Financial Times

Strong investor confidence boosts new opportunities

The Colombo Stock Exchange (CSE) said last week that the prevailing peace process, stable political situation and current economic conditions were ripe for more investments in the stock market.

"Interest rates, as measured by the 12-month Treasury Bill rate, dropped to 10 percent at year-end from a 13.8 percent level at the beginning of the year. Lower interest rates have led to a decreasing rate of return on investments in the form of money put away in banks -- prompting more people to look into the benefits of investing in stocks as an alternative option," the CSE said in a statement listing out the advantages in investing in the stock market.

It said the market has reflected the current positive sentiment with the All Share Price Index (ASPI) gaining 31.2 percent and the Milanka Price Index (MPI) reporting a growth of 33 percent last year. Estimated GDP growth in 2002 is at 3.2 percent from a negative 1.4 percent in 2001 with inflation reduced to 9.6 percent from 14.2 percent in 2001.

The largest Initial Public Offering (IPO), Sri Lanka Telecom Ltd (SLT), was listed in January 2003 along with Lanka Hospitals Corporation Ltd (Apollo), adding on an impressive Rs. 23.7 billion to the bourse. The two listings helped boost market capitalization of the Colombo Stock Exchange (CSE) by 26% with SLT accounting for 14% of the total market capitalization of the bourse as of end January 2003.

The CSE hopes that the boost in liquidity and market capitalization through the share issues of Sri Lanka Telecom and Apollo Hospitals will reflect favourably on chances of getting re-included in the MSCI Index, a benchmark index for fund managers globally. "A re-inclusion would mean that a strong possibility exists for international fund managers to enter the Colombo stock market," the statement said.

Corporate profits registered by companies listed on the bourse have also increased in recent times with the first three quarters of the year under review, showing a rise in quarterly profits by 127 percent in comparison to the same period in 2001.

"The peace process combined with a relatively stable political situation, with improved economic fundamentals, lower interest rates and high corporate profits help make the stock market an appealing avenue for investments - an attractive choice for people looking to maximize their returns," the CSE added.

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