Professional Documents
Culture Documents
Sri Lanka Foreign Roadshow Book
Sri Lanka Foreign Roadshow Book
Sri Lanka Foreign Roadshow Book
INCE the end of Sri Lankas three-decade civil war in 2009, the country has
been on a fast track to achieving growth unmatched by most economies. Sri
Lanka is poised to pull off average GDP growth of 8% per annum over the
next three years, buoyed by sound fiscal and monetary policies, unprecedented
growth in infrastructure development, evolution as a tourism and transshipment hub,
and a rapidly growing middle class. Sri Lankas medium-term GDP growth forecasts
rank it as South Asias fastest-growing economy.
The Colombo Stock Exchange (CSE) trades at a discount and offers attractive
returns, underlined by strong corporate earnings potential. The CSEs low correlation
to developed markets compared to most other emerging markets provides a
unique diversification opportunity to investors seeking emerging market exposure.
Furthermore, the CSE, together with the Securities and Exchange Commission
(SEC) of Sri Lanka, is taking concrete measures to increase free float and market
depth in order to improve investibility.
Given Sri Lankas robust growth and the CSEs attractive returns, the Sri Lankan
equity and debt markets offer a unique opportunity to investors in an investment era
impacted by economic growth worries.
Table of Contents
Sri Lanka South Asias fastest-growing economy
Sri Lankas growth story to continue with average GDP growth of 8% per annum over the next three years
Government targets 3.8% budget deficit by 2016E without compromising economic growth
10
11
Sri Lanka targets USD100bn economy by 2016E, driven by growth in tourism, transportation, and
export-oriented industries
16
16
#2 Port expansion plans aimed at promoting Sri Lanka as a leading transshipment hub
17
18
#4 Increased consumer demand and foreign investments drive growth in real estate and financial services
19
Sri Lankas capital market on a higher growth trajectory supported by strong market fundamentals
24
CSE has had a bull run unmatched by most other markets since 2009
24
25
25
The CSE provides a good diversification option for emerging market investors
26
Increased foreign investor confidence in the market witnessed through net foreign buying
27
Liquidity remains a concern, but corrective action is being taken to address this issue
29
29
31
Corporate debt market expands in 2013 and signals further growth potential
32
33
40
40
41
Market indices
41
Trading details
42
Transaction costs
42
Settlement 43
Infrastructure and systems
43
Regulatory framework
45
45
45
Members 46
Trading members
48
Custodian banks
50
52
54
Sri Lankas growth story to continue with average GDP growth of 8% per annum over
the next three years
Since the end of the war, the Sri Lankan economy has grown at an impressive 7.5% per annum (Exhibit 1) well
above that of the global economy and indicative of resilience in the wake of domestic and global challenges. The
Central Bank of Sri Lanka (CBSL) expects the economy to grow at an average 8% per annum over the next three
years, even amid the global slowdown; this growth rate is much higher than that expected in other emerging and
developing economies (Exhibit 2).
Exhibit 1:
Exhibit 2:
Exhibit 4:
3,557
Thailand
Indonesia
Sri Lanka
Vietnam
1,755
1,257 1,489
India
752
Pakistan
USD
6,000
5,000
4,000
3,000
2,000
1,000
0
Bangladesh
Exhibit 3:
2007
2008
2009
2010
2011
2012
2013
Headline
Core
Dec-13
0.0
2006
2.1
Aug-13
4.5
5.0
Mar-13
5.8
6.9
4.7
Oct-12
6.9
May-12
7.0
Jan-12
7.0
Aug-11
7.7
Mar-11
8.5
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Oct-10
10.0
Exhibit 6:
May-10
15.0
Jan-10
Exhibit 5:
LKR
250
Exhibit 8:
200
100
Jan-07
May-07
Oct-07
Mar-08
Jul-08
Dec-08
May-09
Sep-09
Feb-10
Jul-10
Nov-10
Apr-11
Sep-11
Jan-12
Jun-12
Oct-12
Mar-13
Aug-13
Dec-13
150
LKR/USD
Source: Bloomberg
LKR/EUR
LKR/GBP
Government targets 3.8% budget deficit by 2016E without compromising economic growth
Sri Lankas fiscal deficit has steadily declined since 2009, and the government projects a further drop to 3.8% of
GDP in 2016E (Exhibit 9). The government expects to achieve greater fiscal consolidation through expenditure
rationalization policies, while maintaining public investment at levels that support economic growth (Exhibit 10).
