The Index is designed to representthe Sri Lankan equity market, yet also be efficient to replicate, with possible application for index funds and 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.
“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 indexlinked financial products” commented Alka Banerjee, Vice President, Global Equity & Strategy Indices at S&P Indices.
“The CSE has embarked on a focused transformation programme 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. I am confident that a credible and transparent index will positively impact the market” CSE Chairman, Krishan Balendra, said.
The S&P Sri Lanka 20 has been designed in accordance with international practices and standards. All 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, rulesbased 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.