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2020, a turnaround year for Stock Market in Sri Lanka

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* Benchmark ASPI recorded a growth of 10.5% in 2020

* 2020 market turnover highest since 2011

* Market Capitalization grown a trillion rupees since 12th May 2020

* Increasing interest among local youth a key feature

The Sri Lanka stock market ended 2020 on a positive note today, marking a year in which the Colombo Stock Exchange (CSE) has seen indices indicate noteworthy resilience and attract record-breaking levels of trading activity.

 

Market Performance

The benchmark All share Price Index (ASPI) closed 2020 recording a growth of 10.5%, the highest annual increase the index has seen since 2014 and only the 12th occasion the index has seen a double digit percentage growth in CSE’s 35 year history. The ASPI ended 2020 on 6774.22 points. Sri Lanka’s ASPI was also recorded as the best performing stock market index for the month of September 2020, with the index recording a remarkable 12% growth during the month.

The ASPI on 12th May 2020 recorded its lowest point in over a decade but recovered from this to post a 59% gain by the end of the year. Although the S&P SL20 index, which features the CSE’s 20 largest and most liquid stocks has declined by 10.1% in 2020, the index has recovered substantially indicating a trend similar to the ASPI with 57% growth since 12th May, closing at 2638.10 points as of 31st December 2020.

The overall value of the stock market, which is represented by the Market capitalization, has also improved adding Rs. 109 Billion during 2020 and more substantially by Rs. 983 Billion since 12th May. The market recorded a daily average turnover of Rs. 1.9 Billion, this daily average turnover is the highest recorded for a year since 2011. The total turnover for the year was Rs. 397 Billion which was also the highest since 2011.

Overall market activity in terms of the average number of trades carried out during a trading day also increased significantly, ending double the average figure recorded in 2019 and triple the figure recorded in 2018. This indicates high investor participation.

Local Investor Interest a key Highlight

A significant increase in CDS account openings was observed in 2020 with 17,600 new investors entering the market which is 70% higher than the number of new investors in 2019 and 56% higher than 2018. Local investors have contributed to approx. 79% of the total market turnover in 2020 which is higher when compared to approx. 63% in 2019 and 55% the year prior to that.

The year 2020 has also seen a greater interest among younger investors in the retail segment, with 46% of the total accounts opened being attributed to the 18-30 age group. This marks an interesting development considering the fact that a large portion of retail stock market investors have traditionally been above 50 years of age.

 

A capital outflow trend in terms of foreign investors

On the foreign investment front, 2020 has recorded a net foreign outflow of Rs. 51 Billion, largely in line with the foreign fund outflow trend recorded in emerging and frontier markets. However it is noteworthy that Sri Lankan equities attracted purchases worth Rs. 53 Billion during 2020 by foreign investors, ending close to the Rs. 56 billion figure recorded in 2019. The stock market at present continues to indicate attractive valuations relative to other markets in the region.

Growth Initiatives

The Colombo Stock Exchange also introduced a number a progressive growth measures during the year to enhance operational efficiencies and the attractiveness of the Sri Lankan stock market in the perspective of both investors and issuers.

The Digitalization drive of the Sri Lankan stock market which was implemented in 2020 has enabled end-to-end connectivity electronically at all stakeholder touchpoints and was implemented as an industry-wide exercise, bringing substantial convince to investors and operational efficiencies to stakeholders.

During the year CSE also expanded the eligibility criteria for initial listing of shares on the Main Board and the Diri Savi Board to enable a wider spectrum of companies to qualify for a listing. Rule revisions, which were also carried out during the year brought about changes to the IPO timelines and the basis of allotting shares which were done to complement Sri Lanka’s rapidly developing commercial landscape comprising multiple business models and segments. The revisions were directed at improving the efficiency of the listing process while offering greater flexibility to companies listing on the CSE.

