Sri Lanka’s local capital market remains highly undervalued, despite experiencing surges in growth, Colombo Stock Exchange (CSE) Director Ray Abeywardena said, speaking to an investor forum held by the CSE and Securities and Exchange Commission of Sri Lanka (SEC), in association with the Embassy of Sri Lanka to the Kingdom of Saudi Arabia, in Riyadh recently.
“Despite the surge, the CSE remains highly undervalued compared to our regional peers. From a valuation perspective, we present one of the most compelling propositions in Asia,” Abeywardena said, referring to the performance recorded post the presidential election in 2024.
“The All-Share-Price-Index (ASPI) has experienced exponential growth and today, as we gather here, it sits over 23,800 points, representing a staggering 120% growth since October 2024, post the Presidential Election.”
Emphasising the investment opportunity, he noted: “To put that in perspective: An investment made in our equity market just over a year ago would have more than doubled in value.” He added, “And as you are aware capital gains acquired in our market are free of tax.”
On regional performance, he remarked: “The performance speaks for itself. I am pleased to highlight that in 2025, the CSE was the 3rd best performing market in the entire region.” He elaborated, “We have demonstrated resilience, robust volume, and a full year growth of 42% on the ASPI and over 26% on the S&P SL20 in 2025.”
In his welcome address, Ambassador of Sri Lanka to the Kingdom of Saudi Arabia Ameer Ajwad stated that a significant opportunity remains in broadening public participation in the capital market of Sri Lanka. As financial literacy and investment awareness among potential investors are limited, the investor forum would serve to bridge the knowledge gap.
Providing a market perspective, Dr. Naveen Gunawardane, Co-Founder and Managing Director of Lynear Wealth Management, presented on ‘Sri Lanka Equities: Navigating the Next Phase of Growth’. He highlighted that IMF-supported reforms have led Sri Lanka to a new paradigm in macroeconomic management, creating conditions for extended macro stability with market-driven interest rates and currency. He noted that this shift – moving from a history of macro instability – will likely drive domestic institutional and retail investors to increase allocations to equities and real estate.
Despite the recent rally, he emphasised that Sri Lanka’s equity market remains structurally undervalued and under-invested by foreign investors, with LYNEAR’s coverage universe of 45 stocks trading at a 1-year forward P/E of 9.4x, and the banking sector at 0.9x estimated December 2026 book value.