Winning back investor confidence and trust is immediate priority - CSE new CEO

Monday, 23 December 2013 00:41 -     - {{hitsCtrl.values.hits}}

  •  Rajeeva Bandaranaike has new plans and to focus on results in his return to Colombo Stock Exchange as CEO having previously served for 19 years
  • Says time is opportune for investment in the Colombo stock market as there are many attractive valuations
Rajeeva Bandaranaike mid-last month assumed duties as the CEO of the Colombo Stock Exchange. He succeeded Sureka Sellahewa, who moved out of the CSE following a 23-year stint. Rajeeva is no stranger to capital markets. He served the CSE from July 1992 to June 2011 and held the positions such as Assistant Manager (Clearing and Settlement), Manager Trading, Senior Manager (Marketing and Human Resources) and Assistant General Manager (Business Development). His return to the CSE comes with added experience and insight from a key stakeholder of the market – listed firms. During the short stint outside the CSE, Rajeeva was the CEO of Orient Finance PLC since May 2012 and was CEO of People’s Merchant Bank PLC from July 2011 to May 2012. Professionally, Rajeewa has a Masters in Business Administration (MBA) from the University of Southern Queensland (USQ), Australia and a Bachelor of Laws (LLB) Degree from the Open University of Sri Lanka. The Daily FT met up with the new CEO of the CSE to get a first hand view of the capital market, its current status and future scope as well as plans. Here are excerpts. Q: How would you describe the current status of the Colombo stock market? A: The Colombo stock market is undergoing a correction from the high level where it was sometime back. With attractive valuations at present, we have seen renewed investor interest. The market certainly offers value for both local and foreign investors. Certain companies and sectors are trading at notable discounts. There is also a collective effort by all stakeholders to further develop the market. Under the leadership of the Securities and Exchange Commission and the Colombo Stock Exchange the capital market industry is aspiring to boost market capitalisation to a level of $ 40 to 50 billion by 2016 from the current level of $ 20 billion. What we are endeavouring is to achieve sustained growth aided by sound fundamentals. Q: How is this being pursued? A: Last year the SEC in consultation with all stakeholders including the CSE came up with a 10 point plan aimed at expanding the products offered, listing companies from both private and state owned enterprises, developing the unit trust and bond market, modernising market infrastructure, demutualising the CSE, amending the SEC Act and widening the opportunities for investors. These 10 issues are addressed by well represented Committees. Since I have joined the CSE in mid-November I have met all those Committees. There has been considerable progress in some of the initiatives whilst others are being worked on. Fruits of some of these initiatives are already being enjoyed by the market whilst others will be realized in the coming months. Some initiatives that are being pursued will take time. Q: What are your immediate priorities or challenges? A: Winning back investor confidence and trust is the immediate priority. There has been some negativity in the past and there is an effort by all stakeholders to work together and move in one direction. We will also more aggressively promote the Colombo stock market via local and international road shows. Getting back to the Morgan Stanley Index is another priority. The industry is collectively working on addressing the qualifying criteria. With attractive valuations we have seen sustained net foreign inflows to the Colombo Bourse (over Rs. 30 billion up to end November) and being part of the MSCI will be a further boost. To woo more foreign funds and investors, several road shows were conducted successfully in Mumbai, Dubai and Hong Kong. Another is planned in Singapore in January 2014. Similar exercises are planned in Abu Dhabi, UK, US, Australia and China for 2014 as well. I will also focus on faster implementation of CSE-linked issues under the 10-point plan and helping other stakeholders to turn ideas into action. This is a collective effort and CSE will champion implementation where necessary. Our strategic plan for 2014 will be results oriented with Key Performance Indicators (KPIs). We will also enhance organizational capacity where required. Q: You say there is value in the market at present but the CSE hasn’t seen the desired level of rebound in terms of investor activity. Why is this? A: I firmly believe that time is right for buying. Universally most investors buy when the market is low. We have seen renewed interest and it is a matter of time for the market to witness greater level of investor participation. It must be emphasized that the CSE has also seen an unprecedented development in the listed corporate debt market. Over Rs. 40 billion has been raised by the listed corporate debt market with more issues in the pipeline. So the CSE has scope for investment in both listed equity and debt. On the latter we are focusing on encouraging more secondary market trading. Q: Some feel the market is over-regulated hence a more rapid growth is being stifled. Can you comment? A: I don’t think the market is over-regulated. A developing market needs robust and strong set of necessary rules and regulations. In parallel to other peer markets Sri Lanka’s rules are not too onerous for listed firms as well as market participants. Having been out of the CSE for about 2 years and being CEO of two listed companies, I gained good knowledge and experience so my understanding is better in coming back to the CSE. Greater and continuous investor education has been identified as a key need and this will be further enhanced in 2014 as well. This is important for investor confidence. New investors must understand the risks and rewards of any market. Proper education will ensure a proper choice of whether new retail investors will come direct to the market or tap opportunities via unit trusts. An important aspect of both investor education as well as luring new investors is that the CSE is working with the Sri Lanka Foreign Employment Bureau. Under this initiative we address skilled employees pursuing overseas employment on their fund management aspects. This segment is the future Diaspora or a key stakeholder of the economy due to inward remittances. We hope these Sri Lankans will channel a part of their money to investing in sound stocks which provide long term returns in terms higher appreciation and dividends. Q: In 2013, we haven’t seen many IPOs despite the Budget making available some incentives. A: IPOs take time but I am aware several firms are in the process. Both the CSE and the SEC are working together to improve listings. We have identified about 30 companies and there have been discussions with several on a one-to-one basis to encourage and facilitate listing. Investment banking industry is also working on this. Recently there was a meeting involving Deputy Minister for Investment Promotion, the SEC and the CSE with broking firms as well. The SEC is exploring the possibility of a special listing scheme for BOI approved ventures. As part of enhancing the industry human resource skill set the CSE is working with several Universities and offered internships for undergraduates. The CSE also launched an Android mobile application which offers live stock market information at the swipe of your finger. The application is available on Google Play and can be downloaded free onto all Android devices. Q: How differently will you work with the stock broking community? A: The Colombo Stock Brokers Association is an integral part of the capital market stakeholder community. Their inputs have gone in to the 10 point plan as well. I have held discussions with the broking community and will work closely in steering the market to be more dynamic. The CSBA has made some recommendations to improve their viability and they are being considered at present. The CSE has also stepped up support in recent months for the brokers as they play an important role in the development of the capital market. Q: What improvements are being made to the market infrastructure? A: We have a robust Automated Trading System along with a sound Disaster Recovery System. We will pursue continuous improvements and be ready for trading of new instruments. We are also expanding the Central Depository System. With regard to risk management, a decision has been made on the arrangement of a Central Counter Party (CCP) in consultation with the SEC, the Central Bank and the industry. Expression of interest has been called by the Central Bank for a consultant. A robust CCP is a precursor to the regime of Delivery Versus Payment (DVP) and introduction of new investment instruments such as derivatives. An independent CCP will add value, enhance system stability and improve investor confidence. Q: What is the progress of CSE’s relationship with regional and global exchanges? A: We will continue to effectively use our membership with the World Federation of Exchanges (WFE). We are continuing our dialogue with the National Stock Exchange of India, and more recently the SEC made a visit to the Singapore Exchange (SGX) whilst with the London Stock Exchange owning our ATS solutions partner MillenniumIT, we are in closer contact with the LSE as well. Our planned road show in London will be closely coordinated with the LSE.