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This time it’s different. Is it?


19 November 2012 05:42 am - 0     - {{hitsCtrl.values.hits}}


By Indika Sakalasooriya
The press conference called by the Securities and Exchange Commission (SEC) of Sri Lanka last week may have reminded most of the enlightened attendees the most dreaded phrase in the financial world, ‘this time it’s different’.

The Colombo Stock Exchange (CSE), stockbrokers, margin providers and representatives from the unit trust industry were there on the head table giving a serious impression that this time things are really different.

However, it didn’t take much time to realize that this time also it’s not so different. Both the SEC and CSE began to harp the same tunes they’d been harping for the last decade. The only difference was that they, particularly the SEC and the stock brokers had identified ‘certain media’ as the main culprit for the Sri Lankan capital market to not to perform well in the recent times.

And quite surprisingly, the key issues like high interest rates, fiscal imbalances and governance issues were more or less cited as secondary matters.
In fact, one journalist was reproached by the SEC Chairman Dr.Nalaka Godahewa during the press briefing for being ‘negative’ and looking only at the slip-ups made by the SEC.

The Colombo Stock Brokers Association (CSBA) also tried to sound very professional affirming that there were no errant stockbrokers in the country and stressed that mass market participation was required for the Lankan capital market to develop.

But they were very careful not to mention a tiny wee bit about their falling income due to the lack of retail participation in the market.

No difference
To his credit however, Dr.Godahewa humbly admitted the fact that the 10 initiatives the SEC was pushing forward under him were not new. CSE Chairman Krishan Balendra was also quick to acknowledge that the CSE’s twelve initiatives were also not new and in tandem with the SEC’s.
According to Dr.Godahewa these 10 initiatives and the recent changes in SEC regulations were the results of a continuous consultative process the SEC had with market stakeholders. It seemed that this consultative process and the relaxation in rules have led brokers mend their previously sore relationships with the SEC and get on to the bandwagon with the SEC and the CSE to develop the country’s capital market.

Core issues
However, unfortunately, during the press conference it was clear that neither party showed a serious commitment to address the core issues which had been ailing the Colombo bourse for so long.

The SEC was not able to provide a clear answer to how they expected to build the integrity of the market regulator in the backdrop of the resignation of two well respected personalities in the country from its high post—one to uphold her principles and the other due to the pressure exerted on him to resign by the high powers.
However when the journalists queried about a so called mafia that was said to be operating in the Colombo bourse, the SEC and the brokers were quick to jump to explain the definition of the term mafia and the adverse impact the use of the word has on the Lankan capital market and its investors.

The brokers also talked about developing the capital market and educating the investors. However, it seemed that the lack of proper and quality research, a very important tool that creates investor awareness, coming out from their broking houses completely slipped out from their minds.

On the same platform
All in all it was good to see all the market stakeholders on one platform. They seemed ready to kick-off a new journey.  But unless they are ready to earnestly evaluate what went wrong in the past, and learn from the mistakes, their forward march would be difficult. If that happens, the so called culprit, media, would then not write so negative copies.

And also it is important for the regulators, policy makers and stockbrokers to comprehend the simple fact that the performance of a stock market is not insulated from what is happening in the country’s economy. The capital market will not go up because the authorities want it to go up.

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