Local investors account for 95% of turnover at CSE
13 Jan 2022
Local investors account for 95% of turnover at CSE
13 Jan 2022
28 IPOs in 2021
Historic market capitalisation-to-GDP ratio of 36.7%
By Imsha Iqbal and Shenal Fernando Domestic investors accounted for 95% of the daily turnover of the Colombo Stock Exchange (CSE) in 2021 on the back of increasing retail investor participation in the market. This increased local participation with over 63,163 people trading at least once in the CSE during 2021, which was a 70% jump compared to 2020 and has helped the stock exchange reach unseen historic highs across the board as per the presentation made by CSE Chairman Dimuth Fernando yesterday (12) during an event.According to Fernando, domestic participation in the daily turnover has increased to 95% in 2021, up from 80% in 2020. This represents a dramatic shift in the market in comparison to a few years when foreign participation accounted for a significant portion of the daily turnover. According to Fernando, foreign participation in the daily turnover was as high as 47% in 2017, but has progressively decreased since falling to 44% in 2018, 36% in 2019, 20% in 2020, and falling to a mere 5% in 2021.In 2021, the CSE recorded 28 IPOs, the second highest figure recorded in the history of the CSE behind only 2011 and 2013 when the CSE recorded 30 IPOs each year. Out of the 28 IPOs in 2021, 14 were debt IPOs, 13 equity IPOs, and one was an equity introduction IPO. All 13 of the equity IPOs were oversubscribed within the opening day. According to Fernando, their target for 2021 had been 20 IPOs which had been easily surpassed and he claimed that this reflected the demand and faith in the corporate sector.The All Share Price Index (ASPI) went up by 80% in 2021, while the Standard and Poor’s Sri Lanka 20 (S&P SL20) index was up by 60%, Fernando claimed. Expanding on this, he claimed that the market capitalisation by the end of the year was Rs. 5.48 trillion, a historic high for the CSE. Similarly, the daily average turnover also reached an all-time high of Rs. 4.88 billion easily surpassing the targeted daily average turnover of Rs. 4 billion in the beginning of 2021.The market capitalisation-to-GDP ratio also achieved a historic high in 2021 reaching 36.7%, up from 19.7% in the previous year. In contrast during the 2011-2019 period, the market capitalisation-to-GDP ratio hovered at around 20-30%. The CSE contributed Rs. 7 billion in direct government revenue during 2021. The contribution to the Government from the Securities and Exchange Commission (SEC) cess fee was Rs. 1.6 billion in 2021. According to Fernando, the historic performance of the CSE in 2021 was due to not only the positive momentum created by increased local investor participation, but also due to the fact that corporate earnings themselves had reached historic levels.He added that the CSE conducted educational as well as awareness campaigns through social media.He also stated that digitalisation of the stock market made it much more accessible to individual investors along with the SEC. Accordingly, approximately 30,000 new Central Depository System (CDS) accounts have been created.Setting out their targets for 2022, Fernando stated that the CSE expects to increase new listings and that there are already many in the pipeline.He further said the CSE anticipates infrastructure developments as a joint effort with the SEC in the coming 12 months along with a common auto management system with all the brokers, adding that this is owing to instances where the market halt did take place in the last year due to third party vendors.“So we wanted to step in and take some leadership working with our broker partners. Therefore, we have strong automangement systems,” Fernando explained.He added that there are exciting new products coming into the stock market and the CSE is working towards this goal with the support of the Central Bank of Sri Lanka (CBSL) and other banks “quite extensively since last year”. The CSE is also to harmonise the market participant rules with the broker rules and consider it as a milestone, according to Fernando, who also noted that it would be done in the first quarter (Q1) of this year.
