CSE renews call for return of state-controlled captive funds to revive market

The Colombo Stock Exchange (CSE) has renewed the call for the return of captive funds such as the Employees’ Provident Fund (EPF) to reinvigorate the ailing market. 

CSE Chairman Ray Abeywardena during a capital market conference held in Colombo last week said getting the captive funds back to the market is in the top of his “wish list”.

Abeywardena said it was a “miracle” that the market had survived the last four years without a single local captive fund investing in the market despite the assurance from those in power that the EPF would be permitted to get back to the market.

He was of the view that it was high time that safeguards were put in place to monitor investments made by the captive funds and that they can be restricted to investing in the top 20 companies only. 

Responding to a query, he said those who were responsible for dumping shares to the EPF and other state-run funds—the key reason for these funds to be kept away from the market—must be brought to book to ensure that others are not penalized for the past wrong doings of a few. 

While the foreign investors continue to be prudent in their stock selection and continue to make investments, the local funds are unable to seize the opportunity, he lamented.

Meanwhile, Abeywardena said the CSE plans to hold more foreign road shows this year to market Sri Lanka’s capital market, which is backed by excellent valuations. 

He pointed out that the bourse is trading comparatively cheap at under nine times on multiples.

He also said the CSE conducted around 450 seminars last year to educate the prospective local investors on how to invest in the market and what to look for when investing.

Responding to a question on the plight on the unit trust (UT) industry, he agreed that the penetration has been poor despite the UT industry being in existence since the early 1990s. The tax incentive increased the assets under management but did not increase the number of UT holders. 

He was of the view that the investors within a Rs.100,000 or less should first be directed to invest in UTs and thereafter be permitted to invest directly in the equity market. 

Commenting on the debt capital market, Abeywardena stated that discussions are underway to list both the government sovereign bonds and local treasury bills on the exchange, which will definitely create more awareness to the market. 

Abeywardena further stated that regardless of what government is in power, the policies and the directives of the regulators must not change.