Oct 142013
Separate board to list BoI firms
Both the Securities and Exchange Commission (SEC) and Colombo Stock Exchange (CSE) are currently working on a project to lure the Board of Investment (BoI) companies into the stock market in a bid to increase the number of listings and market liquidity, according to a top capital market official.

SEC Chairman Dr. Nalaka Godahewa told last week that a separate board would be introduced in addition to the existing Main Board and the Diri Savi Board to facilitate the process.

“We have agreed to allow the BoI companies to list on a separate board without having to wait three years to list on the Main Board,” he told a business forum organised by the CSE targeting potential new listings.

Currently, a company seeking a listing on the CSE, irrespective of being a BoI or otherwise, will have to follow the existing listing rules and thus, the BoI firms do not enjoy any special treatment.

Meanwhile, CSE Assistant General Manager for Regulatory Affairs Renuke Wijewardena speaking to Mirror Business said although this is a new development, they have not finalized any rules as yet.

“This is a new thing. But we have not yet finalized any rules so far,” he remarked.

However, to this end, a policy paper has already been prepared and both the SEC and CSE have extensively discussed them.

“These policy papers have been extensively discussed both at the CSE and SEC to address all possible concerns,” Dr. Godahewa added.

According to the BoI, there are about 1,700 BoI companies operating in Sri Lanka but did not have figures as to how many are already listed on the CSE.

“But I believe most, if not all leading Sri Lankan companies such as John Keells Holdings have some of their business units established under the BoI and most of these companies are listed,” said BoI Director Media and Publicity Dilip S. Samarasinghe.

Both the SEC and CSE are currently exploring all available options to lure more companies to go public in their quest to increase the number of listed entities to 400 by 2016 from the existing 288 and to improve the market capitalization to at least 50 percent of the gross domestic product (GDP) by the end of 2016. (DK)

Aug 222013
CSE releases market listing guide to encourage investment
The Colombo Stock Exchange (CSE) yesterday launched a publication titled ‘A guide to listing on the CSE’, in a bid to raise awareness on equity listing and corporate debt securities.

This issuer relations guide has been initiated under the Securities and Exchange Commission of Sri Lanka’s (SEC) project eight, one of the ten key SEC projects.

Some areas covered under this publication include; considerations when planning for an IPO, the IPO process of a company seeking a listing, along with timing the market, the parties involved in an IPO, timelines involved and the regulatory and legal framework governing these areas.

It also outlines the opportunities and potential benefits for a company seeking a listing on the exchange, including a list of the concessions introduced by the government’s 2013 budget.

“The CSE wants to increase new listings and this is an initiative taken in this regard.

This publication will benefit companies which are planning to list and will also provide valuable insights to those who have not considered listing yet,” CSE Chairman, Krishan Balendra said.

“One of the concerns we have right now is the lack of IPOs coming in to the market. The main reason for this is that most companies are now looking at debt as a solution for raising capital,” SEC Chairman, Dr. Nalaka Godahewa stated on the sidelines of the launch.

However, Godahewa noted that when the equity market picks up, more IPOs will eventually start coming. “To achieve that we will have to do more work like educating people about the processes involved, the benefits, regulations etc. which is a continuous process. This launch is a step in that direction,” he said.

Aug 212013
SEC seeks rule change to lure pension funds to debt market
While steps are being taken towards facilitating US dollar bonds issuances by Sri Lankan corporates, capital market regulator is currently exploring the possibilities in getting the restriction on large pension funds in investing in the country’s corporate debt market, relaxed.

According to the Securities and Exchange Commission (SEC), the rationale behind this initiative is to encourage longterm fund investments in to the corporate bond market.

“We are currently in discussions with the Treasury, Central Bank, Insurance Board etc. to relax these restrictions and allow more devolvement from these funds,” SEC Chairman Dr. Nalaka Godahewa.
Currently, the investment guidelines of long term pension funds such as insurance funds, Employees’ Provident Fund, Employee Trust Fund etc. do not permit large investments in corporate bonds.

Participating in a panel discussion on the ‘Diversification Opportunities for Financing for Sri Lankan issuers’, organized by Standard & Poor’s last week, Dr. Godahewa observed the absence of an active secondary market in Sri Lanka as an impediment for the corporate bond market to take off.

“One important thing to develop the corporate bond market is to have an active secondary market. To do that, one thing we are lacking in Sri Lanka is the market makers,” he observed. Mirror Business previously pointed out that corporate debt is highly concentrated among a very few large institutional investors such as banks and large corporates.

And it was also highlighted that predominantly due to the lack of liquidity, there is virtually zero secondary trading of these listed corporate debts.

