Bourse enjoys big gain

The Colombo stock market yesterday recorded one of its highest recent day-gains helping it to soar to three week high as renewed foreign interest spurred local sentiments.

The benchmark All Share Index gained by 151 points or 2% to close at 7,377 points, highest since 11 March whilst the Milanka Index enjoyed a similar gain as well.

Turnover was relatively low at Rs. 1.6 billion, which was attributed to lack of sellers given the re-rating of prospects in the market since Thursday’s gain on the strength of new foreign interest. Incidentally the market recorded its second consecutive day of net inflow yesterday.

“The indices rose sharply on renewed buying across the board amid moderate activity levels with moderate foreign participation accounting for a net inflow,” John Keells Stock Brokers said.

On Thursday net foreign inflow was Rs. 700 million whilst yesterday it was around Rs. 53 million, low in line with below average turnover. The two days of net inflow has boosted investor sentiment as non-nationals have been net sellers to the tune of Rs. 6.9 billion year to date on top Rs. 26.4 billion in 2010.

Premier blue chip JKH which is a proxy for the market among foreigners, shot up by Rs. 10 to close at Rs. 295.60 whilst it hit an intra-day high of Rs. 297.90. Despite demand there weren’t willing sellers as only 356,900 JKH shares traded.

Distilleries Company was the main contributor (Rs. 159 million) to the market turnover with a crossing of 800,000 shares at Rs. 180. The share price increased by Rs. 2.30 (1.28%) and closed at Rs. 182.  Foreign holding of the company increased by 766,700 shares.

DFCC Bank which announced an interim dividend of Rs. 7 per share saw its stock price increase by Rs. 10.80 or 1.11%. Aitken Spence, Hayleys, Hemas were among other notable gainers among blue chips.

NDB Stockbrokers said retail investors showed interest across the board with freedom with the end of credit clearance on Thursday. “Blue chip counters continued to surge which helped indices to gain. All the sector indices gained today,” it added.

Bank, Finance & Insurance sector was the main contributor to the market turnover (mainly due to Central Finance) with the sector index increasing 1.63%.

Manufacturing sector also contributed to the market turnover (due to Ceylon Grain Elevators and Piramal Glass) with the sector index increasing 2.52%. Lanka Floortiles also announced an interim dividend of Rs. 2.50 per share but its share price dipped by 70 cents to Rs.130.40.

Reuters said that analysts had said worries over inflation may hurt the market with a possible supply disruption due to ongoing turmoil in the oil-producing Middle East and North Africa. Oil rose on Friday, with Brent nearing $118.  Government data showed March inflation year-on-year rose beyond forecasts to a 26-month high of 8.6 percent.

The bourse is trading at a forward price-to-earnings (P/E)ratio of 15.2, one of the highest among emerging markets, compared with an average 12.5 in Asian markets and 11.7 for global emerging markets, Thomson Reuters StarMine data showed.  Colombo is still Asia’s best performer in 2011 with an 11.2% gain, after bringing in the region’s best return of 96% last year.

The rupee closed flat at 110.38/40 a dollar from Thursday’s close after it trades at 110.20 on exporter conversions but bounced back on state bank buying, dealers said.

Raj made $ 1 m in two minutes from inside tip

Reuters: Fund manager Raj Rajaratnam made $1 million in two minutes of frantic calls after receiving an inside tip about a big investment in Goldman Sachs Group Inc at the height of the financial crisis, prosecutors said at the Galleon founder’s insider trading trial.

In the biggest Wall Street insider trading case since the 1980s, U.S. prosecutors have persistently pressed phone tap evidence that Rajaratnam had a direct line to his friend and then Goldman Sachs director, Rajat Gupta, who leaked bank secrets to him. The trial is in its fourth week and could last until the end of April.

On Wednesday, the Manhattan federal court jury heard another FBI phone tap to support government allegations Rajaratnam knew a day before it was announced in September 2008 that Goldman would receive a $5 billion investment from Warren Buffett’s Berkshire Hathaway Inc.

In the phone tap of a call on Sept. 24, 2008, between Rajaratnam and his personal Galleon trader, Ian Horowitz, he is heard describing his efforts the previous day to buy shares two minutes before the 4 p.m. stock market close.

“I got a call at 3:58, right?” Rajaratnam said, referring to the Sept. 23 conversation with Gupta about a Goldman board meeting that day. “Saying something good might happen to Goldman, right?”

But when he then called Galleon, the first trader he reached was unable to complete it.

“I, so I told Ananth to buy some, he was f***ing around, he can’t, you know. So I went to Gary and just buy me, right?”

The full name of trader Ananth was not known and the other person was Gary Rosenbach, then a Galleon manager.

Prosecutors said Rajaratnam ordered $43 million worth of Goldman stock, $27 million of which was filled in two minutes. Rajaratnam’s profit was $1 million, the government said. Gupta, who has been charged by U.S. market regulators in the case, is also a former global managing director of the elite McKinsey & Co consultancy.

Defence lawyers argue that Sri Lankan-born Rajaratnam, 53, purchased stocks on Sept. 23, 2008, in anticipation of the government bailing out banks, which would have been good news for the whole financial industry.

In all, Rajaratnam is accused of making $45 million in illicit profits from 2003 to March 2009 on dozens of stocks based on tips from high-placed corporate insiders. His defence is that he made money based on analysis and public information. Galleon hedge fund managed $7 billion at its peak. It was wound down in late 2009 without losses to investors.

The audio tape was played during the testimony of Adam Smith, a former Galleon portfolio manager who pleaded guilty to securities fraud and conspiracy in January and agreed to testify against his old boss. He is among 19 out of 26 people charged in the sprawling case to have pleaded guilty.

Under cross-examination, Smith acknowledged he had lied to Galleon about losing one of the firm’s computer laptops after Rajaratnam’s October 2009 arrest, and had actually thrown it away in a rural part of upstate New York, where he lives.

Smith, 39, also acknowledged pressure from prosecutors and the FBI, including wiretaps last year after he left Galleon.

He was asked by defence lawyer Terence Lynam whether he was willing to do whatever the FBI and prosecutors told him to do to help himself, including avoiding obstruction of justice charges and receiving a lighter prison sentence. Smith had agreed to be recorded in a call with trader Horowitz.

“It was an absolutely impossible situation for me but I did choose to do it. It was impossible because anything I chose would be a bad outcome for me ... The FBI put pressure on me to do it, they said they had evidence against Mr. Horowitz,” said Smith, whose testimony began on Tuesday.

One lighter note came when Assistant U.S. Attorney Andrew Michaelson misinterpreted a “pm” reference in his notes, meant to indicate that Smith had been a portfolio manager.

“When you were, uh, prime minister,” Michaelson began, prompting much laughter in the courtroom.

“Not yet,” Smith countered.

The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.