Tax reform policies implemented since 2011 have also increased revenue mobilization.
Exhibit 9:
Exhibit 10:
B+
negative
2009
B+
positive
2010
BBstable
2011
BBstable
2012
BBstable
2013
B
negative
2009
B+
stable
2010
B+
positive
2011
Moody's
B+
stable
B+
stable
B1
stable
2012
2013
2010
B1
positive
B1
positive
2011
2012
B1
stable
2013
Fitch Ratings maintained its rating and believes Sri Lankas resilient growth performance, healthy human
development and strong payment record should offset weakness in its fiscal and external balance sheet and
moderate domestic savings relative to investment needs.
S&P affirmed its rating due to the countrys robust growth prospects, progress in addressing a number of its
structural weaknesses through fiscal measures as well as success in maintaining inflation at single digits.
However, the rating agency cautioned against Sri Lankas weak external liquidity and a moderately high and
increasing net external liability position.
Moodys confirmed Sri Lankas stable rating, but revised its outlook to stable from positive. The rating agency
stated the revision was due mainly to the decline in the countrys strength of its external payment position over
the past two years and a slowdown in the pace of its fiscal consolidation.
10
Exhibit 13:
Source: Ministry of Finance and Planning, Board of Investment of Sri Lanka, Central Bank of Sri Lanka
105
Bangladesh
130
129
122
India
134
132
132
Bhutan
141
148
142
Afghanistan
164
168
160
2012
107
107
2010
108
110
2008
105
Pakistan
2006
Nepal
2004
79
2002
95
2000
95
1998
Maldives
HDI Value
0.8
0.7
0.6
0.5
0.4
0.3
1996
89
1994
81
1992
85
1990
Sri Lanka
1988
2012
1986
2013
1984
2014
Exhibit 15:
1982
1980
Exhibit 14:
Sri Lanka
High Human Development
Medium Human Development
South Asia
World
Source: Human Development Reports (1980-2012)
11
1,500,000
1,274,593
1,005,605
855,975
654,476
Exhibit 17:
USDm
3,500
3,000
2,500
2,000
1,500
2014E
2013
2012
2011
1,000
2010
2009
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
447,890
2,500,000
2016E
Exhibit 16:
500
0
2010
2011
2012
2013
2014E
2016E
16
Several domestic-listed companies have drawn up plans to open hotels in several parts of the country, including
Trincomalee, Yala, Kalpitiya, Wilpattu and Galle; these hotels would contribute towards the SLTDAs 2015 target of 30,000
hotel rooms.
In addition, several international chains are set to launch hotels around Sri Lanka. Hyatt Hotels Corporation aims to launch
the Hyatt Regency Colombo in 2014. The Sheraton brand, owned by US-based Starwood Hotels & Resorts Worldwide
Inc., has signed an agreement to manage and operate the Sheraton Colombo hotel. This USD80m, 306-room luxury hotel
is expected to start operations in 2014. Shangri-La, a Hong Kong-based hotel chain, is investing USD350m in a 6-star,
500-room hotel on Galle Face Green, Colombo 01, expected to commence operations in a couple of years. The company
has also invested USD150m in a 300-room hotel in Hambantota, to be opened in 2014.
A number of integrated resort projects are in the pipeline, namely the Waterfront Development Project (by John
Keells Holdings PLC), Crown Sri Lanka, and the Queensbury (by Vallibel One PLC), with their estimated completion
dates scheduled within three to five years.
