.

Value vs Price

Mr. Rienzie Wijetillake, the Chairman of the Colombo Stock Exchange (CSE), told a news conference called some time ago to announce last week’s Value vs Price seminar for international fund managers that the event was being ``meticulously planned.’’ Nothing was being spared to lay on the best we could offer in the all found package proffered. Participants were given five-star hotel accommodation gratis and all their meals were free. A pre-conference week-end jaunt to either the southern beach resorts or the cool mountains was arranged.

Some of the blue chip companies whose shares have been taking a battering put up a sizable ten million rupees to pay for the whole exercise. The Securities and Exchange Commission (SEC) and the CSE were to make up any shortfall should the need arise. The President and the Leader of the Opposition were to address the fund managers during the two-day conference, the organisers having taken care not to have them together. The idea was to show overseas investors that whoever runs the government, there would be policy continuity. In the event, Mr. Ranil Wickremesinghe showed up. President Chandrika Kumaratunge did not.

That was a disappointment. Surely the fact that the president was going to be away attending the World Bank and IMF meetings in Washington was known well in time to her secretariat. It is inconceivable that the dates were set without first making perfectly sure that the president could be present if she was accepting the invitation. Having accepted it, giving the green light to those making the arrangements to tell their guests that she would be there, what followed was inexcusable. The president broke journey in London on her way back home and was reportedly held up there. The organisers of the Colombo conference first made excuses for her not inaugurating the conference as originally announced. They then said that she would be meeting the fund managers later. Finally she was to host a reception. But none of that happened.

Whether the famous Chandrika smile would have dazzled the visiting managers and persuaded at least some of them to put their money here, we do not know. The organisers who were sending out 300 invitations had hoped that there would be about fifty acceptances. But despite the sweeteners, actual participation from abroad was only 26. Even that might have been good enough if some key decision makers controlling substantial investment funds were among those who came. Although there was no formal word on the subject from the CSE, all those who would like to see a prettier picture on the Colombo bourse can only hope that the expended effort (and money) yielded some result.

There is no doubt that Colombo had taken an unfair beating due to factors that were outside Sri Lanka’s control. First there was the East Asian crisis that led to a rapid exodus of western funds out of Asian stock markets. As recovery was slowly setting in, the second shock of the Indo-Pakistan nuclear race took its toll. Sri Lanka, though not geographically a part of the subcontinent proper is generally viewed as a part of the region. The result was that not only the Bombay and Karachi bourses were hurt. We too took a kidney punch. Sentiment is the name of the game and it worked very much against us.

Neither the Colombo Stock Exchange nor the companies that participated in last week’s seminar wanted to engage in a whitewashing exercise. They wanted to show the real picture to investment managers whose fund placing decisions can make a real difference to our stock market. Those who were here would have been able to see for themselves that Sri Lanka is not a country on the brink of anarchy. Our fully automated stock exchange is on par with the best in the world with scripless trading well established. The regulatory framework is good and many of our companies deserve much more than a second look by investors looking for growth.

Certainly there are negatives. The war has taken its toll and will continue to hurt the economy the longer it rages. Those fund managers who talked with the business community here would surely have learned that the existing labour regulations are a disincentive to business. Both the government and opposition know this very well but nothing is being done about it for fear of losing votes. Also, our currency has for the past several years been on a downward slide. Although shares on the Colombo bourse may be dirt cheap in hard currency terms, hardnosed investors are only too well aware that the exchange rate will work against them. Then of course there is the problem of illiquidity of our market, a point that has been repeatedly made. And factors like the president’s no show at the conference would hardly have suggested a disciplined style of governance.

We are not overly optimistic that the conference will ginger foreign support for the Colombo stock market in the short term. It was foreigner participation that shot the market up to dizzy heights five years ago with many stocks reaching unrealistic highs. From the country’s point of view, it is far better to have locals rather than foreigners holding the dominant equity of Sri Lankan blue chips and it is time that our institutions, like the EPF and ETF took a more proactive role in quoted portfolio investment. They must certainly be ever conscious that they are investing employees’ money and not lightly take ill-judged decisions. But a wise long term view can help both the market and their members.

| NEWS | PROVINCIAL | POLITICS | DEFENCE | FEATURES | LEISURE | BUSINESS | SPORTS | ADS |