The Colombo Stock Exchange (CSE) in recent weeks has garnered a keen interest among foreign institutional investors, with a surge in foreign activity contributing to a strong showing in both daily turnover levels and the performance of the stock market indices.
The benchmark All Share Price Index (ASPI) recorded consistent gains over the month of April, crossing the 6,500 mark on Thursday the 20th. The index closed at 6,535.54 points by the end of trading for the week, a 4.93 percent increase in the index year-to-date. The S&P SL 20 index, which features CSE’s 20 largest and most liquid stocks has also improved consistently, making a 6.85 percent gain year-to-date and closing at 3735.83 points for the week.
Consistent foreign inflows have been a standout feature of the performance of the market in recent weeks, with net foreign inflows for 21 consecutive trading days by the end of trading on Friday the 21st of April. Foreign investor activity in 2017 so far, has marked a net foreign inflow of Rs.14.3 billion, a vast improvement compared to previous years, which recorded an inflow of Rs.383.5 million in 2016 and an outflow of Rs. 5.3 billion in 2015.
Foreign investor contribution to total turnover in 2017 stands at 51.4 percent, another improvement in comparison with 42.0 percent in 2016 and 34.4 percent in 2015. This marks the first occasion where foreign investor contribution to yearly turnover has exceeded the 50 percent mark since year 2008, a clear indication of the growing interest among foreign investors in the Sri Lankan capital market.
Overall trading activity has also improved in 2017, with the daily average turnover recorded for trading year-to-date marking an improvement to Rs. 877.8 million from Rs.737.2 million in 2016.
The total turnover for the week that ended on 21st April 2017 was over Rs. 11 billion.
EPF investments in Colombo bourse continue to plummet
By Chandeepa Wettasinghe
Sri Lanka’s largest state-run private sector pension fund, the Employees’ Provident Fund (EPF), currently has approximately Rs. 1,772 billion of investments in its portfolio, but its investments in the Colombo bourse has declined, the Central Bank disclosed last week.
Responding to a Right to Information request made by Transparency International Sri Lanka Executive Director Asoka Obeysekere, the Central Bank said 93.13 percent of its investments, worth Rs. 1,650 billion, are in government securities.
The Central Bank came under intense scrutiny over the past two years since the EPF did not engage in the primary market for government securities, instead purchased securities at prices higher than the primary market rate from controversial primary dealers.
According to the Central Bank, nearly 4 percent or Rs. 70.58 bllion of the EPF portfolio consists of investments on shares in the Colombo Stock Exchange.
The investments made in shares however have declined over the years, from Rs. 8 .11 billion invested in 2013 to Rs. 4.81 billion in 2014, Rs. 1.27 billion in 2015, and Rs. 1.31 billion in 2016.
Colombo Stock Exchange stakeholders have been rallying for higher level of participation of pension funds in the market to create positive investor sentiment.
Meanwhile, just under 2 percent of the EPF investments are in corporate debentures, while unlisted equities, trust certificates and reverse repo investments make up the remaining minority of investments.
According to the last EPF investment policy statement that has been published, the EPF is to evaluate foreign investments, given the low interest rates which were prevalent during the period of policy formulation, which EPF officials claim was formulated several years ago. A new EPF Investment Policy Statement or EPF annual reports since 2013 have not yet been published.