CSE's exceptional performance , credit to Govt - Chairman

Much of the credit for the exceptional performance of the Colombo Stock Exchange (CSE) should go to the government.

The CSE believes that the time is ripe for placing the investment story of Sri Lanka on the world stage through high profile promotional activities, states Chairman CSE, Nihal Fonseka in the CSE annual report 2009.

Eradication of the conflict which had gripped the country for three decades had a positive impact on business and investor sentiment from May last year.

The bleak global and domestic economic circumstances changed as the year progressed.

The Government and the Central Bank succeeded in rebuilding depleted foreign reserves and providing a catalyst to stronger economic growth by relaxing monetary policy and ushering in a relatively low interest rate regime.

These factors improved prospects of listed entities and triggered a shift in investments from fixed income assets to equity.

This shift had a impact on the strong performance of the CSE last year, said Fonseka.

Due to poor liquidity, market velocity of the CSE is very low compared with other regional markets. High transaction costs, a smaller investor base, poor investor education, high level of broker risk, lack of new listings, insufficient traded products, insufficient attention to practising good corporate governance and insufficient disclosure by some issuers underdeveloped fund management industry, market microstructure and ownership structure of the CSE are factors that impinge on the development and the expansion of the market.

The All Share Price Index (ASPI) and the Milanka Price Index (MP) recorded the highest ever annual increase of 125 percent and 136 percent and closed at 3,385.6 and 3,3849.4 points respectively.

Based on the exceptional performance of the ASPI the CSE was ranked the Best Performing Exchange amongst the 52 member exchanges of the World Federation of Exchanges (WFE).

The 20 sector indices too recorded gains with the construction and engineering sector leading with a 356.9 percent increase.

Market turnover which remained low during the first four months of 2009 showed a significant increase from May mainly due to domestic investor participation.

The CSE achieved the highest turnover for a given year of Rs. 142.5 bln last year surpassing the previous record of Rs. 114.6 bln generated in 2005.

The average daily turnover increased to Rs. 593.6 mln.

Trading volumes were high during last year resulting in 4.76 bln shares being traded. A total of 1.27 mln transactions took place at the CSE setting another new record for the exchange.

The number of transactions in a single day of trading also reached a milestone in 2009 when 15,290 trades were executed on June 18 last year.

The low liquidity in the market is an issue besetting the exchange.

The CSE's turnover velocity in 2009 was 18 percent which is very low when compared with other exchanges in the region.