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Jan 31, 2011

Investors testing time at Colombo Stock Exchange


Week started on Monday 31 January, 2011 witnessed Colombo stock indices dipping slightly, continuing the selling pressure from last week. “Investor sentiment is mixed amidst the current congestion period of the market. The direction will depend on the extent to which investors would evaluate the interim results.” brokers said.

The All Share Price Index (ASPI) closed at 7,174.87 points, fell 0.24% by 17.62 points and the Milanka Price Index (MPI) closed at 7,134.27 points, coming down by 0.43% through 31.05 points as at end of trading day. Total turnover was at Rs.3.18 billion (rose 10.72%) with 87.57 million shares changing hands (up 7.41%). Foreign purchases rose 39.78% to Rs.170.5 million and the foreign sales also appreciated by 18.03% to Rs.262 million. Meanwhile, the Price to forward Earnings Ratio (PER) declined by 0.37% to 27.1 times.

Power & Energy and Bank, Finance & Insurance and sectors were the highest contributors to the market turnover. Power & Energy sector index increased by 5.21% while Bank, Finance & Insurance sector index decreased by 0.20%. Laugfs Gas (LGL) made the highest contribution to the market turnover. The share price increased by Rs.7.50 (15.66%) and closed at Rs.56.70. Several crossings were recorded including Laugfs Non Voting (LGL.X) 500,100 shares at Rs.40, Asian Alliance (AAIC), 600,000 shares at Rs.150, Diesel & Motor (DIMO) 35,000 shares at Rs.1,400, two crossings of Royal Ceramics (RCL) amounting to 500,200 shares at Rs.160, Renuka Agri (RAL) 4.9 million shares at Rs.6.70, with 115,000 shares of United Motors (UML) at Rs.175.

Commercial Bank (Voting and Non-voting) declared a final dividend of Rs.2 per share last Friday. People’s Leasing Finance declared an interim dividend of Rs.0.50 per share last Friday.

Globally, Asian stock markets skidded as investors feared the unrest in Egypt. Nikkei was down 1.2%.

Sri Lankan Secondary Debt Market Treasury bond yields slightly decreased, while the market activity was normal.

Sri Lankan Rupee depreciated slightly as the exchange rate was recorded at Rs.111.15 to Rs.111.18 per US Dollar.

»»  read more

Jan 29, 2011

Correction continues in Colombo Stocks


Sri Lanka Stock indices dipped with comparatively thin volumes on Friday the 28 January, 2011. Some retail investors, who were late to join the short rally, seem to hold the stocks until a direction is created according to brokers. All Share Price Index (ASPI) and Milanka Price Index (MPI) declined by 0.85% and 1.75% respectively for the week.

The All Share Price Index (ASPI) closed at 7,192.49 points, down 0.26% by 18.62 points and the Milanka Price Index (MPI) of more liquid stocks closed at 7,165.32 points, down 0.42% by 30.05 points during the trading day.

Turnover fell 30.20% to Rs.2.87 billion with a total volume of 81.5 million shares changing hands (down 40.82%), Foreign purchases also declined 36.32% to Rs.122 million and foreign sales tumbled down 21.73% Rs.222 million. However, Price to forward Earnings Ratio (PER) dropped by 0.37% to 27.2 times.

Manufacturing and Bank, Finance & Insurance and sectors were the highest contributors to the market turnover. Manufacturing sector index increased by 1.33%, while Bank, Finance & Insurance sector index decreased by 0.65%. Ceylon Grain Elevators (GRAN) made the highest contribution to the market turnover. The share price increased by Rs.14.60 (8.00%) and closed at Rs.198. Several Crossings were recorded including 2 crossings of Royal Ceramics (RCL) 500,000 shares at Rs.160, a crossing of Hayleys (HAYL) 100,000 shares at Rs.395, 140,000 shares of Ceylinco Insurance (CINS) at Rs.460, 120,000 shares of Lanka Walltile (LWL) at Rs.170 and another 125,000 shares at Rs.165, and 1 million shares of Kahwatte Plantations (KAHA) at Rs.40.

Lanka Ceramic (CERA) announced an interim dividend of Rs.1.00 per share yesterday.

Globally, most Asian stock markets were lower today, with shares in Japan hit by Standard & Poor's down grade of the country's sovereign debt rating. Nikkei was 1.3% down.

Sri Lankan Secondary Debt Market Treasury bond yields slightly increased, while the market activity was relatively low.

Sri Lankan Rupee depreciated slightly as the exchange rate was recorded at Rs.111.13 to Rs.111.18 per US Dollar.

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Jan 28, 2011

Sri Lanka All Share Price Index consolidates after rally


Positive interim results at Colombo Stock Exchange failed to stop indices from falling on Thursday the 27 January,2011. Corrections were made in the plantation sector stocks amidst price bands on some counters. High net worth accumulation was witnessed in certain stocks according to brokers.

