Trading of dollar denominated securities soon at CSE

By Charumini de Silva

The Colombo Stock Exchange (CSE) has entered into a Memorandum of Understanding (MoU) with the Maldives Stock Exchange to introduce dollar denominated securities in the immediate future.

CSE Chairman Vajira Kulatilaka said last week that it has already signed an MoU with the Maldives Stock Exchange to start listing their companies in Sri Lanka to make Colombo a financial and securities hub for the South Asian region.

Highlighting capital market expansion plans, Kulatilaka said that they expect the state owned enterprises (SOEs) and the non-core businesses to be listed in the CSE.

 “This will broaden the depth of the CSE and also cater to one of the basic needs of a stock exchange: to have a market capitalisation of 60% to the gross domestic product (GDP), resulting in Sri Lanka being more visible to investors across the world,” he said at a ceremony held to mark the CSE’s 30th anniversary on Wednesday (2 December).

Despite the year 2015 being a record breaking year for debt issues, Kulatilaka said it was not sufficient.

“The debt market has to be broadened and debt has to broaden. We have to broaden it further, and infrastructure bond has to be introduced at the CSE very soon,” he added.

However, going forward, the Chairman pointed out, it is important to implement the Central Counter Party (CCP) system in the immediate future to assist the capital market in managing risks as well as to attract more foreign investors to Sri Lanka, noting that it was something that lacks in the CSE.

“I think we need all the support from policymakers to put through the Securities Exchange Commission (SEC) Act to Parliament because that is the legal backbone to all these proposals. We can then implement a lot of these proposals based on the Act,” he added.

Further clarifying his point, Kulatilaka asserted that people fear of derivatives pointing that they are very risky, but with the CCP coming in, the risk will be reduced. 

“With derivatives coming in, it will have positive impacts on agriculture, commodities and the hedging side of it will improve the CSE’s service to investors and commodity issuers,” he explained.

He also commended the proposed SME Board by the 2016 Budget and noted that they would implement it in the near future.