Stock market buoyant; CSE and SEC target local and foreign investors
Tuesday, 15 July 2014 00:50
As the Sri Lankan economy takes an upward turn, with economic growth being at 7.5% over the past four years, macroeconomic indicators signal an ideal environment for investment, with bank interest rates at an all-time low, the investment atmosphere is idyllic for prudent and well informed investors.
“It is important to understand the long-term nature of capital market investment and the cyclical flow that it follows. If one looks at the indices right now, one is able to see the positive growth trajectory of the market. The ASPI has crossed the 6,600 point mark and the S&P SL20 was recently at the highest since its launch, indicating that the stock market is now on an upward turn based on valuations and fundamentals,” CSE’s Head of Market Development Niroshan Wijesundere said.
Taking into account this ideal investment environment, the Colombo Stock Exchange (CSE), along with the Securities and Exchange Commission (SEC) and other stakeholders, have taken strident steps to develop the capital market, with a new strategic direction adopted since 2012.
Under the CSE’s three-year strategic plan and the SEC’s 10-point plan, the CSE has embarked on a steady phase of growth and these efforts are now coming into fruition. The CSE and SEC have taken bold and innovative efforts to reach out to attract foreign investors, make information more freely available and educate investors.
The past two years have seen a number of significant achievements:
In 2012, the highest net foreign inflow of Rs. 38,660. 7 m.
In 2013 highest capital raised through debt IPOs of Rs. 68, 262.3 m.
In 2014 (Jan to June) highest capital raised through equity IPOs (since 2011) of Rs. 2,393.8 m.
The CSE in association with the SEC began a concentrated effort to attract institutional and high net-worth investors from across the globe by projecting the CSE as an attractive emerging market. Under the banner of ‘Invest Sri Lanka,’ investor forums were held in Mumbai, Dubai, Hong Kong, Singapore and London over the course of 2013 and 2014.
Presentations were made by high-level Government and financial sector representatives, who made strong cases for investing in the Sri Lankan capital market, during these investor forums. Since the beginning of these international forums, there has been a steady stream of new foreign entrants to the market and renewed interest from existing investors which has increased the foreign purchases and net foreign inflows.
“By correlating the timing of our investor forums with the inflows that have been generated from the respective countries where these forums were held, we are able to directly see the constructive nature of these forums for the stock market in Sri Lanka. Our greatest success has certainly been from Singapore, we have observed a net foreign inflow of Rs. 7,617.4 m in the first six months of 2014, as opposed to a net foreign outflow of Rs. 2,054.4 m in 2013 (Graph 1). In Hong Kong we saw a net foreign outflow of Rs. 175 m in 2013 and a net foreign inflow of Rs. 1.7 m in 2014 (Graph 2),” Wijesundere said.
“Even in the case of the United Arab Emirates, where UAE markets were picking up at the time of our conference; we were able to portray the Sri Lankan capital market as an attractive investment avenue, which had growth potential. We have seen an improvement from a net foreign outflow of Rs. 134.9 m in 2013 to a net foreign inflow of Rs. 29.9 m in the first six months of 2014 (Graph 3). Since the event in Mumbai, we have seen a net foreign flow from India improve from a net foreign outflow of Rs. 106.7 m in 2013 to a net foreign inflow of Rs. 30.8 m in 2013 (Graph 4),” Wijesundere said.
This joint effort between the CSE and the SEC has also resulted in a number of new entrants to the market with 31 new accounts being opened from the locations where the investor forums were held. Additionally purchases from the countries where investor forums were held has increased significantly.
“These forums are a joint effort which brings together a number of the stakeholders within the capital market, from brokers, to custodian banks and the market regulator, their input has been vital to the success of the conferences and the positive outcomes which they have yielded,” Wijesundere added.
In the past months the CSE has launched a mobile application which provided vital market information to users across the island and overseas, in all three languages. The application allows users to access, a market summary, ASPI and S&P SL20 graph details, latest trades, announcements, price list, gainers and losers, details of listed securities and a ‘My Portfolio’ feature which is a personal watch list.
First launched for Android mobile devices, the App is now also available for the iOS platform as well and can be downloaded free of charge from Google Play and the Apple iTunes store. Since its launch in December 2013 the Android App has had 4736 downloads, whereas the iOS app, launched just last month has been downloaded 568 times.
“There is a perception among some that stock market information is available only to a privileged few. However the CSE is committed to ensure that everyone has as much information as possible and is able to access this information regardless of the size of their investment, their location or their language of fluency. Therefore we take meticulous efforts to ensure information is available at their fingertips and accessible on the go,” Wijesundere stated.
The CSE is also making a conscious effort to reach out to a younger more tech-savvy audience that is interested in monitoring the capital market and keeping abreast of the promotional activities being conducted therein.
In order to provide timely updates to this potential and existing investor bracket, the CSE launched a twitter handle (@CSE_Media). Followers, that now number nearly 700, receive updates on announcements, a market summary and information on CSE awareness building efforts, amongst other stimulating updates.
Improving financial literacy
“In order to improve financial literacy amongst potential and existing investors and within this context our Investor Education Team seeks to educate investors on the fundamentals of investing, because it is knowledge of these fundamentals that will assist them to make sound financial decisions,” Wijesundere said.
He further pointed out that the CSE has been engaged in the task of educating existing and potential investors over the last two years. We have a base of investors well educated on the fundamentals of investment and this base will now be able to take full advantage of the market that is posed to grow in the coming months”.
The Colombo Stock Exchange together with the Securities and Exchange Commission of Sri Lanka is endeavouring to educate the general public, existing and potential investors and students on the fundamentals of the capital market and investing therein. The Investor Education Team of the CSE’s Market Development division, in the past six months have reached a large number of potential and existing investors (Table 1).
“We identify specific segments and educate them on financial planning. Due to a perceived risk of investing in the stock market some are disinclined to invest in the capital market. Our aim is to portray the CSE as an alternative investment option,” Wijesundere said.
Investor Education Programs
The CSE also conducts intensive, week-long Investor Education Programs for existing or potential investors, to give them an in-depth understanding of the fundamentals of investing. These training workshops equip attendees with the skills necessary for analysing investment opportunities, capital market processes, and benefits of investing in shares and debt and analysis of listed company financial documents.
“These workshops are attended by anyone from students to retired professionals, who are seeking a thorough understanding of the market in order to make prudent investment decisions. These workshops encourage potential and existing investors to learn the basics of analysing the financial statements of a company and diversification of investment portfolios which provide an advantageous return,” Wijesundere stated.
“With the improvement of market sentiments, investors must be mindful to evaluate fundamentals and valuations and make informed investment decisions. Furthermore they must consider research reports by brokers and seek the advice of investment professionals, before making investment decisions,” Wijesundere said.