* CSE Chief says credible, transparent index will have a positive impact
The battered Colombo stock market yesterday got a fresh boost with world renowned S&P launching a dedicated index in partnership with the CSE.
The S&P Sri Lanka 20 index is designed to be representative of the Sri Lankan equity market, yet also be efficient to replicate, with possible application for index funds and Exchange Traded Funds (ETFs).
The Index includes the largest 20 stocks, by total market capitalization, listed on the CSE that meet minimum size, liquidity and financial viability thresholds. The constituents are weighted by float-adjusted market capitalization, subject to a single stock cap of 15%, which is employed to enhance portfolio diversification.“I am confident that a credible and transparent index will positively impact the market,” CSE Chairman Krishan Balendra told its launch yesterday with SEC Chairman Tilak Karunaratne and stock brokers in attendance.
Balendra said the CSE has embarked on a focused transformation program targeting issuers, investors and intermediaries. In the sequencing of the initiative, launching a co-branded index with S&P Indices was ranked for implementation in Q2 of 2012.
A credible and transparent index would positively impact the CSE by providing visibility and better pricing and serve it well in attracting the foreign investor.
A credible index also forms the foundation for exploring the previously unchartered territory of index linked products as well as cross exchange alliances.
Over $ 1.45 trillion is directly indexed to S&P indices, which includes the S&P 500, the world’s most followed stock market index.
“The S&P Sri Lanka 20 Index was created to help both local and international investors gauge the performance of the Sri Lankan equity market. In recent years, there has been increased interest in Sri Lankan equities from both domestic and international investors, which has spurred demand for a Sri Lankan equity benchmark capable of supporting index-linked financial products,” S&P Indices Vice President Global Equity and Strategy Indices Vice President Alka Banerjee said.
Initially financial markets newswires Bloomberg and Reuters will have the S&P Sri Lanka 20 going live with two others including DirectFN coming onboard.
S&PCNXNIFTI50 in India is widely used index by foreign investors and has had a positive impact for Indian equities market overall, Banerjee told the Daily FT.
The S&P Sri Lanka 20 has been designed in accordance with international practices and standards. Al1 stocks are classified according to the Global Industry Classification Standard (GICS), which was co-developed by S&P Indices and MCSI and is widely used by market participants throughout the world.
The Index employs a transparent, rules-based methodology, adjusts for available float and employs inclusion thresholds necessary to enhance tradability. To be eligible for inclusion, a stock must have a minimum float-adjusted market capitalization of 500 million Sri Lankan rupees (Rs), a six-month average daily value traded of Rs 1 million should have traded at least 10 days of each month for the three months prior to the rebalancing reference date, and a positive net income over the 12 months prior to the rebalancing reference date.
S&P Indices, a leading brand of the McGraw-Hill Companies, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Over $ 1.45 trillion is directly indexed to our indices, which includes the S&P 500, the world’s most followed stock market index, the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, the S&P Global BMI, an index with approximately 11,000 constituents, the S&P GSCI, the industry’s most closely watched commodities index, and the S&P National AMT-Free Municipal Bond Index, the premier investable index for U.S. municipal bonds.
It is not possible to invest directly in an index. S&P Indices does not sponsor, endorse, sell, or promote any S&P index-based investment product. This document does not constitute an offer of services in jurisdictions where S&P Indices or its affiliates do not have the necessary licenses. S&P Indices receives compensation in connection with licensing its indices to third parties.
The Colombo Stock Exchange (CSE) operates the only share market in Sri Lanka and is responsible for providing a transparent and regulated environment where companies and investors can come together. The CSE is a company that is limited by guarantee established under the Laws of Sri Lanka. The CSE is licensed by the Securities and Exchange Commission of Sri Lanka (SEC) and is a mutual exchange consisting of 15 Members and 14 Trading Members. Al1 Members and Trading Members are licensed by the SEC to operate as Stockbrokers.