The All Share Price Index (ASPI) closed at 7,211.11, down 0.42% by 30.76 points while the Milanka Price Index (MPI) of more liquid stocks closed at 7,195.82 points, down 0.35% by 25.03 points during the trading day.

Turnover was at Rs.4.1 billion fell 18.45% with a volume of 137.7 million shares changing hands down 19.71%. Foreign purchases tumbled 23% to Rs.191.61 million and foreign sales came down by 39.81% to Rs.283.68 million. Price to forward Earnings Ratio declined by 0.36% to 27.3 times.

Bank, Finance & Insurance and Manufacturing sectors were the highest contributors to the market turnover while both indices increased by 0.33% and 0.12% respectively. PC House (PCH) made the highest contribution to the market turnover with a crossing of 3,710,000 shares at Rs.27. The share price increased by Rs.5.00 (19.61%) and closed at Rs.31. Sampath Bank (SAMP) also contributed to the market turnover with three crossings of 1,070,000 shares at Rs.301 while the share price increased by Rs 2.50 (0.83%) and closed at Rs.303. Several other crossings were recorded including 3 crossings of Lanka Walltile (LWL) 525,000 shares at Rs.165 and 200,000 shares at Rs.162, 2 crossing of Ceylinco Insurance (CINS) 250,000 shares at Rs.460, one crossing of Hayleys (HAYL) 154,872 shares at Rs.380, one crossing of Citizens Development (CDB) 355,700 shares at Rs.70 and a crossing of Brown & Company (BRWN) 200,000 shares at Rs.254.

Bairaha Farms (BFL) reported a profit of Rs.382.5 million for the nine months ended 546% up from a year earlier which was at Rs.59.23 million with Keells Food Product PLC (KFP) reporting Rs.29.7 million profit for nine months up from 128% compared to earlier years loss of Rs.107.31 million. Premier conglomerate John Keells (JKH) had reported a profit of Rs.5.69 billion up 141% compared to Rs.2.3 billion a year earlier.

Globally, The Dow Jones Industrial Average vaulted over 12,000 for the first time in almost three years but couldn't hold that ground, closing just short of that milestone.

Sri Lankan Secondary Debt Market Treasury bond yields slightly increased, while the market activity was relatively high.

Sri Lankan Rupee depreciated slightly as the exchange rate was recorded at Rs.111.10 to Rs.111.11 per US Dollar.

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Jan 27, 2011

Colombo Stock Market All Share Price Index passes Milanka Price Index


Since week after our Sri Lanka Equity Forum’s exclusive prediction post that said Colombo Stock Exchange’s All Share Price Index (ASPI) would soon pass Milanka Price Index(MPI),continued retail dominance eventually led Colombo’s All Share Price Index (ASPI) to pass Milanka Price Index (MPI) today. Aggressive buying pressure across the plantation sector, retail driven poultry stocks and institutional investors’ interest in SAMP helped gain ASPI. Mixed sentiments on blue chips seem to keep the MPI stagnant.

The All Share Price Index (ASPI) closed at 7,241.87points, up 0.23% by 6.63 points and the Milanka Price Index (MPI) of more liquid stocks closed at 7,220.85 points, dropped 0.28% by 20.07 points as at end of trading day.

Poultry stocks rode the market and reached almost high including Bairaha Farms (BFL) crossing Rs.519 and Three Acre Farms (TAFL) rising to Rs.193.50 with Ceylon Grain Elevators reaching high to Rs.195.

Turnover was Rs.5 billion topped 55.18% with a total volume of 171.5 million shares changing hands (increased 42.15%) with 91 listed gainers and 131 listed losers. Foreign purchases rose by 76.60% to Rs.248.8 million and foreign sales rose by 99.3% to Rs.471.28 million. However, Price to forward Earnings Ratio (PER) slightly appreciated by 0.37% to 27.4 times.

Plantations and Bank, Finance & Insurance sectors were the highest contributors to the market turnover. Plantations sector index increased by 13.45% while Bank, Finance & Insurance sector index decreased by 0.79%. Sampath Bank (SAMP) made the highest contribution to the market turnover with three crossings of 1,300,000 shares at Rs.300. The share price increased by Rs.8.70 (2.99%) and closed at Rs.301.Horana Plantations (HOPL) also contributed to the market turnover while the share price increased by Rs.17.70 (33.52%) and closed at Rs.70.10. Another crossing was recorded for 200,000 shares of Hayleys (HAYL) at Rs.380.

CT Holdings (CTHR) announced an interim dividend of Rs.0.50 per share. CT Land Development (CTLD) announced an interim dividend of Rs 0.60 per share a day earlier.

