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) has been re-elected as the first Vice Chairman of the Commonwealth Telecommunications Organization (CTO) at its Council meeting held in Nadi, Fiji, September 17-18, 2009.

CTO is the official body which deals with telecommunications and delivers unique knowledge sharing programme of the use of Information and Communication technologies (ICT) in specific areas of telecommunications, information technology and broadcasting as well as the internet within the Commonwealth countries.

CTO assists ICT stakeholders to adapt and live with change, by providing consulting and advisory services. The Headquarters of the CTO is based in London and comprises 50 full and associate Commonwealth member countries.

The members of the CTO unanimously decided to hold the 50th Commonwealth organisation council meeting in Sri Lanka in year 2010.
The International Telecommunication Union (ITU) and CTO jointly held the workshop “Next Generation Networks Standardisation Forum” which was hosted by TRCSL in Colombo, from April 7-10, 2009. In the CTO annual report of 2008/09, Patrick Masambu, Chairman of the CTO describing this forum has stated “reports I receive speak of a well organised and well attended event where the unique strengths of the two let giants have complemented each other to produce a memorable event I wish to offer my special thanks to the Government of Sri Lanka and to the TRCSL for their unstinting support without which the event would not have been such a great success. No doubt the key role played by the CTO in the Commonwealth ITU group contributed to the strengthening of this relationship and I look forward to see this mutually fruitful collaboration growing further in strength”.