#2 Port expansion plans aimed at promoting Sri Lanka as a leading transshipment hub
Sri Lanka has the potential to become a transshipment hub in Asia owing to its strategic location on several
shipping routes, coupled with ongoing investment and expansions. The countrys container port traffic increased
to 4.3m twenty-foot equivalent units (TEUs) in 2013 from 3.1m TEUs in 2006 at a CAGR of 4.9% (Exhibit 18).
The announcements made in late-2013 regarding the free-port concept at the Colombo and Hambantota ports
should only serve to fuel this growth trajectory.
Exhibit 18:
Sri Lankas container port traffic increased at 4.9% CAGR over 2007-2013
Container port traffic (TEUm): 2006-2013
5.0
4.0
3.0
3.7
3.7
2007
2008
3.1
3.5
4.0
4.2
4.2
4.3
2011
2012
2013
2.0
1.0
0.0
2006
2009
2010
Source: World Bank data, Sri Lanka Ports Authority, Central Bank of Sri Lanka
17
port a convenient stop for ships from China that need to refuel, break bulk cargo and supply replenishment. The
port can also provide ships from China ample space to set up extensive warehouses for storage and break bulk
handling, which Singapore and Thailand have had difficulty providing in recent times. The new capacity additions
will place Sri Lanka on par with Singapore, one of the largest transshipment hubs in Asia.
Apparel industry continues to be largest contributor to exports, with earnings target of USD5bn by
2015E
The apparel industry contributed roughly 40% of Sri Lankas export revenues in 2013, thus making it the single
largest contributor. Apparel sector exports rebounded recording growth of 8% in 2013 after experiencing a 5%
decline in 2012. The Sri Lankan apparel industry currently provides services to top international brands, such as
Victorias Secret, Nike, Tommy Hilfiger, Next and Marks & Spencer. This industry directly employs approximately
300,000 and indirectly employs an additional 600,000.
In recent budgets, the government extended several incentives to the apparel industry, including depreciation
allowances and lower sea port and airport levies, to help it become more competitive with international peers.
The industry is targeting revenues of USD5bn in 2015E at an 8% CAGR (Exhibit 20).
Knowledge services industry to
Exhibit 19: contribute USD1bn in foreign exchange
earnings by 2016E
USDm
1,200
1,000
800
600
600
200
0
1,000
400
Exhibit 20:
193
2007
256
270
310
2008
2009
2010
400
2011
2012
2016E
18
#4 Increased consumer demand and foreign investments drive growth in real estate
and financial services
Local and foreign investment appetite has driven a real estate boom
Real estate demand in urban areas has been buoyant over the past two years owing to an expanding middle
class and interest from the expatriate community. Urban land prices should see double digit growth after 2013 on
account of this high demand, as per the findings of the Research Intelligence Unit (a Sri Lanka-based research
and consultancy firm). Meanwhile, several development projects have been planned or are under construction in
Colombo, which should be supported by the 2014 budgets proposal of imposing only a 15% tax charge on lease
of land to foreigners. Some of the afore-mentioned development projects are listed below:
Altair, Sri Lankas tallest condominium, located near the Beira Lake and consisting of 400 units, is set for completion by
2017. The project is valued at USD250m.
The OnThree20 apartment project, developed by John Keells Holdings PLC, is a USD65m project expected to feature 475
apartment units. The company aims to complete this by December 2014.
Iconic is another luxury apartment complex being set up in Rajagiriya (a suburban city south of Colombo). With an
investment of USD30m, this project will house 188 apartments and is expected to be completed in mid-2014.
Exhibit 22:
The Sri Lankan government has extended several incentives to the financial services sector in order to continue
supporting economic growth and personal consumption. One proposal allows LCBs to borrow up to USD50m
each year from 2013-2015, without obtaining approval from the Exchange Control Department. Another proposal
allows National Development Bank (NDB) and DFCC Bank (DFCC) to raise up to USD250m each from foreign
sources over a 10-year period in order to provide long-term financing to key growth sectors. The government will
underwrite the exchange risks of these borrowings. In line with this, DFCC issued USD100m in debt in October
2013.
