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‘Colombo Stock Exchange booms again’

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by Dr. Darin Gunesekera

 

International news report the CSE as a top performing stock exchange in 2021. It is heart warming to Sri Lankans.

The headlines cover much. This exchange in its modern form is now 35 years old. Its related Acts and Regulations, 34 years. In these years there have been fairly minor changes as names, etc only. The substantial structure and Regulatory Act have been the same.

The reason is that these were formulated on the basis of economics after some long hands on study. I decided to do it based on economics only. I added the usual cover gloss of current law. The President at the time gave complete freedom. Actually when shortly afterwards I did the Kenyan system, President Moi gave freedom also. Even when I replaced totally what consultants had then just finalized; after all Harvard Consultancy could not complain that they were left behind by Kenya’s own Yale. And after over 30 years except for allowing trade electronically, there is no substantial change.

And, as in Colombo, great success.

This subject, regulating stock exchanges, was begun by William O’Douglas, a Yale Professor. As he himself said later, and his students carried on as tradition, he had no interest in the economics. He thought the US economy well based. He brought in what he later excelled in as a Supreme Court Justice, rights or human rights. That is the old style in Securities Law.

The modern era was actually pioneered by Dr Tan Cheng Theng, about ten years my senior. He was the best student at Harvard Law School and the editor of the Review. When Lee Kwan Yew went on his sabbatical tour of universities, he recruited Tan to do the “SEC” of Singapore. He did so with some brilliant leaps in where there had been darkness before.

I asked him what he considered important, now for him ten years later, as I wished to incorporate the best. He just expressed disgust of the stockbroking and investment banking business. He told me firmly that he was now a “born again” Christian. I understood the sentiment.

But my great uncle had impressed on me that mathematics was at the heart of the courts of law, which is where the People got their law. And mathematics I knew. I had been tasked to take Professor Smale’s ideas on Economics Maths in Law as a teacher briefly at the Yale Law School. So I knew this did not work easily. So I looked for help. My grandfather had been the leading police officer in the British era and anyway the police are the agents of the law. Tyrrel Gunatilleke was then the leading person in the police. I questioned him and he refused to answer but finally relented and told me how he caught criminals. I had the maths, the real maths. That tight construction was possible. And for all securities, including government, which is now the mainstay of the Kenya exchange.

When in Kenya, I was able to reposition the stock exchange so that it had a much greater social force through these constructions and I am very happy that the exchange has climbed to high regard with simultaneous issues in London and that the lead company on the exchange has over 15BUSD in market value.

Colombo, with no change in laws and regulations has the same capacity. But it must address India. Not long after I left CSE, I visited India where I had as an economist some relations with the civil servant in charge. I noticed that his still old fashioned markets had only one third more than Colombo in capital raising as of then. For all India.

This age is actually now coming to an end. It is often said in America that “Finance and Economics is not Rocket Science”. That is true. Elon Musk has discovered it too. Rocket science is still true to WW2 roots. Real Science and tech are far ahead. Any economics student today has to study Maths and stats beyond a rocket scientist.

Three years or so ago I gave a lecture and spent discussion time in NASA talking of my wealth and poverty field. Our field is there in the Beyond Rocket Science.

Not actually because of high speed trading. The youngster who did the largest trading platform, since sold to Chicago, said to me, “Doctor you don’t understand the economics”. But I learnt and now know. The electronics chases the agio, something Dr Tan as a Christian would have found apalling.

The subject is becoming different.

The moment we move to a transactions base rather than stocks, like the competitive agricultural market from Adam Smith demand and supply to rice or wheat in silos, a conceptual change occurs. It is no longer the market for apples. Actually demand and supply, which never existed except as a construct, now de-constructs. Ask yourself, have you ever seen demand or supply prices. No these change all the time. Where is the economist’s price ?Where is there more market volatility in Colombo today ? At the CSE broker’s office or at Keells Veggie counter ? Clearly at Keells. No CSE stockbroker sells tomatoes at 23 today, at 9 in two days time and then 17 in another two days !

Similarly a share which I used to have in my hand and may be photoed and sent to my mother is now some computer entry or slash hashtag, /***/***/*. Actually like a Dialog bill. You just have to go along. But do you want to?

By newspaper accounts, there were some proposals called MCC. The problem unattended to inside that is one long overdue in hitting developing country markets. The problem is that IT, or conversion to IT identification, will hit with anti-commons or gridlock through our systems from the top. Every computer program redefines the finance. And do we need or want it ?

