Enhancing your financial literacy with CSE Education Academy Key market platforms, price indices and investment instruments

By Colombo Stock Exchange
In the journey to becoming a savvy investor, it is essential to grasp the various aspects of how stock markets operate and what opportunities are available to both companies and investors. 
Following on from our introduction to stock market basics in Column 01, let’s dive deeper into the different listing platforms, significance of price indices and the types of securities that shape the market.
Listing platforms at Colombo Stock Exchange 
The Colombo Stock Exchange (CSE) offers three main listing platforms for local companies: 

• Main Board: For large companies with a substantial capital base and is considered as the primary platform for well-established corporations.
• Diri Savi Board: Is a platform funding the growth of mid-cap companies, aiming to be the best in their respective fields.
• Empower Board: Caters to small and medium-sized enterprises (SMEs), providing them with opportunities to raise capital while giving investors the chance to invest in emerging businesses.

What are shares?
Shares represent ownership in a company. Buying shares makes you a part-owner, entitling you to dividends (if declared) and voting rights of the company’s decision-making process during the Annual General Meetings (AGMs), etc. The types of shares include:

• Ordinary voting shares: The most common type of shares, giving the shareholders the right to vote at the company General meetings and the potential to earn dividends based on the company’s profitability.
• Ordinary non-voting shares: These shares offer the same potential for dividends as ordinary voting shares but do not provide voting rights.

Beyond equity, companies and governments also use debt instruments for capital raising, through debentures and government bonds, respectively.
Corporate debentures
A corporate debenture is a security issued by listed companies to raise debt capital. Corporate debenture holders receive fixed or floating rate interest payments as agreed at issuance. There are various types of corporate debentures on the CSE, offering differing levels of protection to the investors, such as secured or unsecured debentures. These instruments play a key role in the capital market, providing companies with a means to raise funds while offering investors stable returns.
Importance of price indices
Price indices provide a snapshot of market performance, helping investors understand trends, assess risk and time their investments. These are the indices offered on the CSE:

• All Share Price Index (ASPI): This is the broadest measure of the stock market’s performance, weighted by the market capitalisation of all listed companies.
• S&P Sri Lanka 20 Index (S&P SL20): This index tracks the 20 largest and most liquid companies on the CSE, giving the investors a snapshot of the blue-chip segment of the market.

Stay tuned for Column 03, where we take you deeper into the world of shares and why they remain a cornerstone of financial markets.