Business
2020, a turnaround year for Stock Market in Sri Lanka
* Benchmark ASPI recorded a growth of 10.5% in 2020
* 2020 market turnover highest since 2011
* Market Capitalization grown a trillion rupees since 12th May 2020
* Increasing interest among local youth a key feature
The Sri Lanka stock market ended 2020 on a positive note today, marking a year in which the Colombo Stock Exchange (CSE) has seen indices indicate noteworthy resilience and attract record-breaking levels of trading activity.
Market Performance
The benchmark All share Price Index (ASPI) closed 2020 recording a growth of 10.5%, the highest annual increase the index has seen since 2014 and only the 12th occasion the index has seen a double digit percentage growth in CSE’s 35 year history. The ASPI ended 2020 on 6774.22 points. Sri Lanka’s ASPI was also recorded as the best performing stock market index for the month of September 2020, with the index recording a remarkable 12% growth during the month.
The ASPI on 12th May 2020 recorded its lowest point in over a decade but recovered from this to post a 59% gain by the end of the year. Although the S&P SL20 index, which features the CSE’s 20 largest and most liquid stocks has declined by 10.1% in 2020, the index has recovered substantially indicating a trend similar to the ASPI with 57% growth since 12th May, closing at 2638.10 points as of 31st December 2020.
The overall value of the stock market, which is represented by the Market capitalization, has also improved adding Rs. 109 Billion during 2020 and more substantially by Rs. 983 Billion since 12th May. The market recorded a daily average turnover of Rs. 1.9 Billion, this daily average turnover is the highest recorded for a year since 2011. The total turnover for the year was Rs. 397 Billion which was also the highest since 2011.
Overall market activity in terms of the average number of trades carried out during a trading day also increased significantly, ending double the average figure recorded in 2019 and triple the figure recorded in 2018. This indicates high investor participation.
Local Investor Interest a key Highlight
A significant increase in CDS account openings was observed in 2020 with 17,600 new investors entering the market which is 70% higher than the number of new investors in 2019 and 56% higher than 2018. Local investors have contributed to approx. 79% of the total market turnover in 2020 which is higher when compared to approx. 63% in 2019 and 55% the year prior to that.
The year 2020 has also seen a greater interest among younger investors in the retail segment, with 46% of the total accounts opened being attributed to the 18-30 age group. This marks an interesting development considering the fact that a large portion of retail stock market investors have traditionally been above 50 years of age.
A capital outflow trend in terms of foreign investors
On the foreign investment front, 2020 has recorded a net foreign outflow of Rs. 51 Billion, largely in line with the foreign fund outflow trend recorded in emerging and frontier markets. However it is noteworthy that Sri Lankan equities attracted purchases worth Rs. 53 Billion during 2020 by foreign investors, ending close to the Rs. 56 billion figure recorded in 2019. The stock market at present continues to indicate attractive valuations relative to other markets in the region.
Growth Initiatives
The Colombo Stock Exchange also introduced a number a progressive growth measures during the year to enhance operational efficiencies and the attractiveness of the Sri Lankan stock market in the perspective of both investors and issuers.
The Digitalization drive of the Sri Lankan stock market which was implemented in 2020 has enabled end-to-end connectivity electronically at all stakeholder touchpoints and was implemented as an industry-wide exercise, bringing substantial convince to investors and operational efficiencies to stakeholders.
During the year CSE also expanded the eligibility criteria for initial listing of shares on the Main Board and the Diri Savi Board to enable a wider spectrum of companies to qualify for a listing. Rule revisions, which were also carried out during the year brought about changes to the IPO timelines and the basis of allotting shares which were done to complement Sri Lanka’s rapidly developing commercial landscape comprising multiple business models and segments. The revisions were directed at improving the efficiency of the listing process while offering greater flexibility to companies listing on the CSE.
2021
Commenting on key developments to be expected in 2021 CSE Chairman Dumith Fernando Said “In 2021, major market infrastructure developments, Product Diversification, widening of the investor base, building a sustainable business model and more importantly working with the Government and the regulator to position the CSE as a pivotal point for capital raising are all on the cards. Increasing the number of companies listed on the exchange is one of the CSE’s key strategic objectives and we are making steady progress on this front. We look forward to enhancing the listing process and establishing a single window within the CSE for potential listings that would make a Public listing on the Exchange a smooth and efficient process.”
Dumith went onto say “Similar to the Real Estate investment Trusts frame work which was introduced in the final quarter of 2020, we are working on the creation of an OTC market for REPOs on Corporate Debt, trading of Gold-backed products and Stock borrowing and lending. On the Regulatory and Governance fronts, we believe the new SEC Act will be an important development covering regulatory changes required for continuing to safeguard investor rights, enabling the de-mutualization of the CSE, facilitating new product development and strengthening the effectiveness of market regulation And of course we see many of the value drivers which have supported strong market performance since May, continuing into the new year. Thus we are entering 2021 on a hopeful but positive note.”
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SLT-Mobitel, the nation’s ICT and Telecommunications Service Provider recently partnered with Spotify, to mark their launch in Sri Lanka. Spotify is a paid premium music streaming app which allows subscribers to listen to music to their hearts content. Both, SLT-Mobitel Post-Paid and Pre-Paid customers will now be able to enjoy Spotify by activating a monthly recurring subscription or one-time subscription plan and access unlimited music streaming and downloading facilities.
The subscription charges will get added to the user’s customary billing, where payment will be deducted in real time. Starting from the payment date, the user will be able to access Spotify and download their favourite songs, for the next 30 days. Users who sign up for their first monthly subscription will receive an additional one month, courtesy of Spotify. The one-month subscription plan is not applicable with one-time subscription plans. SLT-Mobitel data rates, depending on the user’s respective broadband charges, will apply.
