JKH rings opening bell at CSE

By Charumini de Silva
Premier blue chip, John Keells Holdings Plc (JKH) yesterday opened trading on the Colombo Stock Exchange (CSE) marking the first in a series of events featuring companies from the S&P SL20 index.
Given its status as one of the largest listed conglomerates in the country and one of the highest market capitalisations on the CSE, JKH was selected to initiate this new tradition.
JKH…
JKH Chairman Susantha Ratnayake, Deputy Chairman Ajit Gunewardene, Group Finance Director Ronnie Peiris and President and member of the Group Executive Committee Krishan Balendra took part in the market opening ceremony. CSE Board Member Anton Godfrey was also present at the event.
CSE Chairman, Vajira Kulatilaka conveyed his appreciation for the close relationship that JKH has shared with the CSE while expressing admiration for the close relations that the company maintains with its investors.
“JKH really went out of its way to keep relations going and the results are evident. I think that’s what capital markets can learn from — the relationship that they maintained with its big or small investors is very important,” he stated.
The new tradition of having an S&P SL20 company open trading is expected to become a regular occurrence that will help the CSE to further strengthen relationships with listed entities.
Kulatilaka went on to recall with gratitude, the unwavering support offered by JKH during foreign and local road shows and investor forums, adding that he looked forward to similar support in the coming years.
However he noted that the CSE would wait till the end of general elections prior to embarking on any further road shows in order to avoid any political instability in the country. “When you do road shows the first thing the investors ask for is political stability and economic policies of the country.”

Elaborating on the CSE’s future plans Kulatilaka stated that he expects to convert the CSE into a world-class brand with the implementation of world-class infrastructure moving forward.

“We just started working on the infrastructure development in the CSE. In two years time we will have new products coming into the market. We are also changing the listing rules making it more practical and less burdensome, while keeping the stakeholder rights in place. Overall the CSE would see lot of changes happening in the next 24 months,” he revealed.

Commenting on the creation of a Central Counterparty Clearing House (CCP) Kulatilaka noted that legal and infrastructure challenges would first need to be resolved prior to implementation.

“The legal side is especially important. If there was a sudden calamity the fund should be legally protected. We are trying our best to do it within the current legal framework but if there are any gaps, we will have to get Parliament to get a CCP Act drafted. At the moment we expect this process will take between 18 -24 months,” he stated.

He pointed out that CSE would be in a better position to introduce more new instruments, particularly in terms of derivatives. “Without CCP you cannot have derivatives and there are margins that have to be accepted. The whole mechanism will be brought in with the implementation of the CCP.”

CSE CEO, Rajeeva Bandaranaike stated that a UK based firm, BTA Consulting, is working on developing a suitable model for Sri Lanka in setting up a clearing house. BTA Consulting are global experts in post trade clearing systems.

“There is a counter party guarantee for all transactions. We also envisage that all financial instruments will be cleared through this clearing house including Government securities, equities, debt and any other derivative instruments in Sri Lanka. This is a collaborative effort between the Central Bank, CSE and Securities and Exchange Commission of Sri Lanka,” Bandaranaike explained.

Meanwhile, elaborating on the DVP system Bandaranaike said: “With the implementation of the CCP we are also moving to a delivery vs. payment (DVP) system, which will change the way we trade from CDS to DVP. At present when you buy shares; the shares move instantly from seller’s to buyer’s account. The seller will only get paid after three days so there is a settlement risk. With the setting up of DVP system we will address the settlement risk issue, where shares would be exchanged for cash on the same day,” he explained.