Towards an advanced Stock Market for Sri Lanka | Sunday Observer

Towards an advanced Stock Market for Sri Lanka

10 September, 2023
Deputy Director General SEC, Thushara Jayaratne
Deputy Director General SEC, Thushara Jayaratne

There is a pressing need to cultivate financial literacy among the general populace and make it more widespread. Taking the first strides in this direction, a novel program aimed at educating school students about stock market securities was recently launched. The inauguration of this initiative took place at Nugawela Central College in Kandy during President Ranil Wickremesinghe’s visit to the school.

As the initial phase of this endeavour, ‘Capital Market Associations’ will be established in 100 carefully chosen schools, where students will receive comprehensive education and insights into the workings of the stock market.

This program is a collaborative effort involving the Ministry of Education, the Securities and Exchange Commission (SEC), the Colombo Stock Exchange (CSE), and the President’s Secretariat.

To gain insights into advancing the stock market economy in Sri Lanka, we reached out to Thushara Jayaratne, the Deputy Director General of the SEC.

“The stock market represents a valuable avenue for fostering investment opportunities within a nation. However, successful participation in the stock market requires a solid understanding of its intricacies.

The establishment of Capital Trade Associations in schools serves as a commendable approach to impart practical knowledge to students, equipping them with the awareness and skills needed to navigate the stock market effectively as they transition into society.” he said.


“In the realm of school education, students specialising in commerce are exposed to stock market concepts, whereas those pursuing subjects such as science, arts, or mathematics often miss out on this vital knowledge.

Capital Associations, however, offer a solution by providing an accessible avenue for any student interested in acquiring essential stock market knowledge. This inclusive approach ensures that regardless of their chosen professional path, students can develop a foundational awareness of the stock market, preparing them for any future engagement in this financial domain,” he added. “The Government has initiated a program to identify the school union that has derived the most significant benefit from this investment. As part of this program, ten students from that union, along with the subject teacher overseeing the initiative, will be selected for an educational observation tour of the Singapore stock market.

This initiative is anticipated to enrich school education by introducing practical experience in navigating an advanced stock market. It aims to cultivate a new generation of individuals who possess the practical skills and knowledge required to effectively engage with the stock market,” he noted.

According to Jayaratne the SEC plays a pivotal role in regulating the entire capital market, encompassing the stock market and all related sectors and institutions, including stockbrokers and investment fund managers.

He said that the agency diligently monitors daily activities to detect any attempts at irregularities or artificial price manipulation during share transactions. In the event such actions are identified, legal actions will be pursued against the responsible parties.

He said that the responsibility for advancing the Sri Lankan stock market has been entrusted to their agency. Consequently, they have identified various areas within the stock market that require development as part of their efforts to foster growth in both the stock market and the capital market.

“Currently, Sri Lanka’s stock market boasts 800,000 investors, with even fewer actively participating. To address this issue, steps have been taken to bolster the number of investors, and several measures have been implemented towards this objective,” Jayaratne said.


These measures include knowledge dissemination programs conducted at both the corporate and university levels. These programs utilise various methods such as conferences, workshops, programs, lectures, and discussions to impart knowledge to individuals currently involved in the stock market as well as those eager to enter this domain.

“To ensure proper stock market investing, it’s crucial to follow specific do’s and don’ts.

As a result, our institution conducts distinct programs aimed at different audiences, including the general public, university students, and schoolchildren. Through these initiatives, we aim to empower individuals with the knowledge and skills necessary for informed and responsible investing in the stock market,” he added.

He said that despite there being over 2,000 companies in the country, only 290 are listed in the stock market. Additionally, he said that foreign investors contribute only 10 percent to the overall turnover in the stock market. He said that if Sri Lanka’s investments are to thrive, there must be an increase in foreign investor participation. He said that the current count of 290 companies in the stock market and the levels of domestic and foreign investors are insufficient, and more must be done to bolster these numbers.

“Expanding the stock market in our country necessitates the entry of more companies. However, a significant number of large companies in Sri Lanka operate as family businesses.

“These companies are generally averse to issuing shares to the public. Their preference is to maintain their enterprises as family-run businesses,” he said.

“Another significant consideration is that when a company decides to enter the stock market, it must adhere to principles of transparency and accountability. This includes regularly disclosing financial statements, profit and loss reports, and price-sensitive information.

Some Sri Lankan companies, while willing to join the stock market, may not be adequately prepared for this level of transparency.


They often fail to release annual reports and may not fully comply with the rules and regulations that govern stock market participation. It’s crucial that companies entering the stock market understand and commit to these requirements to maintain trust and confidence among investors,” he said.

Some companies opt for bank loans to fuel their business expansion instead of considering going public in the stock market. However, they must repay the interest on these bank loans.

He said that it’s essential for these companies to recognise the benefits of entering the stock market. Then they can issue shares to the public and utilise the funds raised for the company’s growth and development, thereby alleviating the burden of bank loan interest payments.

“To be listed on the main board of the stock exchange, a company’s declared capital should amount to at least Rs. 500 million. Alternatively, for inclusion on the ‘Diri Savi’ board, the company’s declared capital should be a minimum of Rs. 100 million.

Moreover, the introduction of the Empower Board, specifically designed for Small and Medium-sized Enterprises (SMEs), requires these SMEs to have a declared capital of Rs. 25 million to be admitted. This innovative initiative has opened opportunities for smaller companies to access the stock market, enabling these businesses to expand,” he said.

“Currently, our country’s stock market primarily deals with the trading of shares. In contrast, stock markets of developed countries offer a broader range of investment and trading options. To enhance our stock market, there are plans to introduce these new investment methods and products,” he revealed.

Jayaratne also said that in addition to Sukuk, there are several environmental, social, and governance-related investment methods (ESG Products) used in developed stock markets worldwide. These include Blue Bonds, Green Bonds, and Short Selling, which are considered innovative trading methods.

In the future, these new concepts should be introduced and implemented in our country’s stock market, providing investors with a broader range of options.


“Our country’s stock market maintains a favourable legal framework compared to global stock market conditions.

Despite facing a 30 percent decline in the overall price index around this time last year, there has been a significant turnaround. As of September 4 this year, the stock market’s overall price index has surged, showing a positive trend. This upward trajectory is certainly encouraging and bodes well for the future of our stock market,” he said.

Jayaratne stressed the importance of relying solely on information disseminated through the official websites of the SEC of Sri Lanka and the Colombo Stock Exchange when seeking knowledge and information for stock market investments, especially in the context of social media.