The Chief Executive Officer (CEO) of the Colombo Stock Exchange (CSE) Rajeeva Bandaranaike said the CSE has performed well this year amidst the political turmoil in the country, refuting rumours that the Stock Market would crash due to the turbulence in the aftermath of the recent polls.
He said the CSE has done well this year with the All Share Price Index up 2.8 percent and the S&P SL 20 up 1 percent from January to date and volumes are doing better than last year. “I believe political instability is something that the country needs to learn to learn to live with and make the best of it. The positive side is that our country is democratic and we have elected governments. So political changes are inevitable and markets must learn to adjust,” Bandaranaike said.
Foreign inflows have been over Rs.15 billion and net inflows over Rs. 6 billion to the CSE to-date.
“This is a positive trend given only 53 days that has been completed this year,” he said. The CSE recorded an inflow of over Rs.112 billion and a net inflow of Rs.17.6 billion last year. “The foreign investor interest has continued to this year as well,” Bandaranaike said. With regard to the resilience of the market the CEO said since round 50 percent of the turnover of the CSE at present, is from foreign investors. Global factors affect the movement of the stock market since foreign institutional investors who have invested in Sri Lankan stocks are influenced by global factors such as the returns in other markets and interest rate movements in their jurisdictions.
However, he noted that there is a low correlation between the movement of price indices in Sri Lanka when compared to global and regional stock market indices, so in fact foreign investors tend to use our market as a diversification opportunity. To that extent our market benefits from the fact that our market behaves differently to other markets.
On the progress of the multi currency board, Bandaranaike said the CSE is awaiting the regulatory approval for the multi currency board and the formulation of rules. We are hopeful, that we can operationalize it this year. We are also hopeful that some of the non strategic state enterprises could be listed which adds depth to our market by providing market liquidity and wider range of investing options to investors.
“We have also planned to introduce a SME board for the SME sector. The proposed new SEC Act will enable the CSE to work on new products such as Real Estate Investment Trusts, Exchange Traded Funds and stock Borrowing and lending and this will offer a better and wider choice of financial instruments to investors,” Bandaranaike said.