New kid on the ‘stock’ block

The Securities and Exchange Commission (SEC) has granted a licence to the local subsidiary of a Pakistan based company, the only organization to respond to the SEC advertisement to establish stock broking companies in the country.

"There was only one application and that was by Arif Habib Securities Ltd in Pakistan. S.K.M. Lanka is their flagship company in Sri Lanka," a Colombo Stock Exchange (CSE) source told The Sunday Times FT. The source said that, as a first step, a firm wishing to start stock broking has to become a member of the CSE and subsequently apply to the SEC for the license. "We invested Rs.100 million to get approval, which was in the eligibility criteria. This was invested as S.K.M. Lanka's capitalisation," Khalil Masood, Chairman of the company said. He said that SEC has a requirement for the company to bring in at least 50 percent of the business from abroad.

Masood, former Head of Pakistan Customs, Excise and Sales Tax, former Chairman of Corporate Law Authority, former Chairman, Monopoly Control Authority and former Chairman Controller of Capital Issues in Pakistan, noted that Sri Lanka has a large growth potential. "The CSE is under valued quite substantially. Therefore there is an upside potential here," he added. Arif Habib owns 75 percent of S.K.M. Lanka and already operates in Dubai. Masood noted that market capitalisation in Pakistan’s three exchanges during the initial days was about US$ 9 billion.

"It was much like in Sri Lanka. Now we are over US$ 60 billion. I feel it will be the same here," he added. He said that from the countries in the South Asian Association of Regional Cooperation (SAARC), Sri Lanka's stock market valuation is greater. "The valuation of certain firms is low now, but they can be increased. There is no reason why their pricing should be so low. For an example, Nawaloka Hospital is a good example of an under valued company. The professionals who we will bring into S.K.M. Lanka will look into minute details of such firms and try to harness proper valuation in to them," Masood said.