Lanka should list state-owned performing entities -Report

By Jithendra Antonio

At a time the Sri Lankan economy is growing at 8 per cent, a country report by a Colombo-based brokerage stresses the importance of large state-owned corporations getting listed in the Colombo Stock Exchange (CSE) to drive capital markets.

A report titled “Would short-term focus spoil long-term growth?” by NDB Stockbrokers,  estimates that only 30% of the overall economy is represented by the CSE, as majority of massive profit making entities are owned by state  and are not listed in the country’s capital market.

The report goes on to say the country’s state-owned corporation that accounts for large portion of profits, economic activity such as Bank of Ceylon (BOC), People’s Bank (PB), National Savings Bank (NSB), Sri Lanka Insurance Corporation (SLIC), Sri Lankan Airlines, Ceylon petroleum Corporation (CPC), Ceylon Electricity Board (CEB) stocks are not represented in the CSE.

Government institutions which are making profits and have sound management structures should be directed for listings, if the government has any plan to bring them into the Colombo bourse. Not only state institutions, even home-grown global companies such as Brandix, Millenium IT, MAS Holdings, Virtusa have not yet considered the Colombo bourse.

However except state-owned banks and insurance companies, almost every other state institution is said to be running at a loss.

The NDB Stock Brokers’ report emphasizes that key sub segments are hardly represented in the capital market of Colombo, and it is vital to expand the Colombo Stock Exchange so that is represents the overall economy.

The reports stress the need to bring in star performing sectors such as trade, transportation, banking and insurance, BPO, apparel and textiles, power & energy, paddy, minor exports and fishing.

Speaking to Mirror Business, Sarath Rajapakse Director Research at Capital Trust, another brokerage in the Colombo bourse said, as the government has embarked on running many giant businesses in the country, it is highly unlikely that many state-owned big companies that represent the economy would enter the market as the present ruling regime has promised it will not privatize any state-owned asset.

“That is not the role of a government. They should not run businesses. Instead, they should privatize big corporations and bring them to the stock market,” Rajapakse added.

The report suggests from an economic perspective on the external front that Lankan trade deficit has to be controlled and Exchange Rate should not adversely affect exporters. It also states that Interest Rates are likely to remain low. The report also highlights that the government fiscal operations posted an improvement in 2010 with the budget deficit at 7.9% of GDP (compared to 9.9% of GDP in 2009), outperforming a set target of 8.0% of GDP.

source - www.dailymirror.lk