13th Capital Markets Conference puts spotlight on “New Markets, Fresh Initiatives”

The 13th Capital Markets Conference convened in Colombo under the theme “New Markets, Fresh Initiatives,” held against a backdrop of escalating geopolitical tensions and trade disputes. The event brought together industry leaders to examine how Sri Lanka’s financial markets are adapting with renewed optimism, marked by breakthroughs such as the introduction of sustainable bonds and Sukuk. Despite global uncertainty, discussions highlighted the resilience and evolving sophistication of the country’s capital market landscape.

Delivering the keynote address, Colombo Stock Exchange CEO Rajeeva Bandaranaike, provided a comprehensive overview of the structural and strategic challenges facing Sri Lanka’s capital markets, while outlining the proactive measures being taken to address them. He highlighted persistent issues such as limited product diversity, shallow market liquidity, low IPO activity, and the lack of broad-based investor participation. Notable progress was made in recent years with the introduction of sustainable bonds, social bonds, Sukuk (Islamic bonds), perpetual and infrastructure bonds, and frameworks for stock borrowing and lending. He also announced plans to establish a derivatives exchange in partnership with India’s NCDEX. He stressed the importance of foreign investment, referencing findings from global asset managers on what deters or attracts capital to frontier markets. He concluded with a call for greater innovation, regulatory balance, and collaboration across market participants to ensure sustainable and inclusive financial development. A point worth mentioning was that this year, the CSE celebrates 40 years since its incorporation in 1985.

In his One on One Interview conducted by Mirror Business – Business Editor Shabiya Ali Ahlam, Prof. Razeen Sally, a renowned economist and expert on global trade policy, shared critical insights on Sri Lanka’s economic resilience amid shifting global dynamics. Highlighting the IMF’s prediction of a 2.5% slowdown in global growth, notwithstanding any new shocks, he stressed on the fragility of the global context, noting how COVID widened the gap between developing and developed nations with further divergence expected. He warned that the country remains vulnerable as the world moves deeper into an era of protectionism, external shocks, and great power rivalry. He also underscored Sri Lanka’s missed opportunities during past liberalisation, criticised the lack of clear reform strategy today, and cautioned that simply relying on IMF measures or bilateral negotiations would be insufficient. He highlighted three scenarios for Sri Lanka’s future, from passive IMF compliance to structural reform and regional integration, stressing that without bold, strategic reforms, beyond short-term tactics and regulatory compliance, the nation risks another economic crisis. He also touched on shifting global power dynamics, noting that while the US dollar remains dominant, China’s growing influence, despite internal constraints such as weak consumption and a muzzled private sector, has the potential to pose a serious long-term counterweight in trade and geopolitics.

A CEO roundtable was moderated by Innovation Quotient CEO Mafaz Ishaq, who was joined by CSE CEO Designate Vindhya Jayasekera, HNB Investment Bank MD and Group CEO Ray Abeywardena, and NDB Investment Bank CEO Harshana Jayaweera. The panel echoed Prof. Razeen Sally’s concerns for the global economy and the impact of the US tariffs on Sri Lankan exports, urging the need for proactive strategies to mitigate short and medium-term risks. Positioning Sri Lanka as a regional hub for logistics and energy, and creating dedicated export protection funds (following the lead of other countries in similar positions) were suggested. The transformative role of capital markets in economic growth and efficient capital formation was discussed, with liquidity and broader participation from issuers and investors highlighted as priorities to be addressed in order to catalyse the impact of capital markets. Conversation also revolved around the potential of AI in improving investment decision-making and simulating market scenarios, highlighting an opportunity for Sri Lanka. The consensus across the panel was that structural reforms beyond transactional fixes, along with improved transparency and better leveraging of capital markets, are vital to supporting sustainable economic resilience.

The second panel discussion, moderated by RIU Founder and CEO Roshan Madawela, convened under the topic “New Initiatives”, fostering discussion on recent products such as sustainable bonds and ESG financing, and the possibility of attracting foreign investment into Sri Lankan capital markets. CSE Senior Vice President, Commercial Punyamalai Saparamadu, KPMG Principal, Head of Tax and Regulatory Suresh R I Perera, and Senfin Securities CEO Dasun Perera served as the session’s panellists. The session saw discussions on why the progression of REITs in Sri Lanka has been slow, also noting that consideration of the timeline of India’s REITs from being gazetted to issuance suggests that Sri Lanka has time. The panel discussed the debut of green bonds in 2024, noting the energy, blue economy, and eco-tourism sectors as industries that offer scope for further issuances. A notable achievement that was discussed was the issuance of the first Sukuk in Sri Lanka, which is expected to be a catalyst for further issuances. The panel agreed that excessive regulation has hindered market growth, stressing the need for reforms to uncover potential, and in particular, highlighted how Islamic Capital Markets could play a key role in facilitating foreign direct investment into Sri Lanka.

The final panel was on Islamic Capital Markets, which was very relevant in the context of the recent Sukuk issuance by Vidullanka PLC, which represents the first ever listed Sukuk issuance in Sri Lanka. The session was moderated by Adl Capital MD Ishrat Rauff, which was the Joint Arranger of the Sukuk along with NDB Investment Bank. In fact, NDBIB SVP Eshani Thenuwara was one of the panellists along with Senfin Asset Management CEO Jeevan Sukumaran and Vidullanka PLC Group CFO Mafaz Ansar. Whilst Jeevan spoke about his experience with Shariah-compliant Unit Trusts and how these were just starting to gain traction, most of the discussion centred around Sukuk, which was reflective of the general excitement evinced from all quarters on this landmark issuance (please also see inset on Sukuk and its potential impact on Sri Lankan Capital Markets.)

After the conference concluded, delegates participated in an engaging quiz post lunch, followed by a comprehensive program on Sukuk presented by Lead Knowledge Partner Adl Capital Ltd.