Capital market told to step out of comfort zone and think big

The launch event themed ‘Hyper-Leap to the future,’ marking the first phase of the digitization of Colombo Stock Exchange (CSE) was held yesterday. Here Prime Minister Mahinda Rajapaksa launching the initiative flanked by State Minister Ajith Nivard Cabraal and senior CSE and SEC officials (Pic by Kithsiri de Mel)

• Three areas that need urgent attention identified 
• Told to increase number of companies listed to at least 500
• Urged to increase market cap to US$ 60bn from current US$ 12.5bn
• Need for other boards highlighted to list,  attract specific biz sectors 

By Shabiya Ali Ahlam
The government yesterday did not mince its words to clearly lay out what is expected from the country’s capital market as the stakeholders were told to venture out from their comfort zones and work judiciously towards the development and expansion of the market. 

Urging the Colombo Stock Exchange (CSE) and the Securities and Exchange Commission (SEC) to capitalise on the freshly launched digitisation initiative, State Minister of Money & Capital Market and State Enterprise Reforms Ajith Nivard Cabraal asserted the need to improve the focus on expanding the market across diverse areas by at least two folds.

“The digitization will take away from you, the brokers as well as other market players a lot of the paperwork and the mundane tasks that have been so far done by you personally. When relieved from those duties you will have enough time to make the market work,” said Cabraal at the ceremonial launch event of the ‘Hyper-Leap to the future’ initiative held at the CSE, last morning.  

Identifying three key areas that require urgent attention, he pointed out that much is yet to be done on increasing the number of companies trading; raising market capitalisation and expansion of other boards for specific business sectors.

Touching on the first, Cabraal stressed it is imperative to up the number of shares traded in the market.

“I have been here long enough to know that the numbers traded in this wonderful stock exchange has remained almost stagnant for so many years. We are around 200 (companies) something, and we have been in this number for the past 30 years. In the next five years we would like to see the number going up to 500,” he said at the event that was graced by Prime Minister Mahinda Rajapaksa as the chief guest.

With regard to market capitalisation that currently hovers around US$ 12.5 billion, a contraction of about 50 percent from 2014 levels, Cabraal said come 2025, the capitalisation should reach to at least US$ 60 billion.
“We need to grow this market again. This is vital. If you want the government to come here and use it as a repository for funds, you have got to also be able to provide that. If the capitalisation is at US$ 12.5 billion, I don’t think you can do that. So set your sights high,” he told the SEC and CSE officials.

While stressing the need to bring in sufficient capital to support the market, which in turn would allow the conceptualisation of new instruments, Cabraal highlighted the importance of other boards targeting certain specific business sectors such as startups, tech firms and SMEs.

Reflecting similar sentiments, SEC Chairman Viraj Dayaratne noted that while digitisation creates that paradigm shift towards the development of the market, that by itself is not adequate and there is much more to be done.

“We need to think out of the box…by making use of this opportunity to appeal to the large companies in Sri Lanka which are yet to list - come forward and list your companies in the Colombo Stock Exchange. We need to increase the depth and the breadth of the market,” he said. 

Touching on the improved role of the SEC was its Director General Chinthaka Mendis who highlighted that the SEC can no longer be restricted to its traditional role of market regulator and take the conventional approach to boost investor confidence. 

“The SEC has been particularly busy over the past few months, starting with the feasibility study of the entire stock market. We have been focusing on technical and regulatory reforms vis-à-vis to make our market business-friendly, particularly to make our market attractive for local and foreign investors,” he said. Meanwhile, CSE Chairman Dumith Fernando opined that market stakeholders’ stars seem to be finally aligned with the fast track development embarked in collaboration with the regulator.

“We will rise to the challenge of playing the role expected from us, fully and comprehensively, to enable capital mobilization for your ambitious economic plans for mother Lanka. The best is yet to come,” he said.