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CSE’s newest digital push expected to make it worth US$ 60 billion in 5 years

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by Sanath Nanayakkare

The Colombo Stock Exchange (CSE) with its newest digitalization drive should do well enough in the next 5 years to accumulate a market capitalization of US $ 60 billion, Ajith Nivard Cabraal, State Minister of Money and Capital Market and State Enterprise Reforms said yesterday.

“Then the Colombo Stock Exchange will have a capacity which can provide funding not only to the government sector but also to the private sector making sure that the President’s goals of prosperity will be achieved,” he said.

Minister Cabraal made these remarks on the trading floor of the Colombo Stock Exchange (CSE) yesterday at a special market opening ceremony where Prime Minister Mahinda Rajapaksa launched a new digital platform for CSE, enhancing the investment experience for investors, stockbrokers, listed companies and other stakeholders.

The digital strategy themed ‘Hyper-Leap to the future’ is formed to digitalise all stakeholder touchpoints enabling end to end connectivity electronically. It will position Sri Lanka to become a global financial hub redefining the stock market landscape.

Elaborating on his point the state minister said,” As a person who on been involved in the stock exchange and securities matters for a long time in various capacities, I know how difficult it is to get a project of this nature going. I know you have put in a lot of work. Way back in 1993 at the time I was the president of the Institute of Chartered Accountants, we organized the mCentral Depository System (CDS) for the first time. I think that was a revolution – a special one- because all the brokers who were struggling with share certificates and documentation were suddenly relieved of all these duties and they could go out and sell, go out and make the market a lot more vibrant. I see an opportunity like that once again,

“The digitalization will take away from brokers as well as market players a lot of paperwork and mundane tasks that have been so far done by you personally. When you are relieved of these duties I am sure you will find enough time to make the market work more efficiently and productively. You need to have buyers whose numbers are increasing and you need to have sellers who will be providing the supply of shares in this business. This means you need to focus on these vital areas and aspects in the market.

“You have got to make sure that the number of shares you have is expanded regularly. I have been around long enough to know that the number of companies that have been trading on the stock exchange has remained almost stagnant for so many years. Every time when someone asks how many companies are there on the stock exchange, we say 200 something. I think this ‘200 something’ has been the number for the last 30 years. So, 5 years from now, we’d like to see this number being spoken of as ‘500 something’. I think you all can do that. As CSE chairman already mentioned there is an effort to make these numbers grow. There is ample opportunity. If all of you take the pains to do that, you can make it happen.

“In 2014, when President Mahinda Rajapaksa relinquished office at the end of 2014 – the market capitalization of CSE was 25 billion dollars. By the end of 2019, it came down to just half of that. – only 12 ½ billion dollars, marking a massive drop. We need to grow this market again. We need to make sure that your efforts are directed towards making the market to expand. The Director General of SEC said, you want the government to come here and use this as a repository of funds. With a 12 ½ billion dollar market cap, I don’t think you can do that. So set your sights high. Set your sights at US $ 60 billion dollars, if I may suggest, for the next 5 years. Then you will have a capacity which can provide funding not only to the government sector but to the private sector making sure that the President’s goals of prosperity will be achieved.

“My Friends, we have our work cut out. The President and the Prime Minister have given you the indication that support will be extended to the stock exchange. I have been appointed as state minister in order to make us responsible for that task. So, I personally will be supporting you. I would like to see you take the direction to move forward. Now you have digitalization in place. I think you need to build on that foundation. There will be plenty to do to achieve our goal. You have got to make sure that you bring in capital that will support the market. This is not going to be easy. I remember from 2007 onwards we were going abroad, we were making sure that capital was adequate in this country.- When we could not raise it globally, we raised it from foreign sources. So, you need to do that. You need to provide capital to companies and you need to provide capital so that new instruments could also be put in place in this country. It would be of total relevance to see an SME Board, a Startup Board, an IT Board and maybe a mechanism to list the BOI companies also on the stock exchange. This means there ‘s plenty of space. Now that you have had the first hurdle cleared, the next is also going to be exciting and we’d like to see you take it up from here. Together we can usher in an era of prosperity in our country with the participation of a truly representative investor community,” he said.

SEC chairman President’s Counsel Viraj Dayaratne, SEC Director General Chinthaka Mendis, CSE chairman Dumith Fernando, and CSE CEO Rajeeva Bandaranaike also spoke at the event.

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New IPS report on ‘Elasticity Estimates for Cigarettes in Sri Lanka’

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• New study finds that increasing taxes on cigarettes will have twin advantages of reducing cigarette consumption and increasing government revenue.

• Calculated tax and price elasticities of demand for cigarettes show that smokers are price sensitive: increasing cigarette taxes by 10 per cent will reduce consumption by 8 per cent.

• A simulation exercise shows that when cigarette taxes are raised in line with inflation and streamlined between 2020-2023, government excise tax revenue will increase by LKR 37 billion by 2023 and 140,000 premature deaths from cigarette consumption can be prevented in the future.

The Institute of Policy Studies of Sri Lanka (IPS) has released a report which provides a comprehensive assessment of Sri Lanka’s historical and current tobacco tax policies to assess whether they are in line with the World Health Organization’s (WHO) recommended best practices. The new report ‘Elasticity Estimates for Cigarettes in Sri Lanka’ is authored by Dr. Nisha Arunathilake, Harini Weerasekera and Chamini Thilanka, and is part of a series of IPS research focusing on health and education.

