HSL
striving to make a difference in CSE
Sanjeevi JAYASURIYA
Heraymila Securities Limited (HSL) is a new name in the South Asian
financial sector, but it’s newness belies a wealth of financial wisdom
and experience. It is the second foreign owned trading member of the
Colombo Stock Exchange (CSE) and the first to set up office in the post
war Sri Lanka.
HSL is fully owned by Heraymila Investments Ltd., (HIL) and is a UAE
based international asset management company with investments in 33
countries. HIL is engaged in managing global investments including major
banks and property development and in the leasing of Airbus 320
aircraft.
HSL’s vision is to become one of the foremost financial organizations
in Sri Lanka with a strong set of values, integrity, and commitment to
build professional client relationships. To achieve this HSL operates
with clear strategies. Firstly, HSL believes in winning the trust and
confidence of their customers by giving honest investment advice.
Secondly, HSL focuses on what matters most - “Getting their buy and
sell calls right.” HSL follows a value-investing approach from a buy
side perspective.
This week, Daily News Business features the CEO of Heraymila
Securities Limited, Ravi Abeysuriya in this column.
Here are the excerpts of the interview:
Q: What is going on in the Stock
Market’
Ravi Abeysuriya, Picture by Saliya Rupasinghe |
A: Our market is going
through a correction now, which is natural. After becoming the world’s
second best performing market in 2009, CSE emerged as the best
performing global stock market providing a return of 96 percent for the
year 2010. It is quite natural for stock markets to have significant ups
and downs, because markets are driven by human behaviour, simply put
“greed” and “fear”.
Soaring stock markets lead to Alan Greenspan’s infamous 1996
reference “irrational exuberance”, where prices of stocks become out of
sync with their fundamental valuations and the market becomes a “Pyramid
Scheme”.
Astute investors such as our present company who had been investing
billions of rupees in our market since 2005 completely exited the market
in 2010.
In fact, HSL research published in October 2010 clearly said that the
Sri Lankan stock market is extremely expensive and is poised for a
correction. This is exactly what has happened.
Now, when our market has started declining, “fear” has set in, and
expecting further declines in the market, investors are staying away
from investing in the stock market.
Because our investors have borrowed money to invest, the market
decline has been exacerbated due to force selling.
Most of the investors who started investing in late 2009 and 2010 are
experiencing a market correction for the first time. One cannot blame
the situation on the regulator for this situation. It is time we learn
the reality of stock markets.
Q: What advice would you give to
investors?
A: Primarily, our
investors need to educate themselves about investing. Investing involves
understanding the company fundamentals. A commonly used measure of stock
valuation is Price/Earnings multiple (PE).
This measure indicates how many times the stock price is in
comparison to company earnings. Smaller numbers tend to indicate cheap
stocks and higher numbers more expensive stocks.
Investors should avoid punting, where you invest on rumors and
without any rational thinking. Excessive borrowing and investing in the
stock market is extremely unsafe because one can lose heavily in a
falling market.
Be wary of investing in speculative illiquid stocks as you may end up
holding them when someone else is dumping.
The best advice I can give is to have a professional investment
advisor that you can trust, who will take time to understand your return
objectives and risk tolerances and recommend a portfolio of stocks that
suits you.
Ensure that you make the decision to act based on the advisor’s
recommendations, and never give the authority to buy and sell stocks to
your investment advisor. If you are giving the authority to buy and sell
stocks on your behalf to your investment advisor, give it in writing as
per the guidelines issued for discretionary accounts by the Colombo
Stock Exchange.
It is imperative that you check your bought and sold notes as well as
the CDS account statement to ensure your investment advisor is acting
according to your instructions to buy and sell stocks.
If you find that, your broker has bought or sold stocks against your
wishes, immediately inform the compliance officer of the stockbroker and
if the company takes no action, inform the Colombo Stock Exchange.
If you cannot devote time and effort to learn about investing and to
carefully follow your investments, make use of unit trusts to invest in
the stock market. Unit trusts are managed by professional fund managers
and are more suitable for retail investors who do not understand stock
market investing.