Globally, European stocks were higher today as confidence in the global economy improves ahead of the U.S. Federal Reserve's key policy meeting. FTSE 100 rose 0.7%.

Sri Lankan Secondary Debt Market Yields were slightly up in the Treasury Bill primary auction. Secondary market Treasury bond yields slightly increased, while the market activity was relatively low.

Sri Lankan Rupee depreciated slightly as the exchange rate was recorded at Rs.111.07 to Rs.111.10 per US Dollar.

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Jan 25, 2011

Five day rally ends at Colombo Stock Exchange


Colombo Stock market witnessed short term profit taking weighed on indices during early trading on Tuesday the 25 January, 2011. However, renewed interest in poultry sector and plantations stocks fueled by positive interim results created a bullish sentiment towards the end of the trading day.

All Share Price Index (ASPI) closed at 7,225.24 points down by 0.5% through 36.13 points while the easily moving Milanka Price Index (MPI) closed at 7,240.92 points dipped 0.79% by 57.65 points during the day. Turnover dropped 21.1% to Rs. 3.2 billion whilst the foreign purchases dipped by 55.71% to rs.140.9 million and foreign sales also declined 59.74% to Rs.236.4 million. A total of 120.7 million shares got traded down 35.15% compared to a day earlier. Meanwhile, Price to forward Earnings Ratio (PER) tumbled 0.36% to 27.3 times.

Manufacturing and Beverage, Food & Tobacco sectors were the highest contributors to the market turnover. Manufacturing sector index decreased by 0.64% and Beverage, Food & Tobacco sector index increased by 0.53%. Laugfs Gas (LGL) made the highest contribution to the market turnover with a crossing of 494,700 shares at Rs.49.60. The share price increased by Rs.1.30 (2.69%) and closed at Rs.50.

Several other crossings were recorded including 1 crossing of Hayleys (HAYL) 225,000 shares at rs.358.90 per share, 1 crossing of Amaya Leisure (CONN) 500,000 shares at Rs.120 per share, 1 crossing of Brown & Company (BRWN) 100,000 shares at Rs.259 per share and two crossings of 150,000 shares of Lion Brewery (LION) at Rs.192.

Vallibel Power Erathna (VPEL) announced an interim dividend of Rs.0.20 per share. Watapota Investments PLC (WAPO) announced a rights issue of seventy five (75) for every two (2) shares at an issue price of Rs.20.

Globally, The Dow Jones Industrial Average came within a hair's breadth of 12000 as investors embraced positive corporate earnings.

Sri Lankan Secondary Debt Market Treasury bond yields slightly increased, while the market activity was relatively high.

Sri Lankan Rupee depreciated slightly as the exchange rate was recorded at Rs.110.95 to Rs.111.00 per US Dollar.

»»  read more

Colombo Stock Indices gains amidst mixed sentiments



Colombo Stock Indices gained slightly on Monday the 24 January, 2011 while investors showed mixed sentiments on different counters. Buying pressure was witnessed in finance and manufacturing sectors. However, profit taking in small and mid cap counters subdued last week’s momentum according to brokers.

The All Share Price Index (ASPI) closed at 7,261.37 points, topped 0.10% by 7.36 points and the Milanka Price Index (MPI) closed at 7,298.57 points, increased 0.08% by 5.62 points at the end of market hours.

Turnover was at Rs.4.1 billion rose 0.19% with a total of 186.15 million shares traded (down 12.74%) and foreign purchases rose 33.83% to Rs.318.15 million whilst the foreign sales recorded high by 20.93% at Rs.587.35 million. Price to forward Earnings Ratio (PER) slightly dropped by 0.36% to 27.4 times.

Bank, Finance & Insurance and Manufacturing sectors were the highest contributors to the market turnover while indices increased by 0.85% and 0.87% respectively. MTD Walkers (KAPI) made the highest contribution to the market turnover. The share price decreased by Rs.16.30 (19.18%) and closed at Rs 67.90.

Several other crossings were recorded including 1 crossing of Amana Takaful (ATL) 5,00,100 shares at Rs.4, a crossing of Asia Capital (ACAP) 1.4 million shares at Rs.93, a crossing of Royal Ceramics (RCL) 200,000 shares at Rs.165, two crossings of lion Brewery (LION) 233,000 shares at Rs.190, a crossing of 50,000 shares of central Finance (CFIN) at Rs.961 per share and a crossing of 1,141,500 shares of Lanka Aluminium (LALU) at Rs.41.50 per share during the day.

Chemanex (CHMX) announced an interim dividend of Rs.1.00 per share last Friday.

Among the positive contributors were Lanka Orix Leasing (LOLC) which rose 3.05% by Rs.4.20 closing at Rs.141.90 with Cargills Ceylon (CARG) closing at Rs.239.50 (up by Rs.6.60 at 2.85%) and Ceylon Theatres (CTHR) closing at Rs.223.30 rose by Rs.9.80 at 4.56%.

