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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » 400 listed companies by 2016 - SEC Chairman

400 listed companies by 2016 - SEC Chairman

+11
rainmaker
No
knockknobbler
Antonym
K.Haputantri
Jiggysaurus
Whitebull
Redbulls
UKboy
seek
sriranga
15 posters

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sriranga

sriranga
Co-Admin
The Colombo Stock Exchange (CSE) is expected to see the number of listed companies rising to at least 400 by 2016 from the existing 287. This will address the lack of liquidity, which has been the biggest issue in the Sri Lankan stock market, according to the top most official in the country’s capital market regulator.

“One of the biggest issues we identified while drafting our capital market development road map was the lack of liquidity in the market. So, we wanted to identify why companies were not floating and then started the facilitation process, relaxing certain barriers and providing incentives as reflected in the 2013 Budget,” said Dr Nalaka Godahewa, the Chair man of the Securities and Exchange Commission (SEC).

The Budget 2013 proposed to offer a threeyear half tax holiday for new companies that would be listed on the CSE before December 2013 and maintain a minimum of 20 percent of its shares with the public.

Addressing the 12th LBRLBO CFO Forum on ‘Sri Lanka Capital Market: Opportunities and Challenges’, Dr Godahewa said unlike in many other countries, 95 percent of the Lankan capital market revolved around the CSE and in that also, listed companies consists of only less than 5 percent of the operationally active companies in the country.

Meanwhile, Lloyd Fisher, an emerging markets investor, representing the foreign investors said that they perceived Sri Lanka as neither an emerging market nor a frontier market but somewhere in between.

“But for us, lack of liquidity is the biggest problem we face in the Sri Lankan market. If someone gets in (invest), he should also be able to get out as well,” Fisher noted.

Joining in the panel discussion was the Chairman of the Softlogic group, Ashok Pathirage, who said the country’s equity market was not geared to absorb large Initial Public Offerings (IPOs).

“This is particularly evident in the secondary market and we realized this when we first went to the market to raise Rs.4 billion in 2011,” he said.

Dr Godahewa is also of the view that many successful private sector companies operating in the country are not convinced of the windows of opportunities available by floating and also said that the existing listed companies too should be encouraged to increase the free float.

“The government is also opening up for the recommendation for listing state-owned enterprises (SoEs) as the policy of the government is not privatization. What I believe is listing will ensure greater transparency and better governance of these SoEs.”

As of end-2012, the market capitalization of the CSE stood at Rs.2.2 trillion or US$ 18 billion, one of the smallest in the world. The contribution to the economy was also less impressive of the capital market as it has only 30 percent of the GDP. This is in stark contrast to countries such as Malaysia (160 percent) and Singapore (250 percent), where the capital market is larger than the size of the economy.

During the five years to 2012, the number of listed companies in the CSE increased only by 52.
http://www.dailymirror.lk

http://sharemarket-srilanka.blogspot.co.uk/

seek


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@sriranga wrote:

Joining in the panel discussion was the Chairman of the Softlogic group, Ashok Pathirage, who said the country’s equity market was not geared to absorb large Initial Public Offerings (IPOs).

“This is particularly evident in the secondary market and we realized this when we first went to the market to raise Rs.4 billion in 2011,” he said.


He is not ready to accept that his IPO was heavily overpriced. Because of SHL(specially), EXPO and some others, now people know how to bypass IPO and buy the same at more than 50% discount.

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
The Budget 2013 proposed to offer a threeyear half tax holiday for new companies that would be listed on the CSE before December 2013 and maintain a minimum of 20 percent of its shares with the public.
This is a very generous offer from government side. However I doubt this is good enough to convince our Sri Lankan family own businesses come to the market. Rolling Eyes

As Sri Lankans, Accountants who handle balance sheets of family own businesses are always always advised not to show large profits. It is the general trend.
Being a company in the market, you have to show your financial reports fairly decent manner. Big or small some families do not want to do this.
Some do not want show their compaies figures on a public platform as well.

Therefore I think SEC should grant at least 3-5 year 100% tax holiday for all new companies.

Again. If companies just want to get the taxbreak, then they can easily dodge this 20% scheme Wink

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
What will happen most of the family run companies will come into the share market to enjoy the tax holiday, but they will form a private limited company to transfer their controlling shares.

