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Sri Lanka mulls new 
rule on stock float

MUMBAI/COLOMBO - Sri Lanka’s stock exchange plans to introduce a rule by the end of the year ensuring companies have a minimum amount of stock available for trade to lure foreign investors.

The bourse is discussing the minimum free-float requirement with regulators, investors and companies, Krishan Balendra, chairman of the Colombo Stock Exchange, said in an interview in Mumbai on Wednesday. A 20 per cent level is being considered with possible exceptions for some overseas companies, Securities and Exchange Commission Chairman Nalaka Godahewa said in an interview in Mumbai.

“We need more companies and more liquidity to attract foreign participation in the markets,” Balendra said.

The bourse is seeking to lure more international investors to a market valued at $17.5 billion, the smallest of 16 Asian-Pacific stock markets tracked by Bloomberg. Hong Kong, which has a $3.49 trillion stock market, requires companies to make at least 25 per cent of outstanding shares available for trading, according to the website for the city’s bourse.

“Foreigners are only able to invest in a limited number of Sri Lankan stocks as there’s not enough liquidity,” Ravi Abeysuriya, chief executive officer at Heraymila Securities, said in Colombo. “There’s need to increase liquidity.”

The benchmark Colombo All-Share Index rose 0.1 per cent at 2:41pm local time, the first gain in four days. The gauge has fallen 25 per cent in the past two years as the government devalued the rupee and raised interest rates to narrow the trade deficit and combat inflation. The index more than quadrupled over 2009 and 2010 as economic growth accelerated following the end of a civil war against Tamil separatists.

“The market has corrected but firms continue to see good earnings,” Balendra said. “As a result, valuations now are quite attractive compared to other regional markets. There is lot of growth potential and the prospect of the economy is positive.”