The Colombo Stock Exchange in Sri Lanka
Consistently One of the Best Performing Stock Markets in the World
Nov 15, 2009
The Colombo Stock Exchange (CSE) is the main stock exchange in Sri Lanka. It provides a fully automated trading platform and is known to be one of the most modern exchanges in South Asia. The vision of the CSE is to help build the wealth of the nation by creating value through securities.
According to the CSE’s website it had 235 listed companies with a combined market capitalization of $7.6 billion as of 31 December 2008.
The CSE was established in 1985 when it took over the Stock Exchange from the Colombo Share Brokers Association (which had been in operation since 1896). It has a membership of fifteen institutions who are all licensed to operate as stockbrokers.
Technology of the Colombo Stock Exchange
In 1991, the CSE installed a central depository and an electronic clearing and settlement system for share transactions. Following that, in 1997, the trading activity was automated with the installation of the Automated Trading System (ATS).
Today it is a modern exchange, which offers a state-of-the-art technological infrastructure to facilitate an "order-driven trading platform" for the trading of securities, including equities (shares), corporate debt securities (corporate bonds) and government debt securities (government bonds).
The Colombo Stock Exchange was the very first exchange in the South Asian Region (and the 52nd exchange in the World) to be elected as a member of the World Federation of Exchanges (FIBV) in October 1998. The CSE was one of the founding members of the South Asian Federation of Exchanges (SAFE) and still holds the Chairman position.
Foreign Investment in the Colombo Stock Exchange
Companies listed on the CSE have benefited from a huge increase in foreign investment following the end of the 30 year civil war against the separatist terrorist group, the Liberation Tamil Tigers of Eelam (LTTE) on 18 May 2009. Foreign investment in the CSE is generally freely permitted and yields from investments such as interest, dividends and other profits from such investments are not subject to Exchange Control Regulations by the Sri Lankan Government.
Record Growth of the Colombo Stock Exchange
After performing averagely throughout the 1990s mainly due to the Sri Lankan civil war, firstly the ceasefire agreement signed in 2001 and then the official declaration of the end of the war in May 2009, there was unprecedented growth in the both indices of the CSE; the All Share Price Index (ASPI) and the Milanka Price Index (MPI).
The ASPI Index, which was around the 500 mark in August 2001, has now surpassed the 3000 mark.
This has led to the CSE being consistently voted one of the best performing markets in the world, most recently by Reuters on October 5, 2009 saying it was the best performing stock market in the world so far in 2009. The ASPI broke a record on that day when the index closed at 3,098.2, the highest point reached by the CSE index. The growth of the index for the year to date reached 106.1 %. The MPI closed at 3,508.7 on the same day, recording a year to date growth of 115.1%. The market capitalisation of the CSE on October 5 2009 was Rs. 994.5 billion, the highest recorded in CSE history.
Buoyed by improved investor confidence due to the end of the war, positive political developments and strong corporate results the CSE continues to grow strongly. There is a massive potential in some sectors to grow such as construction (the North and parts of the East of Sri Lanka are all being rebuilt after the end of the war there), banking and tourism (since the end of the war tourist numbers have shot up as many countries have removed their travel warnings).
This is the definitely the best time to start investing in Colombo stocks.
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