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CSE Chairman Dumith Fernando's premature Resignation is a blessing in disguise

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Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

CSE Chairman Dumith Fernando's premature Resignation is a blessing in disguise Frni7i10

CSE Chairman Dumith Fernando was compelled to resign from the Chairmanship of the CSE prematurely without serving its full term of 3 years in office due to serious investor pressure, misconduct and clear conflict of interest in discharging his offiicial duties.

Mr Fernando alleged to have placed increased emphasis and importance relating to his own business activities of Asia Securities in conflict with overall direction and objectives of the Colombo stock market and its participants.

Further during his terms Mr Perera has not been able to attract much desired foreign investment into Sri Lanka unlike his predecessors, which has been one of the main causes of current economic crisis due to depletion of foreign currency reserves. CSE has previously contributed to the country's economy significantly by serving as the main conduit to bring foreign investments in to Sri Lanka.

Mr Fernando was appointed in 1st July 2020 and has resigned within less than 2 years in office. As per the Memorandum and Articles of the CSE, the Chairman is entitled to serve period of 3 years in office.

Mr Dumith Fernando will continue to serve as the Chairman and majority shareholder of the leading Stock Brokering company Asia Securities (pvt) Ltd.

According to market sources CSE Chairman Dumith Fernando's premature Resignation from the Chairmanship of CSE is a blessing in disguise.

Article 49 of CSE Memorandum of Articles is given below:

"49. The Chairman of the Board shall be elected from among the Elected Directors and such election shall take place annually. Nothing in These Presents shall prohibit the re-election of the same Elected Director as Chairman provided that no such Chairman shall hold office for more than three (3) consecutive years from the date of his appointment unless re-elected unanimously by the Board."

Mr. Dumith Fernando appointed as the New CSE Chairman in 1st July 2020

The Colombo Stock Exchange (CSE) yesterday announced the appointment of Mr. Dumith Fernando as the Chairman of the Board of Directors of the CSE with effect from 1 July.

Mr. Fernando has served on the Board of the CSE since 2017 and succeeds Ray Abeywardena, who steps down as the Chairman after completing his three-year tenure.

Dilshan Wirasekara appointed as new CSE Chairman

CSE Chairman Dumith Fernando's premature Resignation is a blessing in disguise Image_12

Dilshan Wirasekara has been appointed as the new Chairman of the Colombo Stock Exchange.

He succeeds Dumith Fernando who served as Chairman since July 2020 has informed the Board of his intention to retire by rotation on 23 June at the conclusion of his current term as a Director.

Subsequently, at its regular monthly Board meeting held on 19 May, the Board of the CSE elected Director Dilshan Wirasekara to succeed Fernando as Chairman with effect from 24 June 2022.

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Debt Market specialist Dilshan Wirasekara unlikely to be the CSE Chairman?

CSE Chairman Dumith Fernando's premature Resignation is a blessing in disguise Fy212210

Debt Market Specialist Dilshan Wirasekara who is the current CEO/Director of First Capital Holding specialised in Debt, Money Market  and fixed income investment in Sri Lanka is doubtful to accept the position of the CSE Chairman due to controversy surrounding his appointment according to market sources.

Mr Wirasekara's appointment yet to be approved by the board of directors of the CSE has been prematurely announced to the media by an error and CSE is likely to make a statement regarding this shortly. He was only nominated by Mr Dumith Fernando, the outgoing Chairman as his preferred choice but yet to be voted or ratified by the CSE board, sources said.

The CSE board is expected to meet in July 2022 to consider the appointment of Mr Dilshan Wirasekara as the Chairman and Board of directors of Colombo Stock Exchange. Many board members have expressed their displeasure and concern regarding the appointment of Mr Wirasekara ahead of Mr Asanga Seneviratne and other suitable board members who posses considerable experience in equity markets.

According to general opinion of investors Mr Dilshan Wirasekara does not posses required experience in equity markets as he has been primarily involved in treasury and money market operations through out his career except his appointment to the CSE board in 2017.

