Unions, CB discuss EPF investments
View(s):Amidst the doom and gloom in the country, there was some welcome news for Colombo’s stock market. The authorities are close to winning the unions over in the Employees’ Provident Fund (EPF) continued investment in the stock market, after a meeting on Wednesday between unions, affiliated to the National Labour Advisory Council, and Central Bank (CB) officials.
The CB team was led by Governor Dr. Indrajit Coomaraswamy and included deputy governors while the unions were led by JVP-affiliated Inter Company Employees Union President Wasantha Samarasinghe, which had requested the meeting to discuss the EPF vis-a-vis share market investments.
“It was a productive and positive meeting in the sense that this is the first time a Central Bank Governor has met the unions and clearly explained EPF investments,” Mr. Samarasinghe told the Business Times.
The EPF invests mostly in government securities, a small percentage in the share market and fixed deposits in banks. During 2010-2013, the Fund drew widespread criticism after investments in many loss-making companies in the stock market during the infamous pump-and-dump trades. In the past few years, new investments in the stock markets have been suspended owing to the dispute while stock market officials have urged the authorities to reconsider the suspension.
Industry officials welcomed the discussion. “The EPF must come back to the market as valuations are extremely attractive and there can be strict guidelines issued on investments for e.g. they can only invest in the S&P Top 20, etc,” said Ray Abeywardena, President Colombo Stock Brokers Association.
Mr. Samarasinghe said they were opposed to increasing the current portfolio of investments which is 4.23 per cent of total EPF investments to 8.5 per cent – without proper safeguards.
On the positive side the CB promised the unions to send them within two weeks the portfolio of EPF investments in the stock market while holding a meeting every six months with the unions as an ongoing discussion.
It was agreed that investment guidelines on EPF investments would be publicised on the CB website as a measure of transparency.
It was also revealed that so far the EPF has invested Rs. 84 billion in the stock market. CB officials had also said they were unaware or not officially informed of a proposal through the Asian Development Bank to increase EPF investments in the stock market.
Palitha Athukorala, President of the National Union of Seafarers Sri Lanka, also present at the discussion, described it as a positive meeting adding that while many unionists expressed confidence in the integrity of the Governor, they were “worried about people at the top (government politicians).”
He quoted the Governor as saying that they need to increase EPF investments as 83 per cent by law is invested in government securities while there is a limit to investing in fixed deposits in banks as that leads to excess cash in banks and inflationary trends.
“Speaking about transparent measures, the governor said special measures have been taken in which no mobile phones are allowed into the dealing room which also has CCTV,” Mr Athukorala said, adding that the authorities seem to have a convincing argument to invest more in the stock market.
It was also disclosed that before any EPF investment is made in the stock market, a research paper would be presented internally on the reasons to invest. The EPF is one of the largest funds in Asia.