The 10th annual CFA Society Sri Lanka Capital Market Awards mark yet another significant chapter in the history of CFA Society Sri Lanka, with the signature event – which recognises and rewards professionals who have established industry benchmarks for the advancement of domestic capital market participants – scheduled to be held in June this year.
CFA Society Sri Lanka works in close partnership with the Colombo Stock Exchange (CSE), as well as the Securities and Exchange Commission of Sri Lanka (SEC), towards the common goal of uplifting the local capital markets and bringing them on par with international standards.
Commenting on the collaborative relationship between the CSE and CFA Society Sri Lanka, Chairman of the CSE Dilshan Wirasekara says: “It’s important for the CSE to partner with CFA Society Sri Lanka to uplift capital market standards. By doing so, we can boost activity in the capital markets, thereby effectively generating capital and directing it to segments of the economy that need it the most.”
He also notes that “there is a dire need for an active capital market, not only in terms of research standards and education but also investor habits and trading activity, to achieve international standards. The Capital Market Awards are a very important aspect of this.”
Financial literacy is a vital component of vibrant capital markets. According to the most recently available data, Sri Lanka’s financial literacy improved from 35% in 2014 to approximately 58% in 2020, driven partly by the numerous initiatives jointly implemented by CFA Society Sri Lanka and the CSE. Nevertheless, financial literacy in Sri Lanka tends to lag behind that of its regional peers.
The CSE Chairman’s view is that financial literacy should ideally be introduced at the school level, and not be perceived as being meant only for a small percentage of the population.
In terms of the steps that CFA Society Sri Lanka and the CSE can take to further improve financial literacy in the country, Wirasekara states: “Our two institutes, together with the regulator, can do a lot, not just in terms of publications, seminars and so on, but also engagement, and to make financial literacy a cultural and social norm.”
“We need to go to the grassroots to see what each of our Institutes can do individually as well as collectively. This could span across education, seminars, publications, and programs, along with encouraging other issuer companies to invest in broad basing financial literacy,” he adds.
Speaking of the Capital Market Awards, Wirasekara noted that it is viewed as the pinnacle in the industry, with a growing participation each year, and boasting judging criteria and process that is considered truly independent, which adds to the brand value of the awards. Over the years, there’s been a vast improvement in the quality of research in the domestic capital markets, while investors are also now looking for data-driven research.
Moreover, the Investor Relations (IR) function is moving in a positive direction, with a greater number of listed companies engaging with investors. To this end, Wirasekara explains that the CSE is also looking to broad base markets, widen the investor base, increase the public float and prompt companies to engage more.
“In the past, investor relations were believed to be merely a means of showcasing results. That alone is not investor relations,” he asserts.
Companies have become more innovative as well, particularly as they had to opt for virtual means of communication due to the COVID pandemic, with virtual investor relation forums enabling investors to ask questions and seek clarification from the company management.
The CSE Chairman remarks: “The Colombo Stock Exchange wants to see more companies investing in IR. The Capital Market Awards also encourage this process as more companies aspire to win the Investor Relations Award.”
With Environment, Social and Governance (ESG) concerns also gaining traction across the world, Wirasekara feels that companies need to look beyond the usual ESG parameters and consider how they can better align with company objectives.
“While ESG is still in its infancy in Sri Lanka, there is a huge movement in capital for ESG-related investments globally. If Sri Lanka puts a framework in place for ESG, then qualifying entities will be able to access this capital,” he adds.
As for the future outlook, he asserts that “the CSE is bullish about the market and we believe that the IMF program would engender a major turnaround, which will be a positive for the capital markets.”
The CSE Chairman continues: “The year 2022 was a record year for foreign inflows to the market since 2017, both from a primary market and secondary market perspective. Amid the return of foreign clients, the local research houses are also equipped with the right talent to cater to them.”
Furthermore, he asserts that the CSE looks forward to working in collaboration with major divisional bodies in Sri Lanka, including CFA, to improve local capital markets.