Sri Lanka’s capital markets poised for growth and economic turnaround

CSE Chairman Dilshan Wirasekara – Pic by Upul Abayasekara

• At the Capital Market Investor Forum, CSE Chairman Dilshan Wirasekara points out Sri Lanka’s steady economic recovery since the series of crises, stressing the investor friendly climate
• Says economy expanded 5% despite contraction in previous years
• Notes foreign 
• reserves have risen to $ 6-6.5 b, stabilising currency and financial landscape
• Emphasises Sri Lanka’s stock market is the most affordable in the region at 8.5 valuation
• Lists robust regulations, diversified financial products, and reforms to listing rules as steps already taken
• Urges enhanced regional collaboration and updates to CDS as the way forward to growth

The Colombo Stock Exchange (CSE) Chairman Dilshan Wirasekara underscored Sri Lanka’s economic resurgence and financial reforms, positioning it as a prime destination for investment in the region. 

Speaking at the Capital Market Investor Forum organised jointly by the Securities and Exchange Commission (SEC) Sri Lanka and Colombo Stock Exchange (CSE), he reflected on the nation’s recovery through several waves of political and economic instability, noting that the successful completion of a critical debt restructuring program in December, along with a favourable review by the International Monetary Fund (IMF) has recently strengthened the country’s position.

“With the economy now growing at over 5% following two years of contraction, Sri Lanka has successfully stabilised its financial landscape,” he said, adding that “Foreign reserves have increased to $ 6-6.5 billion, the currency has steadied, and the banking system liquidity is robust. Inflation remains mostly under control, and single-digit interest rates create an environment conducive to investment.”

He also described Sri Lanka’s stock market as the most affordable in the region, trading at low valuations of around 8.5.  Strengthened regulatory frameworks, reforms to company listing rules, and the introduction of financial products such as green bonds, infrastructure bonds, and sukuks were also alluded to have bolstered market confidence by ensuring transparency and aligning financial practices with global sustainability standards.

“We have made significant progress with the regulator, especially following the introduction of the SEC Act a few years ago and the subsequent developments. The listing rules have been thoroughly reviewed, and new product innovations have been introduced. Just a few years ago, we transitioned from a primarily single-product market to a diverse range of offerings that included previously inactive products. Among these new offerings are sustainable bonds and infrastructure bonds, as well as the inaugural issuances of green bonds,” he declared.

Outlining the objectives of the CSE, the Chairman revealed a new Central Counterparty (CCP) system and updates to the Central Depository System (CDS) aimed to enhance market infrastructure, ensuring a more secure and transparent trading environment

He also spoke of the need to diversify into commodities trading, by partnering with India’s National Commodity and Derivatives Exchange (NCDEX) to establish a gold derivatives exchange. “Such a partnership will leverage Sri Lanka’s strategic location and strong financial expertise to become a hub for commodities trading in South Asia,” he stressed.

Speaking about renewed focus on regional collaboration among South Asia’s frontier markets including Pakistan, Bangladesh, Maldives, and Nepal, he said an agreement among these nations is crucial to foster ties and create new investment opportunities. 

He further opined that this step could lead to the revival of the now-defunct South Asian Federation of Exchanges (SAFE), enhancing market connectivity across the region. “While India remains the dominant force in South Asia’s capital markets, there is vast untapped potential in our collective growth that must be capitalised on,” he remarked.