The need of the hour is to increase the demand of the stock market, said former Director General of SEC Channa de Silva. He told the Sunday Observer that many factors were involved to drive the demand side of the equation .
Among these factors are fundamental earnings growth of listed corporates and attractive valuations of the pricing of shares, investor confidence in the market for local as well as foreign investors, proper governance structures and effectiveness of regulations, access to information for foreign and local investors. Meanwhile, local investors said this was a rewarding investment decision as compared to bank deposits and other alternative investments.
Among the important aspects that we need to promote the local stock market overseas is to engage in foreign roadshows aimed at international investors, he said.
We need foreign road shows in Hong Kong, Singapore, China, Indonesia and should also look at the US, UK, Russia and India as other destinations to showcase the Sri Lankan equity market, specially during this post-terrorism era.
There was a crisis in the Securities and Exchange Commission recently. Former chairman of the SEC,Tilak Karunaratna resigned from the post barely a year after his predecessor Indrani Sugathadasa stepped down in December last year.
Chairman of Venture Capital Lanka, Channa de Silva said that the country should popularise the stock market domestically with rural investors, specially using the mutual fund industry.
He said high bank interest is putting significant pressure on local companies and also defusing their interest to grow fast as borrowing for these companies become non viable. Since depositors get high interest rates they find the stock market unattractive.
All measures should be taken to reduce the interest rates using all mechanisms available to the Central Bank of Sri Lanka. If interest rates do not drop fast it will have a high impact on the markets as well as on the economic growth expectations of the country. It is important that all efforts are made to reduce interest rates, de Silva said. A concerted effort to popularise the stock market within the country as well as internationally with international fund managers is a must, he said. He also said that more companies should get listed as during past year there were virtually no IPOs in the market. Companies should be encouraged to list in the Colombo Stock Market to increase the supply side of the market.
Regulations introduced during the past two years should be reviewed carefully to see whether such regulations will impede listing and make listing non viable for entrepreneurs .
Reviving the stock market requires a fresh attempt from all angles to increase demand and the supply of the market, de Silva said..