‘Investor interest will improve if ‘war risk’ label is removed’
Investor interest will improve gradually in Sri Lanka if the “war
risk” label is removed. If other countries remove the risk premium to
the levels of Thailand, Indonesia and India it will help Sri Lanka to
attract more investors, said Managing Director Ceylon Asset Management
“Despite a continued “terrorism risk” many analysts also expect Sri
Lankan legislators to enact a power sharing proposal offering extensive
devolution to the provinces during the year. This will help undermine
support for militancy and create the conditions for long-term capital to
enter the Colombo Stock Exchange (CSE),” he told Daily News Business.
According to Fernando, the Stock Market can free itself from the ‘war
risk’ and perform normally as other Asian markets during the latter part
The current decline of global equity markets will create a drag on
the CSE as foreign investors’ cash out profits to remit funds back home
to cover losses and urgent bank commitments. Further, local exporters
will also experience declining profitability during the year, he said.
“If Sri Lanka can manage the security risk effectively and develop
national infrastructure, we have the opportunity to emerge as a unique
success story for investors, while the entire world experiences a
decline,” Fernando said.
He said the economy has several developed, world-class industries
such as Tea, Tourism, Apparel, Ports and Logistics in addition to a
mature banking sector and an agricultural base lead by the plantation
Except for the apparel sector, all other sectors are well represented
on the CSE. The Sri Lankan equity market has bolted off the blocks to
become the Top performing equity market in the world, as at January 26,
with a performance of 20.96% (ASPI). The Milanka Price Index has grown
24.01%. Chile’s IPSA Stock Market Select Index follows with 9.83% and
the Shanghai SE Composite Index (China) is third with 9.33%.
The recent initiatives to introduce derivatives by the CSE and the
SEC are indeed well timed, for Sri Lanka.
It will create a platform for several new products and risk
management tools to enable Sri Lankan equity markets to develop rapidly.
Fernando said in the longer term, Sri Lanka has the opportunity to
emerge as a regional shipping, leisure and investment hub for South
Asia, as the only politically neutral country in a divided region.
Investment invariably contains risk but in the new reality of Sri
Lanka, the long-term risk of not being invested in the Stock Market is
greater than short-term risk of volatility for an equity investor.
Sri Lanka has all the ingredients of a compelling investment prospect
this year, he said.
Ceylon Asset Management Co. Ltd, manages two funds (Unit Trusts),
licensed by the Securities and Exchange Commission of Sri Lanka (SEC).