Biaraha Farms (BFL) closed at Rs.457.90, rose by Rs.26.30 and Three Acer Farms (TAFL) closed at Rs.133.60, rose by Rs.24.60 during the day.

Globally, European stocks markets were slightly lower Monday, with auto stocks continuing to suffer due to worries about a possible further tightening of monetary policy by China. FTSE 100 was almost flat.

Sri Lanka Secondary Debt Market Treasury bond yields slightly increased, while the market activity was dull.Sri Lankan Rupee appreciated slightly as the exchange rate was recorded at Rs.110.90 to Rs.110.92 per US Dollar.

»»  read more

Jan 22, 2011

Small and Mid Caps dominate at Colombo Stock Exchange


Colombo’s All Share Price Index (ASPI) gained on Friday the January 21,2011; with the renewed interest shown in Manufacturing sector counters, with the positive interim results of Royal Ceramics (RCL) and Primal Glass (GLAS). Week ended positively with ASPI gaining 3.15% from the last week. However, the volatility of MPI continued, declining 0.11% for this week.

The All Share Price Index (ASPI) closed at 7,254.01 points, rose 0.85% by 60.91 points and the Milanka Price Index (MPI) closed at 7,292.95 points, down 0.11% by 7.73 points during the day. Market turnover was at Rs.4.1 billion down 11.14% with 213.3 million shares changing hands (up 49.86%). Foreign purchases declined by 17.26 to Rs.237.7 million and foreign sales rose by 18.70% Rs.485.69 million. Price to forward Earnings Ratio (PER) slightly appreciated by 0.73% to 27.5 times.

Manufacturing and Bank, Finance & Insurance sectors were the highest contributors to the market turnover while indices increased by 2.38% and 1.09% respectively. Laugfs Gas (LGL) made the highest contribution to

the market turnover with a crossing of 549,700 shares at Rs.48.50. The share price was unchanged and closed at Rs.50. Amana Takaful (ATL) also contributed to the market turnover while the share price increased by

Rs.0.70 (20.59%) and closed at Rs.4.10. Several other crossings were recorded including 1 crossing of 150,000 shares of Royal Ceramics (RCL) at Rs.155, 1 crossing of 500,000 shares of The Lion Brewery (LION) at Rs.190, Diesel & Motor Engineering (DIMO) 1 crossing of 30,000 shares at Rs.1,500 and 1 crossing of Pan Asian Power (PAP) 6,990,000 shares at Rs.4.90.

Globally, U.S. stocks fell slightly as investors fretted over the potential for more tightening measures from China following stronger-than expected economic growth from the country. Dow was down 0.02%.

Sri Lankan Secondary Debt Market Treasury bond yields were mostly unchanged, while the market activity was relatively low.

Sri Lankan Rupee depreciated slightly as the exchange rate was recorded at Rs.111.01 to Rs.111.03 per US Dollar.

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Colombo Stock Exchange ASPI hits all time high


Colombo Stock Exchange ASPI made history, hitting the highest value ever on Thursday the 20 January 2011 while the Diversified sector was up, after a long pause as institutional and high networth investors returned to the market. Stability of the existing positive momentum will depend on the behaviour of these players.

The All Share Price Index (ASPI) closed at 7,193.10 points topped 1.91% by 134.77 points and the Milanka Price Index (MPI) closed at 7,300.68 points rising 0.72% increased by 52.48 points as at end of trading day. Turnover was at Rs.4.6 billion rose 33.06% with a total volume of 142.35 million shares changing hands (down 25.29%). Foreign purchases rose 33.4% to Rs.287.32 million and foreign sales also increased by 139.42% to Rs.409.18 million. Price to forward Earnings Ratio (PER) increased by 1.87% to 27.3 times.

Diversified and Bank, Finance & Insurance sectors were the highest contributors to the market turnover while indices increased by 2.68% and 0.09% respectively.

Laugfs Gas (LGL) made the highest contribution to the market turnover with three crossings (500,000 shares at Rs.47 and 1,000,000 shares at Rs.48). The share price increased by Rs.8.60 (20.77%) and closed at Rs.49.60. Premier Conglomerate John Keells Holdings (JKH) also contributed to the market turnover with a crossing of 712,800 shares at Rs.293. The share price increased by Rs.5.40 (1.84%) and closed at Rs.298.50.

Several other crossings were recorded including 1 of Hayleys (HAYL) with 225,000 shares at Rs.375, 2 crossings of Sampath Bank (SAMP) 292,900 shares at Rs.290, 1 crossing of Colombo Dockyard (DOC) 325,000 shares at Rs.271, 1 crossing of Commercial Bank (COMB) 135,000 shares at Rs.276 and 1 crossing of Renuka Holdings (RHL) 475,000 shares at Rs.72.

