Kenanga Investment Corporation Ltd

Colombo Stock Exchange (CSE)

With the announced end of the war in 2009, the Colombo Stock Exchange registered its sixth highest percentage gain ever, consistently outperforming its regional counterparts. CSE is one of the most modern stock exchanges in South Asia providing a fully automated trading platform and a market capitalization of over US$ 23 billion, it has been one of the best performing stock markets in the world, with average daily turnover rising to over US$ 18 million.

Strong investor sentiment buoyed by political stability and excellent economic prospects pushed market capitalization to a record high in 2009, reaching nearly US$ 1 billion mark for the first time in Sri Lanka’s history. The trend continued with the All Share Price Index (ASPI) breaking the record for its previous high by marking 3549.27 points in 2010.

The CSE is today a robust market with the All Share Price Index (ASPI) marking an annual average return of 36% and market capitalization increasing from US$ 1.5 billion to US$ 7.6 billion over the past five years – a rate of return seldom achieved in mature markets as well as most growing markets.

Comparison Between ASI & Emering Markets Asia

The companies listed on the Colombo Stock Exchange (CSE) are divided into 20 sectors.

Sri Lanka’s high stock valuations, liquid markets and post-war hopeful sentiments are tempting business owners to issue stocks and raise money for expansion, in turn propelling accelerated economic growth. The country’s stocks are now worth US$ 14.1 billion, with the market price to earning multiple being 16.5 times on historical earnings.

Market Capitalization Of the Sectors

Public Offers in the country are substantially over-subscribed during the offer period, with these shares trading with high premiums soon after listing and continuing to do so afterwards. Several companies such as PC House, ODEL, Expolanka Holdings, Browns Investments, Pan Asian Power, Union Bank, Free Lanka Capital Holdings and People’s Leasing have listed on the CSE during 2010 – 2011, substantially surpassing expectations.

Massive infrastructure development continues to attract foreign funds and new investors. One of the best equity markets with extremely favourable price earning ratios compared to regional equity markets, the CSE is recommended by analysts as one of the best markets to obtain high returns for long term funds. Reduced interest rates around 5-8% are resulting in capital inflow and reduced costs of production, enabling higher profit margins, which in turn will increase corporate earnings, enabling investors in the CSE to enjoy huge capital gains and considerable dividends.