Time right for all to benefit from capital market: SEC Chief

SEC Chairman Viraj Dayaratne PC last week stressed that the capital market offers great opportunities for all stakeholders, though emphasising that there is much more to be done.

SEC Chairman Viraj Dayaratne

“A strong Government, the political will, and prudent economic policies are a must if the capital market is to prosper. We can boast that we have all of that,” the SEC Chief said at the launch of digitalisation initiatives of the capital market on Thursday. 

He used the launch, which was attended by Prime Minister Mahinda Rajapaksa, Ministers, and capital market leaders, to appeal to the large companies in Sri Lanka who are yet to list to come forward and list their companies. “We need to increase the depth and the breadth of the market,” he said, adding, “To the SMEs and startups, it is your turn as well. We have relaxed the listing requirements, and there is huge potential to raise the much-needed capital and to investors both local and foreign – come and invest – the valuations are great,” Dayaratne said. 

Following are excerpts from Dayaratne’s speech. 

The Dutch men belonging to the Dutch East India Company, who haggled in the rain, oversaw in 1611, the birth of a new phenomenon called a stock exchange. They were able to do so by daring to think differently. Sri Lankans were not too far behind, the history of the Sri Lankan stock market dates back to late 1896, counting almost 125 years of operations as one of the oldest stock markets in the world. 

The biggest part of digital transformation is changing the way we think - and changing the way we think is the hardest part of change. Nevertheless, Sri Lanka did not find it all that hard to change the way we think, and was the first Asian country to set up a fully automated Central Depository System (CDS) and by 1997, the Colombo Stock Exchange (CSE) was one of the first countries in Asia to introduce an automated system for share transactions. 

Unfortunately however, we had gone into a state of slumber, tired perhaps after somewhat of a fast run during the early stages. We had put into the back burner, the efforts to digitalise the end to end operations of the stock market.

The wakeup call from that slumber had to come in the form of the deadly COVID-19 pandemic. The inability to keep the stock exchange open during the curfew that was imposed to curb the spread of this devastating pandemic exposed our deficiencies and made us think - and think of change. And that change had to come fast.

That is when the SEC decided that it will take the lead in ensuring that all operations of the stock market can take place without any interruption - come rain or sunshine. A joint committee was appointed to come out with a master plan and take steps to achieve the task within a set time span. 

The rest is history, and here we are today ready to launch the complete digitalisation of all operations of the Colombo Stock Exchange, which is a fundamental transition that will usher in a new era for the Sri Lankan stock market. 

The achievement is undoubtedly the most significant achievement since the Automated Trading System was introduced way back in 1997, and I must stress here, Prime Minister, that although it was a deadly pandemic that gave us the wakeup call, we did not do it for the fear of the pandemic, for we knew that the Government had taken timely and effective action to curb its spread. We did it for the sake of development, in order to ensure that the Sri Lankan stock market has all the sophistication and efficiency that is required to attract foreign as well local investors. 

The SEC believes in ensuring that we have in place a robust regulatory regime that can create confidence in the stock market and safeguard the interests of the investors. At the same time, we are aware, that it is our duty to ensure that we facilitate the development of the market and as such we are determined to create a balance between regulation and development of the market. We assure that we will play a proactive role in the development of the stock market and partner all stakeholders in taking our market to the next level – to that of an emerging market in the not too distant future.

Whilst digitalisation creates that paradigm shift towards the development of the market, that by itself is not adequate and there is much more to be done. Due to time constraints, I will not venture to elaborate on steps that are required in this direction but as the President has repeatedly said, we need to think out of the box.

A strong Government, the political will and prudent economic policies are a must if the capital market is to prosper. We can boast that we have all of that. I am happy to say that the Government has fired the first salvo in this regard. The Government has in no uncertain terms demonstrated its commitment towards the development of the capital market and the allocation of capital markets to the subjects assigned to Minister Nivard Cabraal is testimony of that commitment. Minister, we wholeheartedly welcome your appointment and look forward to your guidance and support.

The Prime Minister, you have been a tower of strength to us as our line Minister and we express our deep gratitude and appreciation of the unstinted support and guidance extended to us and thank you most sincerely for taking time off your busy schedule to grace this occasion. 

I will be failing in my duties if I do not refer to and acknowledge the work of the members of the joint committee. They have put in enormous effort and spent a lot of time and energy to make this exercise a success within such short period of time and I thank them profusely. I don’t think the other members will misunderstand if I make reference to Naresh Abeysekere, Manil Jayesinghe and Jayantha Fernando in particular for their enthusiasm and dedication. I must also acknowledge that this initiative would not have been a success if not for the ready support and cooperation of the Broker Firms and wish to express our gratitude to all of them. 

Let me conclude, ladies and gentlemen, by making use of this opportunity to appeal to the large companies in Sri Lanka who 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 – to the SMEs and Startups, it is your turn as well – we have relaxed the listing requirements and there is huge potential to raise the much needed capital – and to investors both local and foreign – come and invest – the valuations are great!