Q: As a foreign owned company what
expertise do you bring to Sri Lanka and as the CEO of HSL how do you
support investors in Sri Lanka?
A: Our parent company is a
well-experienced buy side investor that currently manages approximately
300 million dollars of global assets.
We are able to offer their expertise of investing in developed,
emerging and frontier markets to institutional, high net worth and
retail investors in Sri Lanka.
We have access to proven research methodologies, such as equity
ratings based on 18 specific variables, investment screens and style
cycle to recommend investments. We follow buy side principles of
investing, meaning: we only recommend investments that are good enough
for us to buy. All our client calls are channelled through our telephone
system and are automatically recorded to safeguard our clients and
investment advisors, in case of a dispute.
I strongly believe in professionalism, honesty and integrity. Being a
CFA charter holder I am bound by the “CFA Code of Ethics and Standards
of Professional Conduct”.
HSL has fully adopted the CFA code of ethics that is one of the most
stringent global standards to act with integrity, competence, dignity
and in an ethical manner in providing investment advice and research.
In January 2012, Heraymila Capital will be launching the Sri Lanka -
Heraymila Capital Growth Fund.
This is an actively managed open ended, growth, unit trust fund. This
will provide a great opportunity for investors in Sri Lanka as well as
abroad to participate in the Sri Lanka growth story.
Q: What are the key challenges that
you face?
A: One of the key
challenges we face is attracting good investment advisors. We are
looking for professional investment advisors who are honest and have a
passion to help investors make money the right way rather than by
gambling.
We are also challenged by investors who have unrealistic stock market
expectations. They are still living in the past and continue to expect
extraordinary returns where the Colombo Stock Market grew 125 percent
and 96 percent in 2009 and 2010 respectively. These extraordinary
returns will not be repeated and investors need to adjust their mindsets
and look for annual returns of around 25 percent, giving a reasonable
risk premium over bank deposits.
Q: What changes in the Stock Market
you see going forward to next year?
A: The CSE is executing
several strategic initiatives to drive capital market growth. Mckinsey &
Company is developing a strategic roadmap for the capital market with
detail strategic initiatives to take our market to the next level.
The National Stock Exchange of India is helping the CSE to introduce
a Delivery vs Payment and a Risk Management System that would reduce
counter party risk. We will soon have Standard & Poor’s indices
replacing the All Share and Milanka Index in keeping with international
standards.
Q: Is there anything you would like
to add in conclusion?
A: There is no smarter way
of investing than gradually accumulating fundamentally sound stocks with
growth potential that are trading at low multiples and selling them when
their market price reach their fundamental valuations.
One last piece of advice to our investors from Warren Buffet “When
everyone is GREEDY you should be FEARFUL and when everyone is FEARFUL
you should be GREEDY”.
[email protected]
Profile
Name: Ravi Abeysuriya, CFA
School: Mahinda College,
Galle
Ravi is the CEO/Director Heraymila Securities. Formerly, he was the
Head - Strategic Business Development and Shared Services of the Hayleys
Group, Managing Director of Amba Research Lanka and Managing Director of
Fitch Ratings Lanka. Ravi was responsible for establishing Amba Research
Lanka, a pioneer investment research outsourcing company and Fitch
Ratings Lanka, the first credit rating agency in Sri Lanka. Before
joining Fitch Ratings in 1999, Ravi was Head of Corporate Finance at JP
Morgan. Prior to this Ravi held senior roles in private equity
investing, consulting for the World Bank and for the Government of Sri
Lanka.
He is a past President of CFA Sri Lanka, a former Commission Member
of the Securities and Exchange Commission of Sri Lanka, former Board
Member of Sri Lanka Insurance Corporation, and former Vice President of
SLASSCOM. Ravi is a Fellow Member of the Chartered Institute of
Management Accountants, UK, a Chartered Financial Analyst and has an MBA
from Monash University, Australia. |