19
CSE has had a bull run unmatched by most other markets since 2009
As on 31 December 2013, the CSE had listed on it 289 companies covering 20 sectors, with a market capitalization
of approximately USD19bn. The CSE witnessed remarkable growth after the end of the war, with the benchmark
All Share Index (CSEALL) peaking at 7,800 points in February 2011. Given the bourses unprecedented growth
levels, Bloomberg named it one of the best-performing stock markets in the world for the years 2009 and 2010.
The CSEALL, on average, performed better (over June 2009-December 2013) than global indices (Exhibit 23)
and some of the best-performing regional indices (Exhibit 24), although growth over the immediate post war
period eased after mid-2011 due to a market correction.
Positive market sentiment and conducive regulatory environment has driven market recovery
since mid-2012
However, market fundamentals remain strong, with corporates performing well in the wake of the booming
economy. The market grew 22% by end-2013 after it bottomed out in May 2012; improved market sentiments
and the easing of market liquidity drove this growth.
The CSEALL has significantly
Exhibit 23: outperformed global and developed
market indices
400
320
Exhibit 24:
400
200
160
100
0
Jun-09 Mar-10 Dec-10 Sep-11 Jun-12 Mar-13 Dec-13
CSEALL
Dow Jones
FTSE 100
MSCI World
DAX
Source: Bloomberg
300
240
80
0
Jun-09 Mar-10 Dec-10 Sep-11 Jun-12 Mar-13 Dec-13
CSEALL
Jakarta (JCI)
Thailand (SET)
MSCI Emerging Market Index
Source: Bloomberg
24
6,500
53%
Philippines
Thailand
43%
India
30%
Sri Lanka
2,460
2013
29%
Bangladesh
2,168
2012
87%
77%
Vietnam
2,214
2011
17%
2016E
2,211
2010
2009
489
2008
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1,092
LKRbn
Exhibit 26:
Indonesia
Exhibit 25:
Source: Bloomberg
Exhibit 27:
X
20
700
600
15
500
10
376
400
Current
Source: Bloomberg
1 yr fwd
2 yr fwd
Thailand
Philippines
Indonesia
India
Vietnam
Sri Lanka
5
0
Exhibit 28:
449
492
466
2012
2013
525
300
200
100
0
116
2009
2010
2011
2014E
Source: Bloomberg
25
Most sectors in the CSEALL trading below market and historical valuations
The Hotels & Travel, Diversified and Beverage, Food & Tobacco sectors have consistently traded at higher
P/E multiples than the market over the past four years, thus reflecting their growth trajectory. However, most
other sectors with similar growth potential, such as Manufacturing, Power and Energy, Land & Property and
Construction & Engineering, still trade below the market (Exhibit 29). The P/B valuation shows a similar trend,
with most sectors trading below the four-year market average and historical sector valuations, thereby presenting
attractive investment opportunities (Exhibit 30).
Exhibit 29:
Exhibit 30:
50
6
5
40
30
2010
2012
Avg. market P/E 2010-2013
2010
2011
2012
2013
Trading
Telecommunication
Services
Plantations
Manufacturing
Investment Trusts
Diversified
Trading
Telecommunication
Services
Plantations
2011
2013
Manufacturing
Investment Trusts
Diversified
10
20
The CSE provides a good diversification option for emerging market investors
The CSEALL index has little or no correlation with major worldwide indices, thus making it a good diversification
option for investors (Exhibit 31).
The MSCI Emerging Market Index has strong correlation with some of the major indices, while the CSEALL has
weak correlation to the same indices (Exhibit 32). This provides a good diversification option for those looking
to invest in emerging markets.
