The Employment Provident Fund (EPF) is looking at the possibilities of investing in the Colombo Stock Exchange after positive sentiments reversed the market’s performance yesterday, after both indices took a tumble on Tuesday, Director General of the Securities and Exchange Commission, Channa De Silva, said.

He said the revival of the CSE was in response to phenomenal recoveries made by capital markets in the US, UK and Asia.

"There is a lot of value in the market and now is the ideal time for long term retail and institutional investors to look at making investments," he told the Island Financial Review.

"Long term institutional funds such as the EPF and ETF (Employees Trust Fund) are finding the CSE attractive and they are positively exploring the possibilities of investing at the exchange," De Silva said.

This is hopeful news to EPF members. Critics have often said that because EPF funds were invested in Treasury bills and bonds that yield returns far below the rate of inflation, retired workers actually received negative returns on the their EPF entitlements.

Some have even criticised the government for using the EPF fund as a captive source to fund its spending.

The SEC has for a long time campaigned to convince the managers of the EPF scheme to invest in the CSE so that members can get optimal returns.

In July this year, the Chairman of the SEC, Dr. Gamini Wickramasinghe, told journalists that special approval from the Treasury allowed Bank of Ceylon to invest 20 percent of the bank’s Rs. 28 billion pension fund in securities at the CSE.

However, at that time, the BOC had cautiously invested about Rs. 2 billion only.

"The pension funds of other government organisations too can be attracted to invest in the capital market along with the EPF and ETF," Dr Wickramasinghe said.

Meanwhile, De Silva said that positive events in the US capital markets would cascade into Sri Lanka as well.

"On Tuesday, the Dow Jones bounced back with a 10.8 percent gain, the biggest single-day gain in its history. Since then, markets around the world have begun to turnaround with a lot of passion.

"The phenomenal recovery in the US was mirrored in the UK, where the stock market gained 5 percent, and reflected in Asia, with Japan leading the recovery with a 7.7 percent gain," he said.

According to De Silva, the positive trend is bound to create more positive investor sentiments towards the CSE.

During the turbulent months which saw world capital markets struggle, the CSE had been insulated largely because foreign investors did not have significant investments.