Softlogic Stockbrokers’ Chief Executive Dihan Dedigama on the emerging equities opportunity and transforming equities trading with digital technology.
Dihan Dedigama, Director and Chief Executive of Softlogic Stockbrokers, explores the emerging opportunities in the equities market and highlights the factors and trends shaping its future. In this interview, Dedigama also outlines Softlogic Stockbrokers’ strategic plans for growth. These include extending their reach beyond the Western Province for greater inclusivity, leveraging digital technology to add value for clients, and enhancing their award-winning market research capabilities.
What is your outlook for the equities market? Can you discuss the factors shaping capital market prospects and what sectors show the most promise for investment opportunities?
Sri Lanka’s equity markets are largely driven by two factors: interest rates and economic health. Recent years have been tumultuous, marked by events like the Easter bombings, the Covid-19 pandemic, and an ongoing debt crisis. During the pandemic, export-oriented companies thrived, only to struggle later due to a financial crisis marked by a dollar shortage and exorbitant interest rates, sometimes exceeding 30%.
However, the last few months have signalled a turn for the better. A recovering economy and relaxed import rules have led investors to pivot from fixed income to equities. Daily trading volumes now average Rs2.5-3 billion, primarily fuelled by local investors. This shift is attributed to declining interest rates and noticeable economic improvements, bolstered by assurances from the Central Bank Governor regarding effective policy measures for economic revival.
In terms of sectors poised for growth, the financial services sector, especially banks and leasing companies, is promising. Tourism-related companies may also see some earnings improvements, albeit modestly. The market overall remains undervalued, suggesting that interest could broaden across various sectors shortly.
With the current dynamics of the stock market, how are Softlogic Stockbrokers positioned to unlock value for its investors?
For Softlogic, digitalization has become a cornerstone strategy. We’ve shifted from traditional modes of client interaction— such as phone calls to stockbrokers or back offices—to more advanced digital platforms. For example, our WhatsApp bot enables clients to check account balances, access research reports, and manage portfolios without direct human interaction. Additionally, we’ve streamlined the account opening process. We can open a new account within a\ few hours if the required documents are in order.
Geographically, we’re also expanding our footprint beyond Colombo, countering the misconception that the stock market is solely a Western province phenomenon. We’re focusing on cities like Jaffna, Matara, Galle, and Negombo, aligning ourselves with the Colombo Stock Exchange’s own branch expansion plans.
In terms of innovations, our digital initiatives have been pivotal in growing our client base. It provides seamless client interaction without the need for phone calls. We’ve also automated various accounting processes to reduce human errors and increase efficiency. For instance, clients now receive immediate digital receipts upon making payments. Furthermore, we’re using social media to
keep our sizable client base informed on market updates, research findings, and other relevant information throughout the day.
Our ultimate goal is to empower clients to trade as effortlessly as they would check their bank accounts. We’re working on changing the mindset from relying on brokers to clients confidently making
their own trading decisions. While this self-service model is common in many markets, it’s an area where Sri Lanka has room for growth. We believe that with our digital initiatives, we’re well on our way to facilitating this shift.
As the brokerage industry becomes increasingly competitive, what attributes set Softlogic Stockbrokers apart?
In a fiercely competitive stockbroking landscape with rising costs, we’re strategically managing expenses by minimizing operational inefficiencies, including automating interactions where possible. Yet, we highly value personal relationships; our experienced team is one of our greatest strengths. We’re also investing in the next generation of professionals, recognizing the industry’s potential to boost national economic growth.
Our research department stands out as a particular strength, recently earning recognition at the CFA awards. Despite challenges in retaining talent due to human resource migration, we’re committed to its growth. Our research is increasingly vital for high-net-worth individuals, institutions, and foreign investors. To amplify our impact, we’re expanding our research team and utilizing digital platforms to make our findings easily accessible. Additionally, we’re educating the public and clients through regular seminars, webinars, and reports, aiming to guide both novice and experienced investors.
In summary, we’re blending technological solutions with human expertise to navigate the competitive field and position ourselves as industry leaders. By bolstering our research and talent pool, we aim to contribute substantially to the financial well-being of our clients and the nation.
What are your plans for growth?
Our strategic vision aims to boost digital proficiency among our clients for seamless] online trading. While some clients still favour broker-assisted trades, the global trend is clear: like banking, stock
trading is increasingly moving online. In Sri Lanka, the 700,000 to 800,000 active trading accounts lag behind more mature markets. Our goal is to at least triple this number to infuse the market with the depth needed to attract foreign investors. Achieving this market depth, elusive since the ’90s, is crucial for stability. We’re tackling this challenge with a dual strategy: digital innovation and strategic partnerships.
Rather than building more physical branches, we’re expanding through digital channels. Our collaboration with Dialog’s App Genie, boasting around 6 million users, serves as a prime example.
Converting even a small percentage of these users into active traders could substantially deepen market liquidity. With these targeted synergies and a strong digital strategy, we’re poised to not only serve our clients better but also to contribute significantly to Sri Lanka’s broader economic landscape.