- Cabraal says investors need to focus on longer term outlook, consider risk appetites and learn opportunities from COVID-19
- Perera not looking to invest but says if MDs and others of his companies decide on acquisitions, he will likely agree
The reopening of the stock market was hailed by both business leader and investor Dhammika Perera and Prime Minister’s Senior Advisor on Economic Affairs Ajith Nivard Cabraal yesterday, with the latter calling for an adjustment in investor mindset to focus on longer term stocks.
Giving his views on the reopening of the Colombo Stock Exchange (CSE) today after one and a half months of suspension due to COVID-19 countering measures, the former Central Bank Governor was confident that the market will take the challenging circumstances in its stride.
“I’m very happy the market will reopen. Markets will sometimes be challenged but they must be allowed to operate. The market does not need to care about prices....but for the market to be credible, it must be open,” Cabraal told the SC Securities and Daily FT organised webinar titled “Post COVID 19 Impact on the Economy and CSE.”
“Markets can meet their own needs, and buyers and sellers will decide how they want to transact business. Markets only provide the space for buyers and sellers to meet. There might be some challenges but they will find their own levels,” he added.
“Markets must prepare for bad times and decide what support they need, and it is important they play a proactive role. Before Government jumps the gun and asks what they want, market participants must come up with an idea as to how they want to go forward. Then we will see the true spirit of the private sector,” Cabraal emphasised.
He was also of the view that investors must use different means to achieve their earning targets. He recommended that investors allocate funds based on risk appetite, focus on fixed income instruments if that is their goal, and have a reasonably long-term investment plan to counter possible turmoil.
“Remember don’t be a slave to market-to-market valuations. Short-term decisions often cripple investors. Markets can be fickle but long-term trends are more predictable. Be prepared to keep your commitment to the equity investment for a reasonably long period. Do not commit funds that you need to access by a specific date. Buy on the way down to lower your average costs and sell on the way up to realise gains. Spread your risk over several sectors and develop a portfolio as it is less risk over a period of time. Don’t be greedy, when you get a return realise your gain.”
Cabraal opined that “mixed appetites” were sometimes at play when it came to the CSE earning the market a bad rap among the public but this was not an issue of how it functioned. He also noted that there were lessons for investors to learn from the COVID-19 crisis and the changes it has created.
Perera, responding to a question on what transactions he may conduct, said he preferred to “fine-tune” his many companies, turning the “amber ones green”, and focus on productivity gains in overseas investments, including those in Thailand and Indonesia; but wittily added that if any of his managing directors or others propose an expansion, he will agree to it.
“Only my office will not be seeking to invest; others can do what they wish,” he said. (UJ)