Globally, European stocks fell today, taking their cue from losses in Asian and U.S. markets. FTSE 100 was down 1.1%.

Sri Lankan Secondary Debt Market Treasury bond yields were unchanged, while the market activity was relatively low.

Sri Lankan Rupee depreciated slightly as the exchange rate was recorded at Rs.110.95 to Rs.110.98 per US Dollar.

»»  read more

Jan 19, 2011

Colombo Stock Indices back on track


Singer Finance (SFIN) continued to attract retail investors at Colombo Stock Exchange on Tuesday the 18 January, 2011 whilst Healthcare sector gained, triggered by a negotiated deal of Asiri hospitals (ASIR) as well as on renewed interest in certain counters in the sector. Indices improved amidst accumulation across the board.

The All Share Price Index (ASPI) closed at 7,058.33 points, up 0.72% with 50.27 points and Milanka Price Index (MPI) closed at 7,248.20 points, up 0.11% by 8.16 points during the day. Turnover was at Rs.3.4 billion rose 10.14% with a total of 190.53 million shares changing hands (up 21.59%). Foreign purchases rose 5.89% to Rs.215.38 million and foreign sales decreased by 19.56% to rs.170.9 million. However, Price to forward Earnings Ratio (PER) slightly appreciated by 0.75% to 26.8 times.

Among positive contributors were Diesel & Motor Engineering (DIMO) that topped 12.17% by Rs.168.90 closing at Rs.1,590 and Colombo Fort land (CFLB) closing at Rs.320 that increased by Rs.61.80 through 24.63%.

Bank, Finance & Insurance and Healthcare sectors were the highest contributors to the market turnover while indices increased by 0.04% and 6.06% respectively. Singer Finance (SFIN) made the highest contribution to the market turnover. The share price increased by Rs.1.40 (2.85%) and closed at Rs.51.40. Asiri Hospitals (ASIR) also contributed to the market turnover with a crossing of 41,769,190 shares at Rs 9. The share price increased by Rs.0.20 (2.27%) and closed at Rs.9. Lankem Ceylon (LCEY) announced an interim dividend of Rs.1.00 per share.

Globally, European stocks rose today, taking their cue from gains in Asian equity markets and helped by strength in the autos and basic resources sectors. FTSE 100 was 1.2% higher. Most Asian markets ended higher today, with a strong outlook for nonferrous and precious metals driving several stocks in the sector. Nikkei gained 0.2%.

Sri Lankan Secondary Debt Market’s six months yields were up while three months and twelve months yields were down in the Treasury Bills primary auction. Secondary market Treasury bond yields slightly increased, while the market activity was relatively high.

Sri Lankan Rupee depreciated slightly as the exchange rate was recorded at Rs. 110.81 to Rs.110.83 per US Dollar.

»»  read more

Jan 18, 2011

Singer Finance rally alone among Colombo Stocks


Colombo Stock Indices glided slightly on Monday the 17 January 2011 as investors focused on the IPO gains of Singer Finance PLC (SFIN) which rocketed the trading floor ahead of other listed stocks. However, buying interest was seen in other financing companies such as Central Finance (CFIN) and Asia Capital (ACAP) while mixed sentiments seem to prevail in the absence of aggressive institutional investor participation.

At the commencement of trading Singer Finance (SFIN) rose over 333% beyond its initial public offer at Rs.15 closing at Rs.50.50 at closure of market hours. The All Share Price Index (ASPI) closed at 7,008.06 points, dropped 0.35% by 24.54 points and the Milanka Price Index (MPI) closed at 7,240.04, tumbled 0.84% by 61.05 points as at end of trading day.

Turnover was at Rs.3.17 billion rose 86.11% with 156.69 million shares changing hands, up 22.28% added with 80 gainers and 137 listed losers. Foreign purchases rose by Rs.236.88% to Rs.203.39 million and foreign sales were also seen increased 80.99% to Rs.142.95 million whilst the Price to Forward Earnings Ratio (PER) was stable at 26.6 times.

Biggest contributor to turnover was Singer Finance with the stock closing at 49.20, up 34.20 from the IPO offer price of 15.00 rupees. The stock contributed 949 million rupees to turnover with 26.7 million shares offered to the public and over 21.2 million shares done.

First Capital Holdings (CFVF) closed at Rs.28.30, up Rs.3.70 with Asia Capital (ACAP) rising by 18.14% to Rs.86 (up Rs.12.70) and Ceylon Cold Stores closed at Rs.700 rose Rs.168.60 by 31.73%. Meanwhile, Lanka Ashok Leyland dropped 32.05% by Rs.1,278.60 closing at Rs.3,980.