26
Exhibit 31:
Exhibit 32:
400%
MSCI Emerging
Market Index
300%
DJI
0.634159
0.456548
200%
S&P 500
0.632342
0.383773
FTSE 100
0.774584
0.382894
HSI
0.935409
0.256034
STI
0.900236
0.401249
MSCI World
0.746769
0.162613
100%
0%
Jun-09
Jul-10
CSEALL
DJI
FTSE 100
Straits Times
Sep-11
Oct-12
Dec-13
MSCI emerging
S&P 500
Hang Seng
MSCI world
Source: Bloomberg
Source: Bloomberg
Exhibit 34:
LKRbn
600
100
400
50
200
0
-50
2009
Purchases
2010
2011
Sales
2012
2013
2009
2010
Foreign
2011
2012
2013
Domestic
27
Banks, Finance & Insurance sector the top pick of foreign investors in 2013
During 2013, Banks, Finance & Insurance witnessed the most net foreign inflows, followed by the Beverage,
Food & Tobacco and Diversified sectors. The Motors sector also returned net inflows of close to LKR2.0bn over
the same period (Exhibit 35).
Exhibit 35:
Sectors that witnessed net positive inflows during 2013 (in LKRbn)
2009
2010
2011
2012
2013
(3.78)
(6.42)
(9.45)
2.89
10.71
0.60
2.81
(3.96)
4.02
5.63
Diversified
0.55
(17.13)
(4.45)
29.68
4.77
Motors
0.02
(0.72)
(0.69)
(0.68)
1.85
Telecommunication
(0.49)
(1.61)
(0.30)
(0.09)
0.95
Manufacturing
(0.34)
(0.65)
(1.16)
1.37
0.68
0.00
(0.14)
0.47
(0.15)
0.32
(0.04)
(0.90)
(1.53)
0.22
0.16
(0.16)
(0.30)
(0.04)
1.31
0.12
(0.42)
(0.24)
0.05
0.00
0.08
Plantation
(0.17)
(0.17)
(0.16)
(0.02)
0.07
0.01
(0.02)
(0.27)
(0.00)
0.00
(0.79)
(32.19)
(19.04)
38.67
22.78
Information Technology
28
Liquidity remains a concern, but corrective action is being taken to address this issue
Market liquidity contracted during the early part of 2012; however, volumes have picked up since then and
are now on par with the five-year historical average (Exhibit 36). Factors that contributed to this spike include
the CSEs decision to relax some of its rules relating to broker credit. Furthermore, a rebound in retail investor
sentiment has also contributed to the markets increased liquidity. One of the key concerns of investors has
been the lack of liquidity in the market, which constricts block trades and easy exits. Even though the CSEALL
currently has a free float of ~25%, most companies within the index have a free float of less than 5%. In a bid
to increase liquidity, the Securities and Exchange Commission (SEC) of Sri Lanka issued a directive stating
that Main Board-listed companies should have a minimum public free float of 20%. This continuous listing
requirement is effective from 1 January 2014.
Exhibit 36:
Volume Level
Oct-13
Dec-13
Aug-13
Apr-13
Jun-13
Feb-13
Oct-12
Dec-12
Aug-12
Apr-12
Jun-12
Feb-12
Oct-11
Dec-11
Aug-11
Apr-11
Jun-11
Feb-11
Oct-10
Dec-10
Aug-10
Apr-10
Jun-10
Feb-10
Oct-09
Dec-09
Aug-09
Apr-09
Jun-09
Feb-09
Oct-08
Dec-08
Jun-08
Aug-08
May-08
Jan-08
Mar-08
m
300
250
200
150
100
50
0
Market liquidity has improved following improvements in broker credit and market sentiment
Average
29
Exhibit 38:
400%
S&P 20 Index
Dec-13
Jul-13
Jan-13
Aug-12
Mar-12
Sep-11
Apr-11
Oct-10
May-10
Nov-09
Jun-09
0%
Jan-09
200%
CSEALL Index
30
Exhibit 39:
Exhibit 40:
S&P SL 20 composition
2%
5%
2%
6%
21%
26%
29%
50%
6%
35%
Diversified
Manufacturing
Oil Palms
Telecommunication
4%
Tourism
Telecom
Financial
Real estate
Other
A three-year half-tax holiday for companies seeking a new listing, with at least a 20% float
Exemption of stamp duty for transferring shares to and from margin-trading accounts
A reduction of the tax rate on unit trust management companies to 10% from the current 28%
The full allowance of expenses incurred on the establishment of Broker Back Office systems to be compliant with CSE
requirements in relation to risk management systems
The allowance of direct investments in foreign currency in unit trusts without a Securities Investment Account (SIA)
The appointment of a Presidential Task Force to implement a Capital Market Development Master Plan to oversee the
development of the countrys capital market
31
Corporate debt market expands in 2013 and signals further growth potential
Corporate bonds worth LKR68.3bn issued in 2013
The CBSL targets growing the corporate bond market to USD10bn by 2016E from its current levels. The
government took the first step in this direction by removing withholding tax on interest earned on listed debt
(previously 10%) starting January 2013. As a result, debentures worth LKR68.3bn were issued in 2013 (from
LKR12.5bn in 2012), with approximately 84% of these issues coming from banks and other financial institutions.
