The Colombo Stock Exchange (CSE) appears to be heading for a positive year in 2024, mirroring the anticipated improvement in the Sri Lankan economy as a whole. This optimistic outlook is shared by Dilshan Wirasekara, Chairman of the CSE.
Wirasekara highlights a significant rise in economic activity, which is now translating into increased activity on the stock exchange. This is evident in the substantial growth of daily average turnover (ADT) from Rs. 715 million in January to a more stable Rs. 1.8 billion in March.
However, a key factor currently limiting foreign participation is Sri Lanka’s current default status. With the external debt restructuring expected to be finalized by June, Wirasekara anticipates a shedding of the default status. This, in turn, would pave the way for portfolio funds to invest in Sri Lanka, leading to a significant increase in foreign activity on the CSE.
The domestic economy also presents reasons for optimism. While experiencing negative growth in 2022 and 2023, the last quarter of 2023 showed a positive growth of 4.5%. Looking ahead, projections suggest a growth of 3-5% for the entire year of 2024, which would undoubtedly translate into more activity on the stock exchange.
Another factor expected to boost the CSE is the recent reduction in interest rates by the Central Bank. With fixed income yields previously exceeding 20%, investors often opted for safer options, even if they offered lower returns. As interest rates drop, particularly with the AWPLR expected to reach around 10%, the stock market becomes a more attractive option due to its potential for higher returns.
Wirasekara also points out that the current market performance has been less than impressive, suggesting that the market remains undervalued. This, combined with the anticipated rise in activity and turnover, could lead to a revaluation of stocks, further improving the overall performance of the CSE in 2024.
In conclusion, with a recovering economy, increased foreign participation following the debt restructuring, and lower interest rates making the stock market more attractive, the Colombo Stock Exchange appears well-positioned for a positive year in 2024.