State Minister of Finance and Capital Markets Ajith Nivard Cabraal told stockbrokers that "Sri Lankan investors who acquire shares now would make substantial capital gains very soon". Cabraal made these remarks when he addressed Sri Lanka's Stockbrokers at the Finance Ministry last Friday, 4th September.
Cabraal explained that the Colombo Stock Exchange's All Share Price Index was at around 7300 points by end December 2014 and the market cap was around USD 25 billion. However, the ASPI has now shrunk to about 5300 points with the market cap down to about USD 12.5 billion, even though most companies had accumulated reasonable profits over the past 5 years and their balance sheets had grown.
From this information, it is very evident that the ASPI today should be at a much higher value and the market cap too should be substantially higher. Accordingly, it is clear that there is a huge potential for the valuations of the shares to increase in the near future, since confidence is returning to the markets and economic activity is likely to pick up in the near term.
Cabraal said stockbrokers must therefore try and persuade Sri Lankan investors to invest in the stock market before trying to get foreigners to come to the Sri Lankan bourse.
Cabraal further pointed out that the money markets are quite liquid now and that the total deposits in Banks and Finance Companies exceed Rs.10,000 billion. He therefore urged stockbrokers to try to collectively attract at least 1% of such deposits, which would amount to a sizable Rs.100 billion, and that it would be quite possible to do so in the current low interest regime.
Cabraal stressed that such an investment wave would be a huge boost to the stock market which would also provide a very sound platform for the share investors to take up some useful positions in the stock market as well.
Cabraal also urged the stockbrokers to get out from their comfort zones and become more active. He said, "it's now time for you to go across the country and explain these opportunities to potential Sri Lankan investors and encourage them to enter this market. Don't passively wait for the foreign investors to return, but proactively engage the local investors".
Cabraal added, "in that way, local investors could gain from the current depressed market, particularly in the light of the reduced interest rates". He also asserted that those who invest now will definitely be at an advantage over those who invest later.
