Financial Times

Nallur festival attracts stock market investors

With the Colombo Stock Exchange about to set up a regional centre in Jaffna, Euroville Investments (Pvt) Limited, the only licensed stock brokering firm in the peninsula, took to the streets of Jaffna to attract Nallur Kovil festival devotees to invest in shares.

The Nallur Kovil festival is the biggest Hindu cultural event in the region with festivities spanning twenty-five days, drawing crowds in excess of eight thousand devotees, including expatriates from overseas.

Euroville Investments finance manager V. Niranjan said that trading in shares was a relatively new concept in Jaffna and was confined only to the wealthier business community. "We needed to bridge the gap and net in the middle-income groups as well, so we embarked on this novel publicity campaign to attract people from different walks of life," he said. The response to-date has been extremely good, he said.

Having commenced operations in February 2003, the company has recorded a turnover of Rs. 20 million in its first six months with over 100 account holders amongst its trading clientele. Niranjan said that the company had two objectives at the commencement of business in Jaffna. "Firstly, we felt the need for the region's business community to trade through a licensed stockbroker." At present there were several unlicensed stockbrokers operating in the region, levying relatively high brokering charges.

"We also noticed that many people in Jaffna had bought quoted company shares such as Hatton National Bank, Seylan Bank, and Sri Lanka Telecom from the primary market during the initial public offering (IPO), but there were hardly any purchases made from the secondary market," he said.

He felt that the lack of understanding in share trading had resulted in many shareholders being unable to gain the maximum benefit out of their investments, and had resulted in most of them limiting their returns to that of the dividends paid by each company.

"They are not making any capital gains as a result of their poor understanding of the market trends, and they continue to maintain their portfolio when the market is up instead of selling." He added that sometimes the size of the portfolio was small, and investors were reluctant to make a trip to Colombo to sell their shares.

He believed that once the CSE set up its online trading facility in Jaffna, investors should be ready to capitalize, and make capital gains by dealing heavily in the secondary market. "So our job at the moment is to attract more people into using this new investment tool and to break away from the traditional investments in real estate, gold and fixed deposits," he said. Stock trading has a huge potential in the region as a result of the sudden influx of foreign remittances, he added.

The company's second objective was to create a change in the nature of businesses currently being established in the region. He said that nearly all businesses were either sole proprietorships or partnerships. "We need to create a change in the legal personality of local businesses, to private limited liability companies, so that in a few years we could see them transform into public liability companies by way of a listing in the stock exchange."

At present, Commercial Bank, HNB, National Development Bank, Distilleries and Nations Trust Bank are the hottest shares being traded amongst the Jaffna investors through the Colombo bourse. Euroville Investments is a member of the Euroville group in Jaffna, and is an agent for Bartleet Mallory Stock Brokers.