The request by CFA Sri Lanka follows feedback from its members as to their views.
CFA Sri Lanka conducted an email poll on 18 April which was directed at the current active membership base of 240 members.
The following two questions were asked from them:
1. Do you think the market should be closed for the whole of this week because there does NOT exist an orderly and fair market?
· Not Sure
2. Pertaining to Question 1 do you have any comments on the matter?
CFA Sri Lanka President Dinesh Warusavitharana in his letter to SEC Chairman Viraj Dayaratne PC said 95 members responded to the survey of which 80 (84.21%) were of the view that the market should not be closed, six (6.32%) respondents were not sure, and nine (9.47%) respondents were of the view that the market should be closed. SEC was also provided with the full results of the survey.
“The comments themselves are self-explanatory and indicative of the views of investment professionals working within the capital markets in this country. One of our key advocacy objectives is to be the voice of investors who are not formally and adequately represented in the policy discourse,” CFA Sri Lanka Chief said.
“As investment professionals, we are concerned about the closure of the stock market, as it impedes the ability of the market to function efficiently – the underlying premise of any stock market. The cornerstone of the market is confidence and predictability of rules during good times and bad,” the CFA Sri Lanka letter said.
“All other markets and institutions in which our citizens store their wealth are operating normally – banks, non-banking financial institutions, life insurance companies, unit trust companies, real estate markets, etc. Many of these entities provide daily liquidity for their depositors and/or investors thus they need the stock market to operate to provide price discovery to value their assets that are traded on the CSE,” it added.
CFA Sri Lanka pointed out that the last business day that the stock market operated was Friday, 8 April which implies that 11 days have lapsed since the last day of trading. “If the market remains closed for the rest of this week and reopens on Monday, 25 April it will be 17 days since the last active market day,” it said.
“Similarly for those investors who sold on Wednesday, 6 April or thereafter they will have to wait till the market reopens for their trades to be settled, this is an inordinately long period of time,” the letter added.
CFA Sri Lanka said it welcomed a significant expansion in the CSE investor base over the past two years. More Sri Lankan households have allocated a share of their savings to equities by investing in instruments that are listed on the CSE. Some of these investors may have acute liquidity needs due to the current economic crisis so shutting their liquidity window by a market closure is detrimental to their interest.
“We urge the commissioners of the SEC to take the views of our membership into account and to reconsider the decision to keep the market closed this week,” stated the CFA Sri Lanka letter to the SEC.