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SL's Capital Market under penetrated

The Colombo Stock Exchange (CSE) during the first half of 2012, showed signs of recovery although it remained subdued in 2011.

After the war the stock market grew by 400 percent within a time span of two years. Most new investors who entered the market did not have a good understanding of market dynamics. In 2012 the Securities and Exchange Commission of Sri Lanka (SEC) removed or amended some of regulations and was able to successfully make representations to the government to eliminate some impediments that hindered the capital market from realizing its potential and also further develop the capital market, Nalaka Godahewa, Chairman, Securities and Exchange Commission of Sri Lanka (SEC) in a release said. The government addressed these concerns which reflected its commitment to develop the capital market by proposing many reforms that were outlined in the National Budget.

Prior to relaxing these measures, we were mindful of obtaining the views of industry participants and held regular meetings with them.

"Our primary focus was to ensure responsive regulation that would offer appropriate safeguards for investors and provide impetus for capital market growth."

"And to this end we amended the adjusted net capital calculation of stock brokers for the purpose of granting credit to their clients, lifted the upper limit imposed on the price of transactions on the Crossings Board and lifted restrictions placed on share transactions of stock brokers."

It is noteworthy to mention that the market has recorded a gain of nearly 14% during the second half of 2012. Increased investor confidence and improved macroeconomic situation of the country led to a net foreign inflow of Rs. 38.6 billion, the highest yearly net foreign inflow recorded at the Colombo Stock Exchange (CSE).

The capital market is able to mobilize savings and channel capital to its most productive use and thereby ensure that investors get the best returns for the risk they take and businesses can access finance efficiently.

The government addressed certain issues, which reflected its commitment to develop the capital market by proposing many reforms that were outlined in the National Budget.

The 10 key strategies aimed at expanding the products offered, listing companies from both private and state owned enterprises, developing the unit trust and bond market, modernizing market infrastructure, demutualising the CSE, amending the SEC Act and widening the opportunities for investors.

Though the capital market is an important source of long term finance, in Sri Lanka more companies are still reliant heavily on banks for their financing needs and the capital market is still under penetrated.(HDH).

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