State Finance Minister says stock market activities bounce back

State Finance Minister says stock market activities bounce back

16 September 2020 03:20 pm

Colombo stock market activities have bounced back encouraged by the positives and future upside State Minister for Finance Ajith Nivard Cabraal revealed.

He told capital market players that if it can succeed in securing 1% of Rs. 10 trillion deposit base of banks and finance companies, the Colombo Stock Exchange (CSE ) will benefit by Rs. 100 billion in captive funds. 

“This is the true potential of the CSE, and stakeholders must harness it,” he said. Cabraal also recalled that even in its best effort, State funds such as the EPF invested only Rs. 70 billion

State Minister Cabraal said the Colombo Stock Exchange has so much value as stocks are grossly under-priced,”

. Acknowledging that it is true that foreign investors have sold out to the tune of over Rs. 30 billion, Sri Lankans have reinforced confidence by buying foreign holdings, and he emphasised that it reflected the actual depth of the local investor base. 

‘On the foreign investment front, 2020 has recorded a net foreign outflow of Rs. 34.9 Billion, largely in line with the foreign fund outflow trend recorded in emerging and frontier markets around the world. 

However, the market has continued to attract foreign purchases too with investors continuing to acknowledge attractive valuations compared to 2019, with foreign purchases YTD of Rs. 45 Billion in 2020.’

“It is fine that Sri Lankans are buying in at a bargain, and foreign investors will eventually return and the sellers will be Sri Lankans who bought earlier,” Cabraal said. 

the Colombo stock market has recorded a noteworthy turnaround in recent months, driven by a progress of the indices and improved investor interest, CSE said.

The overall value of the stock market, which is represented by the market capitalization, has also improved adding Rs. 235.5 Billion since 11th May.

‘The year-to-date daily average turnover, which is an indication of investor participation in the market, currently stands at Rs. 1.35 billion – the highest figure recorded since 2014. 
Overall market activity in terms of the average number of trades carried out during a trading day has also increased significantly by 73% when compared to the average figure recorded in 2019 and 133% higher than 2018.

‘The post COVID market presented a unique opportunity for investors to benefit from historically attractive valuations at the time, with the market reaching 4,300 levels. 

The low-price points demonstrated by a majority of the stocks were the ideal entry phase for new investors and an opportune moment for them to experience the market and grow their wealth. 

Local retail investors were quick to identify this opportunity and accumulate stocks at low prices which resulted in high participation levels in the market.

The year 2020 has also seen a greater interest among younger investors in the retail segment, with 47% of the total accounts opened being attributed to the 18-30 age group. T
his marks an interesting development considering the fact that a large portion of retail stock market investors have traditionally been above 50 years of age.