“There is a systematic surge in the region towards a greater degree of economic integration in the real sector through bilateral and multilateral trade due to geo political reasons and the wealth of the nation’s shifting from the West to Asia,” Thilak Karunarathne, Chairman of Securities Exchange Commission of Sri Lanka said.
“If we want our markets to continue their growth and penetrate into global funds we can no longer afford to remain isolated from each other.”
He said India is projected to outperform China economically and socially in the near future.
The market capitalization of National Stock Exchange of India and Bombay Stock Exchange of India is above 1.6 trillion US dollars each followed by a market capitalization of 72.8 billion of US dollars and 21.5 billion US dollars in Pakistan and Sri Lanka respectively.
“As we are aware the real economy is a mirror image of the financial economy,” Karunarathne said.
“Thus substantial economic progress will be accelerated only when integration in the real and financial economy develops hand - in - hand.”
Karunarathne was speaking at the South Asian Investment Conference (SAIC) organised by the Colombo Stock Exchange (CSE) in association with the South Asian Federation of Exchanges (SAFE), held today (27th April) at the Galadari Hotel, Colombo.
He says this integration should be accelerated within the region by creating strong cross border capital market linkages and creating a conducive environment for cross border listings.
Traditionally capital markets are considered as powerful engines of economic growth that mobilizes savings towards productive corporate financing.
The role of financial markets has evolved further with free flow of capital, financial deepening and financial innovation.
Even though the multi-dimensional and complex role of a capital market is widely accepted, developing a robust and efficient capital market is a difficult task for many emerging economies, Karunarathne said.
He said, in doing so the regulatory frame work also should be supportive in these efforts.
“While we promote South Asia as a lucrative destination for investment one could not undermine the role of a constructive regulatory regime in supporting these efforts,” Karunarathne said.
“The financial crisis that tormented growth, in the West as well as some of the Asian giants was due to some weaknesses in the regulatory regimes that could not keep up with the rapid changes in the financial markets,”
“Thus the regulators should keep pace with developments in the capital market.”
He said regulators in the Region should strive towards various bilateral and multilateral efforts that are structured not only to promote the fundamental objectives of securities regulation in protecting investors, promoting fair, efficient and transparent markets and the reduction of systemic risk but also focus on facilitating enforcement of securities laws across borders.
He added that the region should introduce conducive tax regimes and other incentives , enhancing regulatory consistency for international market participants and more over combat the ill effects of over dependence within the region.
“I wish to reiterate the importance of formulating a joint regulatory mechanism while safeguarding the sovereignty of the respective nations and unique characteristics in each of our markets,” Karunarathne said.
“Joint initiatives should be taken to address overlapping concerns and interests,”
“This might be a tedious task as each of our markets are at different levels of development, yet not impossible.”