## Equities Growth Driven by Domestic Investors in 2026 📈

Asia Securities PLC projects a strong year for Sri Lankan equities, forecasting a 20%–25% market upside driven primarily by record-level local participation rather than foreign inflows. • Investor Participation & Liquidity Active equity investors surged to 98,000 in 2025 (up from 60,000 in 2024). New CDS accounts tripled YoY, rising from 19,000 to 57,000. In the first three weeks of 2026 alone, 5,000 new accounts were opened. • Macro-Economic Drivers Interest Rates: Expected to fluctuate within a narrow range of 50–100 bps, maintaining the relative attractiveness of equities over fixed income. Taxation: Growth is supported by a 0% capital gains tax and a 15% withholding tax environment. Credit Confidence: Improving sovereign credit confidence is seen as vital for long-term foreign interest ahead of 2028 debt obligations. • Sector & Market Outlook Foreign Inflows: Viewed as "incremental upside" rather than a necessity for growth. Sector Trends: Investor interest is shifting from traditional blue chips toward growth-oriented digital and telecom sectors. Structural Needs: Emphasis placed on increasing market liquidity and listing larger companies, including potential State-Owned Enterprise (SOE) reforms, to attract global capital.