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| Sunday, 6 April 2003 |
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| News Business Features Editorial
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Debt trading to commence this year - CSE The Colombo Stock Exchange (CSE) will launch the Debt Trading System (DTS) to transact both corporate debt and beneficial interest in government securities in mid-2003 as the DTS cannot be left to idle. It will enhance investor welfare and reduce CSE's dependence on the equity market while making interest rates more market determined. The CSE is also certain that the small and illiquid debt market would also develop as a result, former Chairman CSE Ajit Gunewardene said in the 2002 annual report. The CSE also intends to expand its activities in the Central Province by setting up its second branch in Kandy this year while Jaffna too will follow suit once communication and other infrastructure facilities are sufficiently developed. Gunewardene also stated that CSE welcomes the pending pension fund reforms which would release more funds to the capital market. However, he cautioned that a small and illiquid market such as ours would not be able to absorb these funds. "Therefore, listing privatised companies becomes even more imperative. If not, these funds are likely to be invested abroad, depriving local companies of the much needed capital to fund investments." The CSE's efforts to diversify its activities into trading of government securities has been frustrating due to the delay in regulatory approval being granted for its proposed primary dealer subsidiary. The CSE applied for a primary dealer licence to gain access to the primary market for government securities at competitive rates. "We understand that the Reserve Bank of India permits non-primary dealers access to the primary market. The NSE in India has developed a retail market for government securities using this window." In Sri Lanka, the authorities have limited their initiatives to a network of traders. This constrains market development. As experience has shown, both brokers and dealers are necessary to develop a market. The CSE initiative will provide for brokers to participate in government securities, thus expanding the reach. According to the review of CSE Director General Hiran Mendis, the market rose to new heights during last year, making it stand out in the short history of the CSE. The annual turnover exceeded Rs 30.5 billion while net foreign purchases were Rs 2.4 billion. There was a marked increase in investments too. Market capitalisation at the end of the year was Rs 162 billion, the highest achieved since March 1994 when the All Share Price Index reached a peak of 1378.8 points. The increase is attributed to a growth in prices. |
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