SL's Capital Market under penetrated
The Colombo Stock Exchange (CSE) during the first half of 2012,
showed signs of recovery although it remained subdued in 2011.
After the war the stock market grew by 400 percent within a time span
of two years. Most new investors who entered the market did not have a
good understanding of market dynamics. In 2012 the Securities and
Exchange Commission of Sri Lanka (SEC) removed or amended some of
regulations and was able to successfully make representations to the
government to eliminate some impediments that hindered the capital
market from realizing its potential and also further develop the capital
market, Nalaka Godahewa, Chairman, Securities and Exchange Commission of
Sri Lanka (SEC) in a release said. The government addressed these
concerns which reflected its commitment to develop the capital market by
proposing many reforms that were outlined in the National Budget.
Prior to relaxing these measures, we were mindful of obtaining the
views of industry participants and held regular meetings with them.
"Our primary focus was to ensure responsive regulation that would
offer appropriate safeguards for investors and provide impetus for
capital market growth."
"And to this end we amended the adjusted net capital calculation of
stock brokers for the purpose of granting credit to their clients,
lifted the upper limit imposed on the price of transactions on the
Crossings Board and lifted restrictions placed on share transactions of
stock brokers."
It is noteworthy to mention that the market has recorded a gain of
nearly 14% during the second half of 2012. Increased investor confidence
and improved macroeconomic situation of the country led to a net foreign
inflow of Rs. 38.6 billion, the highest yearly net foreign inflow
recorded at the Colombo Stock Exchange (CSE).
The capital market is able to mobilize savings and channel capital to
its most productive use and thereby ensure that investors get the best
returns for the risk they take and businesses can access finance
efficiently.
The government addressed certain issues, which reflected its
commitment to develop the capital market by proposing many reforms that
were outlined in the National Budget.
The 10 key strategies aimed at expanding the products offered,
listing companies from both private and state owned enterprises,
developing the unit trust and bond market, modernizing market
infrastructure, demutualising the CSE, amending the SEC Act and widening
the opportunities for investors.
Though the capital market is an important source of long term
finance, in Sri Lanka more companies are still reliant heavily on banks
for their financing needs and the capital market is still under
penetrated.(HDH). |