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Methodology revision of All Share Price Index

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Nishantha Hewavithana Head of Research and Strategy

Colombo Stock Exchange (CSE) is planning to revise the calculation methodology of All Share Price Index (ASPI) by changing the constituent weighting method from full Market Capitalization to free float-adjusted Market Capitalization. The following interview intends to provide some essential information in this regard.

1. What is a stock market index and the purpose of it?

A stock market index is a statistical measure which shows changes taking place in the stock market. Hence, an index reflects overall market sentiment and direction of price movements of the stock market. These indices can be calculated for the whole market (broad market index), a select segment (sector indices) or based on any other theme (eg; Dividend Index, ESG Index etc.). Indices are mainly useful in determining the return of the market segment, understanding the overall market direction.

2. What are the different types of calculation methodologies?

There are various types of calculation methodologies based on different aspects. One such aspect is the weighting of index constituents. Two major weighting schemers are weighting index constituents on full market capitalization of each constituent and weighting index constituents on float adjusted market capitalization of each constituent.

3. What is float adjusted market capitalization?

Simply, this means total market capitalization multiplied by the public holding percentage. Public holding is the portion of the issued quantity of shares readily available for investors to trade and expressed as a percentage. This is calculated by companies and disclosed in interim financial statements. The definition of public holding can be found in ‘Contents Definitions and Introduction’ under Listing Rules that can be accessed at https://cdn.cse.lk/pdf/cse-rules/listing-rules/Contents-Updated-as-at-22-06-2021.pdf

For example, in a given company the public holding percentage is 19% means that only 19% of the issued quantity of shares are readily available to go hand in hand among investors in general. The balance 81% is held by strategic investors which we cannot expect to be traded in the market in general. Accordingly, 19% of the market capitalization (known as float adjusted market capitalization) is ready to go hand in hand- on daily basis.

4. What is the ASPI methodology revision of 2022?

The ASPI has been calculated based on full market capitalization which means the index constituents are weighted based on the full market capitalization of each security. Alternatively, it could be weighed on float adjusted market capitalization. The revision is to change the weighting scheme from full market capitalization to float adjusted market capitalization.

Since companies disclose public holding quarterly in their interim financial statements the index weights would be revised quarterly (known as Index Rebalancing).

5. What is capping and why capped at 5%?

Capping is the technique use in index calculation to address the issue of over representation of one of few securities in an index. Index is capped at 5% level to address the issue of over representation of one of few securities in an index. Once capped the excess weight is distributed proportionately among the remaining securities in the index. The same procedure is repeated until no security is exceeding 5% cap rate.

We back calculate Float ASPI index and capped at different cap rates. Based on return per unit of risk, 5% capping level has been the best.

6. What makes CSE to move for this kind of change?

Indices based on float adjusted market capitalization are better able to generate realistic market returns than those based on total market capitalization because they are based on tradable quantities.

Since the introduction of this idea in early 2000, most of the markets have adopted this in their index calculation methodologies. All the index service providers such as S&P Dow Jones, FTSE are using this method and is considered as a best practice in index calculation methodologies.

7. What are the advantages and disadvantages of this move?

The main advantages of the revised index would be that it will generate more realistic returns and the index methodology would be in par with generally accepted best practices of index calculations. There are no disadvantages such.

8. Will the ASPI index value change suddenly due to the implementation this change itself?

No. On the effective date of the methodology revision the ASPI will start moving from the same value that it closed on the day immediately prior to the revision. When this methodology revision is implemented, the serial continuity of the index will be maintained and there will be no sudden shift of the index level solely due to the launch of the new index.

9. How will it affect the ASTRI index (All Share Total Return Index)?

All share Total Return Index (ASTRI) measures the total return (Price Return + Dividend Return). The ASTRI reflects returns due to both price changes and dividend income. After the implementation of the methodology revision of ASPI, the price return component will be based on float adjusted market capitalization. This means that ASTRI is also calculated based on float adjusted market capitalization

10. Is the index methodology of CSE publicly available?

Yes. It is available on CSE website. https://cdn.cse.lk/pdf/Index-Methodologies-of-Colombo-Stock-Exchanhge.pdf



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Emirates and Dilmah Tea celebrate 30 years of partnership

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Dubai, UAE, May 2022 – Emirates and Dilmah Tea have enjoyed a longstanding partnership of brewing the finest teas on board and in Emirates’ airport lounges around the world for the past 30 years. To mark the milestone on International Tea Day, all Emirates’ passengers received a special tea box when they flew from Dubai a few days ago.

 In addition, First Class passengers on flights to the UK were treated to a food pairing, while passengers in the Emirates’ Onboard Lounge were offered Dilmah Tea infused mocktails. The special tea pack for all passengers who flew on Saturday contained three different flavours: Ceylon Breakfast, an Emirates exclusive Turmeric Coconut and Vanilla tea, and the popular Earl Grey with Honey.

 In First Class, Emirates offered the Brilliant Breakfast, one of the many gourmet teas created by passionate Tea Maker and Dilmah founder, Merrill J. Fernando. This was paired with the afternoon tea service on board.

 Moroccan Mint Green tea was exquisitely paired alongside Labneh – a tangy and creamy yoghurt – with roast vegetables for vegetarians. While Dilmah’s Sench Green Extra Special tea – renowned for its delicate taste with herbal finish with a touch of sweetness –  was served with sushi, particularly seafood.

 “Emirates focuses on dishes that emphasise fresh ingredients of the highest quality. We pay special attention to every detail and the quality of the tea we offer our customers is no different. The fact that we have served Dilmah Tea for 30 years across all our cabins is proof of its quality and our satisfaction with the perfect cup of tea.

