The Sri Lankan stock market has continued what has been an encouraging year in 2017, where both market indices continue to record positive returns. The Benchmark All Share Price Index (ASPI) has made a 2.78% gain in October alone and a 6.31% gain year-to-date, while the S&P SL 20 index, which features the CSE’s 20 largest and most liquid stocks has also improved consistently, making a 5.74% gain in October and a 11.50% gain since the start of 2017.
The positive growth of the indices mark a reversal of the declining trend recorded in 2015 and 2016, during which the ASPI recorded a decline of 5.54% and 9.66% respectively. The performance of the market has also resulted in an improved involvement among investors, where the Daily Average Turnover is recorded at Rs. 943 million year-to-date, which is a 28% increase from Rs. 737 million in 2016.
Commenting on market performance, CSE CEO Mr. Rajeeva Bandaranaike stated “2017 has offered encouragement as far as market performance is concerned and investors are starting to recognize long term value in the market. The foreign activity we have witnessed indicates that international investors have been quick to identify an opportunity in Sri Lankan stocks, and with the macro-economic environment continuing to improve we hope to see further advances where secondary market activity is concerned, especially among local retail and institutional investors.”
Capital raised through rights issues highest since 2007
The significant amount of capital raised via rights issues during the year presents another standout feature, with the figure of Rs. 37 billion raised as of end October recording the highest yearly figure since 2007. This development continues to indicate the confidence placed by listed companies in the capital market when addressing their additional capital requirements.
Shift to foreign capital inflow trend in 2017
The market has also continued to attract foreign investment throughout 2017, with Rs. 98 billion in foreign buying contributing to a net foreign inflow of Rs. 19.6 billion year-to-date, a figure that is substantial compared to foreign activity in 2015/16. 2017 also recorded an all-time high for foreign investor buying recorded in the first half of a calendar year.
An attractive market valuation (P/E), encouraging performance among listed entities and capital gains tax exemptions offered to share transactions are considered to be defining factors in attracting the level of foreign investor interest the market has witnessed so far in 2017.
A drive to create awareness on market opportunities
In the midst of the growth of the indices and a number of other positives so far this year, the market continues to trade at a discount compared to regional peers and offers further opportunities for investors – with a market P/E recorded at 10.99 as of the end of October.
The CSE through its market development activities has embarked on an awareness drive in 2017, reaching out to multiple investor segments around the country and in international markets. Such efforts have seen the CSE work with the Securities and Exchange Commission of Sri Lanka (SEC) on “Invest Sri Lanka” Investor Forums in the United States, Australia and New Zealand in 2017 and an island-wide local retail investor focused Investor Forum campaign to create awareness on stock market investment. The CSE branch network has also conducted over 500 educational programmes so far in 2017. In addition, CSE and the Colombo Stock Brokers Association (CSBA) is also presently conducting a series of events presenting investment research on companies featured on the S&P SL 20 Index, to an exclusive audience of Local Institutional Investors.