More financial literacy, demutualisation among others on the cards next year
The Securities and Exchange Commission (SEC), together with the Colombo Stock Exchange (CSE), having introduced blue, green and sustainable bonds, is in the process of introducing more such products, SEC chairman Professor Harendra Dissabandara said, addressing Session 3 titled, Sector Deep Dives II: Capital Market – Catalyst for Growth” at the Sri Lanka Economic And Investment Summit on Wednesday.
“We have been discussing the CSE demutualisation plans for the past two to three decades, and now it is in motion. There are two to three technical and government-side policy matters that are yet to be cleared up. We are working with the Registrar of Companies and the Ministry of Finance to bring listed companies to 500 from the nearly 286 that we already have. The 12 key projects launched by the regulator will assist this cause,” he added.
The CSE data shows 60000 active investors currently in the market. However, they are mainly in trading and not in long-term investments, Prof. Dissabandara added. “Rather than mere trading, it is important for more awareness to increase active investor participation in long-term investments.”
The CSE transaction cost is one of the highest in the world, he said, noting that there are efforts to reduce this and there are discussions with the relevant stakeholders on how to reduce this. “There is a dearth of financial literacy in the country,” Senaka Kakiriwaragodage, also a panellist at the summit, said. “One could become a doctor, lawyer or engineer etc without any financial literacy.”
Over the past 50 years, the country has had only one consecutive 8 to 9-year period without any major incidence (2010-2018), he pointed out, noting that investors were subject to a lot of shocks and downturns in the macroeconomy. “This is why we see a lot of investors limiting their investments in banks, as their number one concern is safety. Due to lower wealth and savings, we are also not willing to wait for long-term returns, which is a cultural factor.”
Relaxing taxes for such equity investments will also help the recovery efforts, he told the Sunday Times Business. “We need to encourage private equity and private capital into the country. We have also seen companies exploring mergers and acquisitions as a growth and consolidation strategy of companies, and such activity has increased recently.”
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