Foreign investment in stock market hits all-time high in 2017

In what continues to be a record-breaking year for foreign portfolio investment in the Colombo stock market, 2017 has recorded an all-time high in foreign purchases during any given  year, with Rs. 105.1 billion (year-to-date) surpassing the previous record of Rs. 104.7 billion set in 2014. 

The development follows signs of renewed foreign interest in the stock market in mid-2017, during which foreign purchases recorded for the first half of 2016 doubled in 2017 and recorded an all-time high for foreign purchases in the first half of a calendar year. Such foreign purchases have contributed to a net foreign purchase figure of Rs. 18.9 billion year-to-date, a figure that is substantial compared to foreign activity in 2015/16.

Growing foreign interest in the market has also contributed to a 30% improvement in daily average turnover, where the figure has improved to Rs. 955 million (year-to-date) from Rs. 737 million in 2016.

The record continues to indicate that foreign investors have been quick toidentifythe future potential and the buying opportunities in Sri Lankan stocks. 

An attractive market valuation (P/E), strong growth in corporate earnings, dividend payments, and Capital Gains Tax exemptions offered to share transactions are considered to be defining factors in attracting the level of foreign investor interest the market has witnessed in 2017.  

Commenting on the development, Colombo Stock Exchange (CSE)Head of Market Development Niroshan Wijesundere stated that the CSE had been aggressively promoting the stock market across all investor segments, in particular foreign institutional investors. 

He added that amidst a number of positives so far this year, the market continues to trade at a discount compared to regional peers and offers further opportunities for investors – witha market P/E recorded at 10.72at present and a majority of listed companies trading below book value. 

“The macroeconomic outlook continuing to improve will also offer both foreign and local investors further confidence in the Sri Lankan stock market,” Wijesundere added. 

The CSE in association with the Securities and Exchange Commission of Sri Lanka (SEC) resumed a concentrated effort to promote the stock market in key foreign marketsthis year, through‘Invest Sri Lanka’ forums in Sydney, Melbourne, Auckland, and most recently in New York. 

Foreign institutional investors and Sri Lankans living abroad present at these events have given a broad endorsement of the investment opportunities and potential in the capital market and have been very optimistic on Sri Lanka’s future growth potential.

In a related development, foreign purchases in the stock market originating from Australia in a particular year recorded an all-time high in 2017, with a figure of Rs. 651 million by the week ending 17 November. A strong community of individuals with Sri Lankan origin eager to look at new Sri Lankan investment opportunities and the celebration of 70 years of diplomatic ties between Sri Lanka and Australia presented the CSE with a unique opportunity to promote the capital market in Australia this year. 

The CSE and SEC have also launched an island-wide local retail investor focused Investor Forum and a campaign to create awareness on the record foreign investment and the potential opportunities in the market for local investors. The local investor forum serieshas been supported through over 500 awareness programs conducted through the CSE branch network so far in 2017. 

In addition, CSE and the Colombo Stock Brokers Association is also presently conducting a series of events presenting investment research on companies featured on the S&P SL 20 Index, to an exclusive audience of local institutional investors – another key investor segment in the Sri Lankan stock market.