I just cannot believe it. We want only what is good economics. Not consultant fit talk that hides loss of rights, loss of economic status and dumbing down of owners.

A simple example. The new sets of MIT graduates mainly who have the over all skills and others in Russia and UK and EU who are using SMART skill sets are doing work on the ground and becoming Associate Profs and quietening as the next wave comes.

One in East Africa work spoke with me., and also a young man yet of the old consultancy type. The latter was deeply concerned with water and sanitation. He had got aid agencies to build the sanitary seats but was having difficulty with usage. I suggested he look to the specialists in seat usage. He blinked. I just fumbled with my airline ticket. He got the message. He soon had frequent flyer…

The other was an anti-commons gridlock studies student who did a SMART project in the Congo. I had also talked with the Governor of the Congo Ituri Province virtually, this was in Covid time. And he went on at some length on Covid difficulties. I told him that at least he has no one saying his capital is the Ebola Capital anymore. He smacked his head. “I had clean forgotten”. That is the Congo for you. Well this student approached the municipal council of Kivu which bordered Ituri. Kivu is a typical Congo town. Kivu is in the Congo river basin. This council had problems of tables and chairs, no trash vehicles, etc. The tech kid ignored these trivialities, maths variables of the global set after all are what count. He just set up a SMART system. Suddenly Kivu found itself thick in development. The kid got them to be, without saying so, SMART security issuers and so moving at whatever level of money was around. No multi million dollar system.

Trucks in that area still hard link, that is rod link not chain link, to each other so that they can go through the potholes in those muddy roads. Different to Sri Lanka dirt roads but called the same. They fully immerse to over roof top level in the pot hole mud and just roar their engines and roll on.

Now their finance at least is up to the mark in mathematical construction.

It is a diverse world. So far, the old rod-linked economics has seen our stock exchange weather it all. I hope the Colombo Stock Exchange and its regulator all the best in the future.



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Webinar on ‘Security of Information Assets: What the Board Needs to Know’

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The Sri Lanka Institute of Directors (SLID) together with EY organized a webinar, moderated by Manil Jayasinghe-Partner, EY on “Security of Information Assets: What the Board Needs to Know” recently to update the knowledge and understanding of Board members on the increasing cyber security risks and threats to information assets of an organization brought about by the rapid wave of digitalization and resulting changes in the way organizations work in response to the on-going pandemic.

The webinar also discussed strategies and best practices on how best to mitigate these risks in securing information assets while ensuring business continuity, loss minimization and quick, safe recovery in the event of a breach. The keynote address was delivered by Dileepa Lathsara-CEO, TechCert and the panel comprised of eminent tech and business leaders Madu Ratnayake-Executive Vice President, CIO/GM Virtusa and D. Soosaipillai-INED of Listed Companies.

“It is important to define what information assets are so that security can be provided to those assets. Contrary to the misconception that information assets are only the application systems or the systems where staff work on and the data that resides on those systems, information assets include supporting infrastructure such as switches, patch panels, routers, servers and all other equipment, and application systems including confidential corporate information in those systems. It is also important to identify where corporate information is stored and who has access to it” said Dileepa Lathsara-CEO, TechCert.

“Boards should get involved in handling cyber security risk by firstly setting a security tone for the organization so that everyone takes security seriously and also ensure that the required resources are made available. Boards can focus on the actual requirements of information security by adopting and adhering to security frameworks, standards, acts and directives such as NIST and ISO27000 series, PCI-DSS rather than having the IT security team re-invent the wheel” he added.

He further stated that cyber security should be incorporated into the digital transformation chain and should not be a mere afterthought to be plugged in at the end. Cyber accountability is also important in that it is the organization’s ability to demonstrate that they have good cyber hygiene to ensure, in case of an eventual attack, the ability to track back to a unique event/person or group responsible with admissible evidence which also aids in quick rectification and recovery. Dileepa also emphasized that it is important to make informed and optimal investments in cyber security mitigation which can be calculated preferably as Annualized Loss Expectancy (ALE) as against ROI since security is about loss prevention and not about earnings where ALE is calculated as the cost of a security incident x chance that the incident will occur in a year.

Panelist Madu Ratnayake said that it is essential and fundamental to have the right people in the security team led by a CISO (Chief Information Security Officer) and that cyber security is a journey and not a destination as security is evolving. The Boards should comprise of members who have expertise on security given that most companies are going digital and the risk becomes crucial.