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
I really hope this government can bypass all the trade unions and place all the heavyweight government institutes such BOC, PB, NSB, SLIC, Sri Lankan airline in the market.
20-25% is an ideal stake to float in the market. It will also help to find some money for a cash trap government. Also if they want, they can buy back 5-15% stake via a government fund.

Whitebull


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@UKboy wrote:
Therefore I think SEC should grant at least 3-5 year 100% tax holiday for all new companies.
Why such a tax holiday ? When a company listed in CSE how does it benefit to the COUNTRY ?

Jiggysaurus

Jiggysaurus
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Whitebull wrote:
@UKboy wrote:
Therefore I think SEC should grant at least 3-5 year 100% tax holiday for all new companies.
Why such a tax holiday ? When a company listed in CSE how does it benefit to the COUNTRY ?

no benefit from a specific company but 400+ listings increase the market cap of the total market and hence LIQUIDITY.
For further info on the benefits provided by liquidity in attracting foreign funds to the market refer the comments made by participants in the LBO forum. http://www.lbo.lk/fullstory.php?nid=890403845

Whitebull


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Jiggysaurus wrote:
@Whitebull wrote:
@UKboy wrote:
Therefore I think SEC should grant at least 3-5 year 100% tax holiday for all new companies.
Why such a tax holiday ? When a company listed in CSE how does it benefit to the COUNTRY ?

no benefit from a specific company but 400+ listings increase the market cap of the total market and hence LIQUIDITY.
For further info on the benefits provided by liquidity in attracting foreign funds to the market refer the comments made by participants in the LBO forum. http://www.lbo.lk/fullstory.php?nid=890403845
Yes it attracts the foreign fund but ultimately when they exit they will take back several times of their investments.

Jiggysaurus

Jiggysaurus
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Whitebull wrote:
Yes it attracts the foreign fund but ultimately when they exit they will take back several times of their investments.[/quote]

Well obviously, nobody invests their money in a devoloping country like SL for charity. They invest expecting to take several times the original investment.
But the money that comes in originally is what helps to fund the trade deficit. All those mercs and benzes (not to mention the aston martins and the rolls and the hummers) need to be paid in foreign currency. Those vehicle manufacturers don't accept rupees. Part of the original inflow circulates within the economy and hopefully helps it to grow.

K.Haputantri

K.Haputantri
Co-Admin
@seek wrote:
@sriranga wrote:

Joining in the panel discussion was the Chairman of the Softlogic group, Ashok Pathirage, who said the country’s equity market was not geared to absorb large Initial Public Offerings (IPOs).

“This is particularly evident in the secondary market and we realized this when we first went to the market to raise Rs.4 billion in 2011,” he said.


He is not ready to accept that his IPO was heavily overpriced. Because of SHL(specially), EXPO and some others, now people know how to bypass IPO and buy the same at more than 50% discount.
Well said Seek. Corrupt IPOs killed the Golden Goose sometimes back.

K.Haputantri

K.Haputantri
Co-Admin
@Jiggysaurus wrote:
@Whitebull wrote:
Yes it attracts the foreign fund but ultimately when they exit they will take back several times of their investments.
Jiggs wrote:
"obviously, nobody invests their money in a devoloping country like SL for charity. They invest expecting to take several times the original investment.
But the money that comes in originally is what helps to fund the trade deficit. All those mercs and benzes (not to mention the aston martins and the rolls and the hummers) need to be paid in foreign currency. Those vehicle manufacturers don't accept rupees. Part of the original inflow circulates within the economy and hopefully helps it to grow."

Well said Jiggs.
Some people seems to be still in the dark owing to their Deshapreymaya. They don't know how efficiently an open economy works if the Govt., owned business entities are privatized and no restrictions for capital floors are imposed. If no genuine effort in this direction is made, Asiyawe Ashchariya will be a day dream.



Last edited by K.Haputantri on Fri Mar 01, 2013 11:10 am; edited 2 times in total

Whitebull


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Jiggysaurus wrote:
@Whitebull wrote:Yes it attracts the foreign fund but ultimately when they exit they will take back several times of their investments.
Well obviously, nobody invests their money in a devoloping country like SL for charity. They invest expecting to take several times the original investment.
But the money that comes in originally is what helps to fund the trade deficit. All those mercs and benzes (not to mention the aston martins and the rolls and the hummers) need to be paid in foreign currency. Those vehicle manufacturers don't accept rupees. Part of the original inflow circulates within the economy and hopefully helps it to grow.
(Actually my concern is not development of stock market but regarding that long term tax holidays.)
I do not think it justifies the 3-5year 100% tax holidays for companies.And all most all these methods give some relief in short term but in long term disadvantages are well over the advantages.It is like treating the symptoms without treating the cause.

