The Founder and CEO of SECQUORO and Chairman of Digitalisation Committee of the Capital Market Naresh Abeysekera, discussing Sri Lanka’s capital market on a recent edition of LMDtv, explained that “broadly, there are two types of investors – the mature or seasoned trader; and the new, fresh, first time investor base, which has ventured into the trading area with the advent of digitalisation.”

“Experienced investors will do their research before trading – [they will] find all relevant information about a company’s operations, its financial track record and how the market operates… whereas new investors tend not do any intensive research and follow the herd – despite the availability of a plethora of digital information channels and social media [platforms], like Twitter and YouTube,” he elaborated.

Abeysekera continued: “If all relevant facts and figures are distilled and analysed appropriately, it is easier to discern whether an organisation’s performance would be directly affected by macro level uncertainty or global economic issues – if there is no significant impact, the valuation of a company should not change.”

“This is primarily due to trades made based on hasty decisions; panic sales result in major stock price falls, despite company performances being historically high with exceptionally good overall financial results being posted,” he averred.

As for digitalisation of the Colombo Stock Exchange (CSE), he revealed: “During the first lockdown, we realised that the market could not operate and digitalisation was imperative. At that time, we didn’t even facilitate online account opening.”

Abeysekera added: “We developed the backbone for this activity within a period of three months, and our infrastructure is now being used by financial institutes and finance companies.”

“The richest people in the world – Forbes’ billionaires – have their money in equity. It is a hedge against inflation and the best form of investing because you bet on a management team. If it performs well, you realise a profit and your valuation increases. The best example of this is Tesla,” he explained.

And he enthused: “We want to democratise this process and take it to the retail base – i.e. increase accessibility in all four corners of Sri Lanka.”

Offering his take of the prevailing state of Sri Lanka’s capital market, Abeysekera remarked that “in terms of technology and regulation, we’re keeping pace with regional stock exchanges, which have been facilitating online trading for many years and can fully function electronically. Today, we are on a par with any regional market on a technology footing.”

“Further, the new Securities and Exchange Commission Act – which was pending for well over a decade – came into force in September last year, bringing us in line with regional regulations, particularly since we studied and followed the rules and conventions governing stock markets of peer countries when drafting ours,” he continued.

Abeysekera said that “once the required technology and regulations have been established, the next challenge is to innovate on capital market products. Problems faced by entrepreneurs and corporates on raising funds can be addressed through innovative instruments that can be used to fuel business growth. If we get this formula right, investments could be secured with ease to create value where many can participate in driving economic growth in the country.”

Airing his views on existing controls to monitor the stock market, he asserted: “In the context of insider trading,
I believe that sufficient mechanisms are in place to keep checks and balances.”

However, with the dynamics of the market changing, “we are investing in the next generation of surveillance technology with more functionality, features and monitoring mechanisms to strengthen the governance framework of trading,” he said, in his concluding remarks on LMD’s weekly TV programme.