Majority of investment professionals disagree with stock market closure

• Over 84% of respondents were of view that market should not have been closed, reveals CFA Sri Lanka survey
• “The cornerstone of the market is confidence and predictability of rules during good times and bad”- CFA Sri Lanka
• Urges SEC commissioners to reconsider decision

The prolonged closure of the Colombo Stock Exchange (CSE) is not a step in the direction in establishing an orderly and fair capital market, investment professionals have expressed in a recent survey. 

The responses of a survey carried out by CFA Sri Lanka among its members have revealed that a good majority is of the view that the decision to close the Colombo Stock Exchange (CSE) from April 18 to 22 shouldn’t have been taken. 

An email poll conducted on Monday, April 18 revealed that 84.21 percent of the respondents were of the view that the market should not have been closed; 6.32 percent of the respondents were unsure as to what action should have been taken, while 9.74 said they were of the view the closure was the right decision. 

The survey was directed to the current active membership base of 240 members. 
The last business day that the stock market operated was Friday, April 8, 2022 and the opening of the bourse on April 25 means that a total of eight active market days are lost. 

“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,” CFA Sri Lanka said in a letter addressed to Securities and Exchange Commission (SEC) Chairman Viraj Dayaratne. 

It pointed out that all other markets and institutions such as banks, non-banking financial institutions, life insurance companies, unit trust companies, real estate markets, etc. in which citizens store their wealth, are operating normally. 

“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,” CFA Sri Lanka said. CFA Sri Lanka further stated that the investors who sold on Wednesday, April 6 or thereafter would have to wait till the market reopens for their trades to be settled, which is an inordinately long period of time. 

As the investor base of the CSE has expanded and diversified in the last two years, an increasing number of Sri Lankan households have allocated a share of their savings to equities by investing in instruments that are listed on the CSE. 

CFA Sri Lanka noted that some of these investors may have acute liquidity needs, due to the current economic crisis. Therefore, shutting their liquidity window by a market closure is detrimental to their interest, the association noted. 

The CFA Sri Lanka urged the commissioners of the SEC to take the views of its membership into account and to reconsider the decision to keep the 
market closed this week.