MARKETS

Investment promotion:

Aggressive drive in China

The Sri Lanka Embassy in Beijing with the Board of Investment (BOI) successfully held two seminars on ‘Investment Opportunities for Chinese Entrepreneurs’ on March 27 and 31, 2009 at the Embassy.

The third and forth respectively in a series of Seminars that have been launched since January this year, on a campaign for an aggressive investment promotion drive, this forum attracted more than 90 Entrepreneurs from specially selected sectors such as Infrastructure, Real Estate, Fisheries and Agriculture, Paper Manufacturing, Steel, Leather Products, Solar and Energy and Cosmetics and Telecommunication.

The country presentations clearly projected the lucrative sectors identified potential Chinese investment further explaining the benefit and concessions granted to them.

At the conclusion of the seminar there were instant responses from the audience particularly in leather, steel and solar power sectors culminating in the signing of letters of intent with BOI to setup joint venture operations with local partners in Sri Lanka.

The entrepreneurs showed a keen interest in establishing links with the Sri Lankan business community and the desire in joining a business delegation to visit Sri Lanka and explore the business environment.

The program was launched under the Mahinda Chinthana policy directive with emphasis on rural development, poverty alleviation and the need to develop Sri Lankan products in the global market and assist small and medium scale industries.

China’s overseas investment is rapidly increasing with the progressive implementation of the “Going Global” strategy prompting the Chinese enterprises to be more enthusiastic in investing abroad and their investments occurring mostly in the Asian Region. Chinese business investment is concentrated in three fields.

One is communications, information systems, and other information technology industries. Second field is trade, wholesale, and retail industries related to market expansion, and three, resource development.

Materials and applications (M and A) and profit re-investment are the rapidly growing methods of investment.

Government promotion and support, low-cost mass production, and other fields that Chinese businesses excel in lie behind this boom, in investment abroad.

Even now Chinese companies have been stepping up investments abroad despite global financial turmoil and have signed many energy and resource deals. The Ministry of Commerce has pledged that China would send more business missions abroad this year to look for investment opportunities.

It is evident that in future, with Chinese economic development and the augmentation of corporate capability, Chinese enterprises’ foreign investment abroad will continue to expand even more.

Investment by Chinese enterprises in Sri Lanka is still low, mainly due to system limitations, and the lack of understanding of the conditions of Sri Lanka for investment.

Well aware of these facts and using the favourable condition that has been created by the “Going Global” strategy the Embassy launched this program in order to create awareness among the Chinese companies about the positive environment and opportunities in Sri Lanka and lure them to Sri Lanka.

Ambassador Karunatilaka Amunugama in his opening remarks said that the Government not only provides facilities to improve products for the export market but also encourages Chinese entrepreneurs to establish production/processing facilities in Sri Lanka.

Noting the benefits for potential investors, the Ambassador emphasized the major infrastructure drive covering sea ports, airports, roads, electricity and rail transport undertaken in Sri Lanka with Chinese assistance to make Sri Lanka a more conducive investment location.

The Ambassador spoke of the presence of Special Economic Zone for Chinese investors in Sri Lanka and invited them to take advantage of the vast opportunities afforded to them in Sri Lanka, particularly with the Eastern and Northern rebuilding and reconstruction drive.

Explaining their experience in Sri Lanka, Vice President, Huawei Technologies Qu WenChu gave a first-hand account of the companies expansion strategy in Sri Lanka and also the investor friendly policies practiced by the Government. “Our investment in Sri Lanka is one of the best investment decisions we have made”, he said.

Vice President, China Light Industry Council Feng that undertook a visit to Sri Lanka recently also spoke very enthusiastically on the Sri Lankan situation and encouraged the Chinese to set up ventures in Sri Lanka.

Deputy Director General of the BoI Kulasekera made a presentation of the investment opportunities citing the facilities accrued under the Free Trade Agreement (FDA) between Sri Lanka and India availing numerous advantages for entry into the vast Indian market, as well as to Pakistan with similar facilities with the FDA with Pakistan. Kulasekera spoke about benefits of the South Asia Free Trade Agreement (SAFTA), when it is fully operationalised.

The European Union (EU) has offered duty free concessions to 7200 products imported from Sri Lanka under their GSP+ scheme. Sri Lanka is the only country in the Asian region, which has been offered such a concession.

