Annual Report 2010 - Ministry of Finance and Planning

1 | DEVELOPMENT PERSPECTIVESPrivate Sector DevelopmentCapital Market ActivitiesAs envisaged in the ‘MahindaChinthana’ the Capital Market willalso be the catalyst for acceleratedeconomic growth particularly to driveprivate investment. The developmentof Capital Market is important toachieve the private sector investmenttarget of 30 percent of GDP.The success of the Colombo StockExchange (CSE), which has becomeone of the best performing stockexchanges in Asia with a marketcapitalization of Rs.2.2 trillion (or40 percent of GDP), is evident forsuccess of government capital marketdevelopment strategy.Conducive measures to developcorporate debt securities market willalso be in place to satisfy financingneeds of the corporate sector. The endof the conflict has positioned Sri Lankaas an inter regional centre, making it akey investment hub for the South Asianregion.The CSE has performed faster and moreextensively during the last 18 monthsthan any other period in Sri Lanka’shistory.It had been adjudged as theworld’s second best performingcapital market for two consecutiveyears. The CSE had achieved a PriceEarnings Ratio (PER) of 25.2 times inoverall compared to its earlier PERat 16.5 times in 2009; beating theworld’s Emerging Market PER andFrontier Market PER. Revived investorconfidence has played a crucial rolefor CSE to achieve the feat whichhas positioned the country on topof most leading stock markets in theworld.Chart 1.62 > Response of API to Various Policy Measures and Economic Management Moves Taken by the GovernmentAll Share Price Index800071256250537545003625275018751000parliamentaryelection3.3bn turnovermarkrestrictions on Americantourists removedmini budgetmotor vehicletax revisionsmonetarypolicy reviews10% price band imposedT+3 rule5000 markstock transactionfees lowered2 nd tranch$2.6 bn IMF loanthe chicken & eggquestionprice bands lifted& new formula came inbudget 2011market cap.reached Rs. 2 trillionexchange controlrelaxations5-Jan 5-Feb 5-Mar 5-May 5-Jun 5-Jul 5-Aug 5-Sep 5-Oct 5-Nov 5-Dec-2010Source: Reproduced from Stock Market Reports by Colombo Stock Exchange122