COLOMBO: Sri Lanka’s securities regulator on Saturday ordered main listed companies to ensure that at least 20 per cent of their shares were available to trade by the end of 2016 to raise liquidity, attract foreign funds and curb manipulation.

The long-debated directive came after foreign investors repeatedly complained about a lack of liquidity on the Colombo Stock Exchange.

According to Securities and Exchange Commission (SEC) data, more than 100 listed firms out of 288, have less than 20pc of their shares available for trade. Some have less than 5pc. The total amount of shares available for trade, or floating, had fallen to 26.1pc by the end of June, compared with 26.4pc at the end last year.

“The overall liquidity in the market should increase by 9 to10pc with the implementation of a minimum free-float rule,” Nalaka Godahewa, the head of the SEC, told Reuters.“The SEC is following the example of many other regional and global regulators by making a minimum free-float mandatory,” he said adding that the decision was taken after public consultations.

According to the rule, companies listed on the main board of the Colombo Stock Exchange should have a minimum public holding of 20pc of total listed ordinary voting shares in the hands of a minimum of 750 public shareholders.

Otherwise, they should have a market capitalisation of 5bn rupees of its public holding in the hands of a minimum of 500 public shareholders while maintaining a minimum public holding of 10pc.

The market welcomed the move and said it would help Sri Lanka’s share market attract more foreign funds into companies other than the 10.

“It is a positive move. If there is no liquidity, what is the purpose of listing,” Danushka Samarasinghe, head of TKS Securities research, told Reuters. —Reuters