Stock market has potential to create wealth for stakeholders – CSE chief
Top stock market officials stressed the importance of the role of the stock exchange in creating wealth for issuers and investors and creating value for its intermediaries such as stockbrokers.
"For his process of wealth creation to happen all stakeholders must come together to make the market work," Ray Abeywardena Chairman Colombo Stock Exchange (CSE) told the Business Times in an interview this week.
He highlighted four critical areas - stable economic growth, political stability, liquidity in the capital market and the urgency of capital funds flowing in for the CSE to bounce back. "Compared to Bangladesh which is growing at 7 per cent for the last 10 years and Vietnam which is growing at over 7 per cent in both their primary and secondary markets while attracting foreigners, the CSE seems to be nowhere.”
He added that there should be political stability to attract foreigners and for the currency to be stabilised – to also attract foreigners. “We are witnessing a comeback of foreigners into emerging markets. Sri Lanka hasn't been able to capitalise on this," he explained. He also noted that presently the market was driven mostly by foreign investors but insisted that this should be supported by local institutional investors. He noted that the market needs a couple of good big listings to boost its liquidity. "The government should realise that it is a key participant in all this. We mostly want The Employees provident Fund to invest in the stock market."
He was critical of the quagmire that the market has been in the past four years. "It has impacted the stockbroking companies badly. They are downsizing. Some stockbrokers are leaving the industry. They are either leaving it for other industries or migrating and we are losing talent," he added.
Once again he reiterated that government funds must come into the stock market while large state enterprises need to be going public. "At least they need to part with a certain percentage off their holding and list on the stock market."
He noted this year jointly with the Securities and Exchang e Commission ( SEC), the CSE will be making representations to the authorities to bring the captive funds into the market. The CSE also plans to showcase Sri Lanka to the world in two to three road shows lined up this year.
Mr. Abeywardena is very appreciative of the SEC. He also appreciated the leadership, support and assistance given by the SEC Chairman in its endeavours to improve the liquidity in the market in further developing the capital market. "After the new commission was appointed, they started engaging the CSE on a regular basis. Now the SEC is accessible at any time and there is a lot of interaction," he said.
He noted that the CSE together with the SEC was successful in clearing some of the backlog that has been collecting over the past few years. "We introduced the Empower Board, the Multi Currency Board and within the next 12 to 18 months we aim to introduce the delivery versus payment (DVP). DVP gives more confidence to investors. Doing all these things are huge upsides for our stock exchange," he said.