The Colombo Stock Exchange (CSE) recorded unprecedented highs in both indices and market performance in 2021 which can be considered as one of the best years for the capital market in Sri Lanka.
Despite several the challenges, the securities market continued to demonstrate strong growth momentum, with the All Share Price Index (ASPI) gaining 80.5% which is the highest return recorded since 2010 and the S&P Sri Lanka 20 index (S&PSL20) improving by 60.5% which is the highest ever recorded,” said Chairman CSE, Viraj Dayaratne, PC said presenting their annual report.
Market capitalization also reached Rs. 5.5 trillion which was 37% of Gross Domestic Product (GDP).
During the year under review, there has been greater retail investor participation with a record number of account openings. The active investor base rose to 63,000 while the number of new accounts opened stood at 37,400. Consequent to representations made by the SEC, the Tax concessions proposed in the Budget 2021 for companies seeking to list during the year prompted several companies to list in 2021. “The CSE saw unprecedented capital raising by companies at the CSE with 29 new listings and capital- raising increased to a record Rs. 124 billion in 2021.”
Over the past two decades, the securities market has encountered rapid changes to its structure, market participants, and regulation. These developments signaled the need for broad reforms to the existing securities legislation although the SEC had been filling gaps and replacing outdated provisions through amendments in 1991, 2003 and 2009.
The long awaited SEC Act (Act No. 19 of 2021) was passed in Parliament in September 2021.
“The year under review has been a turning point for the SEC. The new SEC Act will level the playing field, in terms of regulatory requirements for all our stakeholders. We look forward to continuing to facilitate and promote a fair, efficient and transparent capital market through a firm commitment to our expanded mandate. We expect this well-conceived law to play an important role in expanding the remit of the SEC, modernising the capital market and supporting economic growth and innovation.
The SEC is currently in the process of reviewing existing rules, regulations and standards to be in line with the provisions found in the new Law in order to provide practical measures that will enable it to be enforced effectively.
Furthermore, approval has been granted to implement a REPO transaction mechanism for corporate debt securities through the OTC trading platform of the CSE.
SEC is also in the process of developing the policy and regulatory framework for the introduction of structured warrants as a possible first step towards the development of the Exchange Traded Derivatives Market and assistance of the ADB has been obtained.”