Exhibit 41:
32%
49%
3%
LCBs
LSBs
LFCs
Non-financial institutions
In a low interest rate environment, Sri Lankan corporate issuances present attractive investment
opportunities
Despite a recent spike in yields due to the impact of a global asset sell-off, yields on the governments sovereign
debt issuance have been on a downward trend since mid-2012. Meanwhile, corporate debenture issuances in
Sri Lanka carried rates of 13-15% (the effective annual interest rate), well above the government bond rate of
11%. With government interest rates on a decline and a low interest rate environment in most economies, local
corporate issuances present attractive investment opportunities, providing healthy returns with relatively low
risks. Furthermore, in 2013, two of Sri Lankas leading savings and development banks leveraged increasing
investor appetite by completing bond issuances state-owned National Savings Bank raised USD750m in
September and DFCC Bank raised USD100m in October.
32
LKRm
60,000
47,155
40,000
20,000
0
6,798
9,408
2008
2009
Equity
22,191
22,671
23,076
2010
2011
2012
Fixed income
2013
Other
33
Over the past three years, most unit trusts have outperformed the overall market
Unit trusts have provided investors high returns since 2009 and over the past three years, most unit trusts have
outperformed the CSEALL (Exhibit 43).
Exhibit 43
Returns of top five unit trusts (by market cap) has been higher than market return for most periods
PERFORMANCE
YTD 12 MONTHS 24 MONTHS 36 MONTHS
31-Dec-12 30-Dec-12 30-Nov-11 30-Nov-10
2.34%
7.92%
-5.13%
-10.25%
Unit NAV as at
FUND PERFORMANCE
Cey bank Unit Trust
OPEN-ENDED
BALANCED FUNDS
2.81%
4.14%
-9.13%
-17.75%
OPEN-ENDED
INCOME FUND
10.59
11.96%
13.30%
27.51%
38.45%
OPEN-ENDED
BALANCED FUNDS
28.12
15.27%
17.69%
15.75%
4.06%
OPEN-ENDED
GILT-EDGED FUNDS
10.18
10.27%
11.30%
19.29%
27.01%
OPEN-ENDED
MONEY-MARKET FUNDS
10.56
10.27%
11.19%
22.80%
29.85%
30-Nov-13
26.18
34
Unit trusts manage a portfolio of asset classes and provide investors options to diversify investments
Funds are administered by professional fund managers at a reasonable cost
Unit trust investment is hassle-free since there is minimum administrative work, and even this is often handled by the fund
management company
Investments can be liquidated at any time, as fund managers are obliged to buy back investments at the daily-quoted rates
Investors can choose from a wide range of funds, including equity growth, fixed income and balanced portfolio funds,
depending on their risk appetite. Sri Lanka also offers Shariah-compliant funds
Dividends, capital gains and sales proceeds from unit trusts are tax free
The 2013 budget, in a bid to popularize Sri Lankan unit trusts among foreign nationals and non-resident Sri Lankans,
proposed that direct investments in unit trusts in foreign currency need not be channelled through an SIA
Investors are protected by independent trustees, who are legally appointed under a deed of trust, to safeguard the
interests of unit holders
Most unit trust management companies in Sri Lanka are backed by banks or financial institutions, thereby providing the
unit trusts the same stability as their parent institutions
35
Documents required
Details regarding the required documents for different individuals/entities can be found at the links below:
Local companies, foreign companies and designated accounts (margin trading accounts, collateral accounts and
segregated accounts):
http://www.cds.lk/service/opening-client-accounts-companies.html#sectionA
Resident individuals, plantation employees (if the NIC is not available) and internally displaced persons (IDPs):
http://www.cds.lk/service/opening-client-accounts-resident-individuals.html#sectionA
Funds:
http://www.cds.lk/service/opening-client-accounts-funds.html
40
Debt
As at 31 December 2013, 142 corporate debt securities were listed on the CSE. All government debt and
corporate debt securities are tradable through the Automated Trading System (ATS).
