With the Government finalising plans to complete debt restructuring by June 2204, which would ideally result in the removal of the country’s default status, Colombo Stock Exchange (CSE) chief expressed optimism that this will help to increase foreign participation in the market again.
Due to the political and economic turmoil over the past four years, there has been a notable decline in foreign activity. Sri Lanka’s current status as a country in default has also led to minimal portfolio allocations.
“In past years the CSE witnessed foreign participation of around 45% but at present it’s at 25%,” said Chairman Colombo Stock Exchange (CSE) Dilshan Wirasekara.
“We are confident that with this achievement, portfolio allocations will restart which will result in the foreign activity going back from the current outflow of 7,918.2 to the elevated levels that we have witnessed historically.
We have continued to engage with foreign investors through various roadshows and I represented the Colombo Stock Exchange as the national stock exchange of Sri Lanka as part of the Government delegation to foreign countries to strike up dialogues with potential stakeholders.”
The CSE conducted forums in India, UK, and Dubai, and was part of the delegation to New York and Davos along with President Ranil Wickremesinghe.
“There have been years where we have experienced major outflows and experienced complete turnarounds that offset those negative numbers. We have managed to keep engagement with foreign investors throughout these difficult times for the country,” he said.
The CSE is also contemplating the possibility of conducting regional investor forums to try and generate interest back in our market once again.
He said that overall number of CDS accounts have increased. “We were at 930,022 CDS accounts as of December 31, 2023, and we currently have 933,592 CDS accounts.”
There is a strong anticipation of increased demand for capital raising via the stock market this year, Wirasekara said.
The framework established by the CSE allows listed entities to issue foreign currency denominated equity, subject to certain eligibility criteria and regulatory requirements.
One of the key eligibility requirements is that 50% of the company’s revenues should be in the form of foreign currency, with a minimum threshold of USD 5 million over a period of three years.
Companies that raise foreign currency through this issuance are required to allocate 40% of the proceeds to local requirements, while the remaining 60% can be invested outside Sri Lanka.
