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3. Capital Markets
We request the immediate opening of the Colombo Stock Exchange (CSE). The inability to open the CSE for trading results in long-term reputational damage to the market with price discovery and liquidity being fundamentals of a free market. The capital market has ceased to be an avenue for companies to raise debt and equity. Reviving the market will reduce the dependence on the banking system. A deep and liquid capital market helps companies to raise long term capital needed to finance their businesses which in turn contributes to increasing the overall economic growth. The SEC, CSE and stake holders should address all operational impediments for CSE to fully function on-line, such as making it mandatory for settlement of stock market transactions through online banking and trade confirmations to be sent electronically i.e. email or SMS only and company secretaries undertake secretarial functions.
Set up a Sovereign Equity Fund to provide equity capital to companies affected by COVID-19 that are operationally viable but are over geared with seed capital from the GoSL and multilateral and bilateral development agencies such as IFC, DEG, IBRD, etc. The fund should be managed by an independent team of professional fund managers.
Fast-track the implementation of Real Estate Investment Trusts (REITs) and establish related legislation/regulations. This can also help revive the real estate market as well.
GoSL to raise capital by the issue of long term (10-15 year) tax free infrastructure bonds to foreign and local capital markets, backed by cashflows from the respective infrastructure projects [expressways, railways, airports, power, ports] coupled with a sovereign guarantee. The structuring and awarding of these projects must be expedited.
3.2 Medium to Long Term
Government to supplement the capital of the state banks by having IPOs to raise new capital and listing them and therefore strengthen their ability to support the SME sector and other important sectors such as agriculture and exports in SL.
Direct Government institutions such as EPF, ETF, SLIC, NSB, Bank of Ceylon and Peoples Bank to invest at least 5% of their investment portfolio in fundamentally strong companies which are offering good value at current market prices.
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