From the year 2011 onwards, market capitalization is expected to increase at least by 20% per annum, with more than 60 new firms going public this year, according to Securities and Exchange Commission (SEC).
“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. With this, it is anticipated that market capitalization will increase to Rs 3 trillion by 2011 from the current Rs 2 trillion and that the capitalisation increase will be at 20% per annum,” Indrani Sugathadasa, Chairperson SEC told the Business Times on the sidelines of announcing the regulator’s plans for the next two years at a briefing on Friday.
She said that Sri Lanka’s capital market contribution is around 40% of the country’s GDP compared to markets of developed countries which is over 100 % 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,” she said.
It was pointed out that a total of 554,000 securities accounts have been opened with the Central Depository System 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,” she told the gathering.
She said that the SEC feels that it’s 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.”
Ms. Sugathadasa said that the stock market should further venture into rural areas in order to achieve the SEC’s objective of widening and broadbasing the investor base. She said that last year saw the introduction of price bands to arrest volatility in the market and formalization of credit arrangements to clients. "The price bands came into effect after prices of certain stocks were seen rising without being backed by sound fundamentals," she added. |
E-mail
