Re-open Colombo bourse, urges CSE
The Colombo Stock Exchange (CSE) has written to the Securities & Exchange Commission (SEC) urging it to reopen the stock market which was shut due to the curfew imposed owing to COVID-19. The stock market has been closed for more than a month, since March 20.
The letter was sent on Tuesday outlining certain measures that can be taken to facilitate share trading. The Business Times found out that this action was precipitated by the World Federation of Exchanges (WFE) writing to the CSE two weeks ago saying that the market closure is not acceptable. The CSE is a member of the WFE.
Some 35 per cent to 45 per cent of the total volume traded in the last two years is foreign. In this backdrop, some stockbrokers expressed fears that inevitably a high risk premium will be attached by foreign funds to Sri Lanka in the future when investing. There is a minimum standard for liquidity and if this keeps on going, the market will dry up and some funds may actually blacklist the CSE, one broker remarked. Stockbrokers and investors are raising many concerns on why the share market is closed. They say that one should be able to buy or sell shares whenever, which is one of the fundamentals of a free market.
Foreigners aren’t happy with the way things are going, as they have already lost 5 to 10 per cent in value in their investments with the Sri Lankan rupee’s devaluation against the US dollar. This poses a fresh threat in attracting foreigners henceforth – mainly because they will attach a risk premium when investing in the CSE because of this closure.
“The closure itself is a risk especially for the foreigners and everyone including the locals and foreigners will sell,” an analyst said noting that foreign cash is ‘stuck’ since March 20 and investors are restless.
Some industry players alleged that some powerful brokers and big listed companies don’t want the market to open as they will face margin calls which will prompt their shares to lose in value.
As such they say that with the curfew even if trading resumes, investors cannot buy and sell because they cannot go to the banks to encash and deposit cheques. However, those who want the market open counter argue saying that in the Indian state of Maharashtra the government managed to keep the market open despite the curfew with curfew passes and certain other facilitation which Sri Lanka can duplicate.
As usual, the country’s decision-making in capital markets is in a state of flux.