Two to tango!

• SEC, CSE finally think alike and to act together following agreement on 10-point capital market development roadmap under the aegis of Budget 2013 proposed Presidential Task Force

In a welcome development, the Securities and Exchange Commission (SEC) and the Colombo Stock Exchange (CSE) have agreed on a common agenda and will work together in developing the capital market.

Following several rounds of discussions and sharing respective priorities lists, a 10-point agenda has been finalised and this will be taken forward under the aegis of Budget 2013 proposed Presidential Task Force on Capital Market Development.

The 10 points are  1) Expedite SEC Act amendments to be in line with IOSCO standards; 2) Encourage more listings (public and private) to increase liquidity and market capitalisation; 3) Attract new funds (foreign and local) to broad base the market; 4) Develop infrastructure (trading, back office systems, etc.) to improve efficiency; 5) Develop the corporate debt market; 6) Intensify education and awareness in order to have an educated investor base and to enhance investor confidence; 7) Develop unit trusts industry as a conduit to mobilise savings of the less-sophisticated small investors; 8) Strengthen risk management systems (RMS, CCP, DVP  risk-based capital/supervision, broker back office); 9) Develop new products (derivatives, ETF, commodities) to broad base the product range and 10) Demutualise the CSE from a member-owned company to a company owned by shareholders in line with international standards.

At a groundbreaking first-ever joint platform of all key capital market stakeholders to meet the press, SEC Chairman Dr. Nalaka Godahewa and CSE Chairman Krishan Balendra said the agreement and joint initiative would help create a robust capital market in the country in the medium to long term. The fresh thrust was agreed upon prior to the presentation of Budget 2013, which had seven proposals to boost the capital market, which is currently dominated by equities.

“After a series of internal and external consultations, we have now identified 10 key tasks or projects that need to be carried out over the next three years. We believe these initiatives are essential to address the current limitations in developing the overall capital market. These initiatives together with the Budget proposals will facilitate to create greater vibrancy in the capital market,” SEC Chief Dr. Godahewa told journalists yesterday.

“When we came up with our priorities which numbered around 12, we realised those were almost identical to SEC’s list. A common program has been agreed upon and this makes all of us very focused,” CSE Chief Balendra said.

He said joint committees comprising SEC, CSE Directors, and key stakeholders will work on the common agenda, with Key Performance Indicators (KPIs) and timelines set for implementation under the aegis of the proposed Presidential Task Force on capital market.

Godahewa said this course of action would ensure successful implementation as well as necessary support at Government and policymaking level. He noted that some of the items in the agenda weren’t new but had been under discussion and refinement for some time now.

The joint stakeholder briefing saw presentations by Colombo Stock Brokers Association President Dimuthu Abeysekara, Unit Trust Association President P. Asokan, and Margin Providers Association President Ajith Fernando. SEC Acting Director General Prof. Hareendra Dissabandara and CSE CEO Surekha Sellahewa were also present.

CSBA President Dimuthu Abeysekera said that although he had been in capital markets for over 20 years, it was the first time he had witnessed all stakeholders coming on to a common platform to brief the media and hence he welcomed the initiative.

The officials provided responses to media queries over the effectiveness, credibility, independence, and process of regulation, investigation and supervision, market issues such as manipulation and loss of investor confidence, especially at retail level, as well as investor complaints on brokers.

The officials also explained the importance of a more inclusive and expansive capital market development for the benefit of a larger population, the private sector, and the economy, the role of media, historic and recent performance of the Colombo stock market, and the listed debt market.

Meanwhile, the Colombo stock market yesterday ended weaker for the second session, pulled down by conglomerate John Keells Holdings, a day ahead of the Central Bank’s monetary policy decision, which analysts expect to be held steady.

The Colombo Stock Exchange’s main index edged down 0.3%, or 16.71 points, to end at 5,558.25.

The Central Bank is expected to freeze the key policy rates on Friday at three-year highs. Investors have been shifting to fixed deposits from equities due to high interest rates, stockbrokers say.

Shares in John Keells Holdings fell 8.60% to Rs. 215.80 a share.

The yield on the 364-day T-bill gained eight basis points to 12.73% at a weekly auction, rising for the fifth consecutive week, Central Bank data showed.

Foreigners bought a net Rs. 336.5 million ($ 2.58 million) worth of shares, extending the net foreign inflow this year to Rs. 35.4 billion. Turnover was Rs. 562.4 million, well below this year’s daily average of Rs. 901.3 million.

The rupee closed firmer at 129.85/90 to the dollar compared with Wednesday’s close of 130.20/30 as banks sold dollars amid lack of importer dollar demand, dealers said.