gossip lanka

COVID-19 and the Sri Lankan Stock Market: Looking Ahead with Confidence

The Colombo Stock Exchange resumed stock market operations on 11 May 2020, following an extended closure as a result of the COVID-19 pandemic. In this interview, Mr. Ray Abeywardena, the Chairman of CSE comprehensively discusses the efforts of the CSE amidst the COVID-19 pandemic and offers an outlook on the way forward for the Exchange and the market.

How has the market performed since reopening on 11 May upon resuming operations as part of the Government’s efforts to return to normalcy in civilian life and to revive the economy?

Even before the market recommenced trading, we were confident that there would be buying interest in the market given the attractive valuations the market continues to demonstrate. Although the two market days immediately after recommencing trading on 11 May was somewhat of a decline and an overreaction as a result of the pent up selling pressure, we saw that there was some degree of stability and normalcy that returned to the market thereafter, when investors realized that there was no need to panic while also realizing that there was good long-term buying opportunities. We have also been emphasizing on this ‘once in a lifetime’ buying opportunities in some stocks and just to offer some perspective some of these shares have been trading at price levels similar to what we saw prior to 2009, when the country was going through a war. We were convinced from the start that the market would not crash.

What we have seen post recommencing trading is that discerning investors have made full use of the buying opportunity to benefit greatly and we are proud to say that we have investors that see the long-term benefits of the market. The market continues to offer opportunities to those who have the capacity to buy and hold shares for a period of time to benefit from the true value of a long-term investment. In terms of foreign investors, we have seen a net outflow since recommencing operations which has been in-line with the trend we have observed in most regional markets and peer frontier and emerging markets. However, there is a misconception that foreign investors are only selling, which is not the case. We have seen Rs. 3.1 billion worth purchases by foreign investors in the market since recommencing operations, which shows that the attractive valuations the market displays is acknowledged by the foreign investor segment as well. We have also seen an interest in the market among Sri Lankans who are living or working overseas, which is a key segment of foreign investors that we have targeted through our marketing efforts over the years.