Bank, Finance & Insurance and Diversified were the highest contributors to the market turnover. Bank, Finance and Insurance sector index increased by 0.15% while Diversified sector index decreased by 0.26%. Three crossings were recorded for 354,700 shares of Hayleys PLC at (HAYL) Rs.350, 5,000,000 shares of Dialog Axiata (DIAL) at Rs.11.80 and 75,000 shares of John Keells Holdings (JKH) at Rs.294.50. Cargills (Ceylon) (CARG) announced an interim dividend of Rs 0.50 per share.

Globally, European stocks were trading largely flat early Monday, as weakness in the basic resources sector offset a strong performance by oil and gas shares. FTSE 100 was 0.1% higher. Asian stock markets were mostly lower today, with shares in China trading down as investors showed caution after Beijing raised banks' reserve requirements Friday. Nikkei was down 0.1%.

Sri Lankan Secondary Debt Market Treasury bond yields slightly increased, while the market activity was relatively high.

Sri Lankan Rupee depreciated slightly as the exchange rate was recorded at Rs.110.81 to 110.82 per US Dollar.

»»  read more

Jan 15, 2011

Sri Lanka SEC unveils Capital Market Development plans for 2011-2013



Extract from SEC Chairperson Indrani Sugathadasa’s Address at the recently concluded Breakfast Meeting on 14 January 2011;

We are gathered here today when our stock market has been ranked the 2nd best performing stock market in the world for two consecutive years. The market created history in 2010 by establishing new records in almost all aspects of trading from total market turnover, indices to the market capitalization.

Sri Lanka’s capital market has developed faster and more extensively in the last 18 months than any other period in history. 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. This promising growth in the stock market was mainly backed by peace prevailing across the country. The economy has continued to benefit from stability after the 26-year conflict. The phenomenal growth in the stock market is a positive sign that Sri Lanka`s business landscape is changing for the better. The effects of growth will, no doubt, spill over into the national economy. The government’s stability has given investors a positive outlook. The positive growth momentum of the country so far has factored into the capital market through continued gain in the indices.

Market Performance

2010

2009

All Share Price Index (ASPI)

6,635.9

3,385.5

% Change

96.0

125.5

Milanka Price Index (MPI)

7,061.5

3,849.3

% Change

83.4

135.9

Equity Turnover (Rs Mn)

570,326.8

142,462

Daily Average Turnover (Rs Mn)

2,396.3

593.5

Transactions (No)

3,355,126

1,266,299

Net Foreign Inflow (Rs Mn)

(26,376.3)

(789)

Foreign Investor Contribution to Total Turnover (%)

18.8

30.5

Listed Companies (No)

241

231

Member Firms/Trading Members (No)

23

21

Market Cap (Rs Bn)

2,210.5

1,092.1

Market PER (Times)

25.2

16.5

Turnover to Average Market Cap (%)

34.2

18.0

Dividend Yield (%)

1.2

3.0

No of New Issues

10

3

Amount Raised (Rs Mn)

4,347.4

1,219.3

With the 26 year old war that overshadowed Sri Lanka coming to an end, Sri Lanka is poised to embark on an accelerated development process. In the medium term the government is targeting an economic growth in excess of 8% and anticipates market capitalization to increase to Rs. 3 trillion.

The SEC remains resolute in its efforts to add depth and breadth to the capital market as well as support the country’s development drive by facilitating capital formation within a regulatory framework which is fair and transparent.

In 2010, the SEC implemented some key measures in order to develop the market. The SEC granted licences to 5 Stock Brokers, 5 Investment Managers, 9 Margin Providers, 3 Under writers and 1 Stock Dealer. Also the SEC directed the CSE and the CDS to mandate the lodging of certificates pertaining to all listed securities at the CDS and thereby implement a system of dematerialization of all listed securities. During the course of the year the SEC completed the regulatory framework for exchange traded funds, updated the Code for Unit Trusts, finalized the rules pertaining to Employee Share Option Plans, simplified and reduced transaction cost, reduced the tick size to 10 cents and conducted a consultation on the minimum public float. With the aim of enhancing the surveillance function, the SEC procured a state of the art surveillance system in 2010. The new system has capacity to provide enhanced solutions that will enable us to monitor the market more effectively and eliminate misconduct in the capital market.

The year 2010 also saw the introduction of price bands to arrest volatility in the market and formalization of credit arrangements to clients. The price band came into effect after prices of certain stocks were seen rising without being backed by sound fundamentals. These reforms are indeed reflective of the positive steps that SEC has taken to bring about a strong level of confidence as well as add further liquidity into the market. We acknowledge the cooperation and assistance extended by the stock broking industry and would like to thank them for the confidence and encouragement during challenging times.

