14th, December 1997


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Mirror Magazine


Stock exchange battles blast shock

By Asantha Sirimanne

Part of the automated trading system of the Colombo Stock Exchange which was caught in the bomb blast may need to be replaced to bring the exchange back to optimum operational capability The Sunday Times Business learns.

"We are investing the system at the moment. " Colombo Stock Exchange Director General, Hiran Mendis said.

The trading system was made operational only a day after the Twin Tower building was targeted by a terrorist bomb in October, giving a much needed boost to business and investor confidence.

"Probably no other computer system could have recovered so quickly, " Mr. Mendis said. However problems appeared as orders poured in when trading opened on Maskeliya and Watawala plantation issues.

Though the system was designed to handle 20,000 transactions a day it seemed to run into difficulties after about 1500 orders were piled up for the privatized issue. After installation it had easily coped with 20,000 transactions on test runs.

Officials are convinced that one of the problems is that all other orders were for one security.

"We are correcting the problem at the moment," says Tony Weersasinghe, Head of Millennium Information Technology (MIT) which supported and installed the trading system. Until the blast the system had been operating without a hitch.

Even when the system was experiencing problems on the opening day of Watawala Plantations it was not down completely.

Trades were being executed at much slower pace but the feedback to broker terminals was delayed. Part of the problem had been communications within the wide area network which was unrelated to the system software and hardware.

Once the software glitch is cleared up investigators would be looking closely at the hardware.

An expert from the hardware manufacturer Sun Micro Systems who had visited Colombo had already recommended that some of the hardware be replaced, a sentiment shared by MIT.

"This is a mission critical opportunity," says Mr. Weerasinghe. "Why take chances ?" he asks.

The stock exchange says the hardware in the trading system is full convered by insurance.

But here is general agreement that the network needs to be re-wired and properly rebuild for optimum performance, whether or not key servers in the network are ultimately replaced.

Officials stress that on normal trading days the system had been operating without any problem and any computer system can encounter problems from time to time.

Asia Capital gears up for Carr ride

Asia Capital is planning to increase its corporate finance and asset management activities in the coming months, with the foreign shareholder W. I. Carr playing a key role.

"W. I. Carr recently revamped their entire merchant banking sector," says Asia Capital Director Dirk Flamer Caldera. "They will concentrate very much more on merchant banking and we will work closely with them."

Asia Capital says it is not planning to bring in another foreign or local partner to replace David Creighton Watt. Nigel Austin, Ajith de Fonseka, Rusi Captain and head of equities trading Asanga Seneviratne have also been appointed to the board.

W. I. Carr which owns 21 per cent of the company has also place Brian Brown, a specialist in subcontinent equities in the board of Asia Capital. Asia has been producing joint research with W. I. Carr for several years. Mr. Brown who had earlier been operating from Hong Kong is now based in India. He has visited Sri Lanka several times in the past few months.

During the half year ended September 1997, Asia Capital had made aftertax profits of Rs 85 mn with a third of them coming from its stock broking division. Most of the balance had come from capital gains. Asia Securities was rated top on sales and execution on its trading operations by Asiamoney magazine recently.

However the East Asian crises had cast a shadow over the market in the last few months.

"Stockbroking income has been coming down," admits Asanga Seneviratne. But he expects the market to settle.

Asia had also hired an ex - Crosby investment banker Mathew Donahue to help market Sri Lanka to foreign investors.

In addition to laying more emphasis on corporate finance the company is also strengthening its other divisions to reduce dependence on stockbroking for profits.

The treasury which has so far been managing mostly Asia's own funds will be aggressively looking to manage client portfolios, making better use of the primary dealer licence the company has obtained from the Central Bank. It is also seeking a unit trust licence from the SEC to increase its asset management activities.

"We will also offer margin trading facilities for share trading in the near future," says Mr. Seneviratne.

In addition to bringing in interest income for Asia Capital, this will also generate brokerage for the Asia Securities.

Asia Capital will be looking to make strategic investments in key growth areas in the future including tourism and manufacturing and agriculture.

"We will be looking closely at deal flow," Mr Caldera said. One of Asia's first major investments, made in Dimo Auto Assembly, had to be provisioned off earlier after the company ran into difficulties. However its investment in Forbes Ceylon had been very rewarding.

The company hopes to end the financial year with a profit of Rs 220 mn with the Forbes deal contributing significantly to outcome.

Third party to bolster MBSL?

A third party financial institution is being sought to strengthen the Merchant Bank of Sri Lanka by its parent company, the Bank of Ceylon, financial sources said.

The Merchant Bank together with most other investment banks has been going through a difficult period incurring losses.

The bank is also beleived to carry several hundred million rupees of unrealised losses on its equity portfolio.

Financial sources said top financial institutions had been sounded out by the Bank of Ceylon for a possible link-up or merger, to strenthen and restructure the bank.

The Bank of Ceylon has a majority stake in MBSL. There was speculation that the Bank of Ceylon was planning to sell a part of its holding to another financial institution.

Top officials of Bank of Ceylon declined to speak to The Sunday Times Business on the matter.

The Bank of Ceylon had already lent Rs. 1.8 bn to restructure the maturity of MBSL's debt, after it was exposed to interest rates risk during the high interest rates regime that prevailed in the coutnry during 1995 and 1996. Other investment banks also experienced similar problems.

During the nine its and is carrying forward losses of Rs 101 mn in its books.

Merchant Bank shares traded at betwen Rs 9.75 and Rs. 10.00 last week.

My way goes precious

The BOI has approved a project to establish a gem and jewellery design centre at a cost of US$ 5.5 mn, a BOI press release said.

Operating under the name Myway Creations (Pvt) Ltd., the design centre will carve on precious and semi-precious stones and manufacture gems studded jewellery for export.

Continue to Business page 2 * Christmas tidings for textiles * Trusting Funds to Unit Trusts * Thai Economy to get worse before it gets better

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