One year on: No regrets but happy, says SEC Chief

A year ago when she was tasked with heading the regulatory body of figurative bulls and bears, it may have appeared to be a case of a square peg in a round hole, but marking her first anniversary on the job, Indrani Sugathadasa has no regrets – there’s more happiness and confidence at the top.

“I have no regrets taking on this job and I am happy and satisfied with the success so far,” Securities and Exchange Commission (SEC) Chairperson Sugathadasa told the Daily FT yesterday.

A proven career civil servant prior to the appointment as SEC Chief by President Mahinda Rajapaksa in his capacity as Minister of Finance, Sugathadasa was Secretary to Ministry of Plantation Industries as well as Secretary to the Ministry of Children’s Development and Women’s Empowerment.

She is also the Chairperson of the Insurance Board of Sri Lanka, the regulatory body of the insurance industry.

“I am happy with the progress the capital markets have made so far and the fact that we have laid the foundation to facilitate rapid but sustainable growth,” said Sugathasa, who assumed duties as SEC Chief on 13 May 2010.

“I must confess that I am not the same person who assumed duties a year ago. During the past year I have learnt a lot on the job, whilst all my commission members are highly experienced and competent.

I also have a competent and dedicated set of officers who helped me in my first year,” Sugathadasa said. This she emphasised to counter some written allegations that since the Chairperson was new to the industry, certain officials were misleading her.

She also acknowledged the usefulness of learning via engagement with various capital markets stakeholders. She added that every new measure or even for that matter revisions had been made following extensive discussion within the Commission and in consultation with stakeholders.

The SEC Chief said that as the regulator it was difficult to appease all stakeholders, but all new regulations that the Commission had introduced had been in the larger and long-term interest of the capital markets.

“Though some people may disagree or be disappointed in the short-term, the measures we have taken thus far are for the greater good of all,” she said.

It was emphasised that though the stock market broke almost all trading records in 2010 and so far this year, as a regulator, SEC faced lots of challenges.

“We believe that the foundation to establish a robust and efficient capital market is creating an effective securities regulatory regime,” the Chairperson said, whilst acknowledging that the role of the SEC had been enhanced greatly over the last two years due to the resounding growth in the market.

Most analysts agree that Sugathadasa took over the top post at SEC at a time when stock market was on a persistent bull run, leading up to what some described as a ‘bubble’ by mid last year. This saw the introduction of the highly-contentious price band and to a lesser extent rules to formalise broker credit arrangements to clients.

“We introduced some of these measures to address the excessive price volatility in the market at that time. If we hadn’t intervened with the right regulation, there would have been a bigger price to pay by all stakeholders, which would have been more damaging,” the SEC Chief said.

“As a regulator we have to be timely when introducing new measures or relaxing them or modifying existing ones,” she emphasised, pointing to the gradual relaxation of the price band originally from 15 market days to 10 and now to five in tandem with the success of the desired objectives.

“The commission is equally concerned about a prolonged dip in market as it is about bubbles. We monitor and review the performance daily in order to assess the health of the market,” she added.

Sugathadasa opined that the current bearish run could be due to several reasons. One was that people are comparing it with the bull run of mid last year when prices perhaps may have been artificially high. In that context current valuations may be realistic, she said, adding that investors needed to adjust themselves in tandem with market dynamics.

“Every market has its ups and downs and none has an infinite boom time,” Sugathadasa quipped. Various private placements and successive IPOs sapping up liquidity was also cited as another reason for the bearish run.

However, the SEC Chief was confident that the stock market would rebound and remain dynamic with stability.

She said that fresh amendments to the SEC Act would be fast-tracked with the help of a World Bank Consultant, who would be coming on board soon. These amendments will empower the SEC to implement the demutualisation of the Colombo Stock Exchange, regulate commodities exchange as well as derivatives and take civil action against offenders.

“We are also keen to expand the investor base, encourage more listings and further develop the capital markets, thereby making a greater contribution to Sri Lanka’s socioeconomic growth,” the SEC Chairperson emphasised, adding that the entire commission and staff were keen to end 2011 on a high note.

Stock market rebounds

The Colombo stock market yesterday bounced back to post all-round improvement.

The benchmark ASI rose by 0.3% and MPI more sharply by 0.8%, whilst turnover was a high Rs. 2.03 billion.

After gaining on Monday, the bourse dipped on Tuesday and Wednesday amidst relatively low turnover. Investors and brokers have welcomed yesterday’s gain. However, foreign investors were net sellers to the tune of Rs. 123 million.

“Buying interest on second tier counters pushed the indices marginally higher, while foreign participation remained negative,” John Keells Stock Brokers said.

“Both indices continued to stay green throughout the day while the MPI gained higher than the ASPI, helped by JKH. Retail interest was witnessed with the price increase in a number of low value counters,” opined NDB Stockbrokers.

The Banking, Finance & Insurance sector was the main contributor to the market turnover (mainly due to Nation Lanka, Central Finance and Commercial Bank), while the sector index increased 0.64%. Nation Lanka was the main contributor to the market turnover. The share price increased by Rs. 1.60 (9.14%) and closed at Rs. 19.30.

Following the announcement of a proposed subdivision which will be issued on the basis of 2 shares for 1 share held increasing the number of shares in issue from 15 million to 30 million, Tea Small Holder Factories’ share price increased by 14.86%.