Listing SOEs will be a game changer next year
File picture of Finance Minister Ravi Karunanayake, Prime Minister Ranil Wickremesinghe and former Ceylon Chamber of Commerce Chairman Suresh Shah at the Chamber’s 2015 Economic Summit.
The signals for Sri Lanka’s stock market for the next quarter in 2016 range from confusing to hopeful, according to industry analysts.
They say that while the famous capital market investor George Soros, slated to be in Sri Lanka in early January, and the setting up of the Megapolis in two months will augur well for the capital market, the possible currency devaluation along with foreign / High Net Worth Individuals (HNWI) boycotting the Colombo Stock Exchange (CSE) will spell negativity.
The exchange rate is under pressure due to a strong dollar and capital outflows and the Central Bank (CB) is likely to prop the rates up, which will see outflows from the CSE, according to stockbrokers. However, according to some, the ‘real game changer’ will be listing the State Owned Enterprises (SOEs) as promised in the recent budget. It was announced that the government is keen to streamline its portfolio of investments and will therefore exit partially or fully from those non-strategic investments in Lanka Hospitals, Hotel Developers PLC (Colombo Hilton), Hyatt Residencies, Waters Edge, Grand Oriental Hotel, Ceylinco Hospital and Mobitel by listing such investments in the CSE during 2016.
There will be a paradigm shift if the SOEs are listed,” an analyst said, noting that it will be like what Dialog did to the Colombo Stock Exchange (CSE), 10 years ago. The Colombo bourse’s largest initial public offering (IPO) at the time, Dialog Telekom was pursued by over 40 leading investment banks and fund managers from around the world.The analyst added that SOEs will do a similar thing to the CSE. “The volumes will be low without foreign participation but if the sentiment is right, I think the market can really move up from domestic activity alone with SOEs coming in.
He said that early next year the CSE will slump before it goes up, which is to be expected with the current trend. If SOEs are listed, it will certainly be a boost to the market.Another analyst pointed out that the HNWI like the EPF have stopped buying and the latter has in fact sold over the past two months, which has dropped the indices. “Over the past two months the EPF has sold some 5 million John Keells Holdings (JKH) shares. For a long term (outlook) pension fund this isn’t so good.”He said that if this is stopped or at least curtailed, traders will start eyeing the CSE more positively.