Broadbasing share ownership

Sri Lanka has one of the top performing stock exchanges in the world:

The Colombo Stock Exchange (CSE) has broken all its previous records soon after the Parliamentary elections which gave a resounding mandate to the ruling UPFA. In fact, the bourse is up 21.7 percent so far this year, making it Asia's best-performing market.

Political stability and the prospect of long lasting peace have been the impetus for this landmark achievement. This is a good sign for a country seeking to attract more foreign investments.

But the stock market still seems to be an 'elitist' place, despite the CSE's best efforts to popularize share ownership. Most people even in the cities have little or no idea of what share ownership is all about. This should change if more people are to benefit from the CSE's initiative of reaching out to the people islandwide.

The CSE has opened five branch offices and must be lauded for its initiative of going to the provinces. This gives rural investors a chance to invest in the stock market without coming to Colombo. It has four branches in the Southern (Matara), Central (Kandy), North Western (Kurunegala) and the Western (Negombo) provinces, in addition to the new Jaffna branch opened last week. The CSE should strive to establish branches to cover all nine provinces and attract more provincial companies to enter the listings.

The CSE must begin the drive for share ownership from schools. It should not be limited to students who follow economics and commerce courses, but all students from Grade 8 or 9 should be taught the basics of share ownership and the workings of a stock exchange. The electronic and print media must join this exercise with programs and articles that highlight the importance and benefits of share ownership. Like any other business, it has its inherent risks but the returns too can be spectacular.

Another way of popularizing share ownership is encouraging more provincial companies to enlist on the CSE. This will make them vibrant partners of the national development process and the residents of those areas will also be more likely to invest in such shares. That will broaden the scope of the CSE.

The CSE must be especially commended for establishing a branch in Jaffna, which is experiencing rapid economic growth after the conflict. This will tie in with the Government's Northern Spring program and the revival of economic activities in the region. Six stock brokers have opened offices in the former war zone. The stock brokers will offer clients access to online trading, real-time market information, research reports and investment advice. Indeed, all the services available to investors in Colombo will be available to those in the North.

We are told that the CSE branch will also conduct educational programs to raise awareness about stock trading in the Northern region. This should be emulated by the CSE branches in other provinces as well.

They could perhaps conduct an 'open day' where interested individuals would be allowed to observe the ins and outs of share trading, possibly with a briefing by an expert. This will give them a fair idea of what stock trading entails and how one could enter the business.

It is also important that the opening of the CSE Jaffna branch is given wide publicity in countries such as Canada and Norway which have concentrations of the Tamil Diaspora. Their involvement will be vital to the re-development of the North. Some of them had been misguided and coerced into contributing to the now vanquished Tigers, but now such funds could be diverted to the development of the North, ravaged by three decades of conflict. They should be invited and urged to invest in the CSE Jaffna branch or the main branch.

It will also be important to have businesses from Jaffna enlisted in the CSE as soon as possible. The Diaspora could also fund new ventures in the North. Jaffna has great potential for the expansion of agriculture, food processing, tourism, fisheries and manufacturing industries. The same goes for the other newly liberated towns such as Kilinochchi and Mullaitivu where resettlement and reconstruction are going on apace. The Government is developing these sectors under the Northern Spring program. The export potential to India, a few kilometers away, is another factor.

The recent Jaffna International Trade Fair was a harbinger of things to come. Indian, Sri Lankan and other international companies were present in full force at the fair, demonstrating their commitment to the region. The people of Jaffna were highly enthusiastic about the fair and with the entry of the CSE, they have more positive things to look forward to.

Share ownership should be broad-based with ventures such as these. The CSE and other relevant authorities must stress the fact that it is not only the super rich who can engage in buying and selling stocks. It is - and should be - accessible to all. It is a level playing field. It should be highlighted that one does not need to spend millions of rupees on stock transactions to enter the stock market. Once you are in, it is a matter of time before you trade in stocks like a professional, in consultation with your preferred stock broker. The Government must also encourage more people and companies to enter and invest in the stock market.

The CSE must study the stock markets of other countries to gauge how they have managed to establish a 'stock market culture' where most of the population own shares in various companies. Such models may not suit us in their entirety, but there should be ample lessons for disseminating the message of share ownership. There are many developing countries with highly successful bourses, not only in terms of share volume but also in terms of public participation. That is the ideal scenario that we should aspire to achieve in the medium term through a variety of viable strategies. We should 'start young' as the saying goes to make a share-savvy, economically prosperous nation.