Positive overall CSE outlook projected for 2024
The overall outlook of the Colombo Stock Exchange (CSE), for 2024 seems to be positive due to the positive outlook for the country as a whole, said Chairman of CSE Dilshan Wirasekara. (Pictured)
“There is a significant recovery in economic activity that we see which is now translating into the capital markets and specifically to the Colombo Stock Exchange.”
Notably, the turnover levels of the exchange have experienced a significant uptick from what it was at the beginning of the year. “One can observe an increase from its daily average turnover (ADT) of around Rs. 715 million in January, to the current comparatively more stable Rs. 1.8 billion ADT in March.”
“The most significant reason for this is because the country is currently in a default status. As it is in default and awaiting finalisation of external creditors for the debt restructuring, we are seeing very little foreign activity, and therefore turnover is still dominated by domestic activity.”
“As of March 28, we are currently at 74.91% local 25.09% foreign participation to turnover. A stark shift from previous years, such as in 2018, where we were able to witness a 50-50 foreign to local contribution to the turnover. We are optimistic that as the external debt restructuring is forecasted to be finalised before June, we will then be able to shed our default status.
Portfolio funds can then allocate investments into Sri Lanka, and that will drive an increase of foreign activity from its current status of 25.09%.” The domestic economy has had a negative growth of 7.8% in 2022, followed by a negative growth of 2.3% for 2023. “However, the last quarter for 2023 shows 4.5% growth for that quarter. Therefore, looking ahead to 2024, we are optimistic that a growth of 3% to 5% will be achieved by the economy undoubtedly resulting in a lot more activity. Next, interest rates have been prohibitive for investments. Previously, fixed income yields were over 20%, and people tend to avoid risky asset classes like equity regardless of whether the returns could be rewarding.”
The Central Bank has reduced policy rates, and as the AWPLR downward trajectory appears to be coming closer to 10%, which will primarily expect to stimulate credit growth; ultimately, people will consider investing in the stock market due to low interest rates.
“Also the performance of the current market landscape hasn’t been very impressive since, the market yet remains undervalued. These are all the reasons that would then further result in the valuations being re-rated.”
He predicted that overall, they were quite optimistic that activity and turnover will increase driving yields and the market will perform well for the year 2024 as economic conditions continue to improve.
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