CSE roadmap for expansion | Sunday Observer

CSE roadmap for expansion

6 September, 2020
Dumith Fernando
Dumith Fernando

The Colombo Stock Exchange (CSE) has launched a five-pronged strategy to enhance the attractiveness of the Stock Exchange and make it a leading market for trading in the region, said CSE Chairman Dumith Fernando in an interview with Sunday Observer Business on Friday.

He said the strategic plan backed by the new government with a ministry dedicated to develop the capital market will be a major boost to develop a vibrant market for all investors.

The CSE team met the State Minister of Money, Capital Market and State Enterprise Reforms, Ajith Nivard Cabraal last week for the first time to discuss areas to revive the capital market.

“The discussion focused on areas such as revitalising capital mobilisation and risk management, wealth generation for all citizens and setting up a trusted venue for trading and depository services,” Fernando said. CSE development strategies are centered on re-rating valuations of CSE from being at the bottom of peer markets, attracting new listings to boost liquidity, develop and return the CSE to operating profitably.

The CSE’s price to book valuation which is .9 times is low compared to India’s 2.8 percent, Vietnam’s 1.9 percent and Pakistan’s 1.5 percent.

“We are at the bottom of rating and the question is how do we re rate valuations to rebuild confidence for investors,” the CSE chief said, adding that the current low interest rates will help boost the market.

He said the CSE will engage with the Government to look at obtaining certain incentives and tax treatments.

The CSE will focus on promotion strategies and reviving overseas marketing programs and improve investor relations practices to impart information.

The Stock Exchange aims at attracting large entities to inject more liquidity to the market through larger companies.

“We have developed a survey on impediments to listing in the CSE. We will focus on attracting listings of tech sector firms which are not at a satisfactory level,” Fernando said, adding that the CSE anticipates at least three large companies listing IPOs.

As of April this year the CSE comprised 290 listed entities with a market capitalisation of around Rs. 2,748.10 billion. The number of companies with a market capitalisation of over Rs. 10 billion in the CSE has increased from 44 a decade ago to 53 today and the number of entities with a market cap of over Rs. 50 billion has reduced from 12 to 11 during the corresponding period.

However, the CSE chief is upbeat about the growth of the market with interest rates on a downward trajectory.

“Digitisation is a major component of the expansion drive to get more retail investors on-board,” Fernando said.

Trading activities at the CSE will be digitised from September 17 to offer an efficient service. A digital app will be launched to enable investors to on-board digitally. The app will help investors to operate even during a lockdown scenario. The move will enable telcos to generate customer leads.

The CSE plans to open branches in the Western Province and increase financial literacy. The Stock Exchange will improve trust with key stakeholders such as issuers, investors and the public. The number of referrals from CSE to the Securities and Exchange Commission (SEC) on market surveillance has dropped to 70 percent and client complaints to 70 percent which shows that there is more trust in the market.

“We are currently working with the SEC on setting up an independent client dispute resolution mechanism, the Delivery Versus Payment settlement method to be delivered by the first quarter next year and the Central Counterparty to reduce settlement risk,” Fernando said.

The CSE chief said the CSE has to return to operating profitably and added that new products such as education certificates, gold based products and mortgages as securities will be explored.