 

2021

Commenting on key developments to be expected in 2021 CSE Chairman Dumith Fernando Said “In 2021, major market infrastructure developments, Product Diversification, widening of the investor base, building a sustainable business model and more importantly working with the Government and the regulator to position the CSE as a pivotal point for capital raising are all on the cards. Increasing the number of companies listed on the exchange is one of the CSE’s key strategic objectives and we are making steady progress on this front. We look forward to enhancing the listing process and establishing a single window within the CSE for potential listings that would make a Public listing on the Exchange a smooth and efficient process.”

Dumith went onto say “Similar to the Real Estate investment Trusts frame work which was introduced in the final quarter of 2020, we are working on the creation of an OTC market for REPOs on Corporate Debt, trading of Gold-backed products and Stock borrowing and lending. On the Regulatory and Governance fronts, we believe the new SEC Act will be an important development covering regulatory changes required for continuing to safeguard investor rights, enabling the de-mutualization of the CSE, facilitating new product development and strengthening the effectiveness of market regulation And of course we see many of the value drivers which have supported strong market performance since May, continuing into the new year. Thus we are entering 2021 on a hopeful but positive note.”



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Salon owners contemplating pulling the plug, putting more than 300,000 jobs at risk

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  • = Ban on imported cosmetic products hampers industry
  • = Marked decrease in consumers patronising salons
  • = Developing Sri Lanka as a wedding-hub ‘fading away’
  • = Urges President to help protect the self-reliant industry

By Sanath Nanayakkare

Ninety percent of salons across Sri Lanka are at the risk of closure unless the temporary ban on imported cosmetic products is lifted soon, Jackie Aponso, president, Hair and Beauty Cluster (HBC) said last week addressing a press conference in Colombo.

She claimed that such an eventuality could lead to 75%-80% job losses of industry personnel. “That’s a large number as HBC is a unification of many associations in the beauty and personal care sector with 450,000 members,” she said.According to the figures given by her if the situation persists, 337,500 – 360,000 jobs would be lost for employees in the industry.

‘Yes, there is a sound fiscal argument for the government’s temporary ban on imported cosmetic products in the tight foreign exchange reserves backdrop. But if the ban is not lifted by the end of this month to facilitate the availability of international cosmetic brands in the market for upcoming Christmas and New Year, its impact will take a devastating toll on the 450,000 self-employed individuals engaged in the industry and 1.5 million of their dependents”, Jackie said.

‘Most foreign and local customers prefer international brands for their hair and skin treatments. Although a number of home-grown cosmetic brands have emerged, customers prefer their hair and facials done with brands that have been frontrunners in the market which they have relied on for years. Being a highly customer-centric business, we have to work with formulas that customers are comfortable with, because they are concerned about what we put on their face and hair.”

“It’s a relief to hear that the import ban is temporary. But it needs to be lifted quickly to allow sufficient lead time for cosmetics importers to place orders and bring the products to Sri Lanka. It was no secret that our industry was heavily battered by the Covid-19 pandemic and somehow we braved up to this point safeguarding our businesses. And we all have been looking forward to this season to offset the losses we suffered in the past two and a half years. If the ban is lifted by end of this month, imported brands will be available in the market by mid or end of November, and salons will be well-positioned to start work diligently as the season kicks off. But if the imported products reach here as late as mid-December, then this year also will be marked as another unfortunate business year for the salon industry, “she said.

“When we don’t have wedding makeup essentials, a number of other industries also will get affected; such as hotels, wedding and event planners, wedding florists, bridal photographers, Poruwa suppliers, hall decorators and so on. As a result of the import ban, a black market has emerged where the prices of cosmetics have gone up by 6-7 folds. This has put 90% of our beauty and personal care parlours in great difficulty. A hair spray which was about Rs. 2,000, now costs Rs. 12,000. Can we pass that cost burden to the customer? No, we can’t. It is the same with all other products. There are a few salons that can afford such high costs and charge high prices, but the majority of our members are not so, and they are at the risk of closing their businesses. As there has been a marked decrease in customers patronizing salons, some members even called us and asked for help to sell their equipment and exit the industry. Such a situation may create an unemployment problem as they are all self-employed individuals.”

