Plans to increase stock market contribution to GDP to 50 percent

Hiran H. Senewiratne

The country's stock market contributes only 35 per cent of the GDP, which is relatively small. We need to increase this by 50 per cent of the GDP before the end of this year.

In most of developed countries stock markets are contributing more than 50 per cent of the GDP and play a significant role in the national economy as well, Director General- Securities and Exchange Commission Channa de Silva said.

"We are striving to position the stock market to represent more than 50 per cent of the country's GDP on the national economy in 2007," de Silva said.

The total market capitalization of the Colombo Stock Market for last year recorded US $ 8.5 billion and is expected to touch US$ 15 billion by the end of the year 2007.

The reason for this is that the number of listed companies in the country is very much less than in other countries and we need to increase in numbers by encouraging more companies to be listed to make a significant contribution to the country, he said.

One reason is those listed companies are very much less than in other countries, which is only 237 companies. The number of listed companies in Malaysia is 1025, Thailand 518 and India 5500, he said.

"By the end of 2006, market capitalization of the Colombo Stock Market was US $ 8.5 billion and if we compare this with other stock markets in the region it is low. Market capitalization in other countries in the region for the last year is as follows: Thailand US $ 134 billion, Malaysia US$ 198 billion India US$ 644 billion. Those are some of the recorded figures, he said.

De Silva said that today the country's stock market is in a more positive trend, which was able to register favourable growth during the last five years. Last year alone, it was able to record an overall growth of 41 per cent, while in 2005 it was 27 per cent, in 2004 41 per cent respectively.

He said that this year they expect many companies to list in the stock market and they wanted to get the huge rural sector into the market. Further they expect many infrastructure projects to be listed in the stock market to increase market capitalization from medium to long term, he said.

De Silva said that this year they are planning to introduce the new Securitisaton Act and to make corporate governance mandatory to create a vibrant stock market in the region. Further, setting up a Financial Services Academy is also a part of the programme, he said.