Harsha says political capture of SEC not the answer to ills of CSE

UNP MP Dr. Harsha De Silva claimed yesterday that political capture of the capital market regulator SEC wasn’t the answer to the ills of the Colombo Stock Exchange (CSE).

In response to Daily FT’s lead story yesterday, which featured Finance Ministry Dr. P.B. Jayasundera’s comments following his meeting with capital market stakeholders, the UN MP said the Colombo Bourse would only move forward in a sustainable manner if two things were to happen.

“One is if the macro situation gets better, after all the market value today is a reflection of the profitability of the companies listed on the exchange into the future and if the macro situation gets better for the listed companies to do better, prices will move up,” Dr. De Silva said.

“For this, policy consistency and better governance is key,” he said adding, “Stability in interest rates, exchange rates, and lower inflation expectations will certainly help.”

According to the UNP MP, for a sustainable rise in the stock market, one will have to have increasing opportunities for real growth in the economy in general.

“With growth prospects down due to the multiple reasons, it is not possible to expect a sustainable rise in the indices beyond realistic levels,” he said, though he wasn’t sure whether the “realistic level” had already approached or not.

Secondly, Dr. De Silva said if the micro situation including the CSE itself gets better, the white collar criminals and manipulators must be dealt with once and for all.

“You cannot have a cancer and ignore it. It must be removed before it shuts the entire system down. The CSE and the SEC has not done enough to prosecute wrongdoers. I don’t recall a single instance since the ERI case. Even there the Directors and SEC agreed to compound the case for a mere Rs. 3 million each. What we need to do is to implement the law and not ignore it. Otherwise the law will be biased; if you are in good books with certain people, you are above the law,” opined the UNP MP.

He also emphasised that the CSE must be used to raise funds for development and for that the IPO market must take off, which is also key for a robust secondary market. “That cannot be for a short period after powerful people intervene to direct the SEC what to do; it must be sustained. If not we will have yet another boom and bust!” claimed Dr. De Silva.