CSE Valuations Hit New High, But 2026 Growth Expected to Moderate 📉

• The Colombo Stock Exchange (CSE) market PE is now trading significantly above its 18-year historical average (12.0x), marking a rare valuation premium (FCR). • YTD 2025 Market Performance: • ASPI gained nearly 45%. • S&P SL20 was up 31.3%. • Market Capitalisation increased 45.3% to nearly Rs. 8.28 t. • 2025 Key Drivers & Earnings: • Strong economic performance, lower lending rates, and faster construction growth pushed valuations higher. • GDP growth is estimated at ~5%. • Corporate earnings are estimated to have risen by 25%. • 2026 Outlook & Pressures: • Growth is expected to moderate as a weaker rupee raises import costs and consumption slows. • Projected GDP growth: Easing to 3–4% (from ~5% in 2025). • Corporate earnings growth: Expected to normalise to about 17%. • Sectors like construction, tourism, and diversified exporters remain well-positioned despite the softer outlook.