Listed entities to hit 300 mark

by Lalin Fernandopulle

The Colombo Stock Exchange (CSE) hopes to have around 300 listed entities this year which is an indication of the growth of corporate interest in investing in the capital market, CSE, Head of Market Development, Niroshan Wijesundere said on the sidelines of the launch of the Annual Report 2014 and the strategic plan of the CSE last week.

Arpico Finance and Sinha Hospitals became public listed companies this year taking the number of listed corporates in the CSE to 297. “Corporates have shown interest in listing in the stock exchange having seen the growth achieved by the CSE during the past two years reaching milestones.

We envisage more retail and institutional investors listing with the mega international and local road shows to be held this year,” he said.

The CSE will conduct two international road-shows in London and Luxembourg and locally in Matara, Kandy and Jaffna this year.

The CSE will replicate its international road-shows locally with the support of listed companies enabling interaction with retail and institutional investors in villages.

The All Share Price Index crossed the 7,500 mark in November last year ending the year with a growth of 23.4 percent yoy compared to 4.8 percent achieved in the previous year. Meanwhile the S&P SL 20 Index surpassed the 4,000 mark for the first time since its launch. In its other achievements the CSE recorded a market capitalisation of Rs. 3.1 trillion last year.

The daily average turnover increased 71 percent over the previous year from Rs. 828 million in 2013 to Rs. 1.4 billion in 2014. Most notably the Exchange recorded the highest foreign investment inflow of Rs. 104.7 billion to the equity secondary market as at December 31, 2014.

The CSE’s three-year strategic plan to be launched this year will lay the groundwork for a market offering multi asset classes, full-fledged market makers, an increase in turnover velocity, reclassifying the CSE as an emerging market from a frontier market and transforming the Exchange to a demutualised Exchange.

In a groundbreaking move to ensure a secure environment, the CSE will introduce a Central Counter Party (CCP) system with the setting up of a clearing house, thereby setting the stage for the introduction of new and innovative financial products.

CSE Chairman Vajira Kulatilaka said the CSE targets a market capitalisation of US $ 50 billion. A Clearing House as a CCP is vital to ensure settlement of funds and securities traded in a capital market.

The three-day risk exposure for fund settlement will be mitigated with the Delivery versus Payment system which will be fostered through the CCP.

“The CSE can be proud of its achievements during its 30-year operation but it could not maintain the momentum gained during the 1990s. The Exchange should go in for innovation. We will create a vibrant Exchange with strong equity alternatives, derivatives and a stable debt market offering investors a range of options to diversify their portfolios,” Kulatilaka said. With regard to steps taken by the CSE to nab culprits of pump and dump activities from 2009-2010, Kulatilaka said that the CSE has limited regulatory powers and added that it presents cases of insider trading and pump and dump activities to the Securities and Exchange Commission.

Experts are of the view that the current SEC Act has loopholes for stock market fraudsters to getaway and that it should be amended urgently to curb fraudulent activities.

SEC sources said investigations are going on and that information on the nature of the fraudulent deals cannot be divulged. “To create a robust market and improve investor confidence the CSE will revise its regulatory framework to introduce more safeguards benefiting investors and listed companies,” he said.

“The Exchange will introduce more monitoring mechanisms to ensure attempts made to create a false market are identified and reported,” the CSE Chairman said.

The CSE will revise its listing rules this year to ensure a more effective and efficient listing process that serves the need of all stakeholders.A new trading board in the form of a BOI Board will be launched this year to boost foreign direct investment.