Following Indrani Sugathadasa’s resignation as chairperson, the Securities and Exchange Commission (SEC) has cancelled the scheduled meeting on Monday between commission members and members of the Colombo Stock Brokers Association (CSBA) to discuss critical market issues, SEC officials said.
They said that at a SEC commissioners' meeting on Wednesday, SEC Chairperson Indrani Sugathadasa had requested the SEC Secretariat to ‘seriously’ consider the CSBA proposals.
“They will go through CSBA proposals with the brokers and explore what can be done in terms of granting (concessions)," a CSBA representative confirmed to the Business Times on Thursday. But on Friday SEC officials said that with Ms. Sugathadasa's resignation (the previous day) this discussion and all the decisions they might have taken have come to a standstill.
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| Indrani Sugathadasa |
They said the planned meeting follows a discussion the CSBA had with President Mahinda Rajapaksa earlier this week where they submitted proposals to prop up a crisis-hit market.
They said that the SEC is focussing on two proposals which are under its purview – replacing price bands with circuit breakers and extending broker credit twice to the value of their net liquidity capital. While they say that circuit breakers are a possibility, they point out that brokers already have Rs 2.24 billion worth of unutilised credit. “As at now they can lend credit up to the value of their liquid assets. So what they haven’t used from their liquid asset values adds to this amount,” a SEC official told the Business Times.
He added that this was a pertinent area that SEC wanted to discuss with the CSBA. When asked about her resignation, Ms. Sugathadasa told the Business Times that she was upholding her principles and that despite it being a thankless job, she enjoyed the nearly two years in this position. She stressed that due to the unfolding circumstances she decided to tender her resignation.
It is widely speculated that the vacancy will be filled by former MP and industrialist Tilak Karunaratne.
Independent analysts were wondering what use a regulator is to the capital market when powerful lobbying by a handful of brokers and investors can pressurise the government to 'get what they want’. “They are largely manipulators who are misleading the higher authorities. This is a bad precedence to the capital markets,” an analyst said.
President Rajapakse after Monday’s meeting with the CSBA told brokers that their proposals will be looked at positively and a decision will be made after deliberations with relevant institutions are held on the matter, CSBA representatives said.
They said that the CSBA proposal to increase banks’ lending to stock broking firms by 2.5% to 7.5% (from the now 5%) of their net capital was looked upon favourably by the President and he asked some Central Bank officials to explore this option.
The CSBA had also requested to let foreigners invest in margin trading companies and lend in rupees. “Currently this option isn’t there and when discussing proposals on reviving market sentiments we wanted this done as well,” the CSBA representative said, adding that this was the first-ever interaction CSBA had with a head of state. Basil Rajapakse, Economic Development Minister, Secretary to the President Lalith Weeratunga, Dr. P.B. Jayasundera, Secretary to Treasury and senior officials of the Central Bank were present at the meeting.
The President had urged brokers to try to attract foreign investments and Dr. Jayasundera has been especially vociferous in requesting the CSBA to market Sri Lanka abroad. "He wanted us to bring in US$100 million foreign inflows," another CSBA member said.
The President also had asked them to avoid the steep price fluctuations and volatilities in a bid to cut losses made by those who invest at higher prices. “The importance of more listing of firms was also discussed and it was noted that although more companies were keen on listing in the Colombo Stock Exchange, they have been discouraged by prevalent market sentiments and the failure of several initial public offerings," an analyst said. The CSBA members had also pointed out that despite the positive earnings and favourable macro-economic fundamentals, the market activity levels are on the slump.
Monday's speculative rally in anticipation of the President’s meeting with the CSBA saw a strong recovery in the indices, but this lost steam quickly by Tuesday when the market learnt that no concrete decisions as predicted were arrived at.
The market was seen sliding from its initial spike as most of the retail rallies were on speculation, according to analysts. They said that retail investors booking their profits on the penny counters dragged the indices down. |
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