Stock market still in the doldrums
The Colombo share market is (stuck at) ‘exactly where it should be’, a top capital market and investment professional opined.
Reasoning out this take on the Colombo Stock Exchange (CSE), National Agency for Public Private Partnership Chairman Thilan Wijesinghe, Chief Guest for the 7th Capital Markets Conference mid this week noted in his keynote address that there are serious shortcomings by ‘all’ stakeholders which propelled the CSE to such a disastrous state.
Stressing that remarks are his own and not in his official capacity, Mr. Wijesinghe placed politicians on top as those ‘responsible’ for the gloom the CSE is now facing. “Policy makers, regulators including stock broking houses, stockbrokers and clients all have serious shortcomings which thrust the capital market to such a state.”
He ranked poor enforcement, poor research, poor ethics by stockbrokers and greedy investors and poor economic growth in that order for the CSE’s failure. He and other panellists during the discussion that ensued agreed that the ‘poor’ sentiment in the CSE is ‘self inflicted’. Mr. Wijesinghe put up some statistics which showed Sri Lanka at the lowest end – only sometimes just behind Bangladesh.
While the stark statistics puts the CSE to shame, shares fell for a third straight session on Tuesday as investors expected a budget vote that will be a litmus test for the political stability of the government led by Prime Minister Ranil Wickremesinghe. The final budget vote is on April 5.
Finance Minister Mangala Samaraweera last week presented the 2019 budget which wasn’t specifically aimed at elections to be held later this year.
Mr. Wijesinghe pointed out the country’s dismal economic growth saying that during the past 5-year period the GDP growth was averaging 4 per cent while during the war it was 5.2 per cent. This, many at the conference agreed, was not a pretty statistic.
He charged that pump and dump between 2010 to 2013 negatively impacted the market sentiment and acknowledged that a Rs. 30 share was pursued till it was Rs. 52 and dumped on the EPF. “Why aren’t stockbrokers being taken to task, I absolutely don’t know!”
He also charged that issuing nine new licences in 2011 was a ‘mistake’ as it effectively cannibalised market share of the existing stockbrokers. “After issuing these you question why there’s pump and dump!”
he said noting that pump and dump was a desperate, yet fraudulent attempt at trying to survive and added, “I blame a particular chairman for giving so many licences.”
He added that still the ‘hora hora’ sentiment prevails, but no one has been brought to book. “But we ‘still’ talk about it.” He also charged that the country is ‘still’ awaiting demutualisation.
Sarvodaya Development Finance Chairman Channa De Silva, who was a panellist at the conference noted that the interest rates are so high and that there isn’t an effort to bring them down. He added that the bureaucracy, the Central Bank and the Ministry of Finance have to bring the rates down. CSE Chairman Ray Abeywardena added that there’s no rocket science to bringing the (pump and dump) culprits to justice as it’s a matter of finding out the buyer and the seller and then chasing the money trail. “We need to close this chapter once and for all as we are paying for someone else’s sins.”
Mr. Wijesinghe agreed noting that the ‘simplest’ criminal prosecution can be effected on the pump and dump fraudsters. Many at the conference also questioned as to the ‘delay’ in bringing culprits to justice. Mr. Wijesinghe added that (the SEC) might need to have a ‘truth and reconciliation’ commission for the pump and dump era. He further added that there is much to be desired on the ethics of some stockbrokers.
The capital market is a curial link in mobilising private sector financing, he said but added that limited availability of long term debt, single borrowing limits, limited liquidity, under developed derivatives market, high transactions costs, and legal and regulatory impediments are some the main barriers that hamper the growth of the market.