The proposals outlined in the Budget 2011 will provide further impetus to the development of the capital market of Sri Lanka. The Budget 2011 incorporated many important proposals the SEC had made thus eliminating the impediments that prevailed in the market.. In order to promote Unit Trusts to mobilize savings several significant proposals were included in the budget. The turnover of the Unit Trust industry is to be exempted from Economic Service Charge whilst foreign investment restrictions placed on Unit Trusts investing in Government Securities was relaxed. To encourage companies to list on the Colombo Stock Exchange, expenses on listing a company will be deductible subject to a limit on the value of the Initial Public Offering and the anomaly which existed in the treatment of withholding tax on corporate debt securities was also addressed. These incentives will further create a supportive environment for the SEC to achieve its overall goals and objectives. We would like to thank H.E the President Mahinda Rajapaksa and the Secretary to the Treasury Dr. P.B. Jayasunndera for including SEC’s proposals in the budget.

These initiatives are consistent with the government’s strategic priorities and strive to ensure that the SEC continues to play a significant role in the securities regulatory landscape. Aided by favourable market conditions we have recognized the following five key strategic goals to be achieved in the next three years and in pursuit of these goals we have identified supporting initiatives.

Key strategic goals

1. Facilitate improvements in the capital market infrastructure

2. Facilitate improvements in liquidity and introduction of new products in the capital market

3. Encourage and facilitate the widening and broadening of ISSUER BASE

4. Facilitate widening and broadening of INVESTOR BASE

5. Enhance the SEC’s performance through effective alignment and management of human, information, and financial capital

To attain these goals we intend to amend existing regulation, develop new products, obtain advance technology and infrastructure and improve practices. Successful implementation of these initiatives can only be achieved through extensive support of the stakeholders and therefore we look forward to their continuing support.

1. Facilitate improvements in the capital market infrastructure

One of the main objectives of the SEC is to create and maintain a market in which securities can be issued and traded in an orderly and fair manner. In order to achieve this objective, it is the duty of the SEC to ensure that suitable infrastructure is in place. During the next three years, the following areas have been identified as vital areas that need development within the capital market in Sri Lanka.

· Amendments to the SEC ACT

The SEC has identified that the amendment to the SEC Act as a priority to create a conducive infrastructure to the capital market. Rulemaking is often required to remedy abusive practices and facilitate changing economic conditions. In general, rulemaking and policies are designed to improve disclosure, facilitate the flow of important information to investors and the public, improve governance, promote high-quality accounting standards, enhance the accountability of market intermediaries and other market participants, and strengthen the structure of the trading markets.

The present SEC ACT was introduced in 1987. Though there were 03 amendments thereafter, an overall review of the provisions to align it to the global market trends has not been done.

The SEC Act will be amended to incorporating the following:

o To regulate demutualized exchanges

o Provisions to effectively regulate a Central Counter Party/ Depositories

o To introduce civil sanctions and administrative sanctions to deal with capital market offenders and the introduction of provisions that will provide for restitution for investors

o To licence and regulate derivative exchanges including a Commodities Exchange

o Provisions incorporating legal duties on Auditors in respect of capital market offences

o Other relevant provisions that will enhance protection to investors

Apart from that, introduction of the new Takeovers and Mergers Code, new market intermediary rules, guidelines to register auditors of listed companies will strengthen the functioning of the Capital Market in Sri Lanka.

Demutualization of CSE

The governance structure of the CSE is modeled on that of a “not for profit, mutually owned” organization. Influenced by increasing competition many exchanges have opted to demutualize the governance structure and make the Exchanges commercially focused business organizations. Some of the other reasons that have influenced the change in governance structure are the need to make a distinction between ownership rights and trading rights and enable management to make strategic decisions looking at the perspective of the Exchange rather than being limited by the interest of members.

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.

The Act will also include provisions to effectively regulate a Central Counter Party (CCP)/ Depositories. Establishment of a Central Counter Party will reduce the amount of counterparty risk that market participants are exposed to.

2. Facilitate improvements in liquidity and introduction of new products in the capital market

Liquidity

A liquid market is a market where securities can be sold, with minimal loss of value at any time within the market time. Liquidity is the key characteristic of a developed or an emerging capital market in the world. Liquidity is a function of many attributes such as number of listed companies listed on the exchange, maintenance of a minimum public float of listed companies, new products available in the capital market and number of active investors in the exchange etc.

Liquid equity/bond markets make investment less risky and more attractive, because they allow investors to acquire securities and to sell it quickly, if they need to access their savings as well as alter their portfolios. At the same time, companies enjoy permanent access to capital raised through equity issues. By facilitating longer-term, more profitable investments, liquid markets improve the allocation of capital and enhance prospects for long-term economic growth. Furthermore, by making investment less risky and more profitable, stock market liquidity can pave the way for more investment.