However, SEC has proposed to bring down the minimum subscription of corporate bonds to Rs. 10,000 from the current high of Rs.1 million or so in order to bring active retail participation.(DK)

Aug 202013
Sri Lanka mulls corporate dollar bonds: SEC Chief
In a bid to open Sri Lanka’s corporate debt market to foreign investors, country’s capital market regulator, the Securities and Exchange Commission (SEC) is currently in discussions with the Central Bank to facilitate the issuing of foreign-denominated debt by the corporate sector, according to SEC Chief.

“We are currently discussing with the Central Bank to see how we can allow our companies to issue dollar bonds,” SEC Chairman, Dr. Nalaka Godahewa said.

This i nitiative will be further facilitated through bringing in trading platforms such as Bloomberg/ Reuters because foreign investors prefer to invest via a custodian bank or through Bloomberg/ Reuter’s platforms.

“We are going to allow Bloomberg/ Reuter’s etc. to bring their trading platforms to the Colombo Stock Exchange’s (CSE) system, so that foreigners can easily operate because they prefer them,” he further said.

At present, bond trading is carried out through the Automated Trading System (ATS) at CSE.

The proposal to allow local corporates to issue US dollar-denominated bonds is incorporated under SEC’s eighteen policy decisions to develop the Sri Lankan corporate bond market. For this purpose, a consultation paper has already been uploaded in SEC’s website seeking public comments.

When asked whether the Sri Lankan citizens and corporates will also be allowed to buy these dollar bonds, Dr. Godahewa said that it was open for discussion and still no concrete decision been made in that respect.

Meanwhile, the new NDB Chief, Rajendra Theagarajah proposed the SEC to consider the possibility of opening the rupee-denominated debt to foreigners.

“Perhaps you could also consider during your consultations, whether Sri Lankan corporates and the banks can actually raise and list rupee-denominated debt in Sri Lanka for foreigners.

If we can get our payment and settlement system conducive, I think this will also be a window for discussion,” Theagarajah noted.

According to Dr. Godahewa, during the last six months, there have been 10 debenture issues raising Rs.24 billion, which is more than the total raised through all the Initial Public Offerings combined during the last 3 years.

Jul 112013
Renminbi fund looking at Lankan private and listed equity
A renminby denominated Chinese fund which has access to onshore Chinese credit market has explored opportunities in investing in private and listed equity in Sri Lanka.

A brief statement by the Securities and Exchange Commission said officials from China Highland Capital Management (HCM) recently paid a courtesy call on the officials of the Securities and Exchange Commission of Sri Lanka (SEC) and the Colombo Stock Exchange (CSE).  

“The visit was made to explore the possibilities of investing in private equity, listed equity and the debt market in Sri Lanka and another country in the Asian region,” the statement said.

The delegation from the Highland Fund included Randy Xu, Director, Daniel Zhou, Managing Partner, Danny He, Partner.  

The officials of the SEC and CSE comprised of Dr. Nalaka Godahewa, Chairman, SEC, Lolitha Abeysinghe, Commission Member, SEC, Dhammika Perera, Deputy Director General/ Officer- in- Charge SEC and Krishan Balendra, Chairman, CSE.

HCM is incorporated in Yunnan and has been raising RMB capital from financial institutions, state owned enterprises and leading domestic organizations in China.  

HCM’s investment strategy principally focuses on Asia and targets firms that are positioned to benefit from growing Chinese demand. Key sectors of focus include tourism and leisure, industrial and commercial real estate, financial institutions, agriculture and natural resources.

Jul 012013
SEC to hold ‘Investment Day’ to educate public
The Securities and Exchange Commission of Sri Lanka (SEC) in its endeavour to develop an efficient and effective capital market has organized “Investment Day 2013” at the Sri Lanka Exhibition and Convention Centre on July 6 (from 9.00 a.m. to 5.00 p.m.) under the auspices of Economic Development Minister Basil Rajapaksa.

The aim of this event is to provide knowledge and guidance on investing in the capital market and thereby create a shareholding democracy in the country. The SEC is of the view that the investing public should have the basic knowledge to invest in the capital market and is therefore committed to impart knowledge and awareness to existing and potential investors.

Over the last 12 months, the Colombo Stock Exchange has recorded a growth of 30 percent whilst the annual average return of the stock market over the last five years has been 46%. Over the last few months the stock market has grown significantly as a result of a decline in market interest rates. Many people are keen to invest in the market but lack proper knowledge to do so. “Investment Day 2013” will serve as a good platform for investors to obtain knowledge on investing in the capital market. Furthermore, less sophisticated investors will have the ability to pursue options of investing in unit trusts.