According to the WHO, significant increases in tobacco taxes are the best means of controlling tobacco consumption. High taxes are an incentive for quitting tobacco, reducing consumption, and for not initiating smoking. The report finds that although cigarette prices have gone up over time, cigarettes are still affordable for smokers as tax increases have not kept up with inflation and income increases. Further, the tax structure is not streamlined, and tax policy changes have been implemented in an ad-hoc manner.

The report provides an estimate of price and income elasticities of cigarettes, and uses these to assess the effectiveness of tax increases on smoking prevalence in the country by conducting a simulation analysis. The results show that increasing cigarette taxes by 10 per cent will reduce consumption by 8 per cent. Finally, the study used the estimated tax elasticities to model the health and fiscal benefits of moving to inflation-adjusted and uniform excise tax system over 4 years.

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DFCC Bank and AIA virtually recognise CEO Club award winners

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Launched in 2018, the ‘CEO’s Club’ Awards organized annually by AIA Insurance for DFCC Bank staff, has since been held in grand style each quarter. The event is intended at recognizing and celebrating DFCC’s staff on their exceptional achievements in providing protection to the bank’s customers by introducing AIA’s insurance solutions.

Despite the limitations posed by the Covid-19 pandemic, the management of both DFCC and AIA were determined to continue the tradition of much deserved recognition for the DFCC staff who have excelled in providing insurance solutions to customers. As the first ever virtual AIA-DFCC CEO’s Club Awards Night, the event was held on Microsoft Teams. This pioneering event connected fifteen locations simultaneously, taking digital adoption to a new level, to celebrate award winners.

AIA CEO Nikhil Advani congratulated the winners, while commenting on the long-standing partnership between AIA and DFCC; “AIA are pioneers in Bancassurance in Sri Lanka and DFCC is one of our most valuable partners. Together over the years we have created a strong bond, driven by the common goal of providing protection and financial security to our customers. We are constantly defying odds and challenging the status quo and that is why we were able to take digital to the next level and ensure that these merited recognitions and celebrations took place, uninterrupted.”

DFCC CEO Lakshman Silva also applauded the winners and commented; “DFCC Bank, one of the oldest development banks in the country and now a full-service commercial bank, has had many trail-blazing initiatives. We entered into a partnership with AIA with the objective of enhancing our customer value proposition- and over the years have complemented each other, bringing exceptional value to customers. It was great, that together we were able to overcome the challenges posed by the Covid-19 pandemic and create an opportunity out of it, in creating a first of its kind digital event. This is what great partnerships do.”

Fifty-four CEO’s Club winners from across the island were recognized at the virtual Awards Night, for their achievements in 2019, with six others getting special recognition for their contribution as well. The top ten performers were Samitha Jayathilake ( Kottawa Branch) , Chamindu Anjana (Hikkaduwa Branch) , Dilini De Silva (Moratuwa Branch), Dinusha Jayathilaka (Anuradhapura Branch), Nuwan Abeywickrama (Kiribathgoda Branch), Anjalina Kumarihamy (Piliyandala Branch), Dilanka Jayawardena(Kaduwela Branch) , Lahiru Madushan(Central Sales Unit ) , Paskaranathan Ghengatharan (Kotahena Branch) and Lakshman Thambiraja (Batticaloa Branch ).

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Tokyo Cement and Chevron Lubricants quarterly results boost market

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By Hiran H.Senewiratne 

The CSE turned positive  yesterday with the releasing  of impressive second and third quarter results by two investor favourite counters, Tokyo Cement and Chevron Lubricants, stock market analysts said.

It is said that Tokyo Cement’s second quarter results recorded  Rs. 2.1 billion profit, which was a 183 percent increase compared to the corresponding quarter for year 2019, while Chevron Lubricants recorded Rs. 803 million in profits, which was a 29 percent increase compared to the corresponding quarter the previous year. Therefore, Chevron Lubricants announced a dividend of Rs. 3.50 per share for its shareholders yesterday.

Tokyo Cement’s impressive growth plus Chevron Lubricant’s dividend announcement removed the negative sentiment from the share market, which witnessed negative sentiments as a result of the government’s announcement of the three day Covid 19 curfew from today, market analysts said.  

Amid those developments, the market experienced a day full of fluctuations and both indices moved upwards, i.e., the All Share Price Index was up by 126. 39 points and S and P SL20 went up by 51.82 points    Turnover stood at Rs. 1.64 billion with a single crossing reported in JKH.  The latter’s 1.26 million shares crossed for Rs. 157 million and its share was traded at Rs. 130.50.

In the retail market top five contributors to the turnover were,  Tokyo Cement (Non Voting) Rs. 234.7 million (4.4 million shares traded), Tokyo Cement (Voting) Rs. 176.6 million (2.8 million shares traded), Expolanka Rs. 162.6 million (9.1 million shares traded), Dip Products Rs. 117.9 million (382,000 shares traded) and Chevron Lubricants Rs. 78.2 million (900,000 shares traded). During the day 55.1 million share volumes changed hands in 16138 transactions.    

 Further, two finance companies are going to merge to meet the co-capital requirement of the   Central Bank, which is, Rs. 2 billion; they are Nation Lanka Finance and Sinhaputhra Finance. With the merger the surviving entity would be Sinhaputhra Finance. At present both companies are struggling to meet co-capital requirements of the Central Bank. Once the merger happens they will be able to meet the requirement, stock market analysts said.

Sri Lanka rupee was quoted at 184.25/40 to the US dollar on Thursday while bond yields were largely unchanged, dealers said. The rupee closed at 184.25/35 against the greenback on Wednesday. Bond markets were dull with little activity, dealers said.

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