Panelist D. Soosaipillai said that the first thing is to find a security standard to be adopted in the organization without which there will be limitless spending on security without knowing what the benefits are. The organization should have a security vertical such as a CISO or IT Security, which is where the Boards will look at to establish ownership for IT security. He also suggested that Board does regular, if not half yearly Vulnerability Assessment and Penetration Testing (VAPT) by external 3rd parties into the systems/security matrix of the organization.

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Sampath Bank further simplifies cash management for businesses with launch of Visa Business Debit Card

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Sampath Bank recently announced the launch of Sri Lanka’s first Visa powered business debit card linked to a corporate account – the Sampath Bank Visa Business Debit Card – to help businesses of all sizes gain more control over their expenses.

The Bank’s business customers will now be able to move away from cash and provide separate debit cards to their employees for day-to-day expenditure. They can set monthly transaction limits to each individual card and link the cards to their preferred company account with Sampath Bank. The chosen account will be directly debited each time an employee makes a payment using the card. Businesses can consolidate all spending information using the detailed electronic reports it offers and simplify their payments, bookkeeping, reporting and monitoring processes.

Offering greater convenience and security, this new business debit card from Sampath Bank is set to encourage more businesses to go digital with their expenses, in line with the government and the Central Bank of Sri Lanka’s efforts to drive the adoption of cashless payments in the country.

Commenting on this, Tharaka Ranwala, Senior Deputy General Manager – Operations and Group Chief Marketing Officer, Sampath Bank PLC, said, “We are delighted to help businesses of all sizes go digital with their daily expenses with the launch of the Sampath Bank Visa Business Debit Card. Moving away from cumbersome cash transactions, businesses can now provide staff members with individual debit cards to be used for company expenses. The cards are linked to the customers’ preferred Sampath Bank accounts which get debited every time a transaction is made using these cards. We look forward to seeing our business customers experience the convenience and security offered by this solution to simplify their cash flow management as well as accounting, reporting and monitoring.”

 

 

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CSE indices dip below average turnover

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By Hiran H.Senewiratne 

CSE saw the bear run persist for the third consecutive day with both indices dipping sharply below average turnover. The market was negative and at one point it declined to 200 points and subsequently started recovering  but not up to a steady level, stock market analysts said.

The market saw heavy foreign selling worth Rs. 700 million, up from Rs. 53.5 million, thereby pushing the year-to-date figure up. Foreigners continue to exit from some blue chip companies.

As result, both indices moved downwards. All Share Price Index went down by 131.94 points and S and P SL20 went down by 56.09 points. Turnover stood at Rs. 2.43 billion with a single crossing. The crossing was reported in Lion Brewery, which crossed 673,000 shares to the tune of Rs. 363 million, its shares traded at Rs. 540.

In the retail market five companies that mainly contributed to the turnover were, Vallibel One Rs 290 (5.7 million shares traded), LOLC Rs. 243 million (736,000 shares traded), Expolanka Rs. 197 million (4.4 million shares traded), Browns Investment Rs. 170 million (1.1 million shares traded) and Dipped Products Rs. 127 million (2.9 million shares traded). During the day 141 million share volumes changed hands 23199 transactions.

During the day, top turnover companies, LOLC,  JKH, Browns Investments, Melstacorp and Expolnka contributed negatively to the Index. LOLC  being one of the top listed companies in the stock market  contributed 21 negative points to the All Share Price Index.  Other companies were, JKH 7 negative points, Browns, Melstacorp and Expolanka contributed six negative points each during the day.

It is said that CTC and Carsons Cumberbatch contributed positively to the All Share Price Index.  CTC contributed the highest number of points to the Index which was 10 points.

It is said that even though the market’s recent downward trend is disappointing, it is believed that the bourse will gradually reverse course in line with the expectation of an upward biased long term trajectory.’Consequently, investors are advised to take advantage of the current weakness and focus on accumulating fundamentally robust and liquid stocks in high growth sectors with a long term investment horizon, stock brokers said. 

Sri Lanka’s rupee opened weaker at 195/199 levels to the US dollar in the one-week forwards market on Wednesday while bond yields were slightly up, dealers said. The rupee last closed in the one- week forward market at 196.50/197.50 to the dollar on Tuesday.

 

 

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