With the intention of developing the capital market the SEC formulated a Capital Market Master Plan in November last year. This Plan comprises of 10 key strategies and two of them are aimed at developing the unit trust industry and enhancing investor education. “Investment Day 2013” is expected to foster greater investor awareness on the investment opportunities available in the capital market. The event will assist potential investors to open accounts to transact in shares and unit trusts and will feature prominent professionals from the securities industry, who will address the gathering on a wide spectrum of topics throughout the day, ranging from benefits of investing in the stock market, risks associated with investing in the market and how to mitigate them and investing in the debt market in all three languages. The lectures will be conducted in an easy to understand manner to enable first time investors to derive the full benefit of the “Investment Day 2013” and be informed investors.

One of the main attributes of the event would be that participants will be able to meet the entire capital market including the Colombo Stock Exchange, Stock Broking firms, Investment Managers, Margin Providers, Listed Companies and Unit Trust Management Companies under one roof. These institutions will exhibit more than 60 stalls at the Investment Day. Investors will also be able to witness the launch of two books on investing in the capital market and obtain research reports and free brochures on investing in shares and unit trusts. Furthermore, they will get the opportunity to watch video documentaries in all three languages on investing in the capital market and win opportunities to invest in the stock market free of cost. Entrance to the Investment Day 2013 will be free-of-charge.

Jun 192013
New SEC Act for Cabinet approval next month
The new Securities and Exchange Commission (SEC) Act is now finalized and the SEC Commission will formally approve the amendments proposed within two weeks before it will be sent for Cabinet approval next month, the SEC Chairman said.

“Once the Cabinet approval is given, it will be sent to the Legal Draftsman. But how long it will take with the Legal Draftsman is beyond the SEC’s control. But hopefully, within six months things will be finalized in order to enact the new legislation,” SEC Chairman Dr. Nalaka Godahewa confided.

The new act will provide for the all-time licencing of demutualised stock exchanges, derivative exchanges, clearing houses and central depositories among other initiatives required for a robust legal framework to the SEC to regulate the capital market.

Speaking of the demutualization of the Colombo Stock Exchange ( CSE), another highest priority in the SEC’s agenda, Dr. Godahewa said, although the management of any number of demutualised stock exchanges would be provided through the new SEC Act, the demutualization process is yet to be determined by the CSE.

“There are two things here. One is the legislation permitting the demutualising of the CSE. This needs to be determined by the CSE. The next is the management of such a demutualized exchange. This will be provided by the new act,” he explained.

Another important provision under the new SEC Act is that it empowers the SEC to institute civil sanctions and administrative actions against capital market offenders. Under existing provisions, legal action against the perpetrators can only be taken under the Criminal Law.

Meanwhile, a number of provisions have also been included to enhance the protection of investors including whistle blow protection and powers to protect investors’ assets.

In addition, corporate finance advisors, financial planners, analysts, derivative brokers and dealers will be brought under the purview of the SEC under the new act.

Further, the jurisdiction of the SEC will be extended in respect of companies and market intermediaries making or advising on the offering of debentures to the public, in order to provide an impetus to develop the corporate bond market in Sri Lanka.

Feb 142013
SEC launches book to enhance investor education

The author of the book, Tushara Jayaratne handing over the first copy to Minister Sarath Amunugama in the presence of SEC Chairman Nalaka Godahewa and Acting Director General Hareendra Dissabandara

The Securities and Exchange Commission of Sri Lanka (SEC) yesterday launched a book titled ‘Ayojanayata Mulapuramu’ with a view to enhance knowledge in investing in the capital market of Sri Lanka.

The book launch was held at the SEC auditorium under the patronage of Dr. Sarath Amunugama, Senior Minister of International Monetary Cooperation and Deputy Minister of Finance.

The SEC has a dual mandate of regulating and developing the capital market of Sri Lanka and this publication will undoubtedly give impetus towards developing the capital market.

There has been a significant increase in domestic investor participation with the growth of the capital market and the SEC is in the view that this book will assist investors to obtain a proper understanding of the various aspects of investing in the capital market.

Furthermore, this publication includes practical and useful topics, i.e. factors to be considered before investing in the stock market, step-bystep process of investing in stocks and unit trusts, common mistakes made by investors when investing in the capital market and how to select stocks.

At present, there is a dearth of books written in Sinhala for investors on investing in the capital market and this prompted the SEC to publish ‘Ayojanayata Mulapuramu’ based on the article series published in the Lankadeepa newspaper.

The book is written by Assistant Director, External Relations and Market Development of the SEC, Tushara Jayaratne.

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