Colombo bourse on a firmer wicket
The new Chairman of the Colombo Stock Exchange (CSE) is pushing for a more liquid, multiproduct and more ‘accepted’ stock market in these challenging times.
In an interview with the Business Times on Thursday, Dumith Fernando, Chairman of the Board of Directors of the CSE who settled into his new role on July 1, reiterated his first priority as rightly positioning the stock market. "The value proposition of the CSE in the context of the national growth agenda is very important. We want to revitalise the long- term capital formation and risk mitigation in the stock market," he said.
For this, the exchange is looking at creating exchange trading and risk management products such as mortgage backed securities (shares of a home loan sold to investors) in a 'thoughtful' way. "We can look at allowing banks to lend on housing loans and lay off the risk which is a way to help this industry to mitigate the exposure.”
Secondly, he highlighted broad-basing or bringing the benefits of the capital market to the citizens, adding: "Thirdly we have a trusting trading and depository venue which is the Central Depository System (CDS) through which we can create awareness and easy access and you can introduce better products."
During the last five years, customer complaints to the CSE has dropped by a whopping 70 per cent, he said pointing out that this as an area the exchange has managed well. The surveillance related referrals to the Securities and Exchange Commission ( SEC) has dropped also by 70 per cent.
Mr. Fernando added that now more than ever, the exchange has a better wicket to articulate and implement their strategies with a very proactive SEC team. The CSE has identified five strategic push areas in this regard. As a start, Mr. Fernando said they are trying to analyse how to rerate the CSE valuations. CSE's price to earnings (PE which reflects the earnings potential) stands at 11.4 reflecting a better position than Pakistan (at 15), Vietnam (at 14), the Philippines (at 16) etc. CSE's five-year PE average is 5.2.
The price to book value of the CSE is 0.8 while Pakistan is 1.9, Philippines 1.5 and Thailand 1.5.
Secondly the CSE will attract new listings focused on liquidity. "We are in discussions with the Board of Investment,