• In second day of circuit breaker drama, Bourse stems dip to 4% with Rs. 67 b in value wiped off
• Share price of premier blue chip JKH dips below 
• Rs. 100 to Rs. 94, down by 31% from 11 March 
• Mixed view on whether CSE has bottomed out; analysts see good buying opportunities
• Related party deal on Watawala Plantation boosts turnover to over Rs. 3 b

The Colombo stock market’s struggle amidst the impact of COVID-19 persisted yesterday in a second day of drama, though the fall was dented by a late recovery in buying sentiments. 

The CSE finished the day with the All Share Price Index down 3.29% or 144 points to close at 4,247 points and S&PSL20 Index by 4.26% or 75 points to close at 1,685 points. The finish was better, reflecting a gain of 24 points in ASPI and 18 points by S&P SL20 from intra-day lowest level. 

The market lost a further Rs. 67 billion in value, bringing the total for two days to Rs. 151 billion, and extending the loss in market capitalisation since 6 March to over Rs. 500 billion. 

Within 10 minutes of market opening, the S&P crashed by 5%, triggering the circuit breaker. After a 30 minute cooling period, trading resumed. Turnover was Rs. 3.64 billion with 193.3 million shares traded thanks to a previously announced Rs.3 billion related party deal, involving controlling stake of Watawala Plantations PLC. Beginning trading after 7 weeks of shutdown, the CSE on Monday closed within 38 seconds, with S&P SL20 index falling 10%. 

Yesterday, the ASPI index was dragged down, predominantly due to the price losses in CTC and JKH. “The market recorded net foreign selling while witnessing high domestic participation,” First Capital Research said. Foreigners were net buyers to the tune of Rs. 0.6 million on Monday. 

The mayhem in the market is demonstrated by the fact that premier blue chip JKH was trading at Rs. 94.10, with some analysts claiming it was the first time the stock was languishing below Rs. 100. On 11 March JKH was trading at Rs. 137 and yesterday’s closing reflects a Rs. 43 or 31% dip.

Brokers and analysts were divided over whether the market had bottomed out. Some speculated further selling, whilst others expect buying by bargain hunters to boost the indices. There was consensus that CSE offers excellent valuations for long term investors. 

The ASPI has dipped 30.7% year to date and the S&P SL20 is down by 42.6%. 

Boosting the turnover, Estate Management Services Ltd., sold 74.24% stake in Watawala Plantations PLC amounting to 151 million shares at Rs. 20 each to Sunshine Wilmar Ltd., in a deal worth Rs. 3 billion. 

The impending transaction was first announced in February as part of Sunshine Holdings PLC’s move to restructure and increase its exposure in the FMCG segment. 

SUN and Pyramid Wilmar Plantations Ltd. (PWL), who are parties acting in concert by way of holding 60:40 shareholding in Estate Management Services Ltd. (EMSPL), is to infuse equal amounts as equity for a 50% stake each in a new holding company to acquire 151 million shares or 74% stake of Watawala Plantations held by EMSPL at market price. The transaction will result in SUN’s effective stake in WATA reducing by 7.42%. This divestment shall be used to part fund the increase in exposure in the FMCG segment. The said transaction shall not give rise to a mandatory offer despite it being a transaction that constitutes over 30% of the stake in WATA since the sale of WATA shares by EMSPL to the New Holding Company is a restructure where the ultimate ownership of the 74.24% stake lies with the same parties acting in concert.

SUN shall acquire the remaining 40% stake of PWL in EMSPL, becoming the sole owner of EMSPL thus effectively holding 100% of the shareholding in Watawala Tea Ceylon Ltd. which owns brands such as Zesta, Watawala and Ran Kahata.

Post these transactions, in terms of Sec. 242 (1) of the companies Act No. 07 of 2007, EMSPL shall amalgamate with Sunshine Holdings PLC, following which EMSPL shall cease to exist and Watawala Tea Ceylon Ltd. shall become a fully-owned subsidiary of Sunshine Holdings PLC

SEC, CSE hold talks on current state of Colombo Bourse