Mr Wirasekara's LinkedIn Profile clearly demonstrate his experience in Debt Markets.

CSE Chairman Dumith Fernando's premature Resignation is a blessing in disguise 1d10
CSE Chairman Dumith Fernando's premature Resignation is a blessing in disguise 2d10
CSE Chairman Dumith Fernando's premature Resignation is a blessing in disguise 3d10

Most board members of the CSE believe that an appointment of a Debt /Fixed Market Investment specialist as head the Colombo Stock Exchange, to the hot seat of the headquarters of the Equity market trading in Sri Lanka will be a deterrent to the international and local investors as his emphasis would be to develop the low risk debt market ahead of high risk equities.

"Mr Wiraseka will be promoting fixed market securities instead of the equity market, He will encourage investors to buy Bonds, Treasury Bills and debentures which gives higher rate of interest and instead of stocks, shares, equities of listed entities" one concerned investor tweeted.

CSE Chairman Dumith Fernando's premature Resignation is a blessing in disguise 4d10

Dilshan Wirasekara, the Director and Chief Executive Officer of First Capital Holdings PLC, is a professional investment banker with over 25 years of experience in financial services such as banking, treasury, investment management, capital market strategy, and corporate finance advisory services. Simultaneously, he serves as an elected Board Member of the Colombo Stock Exchange. Dilshan’s career highlights include leading First Capital to become the market leader in categories such as Primary Dealer, Debt Structuring, Trading, and Asset Management. First Capital Holdings PLC is a full-service investment firm that provides independent advice and transaction execution for capital raising as well as other strategic needs such as mergers and acquisitions. As the General Manager of Softlogic Capital PLC, he was part of the team responsible for establishing the Financial Services branch of the diverse Softlogic Group, another significant achievement in Dilshan’s career. Prior to that, he was the Head of Treasury at Nations Trust Bank PLC.

Specializing in Asset and Liability Risk Management, enabled Dilshan to secure the honor of leading and representing two Sri Lankan companies that won the International Bank Asset and Liability competition organized annually by the Netherlands Development Finance Company (FMO), the German Investment Corporation (DEG) as well as Proparco – a subsidiary of the Agence Française de Development (AFD). He further mentioned that he completed his Executive Professional Education at INSEAD Business School in Fontainebleau, France followed by AOTS, in Tokyo, Japan.



Dumith Fernando, Chairman of the Colombo Stock Exchange (CSE), discusses equities’ stellar performance in 2021 and the exciting prospects for the capital market in 2022.

How has 2021 been for the equities market, and how has the CSE performed in 2021?
We are very fortunate that 2021 has been a record-shattering year for the Colombo Stock Exchange (CSE). With corporate earnings at record levels and unprecedented investor interest in the stock market as negative real interest rates prevailed, the CSE surpassed several milestones in 2021. Firstly, we saw record capital raising by companies at the CSE. Secondly, performance indicators of the CSE such as market capitalisation, and total and daily average turnover recorded the highest ever values in 2021. The benchmark All Share Price Index (ASPI) recorded a market return of 80%, which is the highest return recorded since 2010. Compared with the market indices of the Asia-Pacific region, the ASPI consistently maintained its status as the highest yielding index. The S&P SL20 index also recorded a return of over 60%, which is the highest ever recorded. We also had record numbers of investor participants at the CSE.

Despite the market having risen so much, our valuations are still attractive. It is below historical averages – at least 10-12% below the 10-year average. But more interestingly, it is about 30% lower than during previous depressed interest rate periods. Additionally, the Sri Lankan stock market is undervalued in relative terms by 20-25% compared to other emerging or frontier markets.[/size]

How have equities performed against other asset classes?
Like most markets worldwide, Sri Lanka was in a low-interest-rate regime. The environment of very low real interest rates made alternative investments such as fixed-income much less attractive than equities to investors. Many of them gravitated to the stock market in 2020/21, leading to a record number of investors participating in the equities market now. Two years ago, we had about 12,000 investors in the stock market from Sri Lanka. This year we have quintupled that to over 60,000. The overall market activity also accelerated, and total trades per day increased significantly. In 2021, we recorded an extraordinary average of over 32,000 trades daily!

