Ray Abeywardena, Chairman, Colombo Stock Exchange (CSE): Interview

Interview: Ray Abeywardena

How is the dollar trading board expected to contribute to the CSE’s trade volumes?

RAY ABEYWARDENA: The proposed multi-currency board (MCB) has the potential to add a valuable dimension to the CSE, helping us to improve our market size, increase the number of listings and market liquidity. We are particularly keen to pitch the MCB as an alternative listing option to companies across South Asia that may have faced challenges in raising capital. Listing and raising capital in a foreign currency is also set to be an attractive proposition for local companies. The MCB will play a vital role in attracting large companies whose listing would have quite an impact in terms of market size and liquidity, and aid us in our bid to achieve emerging market status. We expect this process to have a positive effect in terms of foreign exchange earnings for the country, as the MCB will create new avenues for foreign investors and local entities to operate within a foreign-exchange denominated market.

What is your assessment of the progress of the CSE’s demutualisation to date?

ABEYWARDENA: The groundwork of the demutualisation process is nearing completion and we are awaiting the proposed new Securities and Exchange Commission Act and the demutualisation plan to be presented to Parliament. The modality of demutualisation will gain further clarity once both bills are passed by Parliament, marking what would be the first significant step in the entire process. We now have a renewed focus on commercialisation due to the impending demutualisation, which will help us achieve our ambitious growth plans.

The process would result in broadening ownership by including a strategic partner and changing the governance structure. This will realign the CSE’s strategic orientation further. We have already embarked on a programme to diversify and rebalance revenue streams, and we will then put greater emphasis on commercialisation and financial performance as we progress.

Where do you see room for new product offerings to drive the growth of small and medium-sized enterprises (SMEs) in Sri Lanka?

ABEYWARDENA: SMEs are widely acknowledged as being the backbone of the Sri Lankan economy, and they make a substantial contribution to GDP and employment. The Diri Savi Board has over the years enabled SMEs to raise capital through a relaxed listing framework. However, the CSE has proposed a dedicated SME platform, which will be implemented with the intention of fulfilling a gap in the value chain. We can now be of service to private equity investors, providing a route for start-ups to grow and mature. An SME Board was launched in January 2018 and will strengthen access to finance through non-traditional means.

We are mindful of the unique nature of SMEs, and our listing rules for the SME Board have been drafted with a strong focus on creating regulations for attracting issuers that vary in scale, profitability and value recognition. In addition to increasing access to capital, this new listing platform will offer SMEs the opportunity to build credibility through respected and balanced governance standards, while also enhancing their visibility and attracting key strategic investors. The proposed SME Board therefore has the potential to positively impact Sri Lankan SMEs and will offer a new and compelling avenue for them to grow.

What role will the CSE play in facilitating the growth and success of the public sector?

ABEYWARDENA: Use of the capital market has often been pinpointed as a means of achieving public sector development, particularly for state-owned entities (SOEs) – helping drive economic efficiency and reform. SOE listings do not necessarily have to be driven by the need to raise extra capital; they can also be used to help drive firms in new directions, where they have the ability to focus on creating value through a commercially centred operation that is accountable and transparent.