The anti-dumping duties imposed on China for certain products by the EU would make Sri Lanka products competitive in the international market. All these facets were highlighted in order to attract investors who were present at the forum.

The Sri Lanka Embassy will conduct trade and investment promotional meetings on a regular basis in Beijing and the provinces in collaboration with the China Council for the promotion of international trade and its sub councils and other related trade chambers to promote Sri Lanka as an investment destination and also to promote Sri Lankan products to the Chinese market.

Shares fall marginally on profit taking

Stocks returned to negative territory during the week as profit taking, mostly by retail investors resulted in a slight downturn in the market.

Indices showed some recovery on Wednesday and Friday, but the gains made were insufficient to regain lost ground. Nevertheless few large deals boosted the week’s activity, as turnover levels remained healthy during the week.

Comparing Week on Week (WoW) the ASPI (All Share Price Index) declined by a marginal 0.7% or 11.3 points to close at 1637.2 points while the MPI (Milanka Price Index) edged down by 1.8% or 31.6 points to 1726.1 points.

A Rs.171.2 million deal on Lighthouse Hotel (LHL) saw its share price rise by 13.7% on Monday.

The trade, which amounted to a 6% stake (2.8 million shares) of the company, went through at a price of Rs.60.50 per share.

During the week the hotel sector counter managed a contribution of Rs.203.4 million, reflecting 27% or the total week’s turnover to become the largest contributor towards market activity.

The LHL share closed the week at Rs.57.50 per share up considerably by 12.75%. Total number of LHL shares traded for the week stood at 3.4 million.

JKH retained investor interest with 2.7 million of its shares changing hands this week. Three trades amounting to 1.9 million JKH shares traded at a price of Rs.63.25 on Thursday. The counter closed at Rs.63.00 per share down slightly from last week’s closing price of Rs.64.50 per share while becoming the second highest contributor towards weekly turnover with Rs.170.5 million.

Lanka Cement (LCEM) saw 5.7 million of its shares trade, becoming the highest traded stock for the week. LCEM saw its share price gain by a sizable 20% WoW, to close the week at Rs.12.00 per share, after reaching a peak of Rs.13.00 during the week. The LCEM stock managed to contribute Rs.68.1 million towards weekly turnover, to become the third largest contributor for the week.

A quantity of 0.6 million of Commercial Bank shares traded this week with the majority (0.4 million) of shares trading on Wednesday. The counter closed the week unchanged at Rs.80.00 per share, with its weekly turnover contribution amounting to Rs.46.2 million. The market turnover totalled to Rs.741.8 million for the week, showing a 80.3% decline compared to last week.

Apart from the few crossings trading activity this week was largely dominated by retail investors. The daily average turnover stood at Rs.148.4 million for the week.

Foreign investors were net buyers for the week, amounting to Rs.27.8 million. Foreign sales for the week stood at Rs.77.4 million. Foreign purchases were comparatively high, amounting to Rs.105.2 million. Foreign participation for the week amounted to 12.3% of total activity less than the 39.4% posted during the last week.

Lanka Cement, Lighthouse Hotel, JKH and Janashakthi Insurance were among the highest traded stocks for the week

Point of View

New year holidays to keep investors away

Profit taking brought the indices down marginally during the week on relatively low volumes. The All Share Price Index (ASPI) lost 0.7% during the week compared to last Friday’s closing level.

We expect the sentiment to get dull over the coming week with the Sinhala and Hindu New Year holidays expected to keep the investors away from the market.

Thus we believe that the overall activity levels would show a decline in the coming week. Furthermore profit taking may continue in the market place, and we advice the investors to keep a close eye to capitalize on opportunities for bargain hunting.

The information contained herein has been compiled from sources that Acuity Stockbrokers (Private) Limited (ASB) believes to be true and reliable but we do not hold ourselves responsible for its completeness or accuracy. No matter published herein create any liability of any kind on ASB.

All opinions, views, findings and conclusions included in this report constitute ASB’s judgment of this date and are subject to change without notice. ASB has the sole copyright for this report and the information and views contained cannot be reproduced or quoted in part or whole in any form whatsoever without the written permission from ASB.