For all the drama that the Colombo Stock Exchange (CSE) has attracted in recent times, the fact is that less than one per cent of Sri Lanka’s population invests in stocks.
Dr Sarath Amunugama, Senior Minister of International Monetary Co-operation and Deputy Minister of Finance and Planning, said that one of the reasons for this is the lack of awareness of the market.
“To reap the benefits of the capital market investments every Sri Lankan needs to be financially literate,” he said at a recent awards ceremony in Colombo organised by the Securities and Exchange Commission (SEC) to confer diplomas and certificates to 800 industry professionals who completed the SEC’s Capital Market Education and Training course. He told the audience that a vibrant capital market can stimulate economic growth by converting savings to investments and also assisting companies to raise funds. “In reality ours is not a matured capital market yet. The capital market heavily depends on equity contribution at the moment, yet the market capitalization of Colombo Stock Exchange is still below US$ 20 billion and as percentage it is around 33 per cent of the GDP. In a comparable economy we would expect market capitalization to be at least 70 – 80 per cent of the GDP. Therefore, we have work to do to develop our equity market further. If we target market capitalization to be 50 per cent of the GDP by 2016 which means we need to envisage the market capitalization of Colombo Stock Exchange to reach approximately Rs 6.5 Trillion by 2016,” he said adding that the capital markets have to think beyond just equity. “We need to develop our debt market and other financial instruments such as derivatives, futures. We need to look at new concepts such as commodity market development. To do all these things we need to have a vision and a plan. I am pleased to announce that the Government has now identified 10 key initiatives which will form the basis of our capital market development roadmap for the next two to three years,” he said, referring to the 10-point roadmap announced in the 2013 budget.
He said there is a need to identify the reasons why companies are reluctant to get listed and encourage them by creating more awareness of the benefits involved. “We must show companies that the CSE in an ideal forum to raise capital and make the listing process less cumbersome. We are hoping to increase to double the number of companies listed on CSE by 2016. The market liquidity can be increased by increasing the number of listed companies,” he said.