“We have an exceptional partnership with Dilmah and we have grown in tandem for the last 30 years. Over 9.6 million tea bags are used each year across our fleet with more than 10 tea varieties on offer, including an exclusive Emirates Signature Tea served in First Class,” said Thomas Ney, DSVP, Service Delivery at Emirates.

 Dilhan C. Fernando, son of Dilmah Founder and CEO of the family company explained: “For 30 years we have grown a tea inspired collaboration with Emirates, offering customers a uniquely Emirates experience in tea. To celebrate the Pearl Anniversary of our partnership in tea, we made a tea that is as rare as it is magnificent. A seasonal tea with extraordinary finesse, handpicked from tea bushes prepared for months and crafted into a numbered limited-edition tea.

“Our co-operation with Emirates truly presents the luxury in fine tea, and – in our tea mocktails and food pairings – contemporary, tea inspired hospitality. For the last 30 years we have created these unique moments for Emirates customers either on the ground, in its lounges around the world, or at 40,000 feet and this year is no different. We are excited to have the special 30-year blend on board Emirates’ fleet.”

A world-class partnership

Millions of world class cups of tea have been poured for Emirates’ customers since the airline’s partnership with Dilmah began in 1992.

The airline brings the finest products on board through long standing partnerships worldwide, including support for local suppliers and artisans. Emirates takes the Dilmah brand to more than 130 destinations on six continents.

 The teas offered on Emirates are chosen by popularity amongst customers, catering to different preferences like minty or citrus infusions as well as by looking at tea drinking trends. With an increasing focus on wellness amongst customers, the airline recently introduced a new tea in its airport lounges – Turmeric, coconut and vanilla featuring antioxidant properties.

 On board, the most popular tea in Economy Class is the Dilmah Ceylon Black Tea while passengers in First and Business Class favour Moroccan Mint and Breakfast Tea. Emirates serves a selection of six teas in Business Class and its airport lounges, and a further six teas in First Class.

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AkzoNobel honours students of City School of Architecture at Colour Awards 2021-2022

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– Annual design competition celebrates young design talent for fourth year running

AkzoNobel Paints Lanka (Pvt) Ltd., in partnership with the City School of Architecture (CSA), honoured the winners of the Colour Awards 2021-2022 at the CSA Graduation & Awards Ceremony held recently at the BMICH.

A partnership initiated four years ago by the producer of Dulux paints in Sri Lanka, the annual competition hopes to raise the bar of design and innovation standards and encourage young creative talent as important future players in a fast-evolving industry.

Every year the prize invites first year students from the City School of Architecture to face a new colour and architecture-themed design challenge. After several mentoring sessions by the academic staff of CSA -namely Archt. Nela de Zoyza, Archt. Anurangi Mendis, and Archt. Shayan Kumaradas-, participants are then required to produce a final submission and present it to a high-profile selection committee.

This year, each submission was reviewed by a star-studded panel of industry specialists, including Mr. Romesh de Silva, Ms. Charmaine Mendis, Archt. Shevanthi Basnayake, Archt. Kosala Weerasekera, Archt. Rehan Thillakeratne, and Archt Nandika Denipitiya, together with the Managing Director of AkzoNobel Paints in Sri Lanka, Mr. Wasantha Heenatigala.

Following a rigorous judging process, the five most impressive submissions were chosen, with winners being conferred a generous cash reward, as well the prestige of having being recognized by the pioneers of the paint manufacturing industry in Sri Lanka and the world.

Speaking at this year’s ceremony, Upendra Gunawardhana, Head of Marketing of AkzoNobel Sri Lanka commented, “As a leading global paints and coating company, we are convinced that in helping develop and highlight emerging talent, we are also playing a crucial role in shaping the future of the industry. With the Colour Awards we hope to provide a platform through which university students can hone their design thinking skills on an industry level, while at the same time also consistently set benchmarks of innovation for the years to come.”

“Over the years AkzoNobel has played a significant role in supporting the educational growth and creative development of our students through its Colour Awards,” said Archt. Professor Lal Balasuriya, Head of School of the City School of Architecture. “Here, young design aspirants are given the chance to test the limits of both, their creative ingenuity and industry acumen, and we’re sincerely grateful to AkzoNobel for this transformative opportunity.”

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Wing Commander (Retd.) D. Pradeep S. Kannangara elected president, Industrial Security Foundation

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The Industrial Security Foundation (ISF) which acts as the sole organization in Sri Lanka to represent the Private Security industry having incorporated by an Act passed in the Parliament, Act No. 51 of 1999, elected Wing Commander (Retd.) Pradeep Kannangara as its President for the years 2022/2023 at its 30th annual General Meeting which was held at the PIM Auditorium in Borella. Wing Commander Pradeep Kannangara was appointed President while 14 other members were appointed to the Executive Committee, strengthening the ISF in order to drive and uplift the standards of the private security industry in Sri Lanka.

He has served on the ExCo consecutively since 2012 under four different presidents where he held the positions of Senior Vice President during the last three consecutive years. He has also been a committed member of the ISF and was awarded prestigious coveted FISF title due to his many valuable contributions to the organization and the Private Security Industry in Sri Lanka in 2012.

Wing Commander Kannangara’s journey into private security began after a successful career in the Sri Lanka Air Force for over 24 years where he served in many capacities finally being the Officer Commanding of the Special Air Borne Force. A recipient of the Ranasura Padakkama (RSP) Gallantry award for his bravery, sacrifices and service to the nation by the President of the Socialist Republic of Sri Lanka in 1990. He holds a Master’s in business management from the Edith Cowan University, Perth, Australia too and serves as a Board Director in AB Securitas (Private) Limited in Sri Lanka and AB Securitas Bangladesh Limited.

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