Low interest rates, better corporate results :

Bullish sentiment at CSE

Market analysts said that the exceptional performance in the bourse is mainly due to low interest rates and better performance of companies during the year.

The Colombo Stock Exchange (CSE) made history last week when its Market Capitalisation surpassed the Rs. 3 trillion mark for the first time in its history. At the close of trading on Wednesday the Market Capitalisation of the Colombo Stock Exchange (CSE) was Rs. 3.0067 trillion.

On Thursday, CSE's S and P Sri Lanka 20 surpassed the 4,000 mark for the first time since its launch and closed at 4013.18, a 23 percent growth year to date. The S and P SL 20 covers the largest and most liquid stocks from the Sri Lankan equity market and is designed to be the basis for tradeable products.

The index is based on S and P Indices’ global index method, which provides consistency, transparency and liquidity. The S and P SL20 was launched in June, 2012 and showed a growth of 8.4 percent at the end of the same year. The S and P SL20 showed a growth of 5.8 percent in 2013.

“Market interest rates have been declining continuously and now the rates have come down to 7-8 percent. On the other hand, half year and quarterly reports of corporates are coming up with better results.

Therefore, investment in stocks and equities have become the best option,” said the President of Colombo Stockbrokers Association, Dimuthu Abeysekara.

Market analyst Mangala Boyagoda said that as all the regional stock markets are performing well and therefore, there is no reason for the CSE to not grow.

The low interest rates is the main factor but other factors such as peace, macroeconomic conditions have contributed to growth. There are good but undervalued stocks in the CSE and therefore, the market is going up, he said.

The exceptional performance comes in the wake of a series of positive achievements for the CSE over the past few months with the ASPI crossing the 7,000 mark in August and the S and P SL20, crossing the 3,500 mark in June this year, for the first time since its launch in 2012.

This year, to-date, there have been five equity Initial Public Offerings (IPOs), one equity introduction and six debt IPOs. The five equity IPOs raised a total of Rs. 2.7 billion, the highest since 2011.“The performance of the CSE over the past few months is a clear indication that confidence in the market, among foreign and domestic investors, is growing. The CSE with the Securities and Exchange Commission have ensured a competitive market which is strictly regulated and therefore, attracts savvy investors and high value companies,” CSE Chairman Vajira Kulatilaka said. “The Foreign Investor Fora conducted by the CSE and SEC in the past year in Singapore, London and most recently in New York, have enlightened international investors of the value proposition in the Sri Lankan Capital Market and thereby attracted foreign funds which have contributed positively to the performance of the market,” CSE CEO Rajeeva Bandaranaike said.

- GW