[*]Central Counter-Party to be introduced by 2016E
[*]Consultations for new listing rules underway
[*]Secondary trading on Government securities by 2016
[*]Stock borrowing and lending, regulated short selling by 2017
Net foreign inflows expected to continue in 2015
The Colombo Stock Exchange (CSE) announced a new strategic vision for the local Bourse, targeting a market capitalisation of $ 50 billion within the next three years.
Speaking at the launch of the CSE’s Annual Report 2014 on Monday, CSE CEO Rajeeva Bandaranaike described several initiatives that the Bourse would be implementing in order to expand its market size, diversify product offerings – through the introduction of strong markets for derivatives and equity alternatives – and improve its risk management framework.
He further announced the CSE would be introducing secondary trading on Government securities in 2016 and regulated short-selling and stock borrowing and lending in 2017.
“Our vision is to push ourselves to become an active and liquid market with multiple asset classes that is home to vibrant and fully-fledged companies. By focusing on issuers and market intermediaries, innovation, investors, capabilities and infrastructure, we hope to move from being classified as a frontier market to an emerging market,” Bandaranaike stated.
In that context, he explained that steps were already underway to completely revise CSE Listing Rules with a view to streamlining the process in order to encourage more companies to list.
“We are also working to re-brand both boards of the CSE in order to give better opportunities to SMEs and BOI companies. Consultations with the investment banks and listed companies have already been carried out and we are now speaking to other stakeholders and will soon be seeking regulator approval,” Bandaranaike said.
Addressing the issue of balancing the Bourse’s requirement to generate more listings against its need to bring in quality companies to list, CSE Chairman Vajira Kulatilaka stated that venture capitalists and private equity funds would have an increasingly important role to play.
“We’ve always discouraged weaker companies from coming to the market but at the same time we firmly believe that bad companies can be made into good companies through knowledge sharing and education on good governance.
“In the United States this happens more naturally because venture capitalists will seek out viable companies and help instil those values before linking them to private equity. These are crucial ingredients and we can see that these have started to happen in Sri Lanka as well and I’m sure that they will help find and polish these diamonds and bring them to the market,” Kulatilaka stated.
Meanwhile, commenting on the status of efforts to implement a Central Counter Party (CCP), Bandaranaike announced that a clearing house that could act as a guarantor on all transactions was expected to be established by the end of 2016; a move which would pave the way for the establishment of a Delivery Versus Payment (DVP) settlement system.
Elaborating on plans to increase market liquidity, Bandaranaike stated that recent educational and awareness programs initiated by the CSE would be continued while stockbrokers would also be encouraged to travel to regions outside Colombo with a view to improving accessibility and improve retail investor participation.
He added that unit trusts would be an excellent vehicle to with which to introduce inexperienced retail investors into the Bourse and stated that Matara, Kandy and Jaffna had already been earmarked for promotional activities in this regard.
Commenting on the status of foreign funds into Sri Lanka, Bandaranaike noted that the CSE recorded three consecutive years of foreign inflows up to 2014 and further noted that figures for the first five months of 2015 remained promising.
“Where we had a net foreign outflow from January to April 2014, we saw net foreign inflows during the same period, so foreigners have been getting into this market and that is a very positive sign,” he stated.
Bandaranaike added that the CSE’s international road shows in New York, Singapore and London had garnered significant interest from foreign investors, leading to a marked improvement in investment from those regions and announced that this year the CSE would be carrying out further road shows in London and Luxemburg.
Courtesy: Daily Financial Times 03 June 2015