A recent survey carried out by the Chartered Financial Analysts Society (CFA) revealed that 84% of its members are against the prolonged closure of the Colombo Stock Exchange (CSE).
The survey was carried out following CSE’s decision to halt trading for an extra five days commencing 18th April. Combined with CSE’s closure for the Sinhala and Tamil New Year, this adds to a total market closure of 8 business days.
The survey, done by CFA among its members in the form of an email poll on Monday the 18th of April, revealed that 84.21% of the respondents were against the decision to halt trading at the CSE, while 9.74% of the respondents were for the closure of the market. 6.32% of the respondents were unsure as to what action should have been taken.
The survey was directed at CFA’s current active membership base of 240 members.
“As investment professionals, we are concerned about the closure of the stock market, as it impedes the ability of the market to function efficiently – the underlying premise of any stock market. The cornerstone of the market is confidence and predictability of rules during good times and bad,” CFA Sri Lanka said in a letter addressed to Securities and Exchange Commission (SEC) Chairman Viraj Dayaratne.
He pointed out that all other markets and institutions, such as banks, non-banking financial institutions, life insurance companies, unit trust companies, real estate markets, etc., in which citizens’ wealth is stored are operating as usual.
“Many of these entities provide daily liquidity for their depositors and investors; thus, they need the stock market to operate to provide price discovery to value their assets that are traded on the CSE,” CFA Sri Lanka said. CFA Sri Lanka further stated that the investors who sold on Wednesday, April 6, or thereafter would have to wait till the market reopens for their trades to be settled, which is an inordinately long period of time.
Owing to the CSE’s boom in the last couple of years, many households in Sri Lanka adopted the habit of investing a part of their savings in equities by investing in entities listed in the CSE. CFA SL pointed out that since some of these investors may have acute liquidity needs due to the current economic crisis, a market closure might prove detrimental to their interest as their liquidity window is shut.
The CFA Sri Lanka urged the commissioners of the SEC to take the views of its membership into account and reconsider the decision to keep the market closed this week.
No.820, Mount Cresent,Malabe,Sri Lanka