Tea with Rohan Goonewardene, MD/CEO of First Guardian
Equities
Good governance critical for vibrant stock market
Hiran H. senewiratne
The stock market is a good indicator of confidence that investors
have on a particular company, industry and more so on the country,
Managing Director/CEO of First Guardian Equities, Rohan Goonewardene
said.
He said that investors pay higher premiums when they feel that the
prospects are bright and sustainable.
Therefore, while directors and the management are themselves
responsible for the attractiveness of their own companies, key policy
makers like the regulatory bodies and sections of government are also
responsible for putting the necessary systems in place to reassure and
comfort the prospective equity partners of our economy.
Q: What kind of business does your company engage in?
We are a licensed stock broking company dealing in stocks and bonds
listed on the Colombo Stock Exchange. We like to think of ourselves as
wealth managers as we don't just only buy and sell on behalf of our
clients, but also advice them on portfolio strategy and portfolio mix to
meet their specific investment goals.
MD/CEO First Guardian Equities Rohan Goonewardene. Picture
by Saliya Rupasinghe |
The discerning investor seeks more than order execution and invests
based on sound fundamental and technical research and that is what we
provide.
We commenced business in October 2006, and we are proud to say that
First Guardian Equities is the only Stock Broking Company in Sri Lanka
with an International Systems Standardisation Certification ISO
9001-2000 awarded by Moody's of UK.
These high levels of service we provide our clients is largely due to
a dedicated staff that persistently fulfils the challenging service
excellence requirements of our shareholders Guardian Equity, the
Hirdaramani Group, Raj Rajaratnam and S.K. Wickremesinghe, as well our
Independent Directors B.R.L. Fernando and Ranil Pathirana.
Q: Do you think that the Stock Market in Sri Lanka is a good
indicator to determine economic development?
Yes and no. Although there is some representation of almost all major
sectors of the economy in the stock market, like telecom, banking and
finance, plantations, manufacturing, leisure sector etc, there are
altogether only around 250 companies listed in total.
The largest employer in the country which is the agricultural sector
is largely in private smallholders hands. Industries that have seen
significant wealth creation in the past five to ten years namely the
apparel, BPO, IT, media are yet to be represented in the stock exchange
in a tangible manner.
Sectors like power and energy, food and agriculture and
infrastructure development which are most likely to be growth industries
for the next decade or so are yet to make their presence felt on the
bourse.
For any country to develop it has to have a pricing mechanism for its
goods and services and access to capital markets. The stock market as
part of its role provides that mechanism and is therefore integral to
any country's development plan. If the private sector is to be at the
forefront of the nation's development strategy, then the capital markets
should be the reformed as a priority.
Q: What would attract companies to list on the Stock Exchange?
Companies that are in private hands need to be made to understand the
benefits that derive from a listing. One is that there is readily
available capital for growth and expansion.
The other is the ability to draw professional management to their
work force as young professionals entering the work place would prefer
to work for established names. Professionals are concerned about image
and where they work matters to them.
Also employee share option schemes make it attractive for them to
join a company. In the developed world and even in India and China,
ESOPs play a large role in attracting, retaining and compensating the
best talent.
Then there is the exit option. Very few businesses have stayed in the
hands of the founder's progeny. One can only think immediately of the
Tata's of India and the Wallenberg's of Sweden, in which the founder's
descendents continue to own and manage the business.
General Electric was founded by Thomas Alva Edison but it is in the
hands of the public shareholders and is managed by professionals. So the
equity market is a good mechanism for price discovery in the event the
original promoters desire to dispose of a business.
Further companies that are listed have immediate recognition and
acceptance when marketing their products or services.
Globalisation has a tendency to reward transparency and this would be
a key competitive advantage in the market place.
Q: How can the younger generation be encouraged to invest in the
stock market?
The concept of saving and investing has to be taught from an early
stage. Basic fundamentals of investing, is vital not only for bankers
and accountants etc as many believe, but for anyone who has a desire to
create wealth and preserve it effectively to improve their lifestyles
and financial security.