Tell us about some of the capital market development initiatives, products and strategies, their progress thus far and plans for the future?
For the longest time, the CSE had been a market for shares and debentures only. But in 2020, we put a strategic plan in place where we wanted to increase options for investors so that you could invest across asset classes while also managing risk better.

We introduced dollar listings or multi-currency listings, so now local companies, particularly exporters and Sri Lankan multinationals who require foreign currency capital can access that through the CSE. We also introduced REPO trading on debt securities, which has already started.

Another significant market infrastructure development in 2021 was the introduction of Delivery vs Payment (DVP) which puts us on par with global exchange best practice and mitigates settlement risk.
Over the next few months, we hope to introduce some exciting new products, including stock borrowing, lending, and short-selling. We will also launch gold-based traded investment products, ETFs (Exchange Traded Funds) and structured warrants. We are keen to complete the demutualisation of the CSE by 2023 and hope the government will fast track the necessary legislation.

Another significant development has been the Digitalization Drive of the stock market, initiated by the Securities and Exchange Commission of Sri Lanka (SEC) and the CSE. The second phase of the digitalization of the stock market was launched in 2021, adding a wealth of new technological advancements in terms of the CSE web, social media, and mobile app. The latest features of the mobile app include CDS eConnect and MYCSE, benefiting a wide range of stakeholders in the stock market, enabling a productive user experience with increased efficiency. Our digitalisation efforts have brought a new generation of investors into Sri Lanka’s capital market.

The CSE had several IPOs during the past year. Can you tell us about these?
Providing a venue for efficiently channelling excess savings into companies that require capital is one of the most critical economic functions of a stock exchange. Over the last few years, the CSE saw vigorous debt capital raising via corporate debenture issues while equity listing experienced a lean period. That changed in 2021. As of November 2021, we have raised capital worth Rs124 billion via 47 listings. We have raised over Rs12 billion via equity IPO listings, the highest ever capital raised via equity listings since 2011. Every single equity listing had been oversubscribed on opening day. We have also seen listings from companies of different sizes and diverse industries entering the market. That proved that the value proposition of the CSE to private sector businesses is broad-based and not limited to a privileged few.

There is a strong case for companies to list on the CSE, but are there reasons it would be especially so this year/2022?
Increasing the number of companies listed on the exchange was one of the CSE’s key strategic objectives for 2021, and we have made steady progress on this front. In 2021, we made improvements to expedite the listing approval process and established a single window within the CSE for companies wishing to list. Had we not done this, it would have been practically impossible to facilitate all the listings by the end of 2021. As discussed before, we are introducing diverse avenues to list, catering to different companies and requirements, such as multi-currency listing, the listing of shares by special-purpose acquisition companies, green bonds, and more. We also made strong representations, with the support of the SEC, to bring about tax incentives for companies wishing to list, in the government budget of November 2020. That prompted several companies to come to market in 2021.

As companies revive from the Covid pandemic and are searching for avenues to grow with new objectives, companies must turn to viable sources for long term capital raising. So, with the growing number of investors and funds available at the CSE and the global and Sri Lankan recognition that listed companies are gaining, this is an ideal time to join the stock exchange for companies to meet capital requirements and leverage all the benefits, including the recognition, of being listed.

Will equities still be a compelling asset class in 2022? How should investors approach investing in stocks?
We now have a stock market that is a real marketplace with large numbers of capital and investors. As we continue to experience a negative real interest rate environment in 2022, there are few better performing asset classes than listed equities that deliver a balance of returns and value appreciation while also being liquid. With the infrastructural, technological and legislative improvements, CSE has become a venue where all stakeholders can conduct business with convenience and ease. With diverse companies still expecting to list on the CSE, the market offers opportunities for investors of all interests and scales. At the same time, investors need to place a premium on investing with knowledge. Investors need to acquire credible and reliable information and market awareness from trusted and experienced sources while understanding their investment capacity and return expectations.

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