COLOMBO, May 12 (Reuters) - Hong Kong-based brokerage and investment firm CLSA has paid $2 million for 25 percent of Sri Lanka's CT Smith Holdings Ltd, a subsidiary of listed CT Holdings PLC CTHR.CM , officials said on Monday.

CLSA will distribute research products by the CT Smith while subsidiaries of both companies will work on client relationships, execution, global and local market insights and placement capability.

"Sri Lanka is one of the easiest markets for foreigners to operate in among the frontier markets in Asia," said Donald Skinner, CLSA's global chief operating officer.

However, he said liquidity in shares will be the major issue in Sri Lanka's $20 billion bourse for foreign investors to buy and exit when they want.

(Reporting by Shihar Aneez; Editing by Matt Driskill)

((shihar.aneez@thomsonreuters.com)(+94-11-232-5540)(Reuters Messaging: shihar.aneez.thomsonreuters.com@reuters.net twitter:@shiharaneez))

Keywords: SRI LANKA C T HOLDINGS/AQUISITION