Market indices
The CSE has two main price indices (the CSEALL and S&P SL 20) and 20 sector price indices. Index values are
calculated on an ongoing basis during trading sessions, with closing values published at the end of regular trading
sessions.
The All Share Price Index (CSEALL)
CSEALL is a market capitalization-weighted index wherein the weight of a company is taken as the number of
ordinary shares listed on the market. This weighting system allows the price movements of larger companies
to have a greater impact on the index. This kind of weighting system was adopted on the assumption that the
general economic situation has a greater influence on larger companies than on smaller ones.
The S&P Sri Lanka 20 (S&P SL 20)
The index consists of the largest blue chip companies based on total market capitalization, with the highest
liquidity listed on the Sri Lankan stock market. The S&P SL 20 follows the methodology of Standard & Poors
indices in order to provide consistency, transparency and liquidity. The index was designed to be a basis for
tradable products, acting as a cost-effective and relatively simple method of replicating trading instruments, with
possible use as index funds and exchange-traded funds (ETFs). To warrant inclusion in the S&P SL 20, stocks
have to meet the standards set for size, liquidity and financial viability.
Size: Stocks are included only if they have a float-adjusted market capitalization of more than LKR500m as of the rebalancing reference dates. Stocks listed on the index have a three-stock buffer to be listed, i.e. a stock has to rank within
the top 23 in order to remain listed. If a stock listed on the index experiences a fall in market capitalization to less than
LKR500m, but is still at more than LKR300m, the stock will remain listed, given that it still ranks within the top 23 and
meets all other required criteria.
Liquidity: In order to ensure the maintenance of liquidity, a minimum six-month average daily value traded (ADVT) of
LKR1m is required. At each reconstitution, which occurs annually, companies listed on the index must maintain their ADVT
at LKR0.7m-1m in order to remain eligible.
Financial viability: In order to maintain eligibility, stocks must continue to be profitable, which is determined by earning
positive net income over the 12-month period preceding the re-balancing reference rate.
41
Trading details
Exhibit 44:
Market phase
Hours
9.00 am-9.30 am
Regular trading
9.30 am-2.30 pm
Market close
2.30 pm
Regular Trading
During regular trading (9.30am- 2.30pm), new orders are continually matched to existing orders in the order
book. If an order cannot be executed, it is stored in the order book.
Market Halt
In the event that the S&P SL20 Index drops 5% within a day from the previous market days close, a Market
Halt is imposed on all equity securities for a period of 30 minutes. If the above scenario takes place at 2.00
pm or later, the market is halted and closed at 2.30 pm. Broker firms may cancel any pending orders during the
Market Halt. However, broker firms cannot enter new orders or amend pending orders during the Market Halt.