According to HBC, the industry’s cosmetics import bill accounts for 0.08% of the total national import bill. They also highlighted the fact that all registered cosmetics importers and HBC members pay their due taxes to the government.

Salon entrepreneur Bernie Balasuriya said: “Our industry brings in foreign exchange to the country. When foreigners and expatriates come to Sri Lanka for weddings, their families stay in hotels for about a week. Sometimes we set up salon space inside the hotel to cater to beauty and personal care needs of these visitors. They want us to use international cosmetic brands. This is an industry which earns foreign exchange and which therefore demands best industry practices.”

Theekshani Kariyawasam, Gold medal winner at OMC Hairworld in France in the category of bridal makeup, who successfully competed against contestants from more than 60 countries, said that the situation is so sad especially because Sri Lankan beauty artistes and entrepreneurs have never been a burden on the economy. We have always relied on our own talent and commitment. We need international cosmetic products to work with and be recognized for highest standards on par with other destinations.”

Asoka Thilakaratna who boasts 35-years of experience in the industry said,”Skilled Sri Lankan hairdressers and beauticians get overseas jobs because they have a lot of knowledge and experience in working with international cosmetic brands and techniques. That serves as a plus point for them at job interviews with prospective foreign employers. Further, I heard the good news that there would be some Indian weddings taking place here in Sri Lanka in November, December and January. I know from my experience that they come as groups about a week before the wedding and get all their beauty treatments done in Sri Lanka. If we don’t have cosmetic brands they love and trust, we could miss out on these business opportunities because they make it a point to stay away from lesser known products and fake products.”

Concluding the comments, Jackie Aponso said,” We have made an appeal to President Ranil Wickremasinghe to consider the lifting of the ban with the objective of protecting this self-reliant industry and its self-employments. We look forward to a favourable solution in time to get back to business.”

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Sri Lanka eyes $2.9 billion IMF loan finalised in December 2022

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Sri Lanka expects the International Monetary Fund (IMF) Board to approve a $2.9 billion loan by year-end, according to a news report by Reuters.The IMF Board approval of the loan is expected by mid-December. From now until mid-November, the country aims to get financing assurances from public- and private-sector creditors.

The country earlier this month reached a staff-level agreement with the IMF for the loan of about $2.9 billion, contingent on it receiving financing assurances from official creditors and negotiations with private creditors.

“It’s going be very tough, but so much of it depends on China, basically one creditor, so maybe it can be done,” a bondholder told Reuters on condition of anonymity.

The virtual presentation to investors on Friday marks the first time the Sri Lankan government has formally engaged with private bondholders after deciding earlier this year that it would restructure $13 billion in international sovereign bonds, held by private creditors such as asset managers BlackRock and Ashmore.Central Bank Governor Nandalal Weerasinghe and Treasury Secretary Mahinda Siriwardena participated in the virtual presentation on Friday, along with representatives of financial and legal advisers Lazard and Clifford Chance.

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SLIM launches SLIM DIGIS for 4th consecutive year

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Sri Lanka Institute of Marketing (SLIM), the apex body for Sri Lankan Marketers, has opened entries for the 2022 edition of SLIM DIGIS from the 23rd of September until the 25th of October 2022. SLIM DIGIS celebrates and rewards outstanding work and talent within the digital sphere. This year’s competition, SLIM DIGIS 2.2, features two awards categories; the special awards category and the main awards category, under which multiple awards are poised to recognize the Best Digital Marketing campaigns from a range of categories chosen specifically to reflect the development and growth of Sri Lanka’s digital marketing sector.

Nuwan Gamage, President of SLIM, stated, “During the last 3 years, as a nation, we have faced numerous challenges than we have ever faced in our history. Consumer behavior changed dramatically, and companies that acted quickly were able to thrive despite the changing economic backdrop. In those agile approaches, we have seen digital marketing play a vital role and I firmly believe that it will continue to play a very prominent role in the nation’s branding national initiative that we are running currently to position Sri Lanka globally to travel, invest and live. I would like to invite all the digital marketers and brand owners to showcase great digital execution that they have done in this challenging environment.”

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