As for me personally, I was introduced to the share market at the age
of 10 with the guidance of my father and a benevolent uncle who gifted
me some CIC stock. The dividend from those shares was the initial
capital I had to invest in the market.
My initial training on investing was very simple yet effective. I was
taught to calculate Net Asset Values Per Share(NAV/PS) and Earnings Per
Share (EPS) based on information from a handbook of Rupee companies
given to me by my father and then compare those with their respective
market prices, Stocks which were below their NAV and the ones with the
lowest Price Earning Ratios (PERs) were short listed on a piece of
paper.
Then supposedly came the more difficult part of investing, picking
the best stocks. However, for a 10 year old boy in 1983, it was a 'no
brainer'. Elephant House had the best hotdogs, milk, icy chocks, meat
products and soft drinks.
To date, in my entire career, there couldn't have been a quicker
investment decision I've made. All my money was going on Cold Stores,
the owning company of Elephant House and nothing else. Ariyaratnam my
father's stock broker and friend very kindly purchased 50 shares at Rs
8/- each into a joint account I opened with my mother.
To be fair, I do recall him warning my father about some labour union
problems in the company. I recall it; solely because it was the very
first time I'd heard the words 'labour union'! But nothing could change
my 10 year old mind which was filled with thoughts of hotdogs and ice
creams.
Although, the hot dogs did seem to taste better as a stakeholder, the
stock started to slide and my Rs.400 investment was being gnawed away
with each passing day to my absolute horror. The worse was still to
come. A few months later the company was suspended and it seemed I lost
everything. At 10, I unwittingly learnt another very important lesson;
to spread and diversify one's investments and the risks associated with
them. It was a shattering experience.
Of course, several years later the stock recommenced trading on the
CSE and traded at about 25 times the price I paid for them!
Q: What is your suggestion to make a vibrant stock market in the
region?
The Fund management industry has to be greatly encouraged. We have
tremendous talent in the country but the necessary systematic upgrading
of skills, exposure and incentives are not provided.
If the huge public captive funds which are controlled by the
government were to invest a reasonable portion of their funds
systematically on the stock exchange, in the best managed private
entities operating in the most potential lucrative sectors of the
economy, it will most certainly fuel tremendous confidence in the
markets and instigate a surge in domestic and foreign investment
participation.
Furthermore we need to develop a market for derivatives, short
selling, commodities, Exchange Traded Funds which will offer investors
more options to benefit not only when the market is going up but even
when the market comes down and these will also help attract more
liquidity.
In small illiquid market, large investors pay high liquidity costs
when entering or exiting a market and that is one more reason why many
of the large funds are reluctant to enter this market in a big way.
Q: In what way should we improve the quality of stockbrokers in
the country?
I would prefer the term financial advisors, individuals who are
professionally trained in all aspects of investment management and are
knowledgeable enough to advice clients to make holistic investment
decisions.
The investing public has a wide range of needs; paramount of them all
is the need to safeguard their hard earned capital. Capital erosion
takes place in two forms, investments that result in loss of capital;
the other is inflation which eats into the real value of money.
A stockbroker has to not only maintain the nominal value of the
investment; he also has to maintain the real value of capital.
Thus it requires specialisation, which will come with education,
training, and experience.
****
Bio-data
Rohan C.J. Goonewardene
Current Designation:
Managing Director/CEO, First Guardian Equities (Pvt) Ltd
Past Experience:
CEO, First Capital DSA Stock Brokers (now LOLC Securities),
Consultant NDBS Stock Brokers,
Barclays Global Investors (London) and CBC Crosby Capital Corporation
Qualifications: MBA, BBA (Management)
Secondary and Tertiary Education:
S. Thomas' Preparatory School, S. Thomas' College, Mount Lavinia
Sports: Represented S Thomas' College Mt Lavinia in cricket, tennis,
athletics. Captained the College second XI cricket team.
Was the school's U19 putt shot champion. |