The Colombo Stock Exchange (CSE) closed the year 2024 with its highest-ever market capitalization of Rs. 5.69 trillion, marking a remarkable performance in the stock market. This milestone provided long-term investors with an impressive 50% return, highlighting the market’s strong recovery and growth.
Market Milestones and Growth
The total market value surged by 34% compared to the previous year, with over Rs. 1.5 trillion added to the market capitalization in the final quarter of 2024. This achievement surpassed the previous record of Rs. 5.48 trillion set in 2021. Both major indices, the All Share Price Index (ASPI) and the S&P SL20, reached their highest levels ever. The ASPI closed at 15,944.61, up from its opening level of 10,654.16, providing a return of 49.66%. Meanwhile, the S&P SL20 rose from 3,068.36 to 4,862.10, delivering an impressive 58.46% return.
These returns marked the highest performance in three years, with the previous peak recorded in 2021 at 80.5%. In comparison, the ASPI gained 25.5% in 2023 and 30.6% in 2022. The S&P SL20’s performance was the best since 2021, which saw a return of 60.47%. In the previous two years, the S&P SL20 delivered gains of 16.42% in 2023 and 37.7% in 2022.
Consistent Growth Amid Challenges
The year 2024 marked the sixth consecutive year of growth for the CSE, a significant achievement given Sri Lanka’s challenges over recent years. These included the 2019 Easter Sunday attacks, the COVID-19 pandemic, and the political and economic turmoil of 2022. Analysts regard the stock market’s resilience and consistent growth as a testament to its ability to recover and thrive despite adversity.
Historical data reveals that the CSE has experienced even higher returns in the past. Notably, the ASPI grew by 125% in 2009 and 96% in 2010, demonstrating its potential for exceptional performance during favorable conditions.
Turnover and Investor Sentiment
The average daily turnover in 2024 was Rs. 2.23 billion, an improvement from Rs. 1.7 billion in 2023 but lower than the Rs. 2.97 billion recorded in 2022 and Rs. 4.88 billion in 2021. The final trading day of 2024 saw a turnover of Rs. 7.7 billion, involving 229.7 million shares. Leading contributors to this turnover included Hatton National Bank (Rs. 688 million), Commercial Bank (Rs. 593.6 million), Sanasa Development Bank (Rs. 464.3 million), DFCC Bank (Rs. 421 million), and Pan Asia Bank (Rs. 338.6 million).
Positive investor sentiment was evident, with notable participation from retail investors and high-net-worth individuals. The banking sector dominated turnover, contributing 47%, followed by the capital goods and diversified financials sectors, which jointly accounted for 27%. The market also recorded a net foreign inflow of Rs. 130 million, further reflecting investor confidence.
Key Drivers of Growth
The stock market’s bullish performance was fueled by several key factors:
- Political Stability: The September Presidential Election, which saw Anura Kumara Dissanayake of the National People’s Party (NPP) emerge victorious, brought political stability. This was further strengthened by the NPP’s landslide victory in the November Parliamentary elections.
- Economic Improvements: The successful progress of the International Monetary Fund’s (IMF) four-year Extended Fund Facility (EFF) program, completion of external debt restructuring, and improved macroeconomic fundamentals boosted investor confidence.
- Favorable Conditions: A rebound in economic growth, lower interest rates, and a competitive exchange rate created a conducive environment for investments in listed equities.
Performance Highlights
On the last trading day of 2024, the ASPI gained 117 points (0.7%), while the S&P SL20 increased by 1%. Key stocks contributing to the positive performance included National Development Bank (NDB), DFCC Bank, and Commercial Bank. These stocks experienced price gains, with NDB’s share price increasing by Rs. 6 to Rs. 113.75, DFCC Bank’s share price rising by Rs. 6 to Rs. 113.75, and Commercial Bank’s share price gaining Rs. 1.75 to Rs. 144.75.
The banking sector remained a top performer, with Hatton National Bank, Commercial Bank, Sanasa Development Bank, DFCC Bank, and Pan Asia Banking Corporation leading the way. Retail investors showed interest in stocks like SMB Leasing Non-Voting, LVL Energy Fund, and Waskaduwa Beach Resort, while institutional investors focused on Commercial Bank, Hatton National Bank, and Aitken Spence.
Sector Contributions
The banking sector was the primary contributor to market turnover, with a sector index gain of 1.86%. Key stocks like Hatton National Bank and Sanasa Development Bank saw notable price increases. Hatton National Bank’s share price rose by Rs. 2.50 to Rs. 319.75, while Sanasa Development Bank’s share price increased by Rs. 4.40 to Rs. 45.90. Pan Asia Banking Corporation also experienced significant gains, with its share price appreciating by Rs. 2.10 (6.38%) to Rs. 35.
Future Outlook
The exceptional performance of the Colombo Stock Exchange in 2024 underscores its potential as a robust investment avenue. Political stability, ongoing economic reforms, and favorable macroeconomic conditions are likely to sustain investor confidence in the coming year. As the market continues to attract both local and foreign investors, it is poised to build on its success and deliver strong returns in 2025 and beyond.
With the foundation laid in 2024, the CSE is set to remain a key driver of economic growth and a promising destination for investors seeking opportunities in Sri Lanka‘s financial markets.
