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Prime Minister Ranil Wickremesinghe gestures during the Q&A session at the Invest Sri Lanka forum in Singapore on Friday alongside moderator Rob Ioannou, Managing Director and Head of International at DBS Private Bank, the platinum sponsor of the forum
By Nisthar Cassim
Prime Minister Ranil Wickremesinghe on Friday for the first time met with capital market stakeholders on the sidelines of a successful Invest Sri Lanka Forum in Singapore, listening to a host of issues and assuring to speed up implementation.
In a proactive move, the Premier offered an audience to the Lankan capital market delegation attending the forum in Singapore at the Four Seasons Hotel. The event saw a record participation of over 300 Singapore-based fund managers and investors.
Sources said the meeting, apart from being the first by the Prime Minister, whose Ministry of National Policy and Economic Affairs Ministry capital markets fall under, was “very useful and positive” with a range of issues - decisions already made but whose implementation was being delayed and those that have been pending for a long time – and new ideas being discussed.
On behalf of the broking community, CSE Chief Ray Abeywardena spoke of macro issues and Asia Securities Chairman Dumith Fernando dealt with the demutulisation initiative.
Among those who attended the meeting were Colombo Stock Exchange Chairman Ray Abeywardena, directors Shanil Fernando and Anton Godfrey, CEO Rajeeva Bandaranaike, Head of Market Development Niroshan Wijesundere, SEC Director General Vajira Wijegunawardane, Colombo Stock Brokers Association President Prashan Fernando of Acuity Stockbrokers and a host of representatives from stock broking firms who participated in the Singapore forum including Asha Phillip Securities, Asia Securities, Bartleet Religare Securities, Capital Alliance, Capital Trust, CTCLSA, First Capital Securities, Lanka Securities, LOLC Securities, NDB Securities, SC Securities and Softlogic Stockbrokers.
Some of the issues listed by the broking community were aimed at enhancing liquidity such as listing state-owned enterprises (SOEs), incentivising more listings by Lankan companies, encouraging state-owned funds to return to listed equities investments such as blue chips and fundamentally sound stocks, fast-tracking the introduction of the Dollar Board and the SME Board, Delivery Versus Payment (DVP) and new products such as Exchange Traded Funds, structured warrants, REITS and equity-linked derivatives, etc. Abeywardane had suggested a multi-stakeholder committee to fast-track some of the pending capital market development initiatives.
In response to some of the issues listed, the Prime Minister had said the listing of SOEs would be done initially with the planned divestiture of state ownership in non-strategic investments such as Hilton and Hyatt whilst some of the other entities may be considered later.
With regard to encouraging state funds to return to the capital market, the Premier advised the broking community to directly take the matter to the Monetary Board and respective funds as the issue of trust and confidence as well as proper returns are key considerations.
On listing more companies, the Premier had said capital markets had to woo the private sector rather than the Government offering specific incentives. He had remarked that the biggest attraction for listing was the ability to raise capital at zero cost than the companies relying on bank borrowing.
The capital market view on demutualisation was shared by Asia Securities Chairman Dumith Fernando. He said that the broking community was not opposed to demutualisation, instead it has been pushing for it, but it preferred a higher percentage of the share.
Brokers had mooted a split of 80:20 for the sharing of one-off financial gains from demutualisation whereas the counter proposal was for 60:40. A compromise suggested was 70:30 but the matter remains unresolved.
The Premier had said that the 40% proposed would not go to the Government but to a capital market development fund hence the resistance may be unwarranted. However, the brokers had explained that the industry has been investing in the business over a long period of time and amidst difficult times as well hence a higher percentage of 70% or more was necessary.
Having taken note of all suggestions as well as the issues discussed, the Prime Minister requested the CSE to send him a formal note listing prioritised matters and recommendations and he would take it up with relevant officials. Premier Wickremesinghe has also indicated that he may consider assigning a special Minister with whom the capital markets could liaise with in terms of bringing up issues and coordinating follow-up action.
The crucial meeting in Singapore comes in the backdrop of sustained bullish sentiments by foreign investors though locals have remain on the sidelines.
As of last week net foreign inflow to the CSE so far in 2018 was nearly Rs. 6 billion though in recent days the market has seen a bit of foreign selling.
In 2017 there was record foreign buying of Rs. 112 billion and net buying of Rs. 17.65 billion in the secondary market and a record total of Rs. 40.1 billion when an inflow of Rs. 22.46 billion is factored in the primary market. The previous highest total net foreign inflow was Rs. 21.7 billion in 2014.
Year-to-date the All Share Index has gained by 3% and the S&P Sri Lanka 20 Index by 1%. In 2017 the Colombo Bourse rose 2.26%, posting the first annual increase in three years, after falling 9.7% in 2016.
