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| Sunday, 6 October 2002 |
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| News Business Features Editorial
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Attracting more domestic institutional investors to stock market Developing corporate governance standards, attracting quality companies to list on the Colombo Stock Exchange (CSE) and the gradual release of captive funds to the market are priorities to develop domestic institutional investor participation. Foreign investors dominated purchases on the Colombo bourse over the past 10 years while the level of participation of domestic institutional investors was negligible. Most domestic institutions invested a bulk of their funds in government securities, states a report issued by the Sri Lanka Association of Securities and Investment Analysts (SLASIA). It is generally believed that the development of the institutional investor base, especially the long-term investor base, is having a positive impact on the development of the capital market. The collective savings institutes fall under two categories - specialised investments and contractual savings institutions. Investors structure investment portfolios to match their liabilities. Therefore, these institutional investor investment portfolios would have a great tilt (shift) towards short-term assets such as short-term bank deposits and treasury bills. A host of recommendations are listed for the development of institutional investors. However, there are two overriding issues which, if addressed, could provide an automatic stimulus to the capital markets. The first issue is the fiscal deficit and all governments need to understand the dangers of crowding out of the private sector if deficits of this magnitude persist. The impact on development of the financial markets is also obvious. The second issue is the lack of quality investments for passive investors. The CSE can boast of a handful of investments that could be considered safe for passive investors, local or foreign. SLASIA last week released three research papers dealing with 'The Domestic Institutional Investor', 'Relationship between the Stock Market and the Sri Lankan Economy' and 'Debt and Equity Future Prospects'. The papers were done by Rajive Casie Chetty, Dr Priyal Perera and Chanaka H. Wickramasuriya, and Revan P. Wickramasuriya respectively.The sponsors of the research papers were Eagle Insurance, Public Enterprise Reform Commission and First Capital Treasuries. The research papers were released as one document at the Annual General Meeting of SLASIA. The new president of the association is Managing Director and CEO of Sampath Bank Anil Amarasuriya while the outgoing president is Ranjit Fernando. |
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