Whitebull


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@K.Haputantri wrote:
@Jiggysaurus wrote:
@Whitebull wrote:
Yes it attracts the foreign fund but ultimately when they exit they will take back several times of their investments.
Seek wrote:
"obviously, nobody invests their money in a devoloping country like SL for charity. They invest expecting to take several times the original investment.
But the money that comes in originally is what helps to fund the trade deficit. All those mercs and benzes (not to mention the aston martins and the rolls and the hummers) need to be paid in foreign currency. Those vehicle manufacturers don't accept rupees. Part of the original inflow circulates within the economy and hopefully helps it to grow."

Well said Seek.
Some people seems to be still in the dark owing to their Deshapreymaya. They don't know how efficiently an open economy works if the Govt., owned business entities are privatized and no restrictions for capital floors are imposed. If no genuine effort in this direction is made, Asiyawe Ashchariya will be a day dream.
Well first of all I do not know how you drag Seek in to this as that quotation has been written by Jiggysaurus.
Then I know you are fond of total privatization due to your shortsightedness.But fortunately although this government has deficiencies they are not that shortsighted.So I do not want to argue with your fantacy of open economy and privatization.

seek


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
It is obvious that CSE should increase its liquidity and more and more companies should be listed. The lack of liquidity creates a hassle in predicting the market direction when the movement of two or three companies decides direction of the ASPI and all other stocks follow it. Look at last few days, it is not the fuel price hike (as some brokers said) or UN issue, it is the downturn of CTC who drag all others stocks.

The impact of CTC, JKH, NEST, GSF, BUKI, CARS etc on deciding the ASPI should be minimized for a fair play.

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
400 listed companies would ensure adequate supply. What needs to be addressed is the inadequate demand.

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@Jiggysaurus wrote:

.....................................
Well obviously, nobody invests their money in a devoloping country like SL for charity. They invest expecting to take several times the original investment.
But the money that comes in originally is what helps to fund the trade deficit. All those mercs and benzes (not to mention the aston martins and the rolls and the hummers) need to be paid in foreign currency. Those vehicle manufacturers don't accept rupees. Part of the original inflow circulates within the economy and hopefully helps it to grow.

This implies ..... that a major portion of the foreign money that comes to the Country , ( by way of investment in stock market ) ,will go back to those foreign countries ...to pay for Mercs and Benzes. since our foreign imports bills are very high, Only a small part will be remained in the country. IT is also said that foreign investors will take back much more than they invested in the country, that is also in foreign exchange.

So, will there be REAL advantage to the country , through this foreign investment in the stock market ?

seek


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Antonym wrote:400 listed companies would ensure adequate supply. What needs to be addressed is the inadequate demand.

Is not the inadequate supply is the reason for inadequate demand?. As per the comment of one of foreign fund manager inadequate supply is reason for them to stay away from the market

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@seek wrote:
@Antonym wrote:400 listed companies would ensure adequate supply. What needs to be addressed is the inadequate demand.

Is not the inadequate supply is the reason for inadequate demand?. As per the comment of one of foreign fund manager inadequate supply is reason for them to stay away from the market
It's a chicken and egg situation, actually; which should come first: more supply or more demand? If there is more supply, will foreign funds allocate more money to SL, to absorb the supply? Or will there be an over-supply, resulting in lower prices? I don't know.

The basic problem is one of liquidity or trading volumes. If a x% increase in supply brings in a >x% increase in demand, great! If not, not good.

As a 1st step, I would recommend a reduction in brokerage and related charges, so that traders are encouraged to execute larger and more frequent transactions. Make share trading a 'high volume, low margin' business like the currency markets. That would address the foreign funds' primary grouse - inadequate volumes being traded...

No


Senior Equity Analytic
Senior Equity Analytic
Who will buy the IPO'S.?Before big things people shopuld be confident on the market.

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@No wrote:Who will buy the IPO'S.?Before big things people shopuld be confident on the market.
Good point. We have seen investors selling other shares to invest in big IPOs. This results in a depressed market.

