CSE to recalibrate benchmark index in quarterly market reset

• Effective from market opening on June 22, move could alter weightings of some of market’s largest stocks and influence investor portfolios
• Says as listed companies report their public holding percentages on a quarterly basis, ASPI requires periodic adjustments to reflect these changes
• Exercise follows adoption of a float-adjusted market capitalisation methodology in January 2022

Sri Lanka’s benchmark stock market gauge is set for a quarterly shake-up next week, with the Colombo Stock Exchange (CSE) rebalancing the All Share Price Index (ASPI) to reflect the changes in public shareholdings across the listed companies. 

Effective from the market opening on June 22, the move could alter the weightings of some of the market’s largest stocks and influence investor portfolios.

The ASPI serves as the market’s principal benchmark and is widely used to track the performance of the listed companies and guide investment decisions.

“As the listed companies report their public holding percentages on a quarterly basis, the ASPI requires periodic adjustments to reflect these changes,” the CSE said. 

It added that the revisions are carried out through the index’s quarterly rebalancing process.

The exercise follows the adoption of a float-adjusted market capitalisation methodology in January 2022, under which only the publicly held portion of a company’s market value is considered when calculating the index. The approach is designed to provide a more accurate reflection of the investable market available to the shareholders.

The ASPI is the broadest measure of Sri Lanka’s equity market, covering all listed ordinary voting and non-voting shares. The changes in the public float levels can result in adjustments to individual stock weightings within the index, potentially affecting the fund allocations and investor positioning.

The ASPI is the benchmark index of the CSE, representing the overall performance of all listed ordinary voting and non-voting equity securities. It reflects the changes in the aggregate market value of the listed equities and serves as a key indicator of the performance and direction of the Sri Lankan stock market.

While the rebalancing does not affect the fundamental value of the listed companies, the market participants often watch the exercise closely, as the changes in the index composition and weightings can influence trading activity, particularly among the institutional investors that benchmark their portfolios against the ASPI.

The CSE said the next quarterly rebalancing exercise is scheduled to take effect after the market close on September 18.