By Duruthu Edirimuni Chandrasekera
The Colombo Stock Exchange (CSE) this year has seen a near 6 per cent index drop compared to 2017, data show.
CSE’s main All Share Price Index was down 5.51 per cent as at Thursday compared to a 2.26 per cent increase in 2017. There was a net foreign outflow with frantic foreign selling in the second half of this year. Foreign selling as at Thursday stood at Rs. 22.8 billion as opposed to foreign buying last year at Rs. 17.7 billion. Compared to last year, the net turnover had dropped to Rs. 199.4 billion against Rs. 220.6 billion in 2017, Thursday’s figures from the CSE show. Trading volumes at CSE have trimmed down drastically in line with the stock price plunges. This year the CSE was recording only a handful of big transactions.
So what’s in store for next year? Unless the same song is to be played next year, the government needs to intervene and administer this situation, analysts note.
“The Employees’ Provident Fund (EPF) must come back to the market as valuations are extremely attractive. This is a priority for next year,” Ray Abeywardena, President Colombo Stock Brokers Association told the Business Times. He pointed out that for the last four years none of the captive funds has invested in the CSE. Major share transactions by the EPF weren’t done since the current government came into power in 2015 for the first time. “Now this has to happen. This is my fervent wish for next year.”
The EPF has Rs. 2 trillion in assets under management. The current investment in the stock market by the EPF is around 2.5 per cent of the portfolio. The EPF bought Rs. 10.8 billion worth of shares during 2010 to 2015, the dark pump and dump era. Of this, Rs. 9.8 billion hadn’t to-date made any returns. So the new government treaded cautiously.
Foreign investors bought into Sri Lankan equities last year more than any other year in CSE’s history. This is a strong endorsement of the value proposition the stock market offers at present. Sri Lanka is presently being pegged by investors and market commentators around the world, as one of the most attractive frontier markets. “And the investment case for the Sri Lankan market is only getting stronger,” Mr. Abeywardena added.
The Central Bank (CB) in October has said that trade and investment guidelines have been agreed upon as preparation for the EPF becoming more active in the CSE. Then with the brief government change on October 26, CB met with trade unions to discuss this as some had opposed it.
Despite the Government signing an agreement with the Asian Development Bank in 2016 to facilitate the funds of the EPF to be invested in the CSE, nothing has happened so far. Some unions in August had urged the Government to go before the EPF members to verify their views on the ADB proposals to move the EPF to the private sector. “We wish to point out that the mechanism available with the Department of Labour to conduct (a) workplace level referendum could be made use of to ascertain the wish of the individual members of the fund,” the unions said in a joint statement.
The Colombo Stock Exchange (CSE) this year has seen a near 6 per cent index drop compared to 2017, data show.
CSE’s main All Share Price Index was down 5.51 per cent as at Thursday compared to a 2.26 per cent increase in 2017. There was a net foreign outflow with frantic foreign selling in the second half of this year. Foreign selling as at Thursday stood at Rs. 22.8 billion as opposed to foreign buying last year at Rs. 17.7 billion. Compared to last year, the net turnover had dropped to Rs. 199.4 billion against Rs. 220.6 billion in 2017, Thursday’s figures from the CSE show. Trading volumes at CSE have trimmed down drastically in line with the stock price plunges. This year the CSE was recording only a handful of big transactions.
So what’s in store for next year? Unless the same song is to be played next year, the government needs to intervene and administer this situation, analysts note.
“The Employees’ Provident Fund (EPF) must come back to the market as valuations are extremely attractive. This is a priority for next year,” Ray Abeywardena, President Colombo Stock Brokers Association told the Business Times. He pointed out that for the last four years none of the captive funds has invested in the CSE. Major share transactions by the EPF weren’t done since the current government came into power in 2015 for the first time. “Now this has to happen. This is my fervent wish for next year.”
The EPF has Rs. 2 trillion in assets under management. The current investment in the stock market by the EPF is around 2.5 per cent of the portfolio. The EPF bought Rs. 10.8 billion worth of shares during 2010 to 2015, the dark pump and dump era. Of this, Rs. 9.8 billion hadn’t to-date made any returns. So the new government treaded cautiously.
Foreign investors bought into Sri Lankan equities last year more than any other year in CSE’s history. This is a strong endorsement of the value proposition the stock market offers at present. Sri Lanka is presently being pegged by investors and market commentators around the world, as one of the most attractive frontier markets. “And the investment case for the Sri Lankan market is only getting stronger,” Mr. Abeywardena added.
The Central Bank (CB) in October has said that trade and investment guidelines have been agreed upon as preparation for the EPF becoming more active in the CSE. Then with the brief government change on October 26, CB met with trade unions to discuss this as some had opposed it.
Despite the Government signing an agreement with the Asian Development Bank in 2016 to facilitate the funds of the EPF to be invested in the CSE, nothing has happened so far. Some unions in August had urged the Government to go before the EPF members to verify their views on the ADB proposals to move the EPF to the private sector. “We wish to point out that the mechanism available with the Department of Labour to conduct (a) workplace level referendum could be made use of to ascertain the wish of the individual members of the fund,” the unions said in a joint statement.
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