We need to see more confidence in the future of our economy and more money coming in. I believe that a government that is more compliant with the world order (without compromising on our sovereignty, of course) would help.

seek


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Antonym wrote:
@seek wrote:
@Antonym wrote:400 listed companies would ensure adequate supply. What needs to be addressed is the inadequate demand.

Is not the inadequate supply is the reason for inadequate demand?. As per the comment of one of foreign fund manager inadequate supply is reason for them to stay away from the market
It's a chicken and egg situation, actually; which should come first: more supply or more demand? If there is more supply, will foreign funds allocate more money to SL, to absorb the supply? Or will there be an over-supply, resulting in lower prices? I don't know.

The basic problem is one of liquidity or trading volumes. If a x% increase in supply brings in a >x% increase in demand, great! If not, not good.

As a 1st step, I would recommend a reduction in brokerage and related charges, so that traders are encouraged to execute larger and more frequent transactions. Make share trading a 'high volume, low margin' business like the currency markets. That would address the foreign funds' primary grouse - inadequate volumes being traded...

Is not that low-volume is a result of less number of shares available in the market? Other than JKH, RICH, COMB, PLC and few others, is there any company in CSE that large foreign fund to enter and exist? Reduction of broker charges will help for retailers and will encourage more short-term trading. Yes, volume will be increase and shares will change hand with in same set of people but number of shares or options available in the floor will not be increased.

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@seek wrote:
Is not that low-volume is a result of less number of shares available in the market? Other than JKH, RICH, COMB, PLC and few others, is there any company in CSE that large foreign fund to enter and exist?
Less number of shares is probably one reason for low volume. If so, we need more large companies to list (increase in supply), but we also need more money to come in (increase in demand).

@seek wrote:
Reduction of broker charges will help for retailers and will encourage more short-term trading. Yes, volume will be increase and shares will change hand with in same set of people but number of shares or options available in the floor will not be increased.
The objective is to increase liquidity. If broker charges are reduced, it would be easier to make profits. Therefore, trading volumes (i.e. liquidity) would increase... And, it would be the same set of people plus many more.

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Large volumes do not come from retailers - this applies for overseas exchanges as well.

Volumes come from trading houses that take large positions and are willing to buy & sell. Trading houses need capital and that capital needs to come from somewhere.

Trading houses also allow retailers to borrow stock and hence short sell.

It is the trading houses that allow foreign funds to buy/sell easily.

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@Antonym wrote:

As a 1st step, I would recommend a reduction in brokerage and related charges, so that traders are encouraged to execute larger and more frequent transactions. Make share trading a 'high volume, low margin' business like the currency markets. That would address the foreign funds' primary grouse - inadequate volumes being traded...

Whatever the level brokerage and related charges are reduced, Share Trading will not be a “high volume –low margin ‘ business like currency market. Simply because currency transactions are “leveraged ‘transactions. These days, some Brokerage houses offer leverage even upto 1:500 times. That is , if your investment is $ 1,000 ,you are permitted to trade upto $ 500,000 ( are entitled to entire gains/losses ). That’s why it looks like high volume business. That transaction model cannot be applicable to Share Trading.

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@knockknobbler wrote:
@Antonym wrote:

As a 1st step, I would recommend a reduction in brokerage and related charges, so that traders are encouraged to execute larger and more frequent transactions. Make share trading a 'high volume, low margin' business like the currency markets. That would address the foreign funds' primary grouse - inadequate volumes being traded...

Whatever the level brokerage and related charges are reduced, Share Trading will not be a “high volume –low margin ‘ business like currency market. Simply because currency transactions are “leveraged ‘transactions. These days, some Brokerage houses offer leverage even upto 1:500 times. That is , if your investment is $ 1,000 ,you are permitted to trade upto $ 500,000 ( are entitled to entire gains/losses ). That’s why it looks like high volume business. That transaction model cannot be applicable to Share Trading.
There is empirical evidence to suggest that by reducing transaction costs (even without leveraging), there would be a more-than-commensurate increase in share trading volumes.
For intra-day trades, the NSE of India charges a brokerage of 0.1% on the buy side and 0.1% on the sell side. That's the kind of reduction I would like to see - gradually, of course... Contrary to your belief, share trading is already a high volume, low margin (HVLM) business in mature markets... not as HVLM as the currency markets, I admit.

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