CSE to launch a dollar board for secondary listing of foreign firms shortly

In an attempt to diversify investment options for foreign investors, the Colombo Stock Exchange (CSE) is set to launch a dollar-denominated secondary board for foreign firms to trade their securities on the CSE shortly.

“It’s a new platform, a new board we are planning to introduce, where trading and settlement will happen based on multi-currency and we will start with US dollar. Initially, it will be opened for companies which are based overseas for a secondary listing on the CSE,” a top CSE official on grounds of anonymity, said.

Foreign firms seeking a secondary listing will have to be listed in their host country, where the market regulator has to be a member of The International Organisation of Securities Commissions.

Initially, the investments of the dollar board securities will be limited to foreigners (non-residential investors).

“We will go by the listing rules of the host country, subject to certain additional disclosures, which are required in terms of the CSE rules. There will be a capital requirement in dollars,” the official said.

Securities and Exchange Commission (SEC) Chairman Ranel Wijesinghe yesterday told Mirror Business that the SEC Commissioners on Tuesday approved the listing rules for the dollar board, paving the way for the new board to be launched shortly. 

For this exercise, the CSE has already received clearances from the Registrar of Companies Department and Central Bank of 
Sri Lanka. 

The CSE official said that as soon as the CSE receives the approval from the SEC, they would launch the dollar board as the necessary infrastructure work has been completed. 

Several Maldivian leisure sector companies have already shown interest for potential secondary listings. 

“It will come from markets where they don’t have a large investor base and cost of listing also matters. The Maldives has some level of good companies, particularly in the leisure sector, but they don’t have a large investor base. When we get one or two listings, others will also look at it,” the CSE official remarked. 

The stockbrokers welcomed the moved by the CSE noting that it would provide more diverse equity investment options for foreign intuitional investors.

Speaking to Mirror Business, First Capital Holdings PLC Research Head Dimantha Mathew said, “It will increase the diversity, by entering into new geographical locations; there will be more variety in investment options for foreign investors.”

He pointed out that the CSE only has one class of equity to be invested in; hence, the foreign investors have limited investment options in the Sri Lankan equity market. 

The CSE expects that Colombo’s comparatively large foreign intuitional investor base and custodian banks will attract foreign firms to Sri Lanka, who are at similar level of the CSE or below. 

Mathew noted that the CSE would probably attract small foreign companies for listings initially. However, he said that Sri Lanka has the potential to attract foreign firms from fast-growing economies in the region, such from Bangladesh in the future.(NF)