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Tuesday, January 18, 2011

Colombo Stock market leads among capital markets in the world

By J.A. Fernando in Colombo

Colombo, 18 January, (Asiantribune.com):

In the wake of the post 3 decade civil war, Colombo Stock Exchange has performed faster and more extensively during the last 18 months than any other period in Sri Lanka’s history, according to Chairman of Securities and Exchange Commission (SEC) of Sri Lanka, Indrani Sugathadasa.

“In a relatively short span of time, the capital market’s role in funding and mobilizing savings has become more comparable to that of the banking sector. The capital market has also firmly established its profile as an indicator and facilitator of growth within the Sri Lankan economy,” said Mrs. Sugathadasa addressing a recently concluded meeting to brief Sri Lanka’s Capital Market performance to date.

Colombo Stock Market which had been adjudged as the world’s second best performing capital market for two consecutive years had achieved a Price to Forward Earnings Ratio of 25.2 times in overall compared to its earlier PER at 16.5 times in 2009; beating the world’s Emerging Market PER and Frontier Market PER according to analysts which makes ‘Colombo Stock Exchange a Riskier market which gives out financially sound returns for investors.’

Mrs. Sugathadasa outlined that All Share Price Index (ASPI) of the Colombo Stock Exchange (CSE) had rose to 6,635.9 points from 3,385.5 a year earlier in 2009 whilst the market prices had appreciated by 96%. Subsequently from 3,849.3 points the more liquid Milanka Price Index (MPI) of CSE had rose by 83.4% to 7,061 points.

The CSE’s equity turnover, which was at Rs.142.4 billion had rose to Rs.570.3 billion increasing market’s daily average turnover to Rs.2.39 billion compared Rs.593.5 million in 2009 resulting in increasing transactions to 3.35 million from 1.26 million in 2009. Colombo Bourse had raised a total of Rs.4.3 billion in 2010 against Rs.1.2 billion in 2009.

Market capitalization had doubled from Rs.1 trillion to Rs.2.2 trillion within a year adding a total of Rs.26.3 billion foreign cash inflows compared to Rs.789 million foreign cash inflow in 2009. On the other hand CSE’s dividend yield had fallen from 3% to 1.2%.

However foreign investor contribution to total turnover had decreased to 18.8% from 30.5% in 2009 whilst the number listed companies had increased to 241 in 2010 from 231 in the previous year 2009 adding two new members completing 23 trading members at the stock exchange.

SEC Chairperson told that a total of 554,000 securities accounts have been opened with the CDS as at December 2010 and only 72,000 account holders have traded at least once during the year. “This is 13% from the total number of securities accounts registered. Also approximately 7,000 account holders trade on a daily basis. This number will increase when we can service more investors. This will depend on our brokers in providing access to clients.’ She said adding that this could be achieved by providing clients with internet trading facilities which we encourage. We think it is important to increase the number of active investors in the CSE as well as to increase awareness among the investors on the stock market.

Meanwhile, Mrs. Sugathadasa noted that the Demutualization of CSE will make it more dynamic and efficient and will increase the confidence of the foreign investors as well as the local investors in the Sri Lankan capital market.

“The amended SEC Act will have legal provisions that will provide expressly for Demutualized Exchanges, profit sharing, listing of a Demutualized Exchange, limitation of shareholding, Government appointees to the board of a Demutualized Exchange and public interest mandate” she said adding that the Act will also include provisions to effectively regulate a Central Counter Party (CCP)/ Depositories as the establishment of a Central Counter Party will reduce the amount of counterparty risk that market participants are exposed to.

SEC Chairperson highlighted that the stock market should venture into rural areas further in order to achieve the objective of widening and broad basing of investor base. “More investors in the stock market will create more liquidity.“ She concluded stressing that the liquidity of the stock market provides investors the ability to quickly and easily sell corporate listed securities.

source - www.asiantribune.com