Transaction costs
Equity
Exhibit 45:
Transaction fees
Fee
Transactions up to LKR50m
Brokerage fees
0.640%
CSE fees
0.084%
0.0525%
CDS fees
0.024%
0.015%
SEC cess
0.072%
0.045%
0.300%
0.300%
Total
1.120%
0.6125% (minimum)
42
The CSE trading records indicate the brokerage as zero for transactions of more than LKR50m. Broker firms
are expected to insert 0.2000% or a higher percentage negotiated between the client and the brokerage before
printing bought/sold notes.
Corporate Debt
Brokerage - Negotiable
Fees (SEC, CSE & CDS) - 2bps (Divided equally among the three institutions)
Government Debt
Brokerage - Negotiable
Closed-End Funds
Exhibit 46:
Transaction fees
Fee
Percentage
Brokerage fees
CSE fees
0.02%
CDS fees
0.01%
SEC cess
0.02%
Share Transaction Levy will not be applicable for units of closed-end funds
Settlement
Exhibit 47:
Settlement details
Security type
Equity
T+3
Corporate debt
Government debt
43
44
Regulatory framework
The CSE is licensed by the SEC to operate as a stock exchange. It is Sri Lankas only stock exchange.
The SEC has rules for securities de-listing, takeovers and mergers and insider dealing. Further details are
available at www.sec.gov.lk.
The CSE has in place stockbroker rules, listing rules for listed companies, as well as ATS and CDS rules. These
are available at www.cse.lk.
Governing body
Name
Mr. Krishan Balendra
Office
Chairman
Elected Director
Elected Director
Mr. M. R. Prelis
Elected Director
Elected Director
Appointed Director
Appointed Director
Appointed Director
45
Members
BARTLEET RELIGARE SECURITIES (PVT) LTD.
46
47
Trading members
CAPITAL ALLIANCE SECURITIES (PVT) LTD.
48
49
Custodian banks
Commercial banks have special participant status in the CDS and provide services to investors. These include:
DEUTSCHE BANK
BANQUE INDOSUEZ
C/o Hatton National Bank Limited,
Cinnamon Garden Branch, 251,
Dharmapala Mawatha, Colombo 07.
Tel: +94 11 2681720, 2686537, 2689176
Email: surenim@hnb.lk
Ms. Sureni Mapatuna
Manager Remittance
CITI BANK NA
65C, Dharmapala Mawatha, P O Box 888,
Colombo 07.
Tel: +94 11 4794700, 2447316/8, 2447318, 2449061,
2328526
Email: mihiri.krishnamoorthy@citi.com
Ms. Mihiri Krishnamoorthy
Vice President Securities & Fund Service
PEOPLES BANK
Head office - Treasury, 5th Floor, 75,
Sir Chittampalam A Gardiner Mawatha, Colombo 02.
Tel: +94 11 2206782, 2781481, 2327841-9, 244631615, 2430561, 2324967
Email: clivef@peoplesbank.lk
Mr. Clieve Fonseka
Head of Treasury & Investment Banking
50
51
th
52
53
January
February
April
1, Wednesday
14, Tuesday
15, Wednesday
4, Tuesday
National Day
14, Friday
27, Thursday
Mahasivarathri Day
14, Monday
Sinhala and Tamil New Year Day / Bak Full Moon Poya Day
15, Tuesday
Additional holiday in lieu of day prior to Sinhala & Tamil New Year Day
falling on a Sunday
18, Friday
Good Friday
1, Thursday
May day
14, Wednesday
15, Thursday
June
12, Thursday
July
29, Tuesday
September
8, Monday
8, Wednesday
22, Wednesday
November
6, Thursday
December
25, Thursday
Christmas Day
May
October
54
Disclaimer
This book is intended to provide some general information relating to the CSE. Whilst reasonable efforts have been
made to include accurate and up-to-date information in the booklet, the CSE does not make any warranties or
representations regarding the accuracy, adequacy, reliability and completeness of the information.
Therefore, the CSE and its employees disclaim all liability for any loss suffered (directly or indirectly) by any person
acting in reliance upon the information contained herein.