Financial Times

CSE still unable to qualify for MSCI index

The Colombo Stock Exchange is still unable to satisfy minimum inclusion criteria to get into the Morgan Stanley Capital International (MSCI) Emerging Markets Index, HNB Stockbrokers said in a research report.

The MSCI uses Free Float Market Capitalisation (minimum size US$ 50 million), as an inclusion criteria.

"Once adjusted accordingly, almost all companies of the CSE fall short of the minimum size guidelines, with the exception of John Keells Holdings," the brokers said in a report called "The Lion Emerges".

Most foreign funds exited the Colombo bourse when the CSE was removed from the MSCI Emerging Markets Index in 2001. This was one of the main reasons for the low foreign participation in the bourse.

HNB Stockbrokers said liquidity and market capitalisation have to improve considerably through privatisations and new listings, while political stability and progress in the peace process were also important for investors.

It forecast the ASPI will rise to 1062 in 2003 and 1275 in 2004 saying that when the Colombo bourse is compared with the other markets in the region it is the cheapest with the best yields with most stocks under valued.

Most of the stocks of the CSE are undervalued when compared to their book values while most Asian markets are trading above the aggregated book value.

The brokers said this was the best time to get in to the market and that investors should consider getting into the market before it is too late. Rienzie Wijetilleke, Managing Director of HNB, highlighted the need for foreign aid to trickle down to solve grass roots level problems and said that a special task force needs to be set up to ensure the effective use of aid.

"In other countries they turn crises into opportunities, and in our country we turn opportunities in to crises," he said.

There is a prosperous future for the CSE given the fact that there is political stability in the country, HNB Stockbrokers said.The peace talks would have temporary glitches but overall, there has been commitment from both parties to solve the conflict peacefully, it said.

(TM)