Corporate Bond Market

The Per Capita Income in Sri Lanka is expected to double in 2016. It is estimated that Rs 1 Trillion of this will be generated from sectors other than the Banking Sector, a significant portion of which will be generated from the corporate debt market. The anomaly which existed in the treatment of withholding tax on corporate debt securities as well as the anomaly of the risk reward structure was addressed and we expect the debt market to develop rapidly. In this regard the SEC will follow up on the Corporate Bond market Development Implementation Plan approved by the Commission. Also the SEC will liaise with the CSE on encouraging trading on the DEX System.

Apart from the above, steps have been taken at present to frame suitable guidelines to encourage the introduction of new funds namely Real Estate Investment Trusts (REIT’s) and Exchange Traded Funds. This will undoubtedly give rise to more investment opportunities for investors and will contribute to the expansion of the number of investors in Unit Trusts.

3. Encourage and facilitate the widening and broadening of ISSUER BASE

Another important strategic goal of the SEC is the widening and broadening of the listed companies in the CSE. It is vital for an exchange to increase the number of companies listed on the exchange as it directly affects the liquidity of the market as well as the confidence of the investors. As a generally accepted practice, the size of the capital market is measured by the market capitalization of the exchange. New listings will increase the market capitalization.

Sri Lanka’s capital market contribution is around 40 percent of the country’s GDP compared to markets of developed countries which is over 100 percent of the GDP. By attracting more companies to list on the stock market we can increase this contribution. The CSE needs more large scale companies to list to generate volumes to cater to large scale foreign investors. That will serve as a positive indicator of the growth momentum of an economy.

From the year 2011 onwards, Market Capitalization is expected to increase at least by 20% per annum. Within a macroeconomic environment of high GDP growth and low inflation supported by fiscal discipline and political stability in Sri Lanka, more companies and infrastructure projects will consider financing their projects through the equity market. It is expected that 50 to 60 new companies (of which approx 25 finance companies as directed by the Central Bank of Sri Lanka), will be listed on CSE in 2011. Hence, it is anticipated that Market Capitalization will increase to Rs 3 Trillion by 2011 from the current Rs 2 Trillion. The SEC is also exploring the possibility of introducing Cross Boarder Listing on the CSE.

4. Facilitate widening and broadening of INVESTOR BASE

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. 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.

We think that it is important to increase the number of active investors in the CSE as well as to increase awareness among the investors. The importance of this goal is to broaden the investor base to increase the liquidity of the market to minimize market manipulations and other market abuses.

The stock market should venture into rural areas further in order to achieve our objective of widening and broad basing of investor base. More investors in the stock market will create more liquidity. The liquidity of the stock market provides investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments. The CSE has already ventured into 4 provinces. The development projects that are underway in the Northern and the Eastern provinces has shown a full swift where the society is very interested in knowing the latest development at the stock market and to invest in it. It is noteworthy to mention here that all 5 existing branch offices of the CSE have performed exceptionally well during the year 2010 and the SEC would like the CSE and stock brokers to venture into other areas such as the East in the near future by establishing branch offices.

The Unit Trust industry, a vital segment of the capital market of Sri Lanka is the best conduit to mobilize savings of the less sophisticated small investors. Therefore, the SEC encourages small scale investors to start their investment through Unit trust as it is less risky than investing in the market directly. To achieve this goal, the SEC already has suggested a marketing plan to promote Unit Trust within Sri Lankan community.

The goal of the SEC’s investor education programme is to guide the investors to make informed decisions by evaluating current and potential investments, while providing critical insights to emerging trends. Some of the activities planned by the SEC in this regard include a TV series and a radio series on stock market investing, both local and foreign road shows, workshops for industry participants and regular seminars for investors.

5. Enhance the SEC’s performance through effective alignment and management of human, information, and financial capital

The SEC is committed to being an employer of choice by consistently attracting, hiring, developing, and retaining a high-quality, diverse, and results-oriented workforce. The expertise and specialized skills necessary in the field of securities regulation are a significant factor shaping the SEC’s human capital planning efforts.

The SEC is placing great emphasis on bolstering its processes and systems in information technology, budgeting, accounting, and internal control functions. In addition, the SEC continues to focus on delivering complete, concise, and meaningful information about the financial and operating performance of the SEC that supports government decision making.

Successful implementation of all these initiatives can only be achieved through extensive support from the stakeholders and therefore we look forward to your continuing cooperation and assistance.

Sri Lanka is undoubtedly poised to take off in 2011. The stock exchange, as an indicator, speaks for the economy’s health and prospects for the local and foreign investors. President Mahinda Rajapaksa has opened the door for foreign investors to invest in Sri Lanka and the political stability of the country provides immense confidence to both local and foreign investors. Let me reiterate our resolve to build our capital market and set it on a strong foundation over the next few years and to contribute towards the President’s efforts of placing Sri Lanka as "the emerging wonder of Asia”. Let us work together as an industry to achieve this.

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