Spotify also has some exciting features that will provide SLT-Mobitel customers with the opportunity to listen to ad-free music, access millions of uninterrupted music under one platform, play any song they like, anywhere they go, and also be able to enjoy their music offline.
SLT-Mobitel customers can select their preferred premium package under four categories; Individual, Duo, Family, Student. Each category has recurring and non-recurring plans. After one month of free streaming, the package will activate once the offer period terminates. While both, the Individual and Student premiums are limited to one account user, the Duo package offers two accounts and the Family premium is accessible through six accounts. To view Spotify plans, users can log on to https://spoti.fi/3aLWvce
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by Sanath Nanayakkare
Anyone conversant with the elements of a political economy would know that Sri Lanka is using its ‘sovereign power’ to manage the different dynamics of the economy in a sustainable manner, Professor W. D Lakshman Governor of the Central Bank said on Wednesday.
“Some critics are saying that we adopt a so-called modern monetary theory. That’s not the case. In fact, Sri Lanka is using its sovereign power in a number of economic aspects to honour its external debt repayment commitments as well as to reduce its debt burden in the medium term as well as achieve resilient growth in the medium to long term, he said.
“We make policy decisions to boost our gross foreign reserves, meet our external debt servicing, to facilitate monetary expansion, to boost our GDP growth, to strengthen our current account balance and manage our domestic and external economic variables in a sustainable manner. This is not a modern monetary theory. This is an age-old tool used by central banks around the world when the circumstances demand it, he said.
“Certain trade-offs will be necessary when dealing with an economy which has a big fiscal gap to bridge. There are efforts to push Sri Lanka towards the IMF again which would in turn have influence on our policymaking. We have taken policy measures to stabilize the economy and we have adequate reserve levels to meet our debt repayments. Meanwhile, we are in negotiations with overseas central banks and multilateral agencies to further boost our reserve level and it would materialise within a matter of weeks,” he noted.
“One of the tools the Central Bank has introduced is in respect of repatriation of export proceeds into Sri Lanka and conversion of such proceeds into Sri Lankan rupees in order to strengthen the foreign exchange situation of the country,” he said.
The Governor made these remarks while delivering the keynote speech at a webinar organised by the Veemansa Initiative led by its Managing Director Luxman Siriwardene – the former Executive Director of Pathfinder Foundation.
The webinar revolved round the topic ‘External debt situation in Sri Lanka: Are we heading for a resolution or crisis?’
Professor Sirimal Abeyratne, Prof. Sumanasiri Liyanage, Dr. Nishan de Mel and Dr. Ravi Liyanage were the other speakers on the panel.
Author
By Hiran H.Senewiratne
CSE produced signs of a rebound yesterday with both indices closing positive, though turnover remained low. Central Bank Governor W.D Lakshman’s recent statement on managing foreign reserves gave some boost to the market yesterday, stock market analysts said.
The index experienced a zigzag movement within the early hours of trading; thereafter, it recorded a slight up-trend as it reached its intraday high of 7,439. Later, the market witnessed a down-trend at mid-day, followed by a sideways movement and closed at 7,372, gaining 43 points during the month of February, market sources said.
It is said the banking sector dominated turnover with a contribution of considerable parcel trades in Sampath Bank, Commercial Bank and HNB.
Further, the Commercial Bank’s impressive quarterly results during the recent turbulent period also built investor confidence. Commercial Bank was able to register a18 percent net interest income when other banks were reporting a decline. Its share price increased by Rs. 3 or 3.5 percent. On the previous day, its shares started trading at Rs. 85 and at the end of the day they moved up to Rs. 88. Due to the positive growth results, the bank announced a Rs. 4.40 dividend per share, plus a Rs. 2 script divergent for every share.
Further, Sampath Bank shares also appreciated in both crossing and retail. In crossings its shares appreciated by Rs. 1.At the end of the day they moved up to Rs. 154.50. In the retail market, its shares moved up by Rs. 2 or 1.3 percent. Previously, its shares fetched Rs. 154 and at the end of yesterday they moved up to Rs. 156.
Amid those developments, both indices moved upwards. The All Share Price Index went up by 104.48 points and S and P SL20 rose by 67.78 points. Turnover stood at Rs. 3 billion with four crossings. Those crossings were reported in Sampath Bank, where 3.9 million shares crossed for Rs. 602.2 million, its share price being Rs. 154.50, HNB 375,000 shares crossed for Rs. 39.4 million, its shares traded at Rs. 105, Pan Asia Power 9.5 million shares crossed for Rs. 33.2 million, its shares traded at Rs. 3.50 and Access Engineering 1.2 million shares crossed for Rs. 28.2 million; its shares traded at Rs. 24.
In the retail market top five companies that mainly contributed to the turnover were, Expolanka Rs. 450 million (10 million shares traded), JKH Rs. 205 million (1.3 million shares traded), Browns Investments Rs. 199 million (34.9 million shares traded), Sampath Bank Rs. 191 million (1.2 million shares traded) and Dipped Products Rs. 137.7 million (2.8 million shares traded). During the day 101 million share volumes changed hands in 18046 transactions.
During the day, Expolanka, the biggest contributor to the turnover, saw its share price appreciating by Rs. 6.20 or 15 percent. Its share price quoted on the previous day was Rs. 41 and at the end of trading yesterday it moved up to Rs. 47.
Sri Lanka’s rupee quoted wider at 193.50/195.50 levels to the US dollar in the spot next market on Thursday while bond yields remained unchanged, dealers said. The rupee last closed in the spot market at 194.50/195.00 to the dollar on Wednesday.
