Stock exchange will be a gold mine - Heraymila CEO

Sanjeevi JAYASURIYA

The Colombo Stock Exchange will be a gold mine for Sri Lanka to sustain high economic growth. The companies will continue to report robust results and have growth in earnings gradually bringing down valuations to more realistic levels, Heraymila Securities Chief Executive Officer Ravi Abeysuriya said.

It is relevant to consider whether the peace dividend has resulted in the stock market being overpriced or is CSE a ‘bubble’ waiting to burst. In the long run, no stock market can sustain the kind of returns the CSE provided over the past two years, he said at the eighth LBR-LBO CFO Forum on “CSE; A blood bath or a gold mine” panel discussion held Tuesday in Colombo. The Sri Lankan market PE multiple has now come down to around 19 times. The timely action by the SEC prevented a blood bath similar to that of Bangladesh. In comparison with MSCI emerging market index of 13 times which consists of countries such as India,

China and Brazil or with the PE multiple of frontier markets, the category to which Sri Lanka belongs to is only about 10 times as Sri Lanka PE multiple stands out as 19 times. Hence it could be argued that our market is still relatively overvalued,” he said.

Sri Lanka needs to maintain 8 percent GDP growth to achieve US$ 4,000 per capita income by 2016.

A shift of wealth from West to East is already under way and similar to Hong Kong to China Sri Lanka will become the gateway to India, an economy with 1.3 trillion dollar GDP and a market with over one billion people. The country has the potential to generate close to a double digit growth rate.

“We have only 255 companies listed in the CSE at present.

“We would witness more companies and even government owned undertakings making use of the CSE to raise long-term funds through corporate debt and equities for expansion,” he said.

It is necessary to promote investor confidence and ethical practices that instill public trust in the market and market intermediaries serve the best interest of clients and robust regulatory standards that protect investors and advocate fair play.

“The need of the hour is the visionary leadership to build our market.

“We must map an ambitious plan for the CSE to make it a gold mine for both the companies listed as well as for investors,” Abeysuriya said.