IFRS compliance will benefit foreign investments

Charumini DE SILVA

The Colombo Stock Exchange (CSE) has been performing tremendously well during the postwar era and has shown market sustainability. The market has practised high levels of disclosure, corporate governance and high accounting standards. "With Sri Lanka moving towards compliance with International Financial Reporting Standards (IFRS) by 2012 it will benefit greatly," Heraymila Securities Limited Director and CEO, Ravi Abeysuriya said. The forces of globalization prompt more countries to open their doors to foreign investment and as businesses themselves expand across borders, both public and private sectors are increasingly recognizing the benefits of having a commonly understood financial reporting framework supported by strong globally accepted standards," Abeysuriya said.

"In attracting foreign buyers to the market it is necessary for the brokers to conduct continuous research. Some of the stocks in the market are slightly overvalued therefore there is a cost in getting out of them and a higher premium has to be paid too," he said.

There are high possibilities to notice a noteworthy foreign participation in the market in the near future as our market is fairly valued or slightly overvalued. Due to the reasons such as sound corporates, increased Gross Domestic Production (GDP), improved earnings from different sectors especially like leisure and construction, affluence in disposal income has uplifted the outlook of our market in an optimistic manner.

"Conducting various road shows and convincing the vision of growth strategy is vital in attracting foreign investors to the market. Compared to the regional countries we have one of the good regulatory regimes. However, it is significant to look at ways of setting up our market into the radar of other markets via International Board," Abeysuriya said. Having a diversified corporate, variety of choices in the stocks, companies with high levels of liquidity and viable level is trading are essential. Encouraging wider institutional investor participation and trading of debt and equity are significant to develop the market. He said investors are keen on investing in state entities like Sri Lanka Catering, Sri Lanka Insurance Corporation and Bank of Ceylon. If these companies are willing to list even in small quantities, it will make a major impact in the market as well as in the levels of corporate governance.

"There is a good opportunity for us to attract foreign buyers especially from countries like UK, Middle East, Australia and China. The recent visit to the London Stock Exchange (LSE) has helped to uplift the image of our market and being a member of the Commonwealth there is high potential to draw the attention of UK investors, " he said.