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| Sunday, 21 July 2002 |
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CSE relaxes rules on member firms The Colombo Stock Exchange (CSE) will permit member firms to diversify business activities while making broker commissions negotiable. "Since the future strategy of the CSE lies in strengthening the competitive position of stockbrokers, we intend to permit member firms of the Exchange to diversify their business activities and concurrently make brokerage commissions negotiable," CSE Chairman Ajith Gunewardene said in the annual report for 2001. As an initial step, the CSE expects to make commissions on Internet trading and day trading negotiable. The Colombo stock market ended the year as one of the best performing markets in the world, whereas paradoxically, the economy recorded its worst performance since independence, said Mr Gunewardene. The All Share Price Index (ASPI) grew by 38.7 per cent and the Milanka Price Index, by 47.6 per cent in 2001. In contrast, the economy contracted by 1.4 per cent, inflation increased to 13 per cent and investment as a percentage of GDP went down to 22 per cent. The fourth quarter saw the market rebound with an unprecedented 53.8 per cent surge in the ASPI. Average daily turnover levels increased from Rs 24 million during the first three quarters to Rs 143 million in the last quarter. The turnaround in the market was due to a change in sentiment and business confidence. The year 2001 was the only year since the inception of the CSE that there had been no initial public offering. One company sought a listing through an introduction. The debt market was relatively more active with seven debenture issues being made by three issuers. Rs 1.5 billion was raised through these debenture issues. Liberalisation and globalisation are inevitable forces that would challenge the current business model of the capital market. They will pose threats especially to small and illiquid markets such as Sri Lanka, he noted. The natural reaction is to seek protection in laws and regulations. In the wake of financial markets, such protection could be detrimental to the industry and service sectors. The CSE is aware of the opportunities and is confident that it could prepare itself to face the challenges by restructuring itself. "We will seek to reposition ourselves from a small liquid equity-based exchange to being an exchange offering diverse products," he said. Privatisation of government-owned business undertakings provide an ideal opportunity for the accelerated development of the market. "Therefore, we urge the Government to treat capital market development as an objective equally important as raising revenue and increasing productivity when considering the privatisation of State-owned enterprises," Mr Gunewardene said. "We are requesting the authorities to consider relaxing some of the restrictions and enable local companies which can borrow in foreign currency to list foreign currency denominated securities in the CSE. An extension of this principle will enable foreign companies to list foreign exchange denominated securities in the CSE," he stated. The CSE will pursue opportunities to promote cross trading and cross listing of securities with other markets. It will help the CSE to position itself as an international exchange and overcome the limitations of size and liquidity. |
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