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by Ravi Ladduwahetty

The Securities Exchange Commission and the Colombo Stock Exchange (CSE) are drawing up plans on how to form alliances with other global stock exchanges, the new Chairman of the Securities Exchange Commission (SEC) Michael Mack told the Daily News Business and Finance in an interview yesterday.

It is particularly easy to form alliances with countries in the region and especially neighbouring giant India in the light of the Indo- Lanka Free Trade Agreement (FTA). There are good possibilities of marketing Indian shares in the Colombo bourse and vice versa, he said.

Mr. Mack, a frontline private sector personality, was a former Group Chairman of Aitken Spence & Co. Ltd from 1991 to 1995, having served on the company's Main Board for a record 21 years from 1970. He was also the pioneer architect of the Group's hotels , airlines and agri-business and graments divisions. He was a past Chairman of Union Assurance Ltd and now a Director of DFCC Bank and Lanka Aluminium Ltd. He also served as the founder Chairman of the Advisory Council on Industry (ACI) during the previous tenure of Prime Minister Ranil Wickremesinghe as both Premier and Minister of Industries, Science and Technology in 1993.

The SEC and the CSE are engaged in a vigourous campaign to encourage investments through the informal economy and the development of Unit Trusts now that the conditions are more conducive and attractive for investments with the Government declaring its policies, he said.

He said that the informal economy was very substantial of the funds in tbe country though those funds were not available for investment in the right channels. "There is a pool of funds which should be made available for development", he said.

"The SEC is also looking at ways and means of easing the regulatory problems that the investors are burdened with. However, it will be mandatory that they be provided with the requisite information very accurately and very timely on a quarterly, half yearly and annual basis," he said.

He said that there are also various changes contemplated in the organisational structure of the Colombo Stock Exchange with a proposed demutualisation program.

"The CSE will be converted into a separate limited liability company and floated as a separate profit making centre whose shares will be freely traded," he said.

This is a worldwide trend as seen in the London Stock Exchange and many such others. Therefore the position of the CSE will change substantially from the present position where it is owned by 15 brokers in the market, he said.

The market has been down in the recent past due to the lack of confidence on the part on investors following market reduction in prices which has been consequent to the prevailing terrorists' war and the LTTE's attack on the Katunayake International Airport and the September 24 twin attacks on the World Trade Centre in New York and the Pentagon in Washington, he said.

There has not been a great deal of marketing of stocks in recent times because the market conditions have not been conducive due to these reasons and also the political instability which loomed over the nation over the last few years. Now with a new Government that is growth oriented and with the prospects of permanent peace on the horizon, prospects for the development of capital markets should be much better, he said.

He said that the Securities Exchange Commission and the Colombo Stock Exchange are both looking forward to methods of reviving the market as there is very little meaning in asking the Government for concessions at this critical juncture. By this method, the SEC is determining more ways of tapping the market support through brokers and others.

Investors are very ambiguous of price fluctuations in the share market. The solution he sees is through Unit Trusts and particularly where part of the money is invested in Fixed Instruments such as Bonds. There is much talk of expatriate retail markets but there is the issue of addressing costs as well he said.

The SEC Chairman said that the Commission is looking at revising brokering charges as well.

He also cited the high interest rates in Treasury Bills that the Government was paying as a deterrent to the development of the share market. The Government was paying high interests rates for Treasury Bills due to the prevailing interest rates in tbe market, he said.

He said that he would like to see more private savings from Provident Funds which could be invested in Stocks and Shares which could give the market more stability in the long term domestic institutional base of investors, which is not available at present.

"This would circumvent the need to depend on foreign investors," he said.

Although the prices have initially risen with the UNF Government announcing its plans, the stock market reacted very favourably in the short term, but when one sees the reality of the Government's plans, more investor confidence in the market should set in, he said.

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