Sri Lanka international sovereign bond trading planned in Colombo bourse
ECONOMYNEXT – Sri Lanka’s dollar denominated sovereign bonds could be traded on the Colombo Stock Exchange with the Central Bank responding psitively to take the initial steps with a listing on the London Stock Exchange, the Securities and Exchange Commission said.
Sri Lanka’s Colombo Stock Exchange is to sign a memorandum of understanding with the London Stock Exchange over trading securities.
"We are firm in our belief that the Capital Market in Sri Lanka should lend itself to facilitate the country’s initiatives to raise funds while at the same time leveraging the opportunities for the CSE to expand the depth, breadth, size, and composition of equity and debt listings," SEC Chairman Wijesinha said in a statement.
"Now that ISB 2019 will be listed on the LSE, future issuances have the potential to be traded on the CSE."
The 5 and 10-year international sovereign bonds were sold last week with a listing promised in London and Singapore.
Sri Lanka’s CSE is planning to set up a multi-currency board in which firms from countries like the Maldives are also expected to be listed.
It is not yet clear how the bond deals would be settled or who would be permitted to buy.
Sri Lanka also sells dollar denominated bonds styled ‘Sri Lanka Development Bonds’ targeted at domestic investors, which can be bought only by those authorised to hold dollar bank accounts.
A deal that is settled by holders of existing US dollar deposits are cleared outside of the Sri Lanka’s monetary base and has no effect on the exchange rate.
However, rupee bonds in Sri Lanka’s OTC markets sold by foreign investors to domestic buyers pressured on the exchange rate has the Central Bank intervening in forex markets using one of its several convertibility undertakings to maintain an unstable peg with the US dollar and then prints money to prevent rates from going up (sterilised forex sales). (Colombo/Mar10/2019 – Opening paragraph changed to say bonds could be traded in the CSE-SB)