Retail investors dominate
No major foreign outflow:
Sanjeevi JAYASURIYA
Local retail investors are dominating the capital market now as
foreign investors are seeking developed markets for investment
opportunities.
“There has been a net outflow of foreign investment from the CSE in
2010 and also in the first two months of 2011. However, this has not
transformed into a significant net outflow of investments from the
country, Colombo Stock Exchange Chairman Nihal Fonseka told Daily News
Business.
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Nihal
Fonseka |
Ravi
Abeysuriya |
“The net outflow is because as a wholesome foreign investors have
invested in private placements or switched to other assets such as fixed
income securities which is now open to them for investment,” he said.
“Condominium properties has not seen sharp increases in the last
couple of years. One of the biggest drawbacks that foreigners refer to
is the low level of liquidity of the market as a whole and many of the
shares that are traded. Foreigners have the option of investing in many
markets and they will evaluate from time to time as to which markets are
likely to give greater future value,” Fonseka said.
“Our market has gone up about four times in value in two years and
they may naturally want to lock in some profits and switch to other
assets in Sri Lanka or elsewhere where they expect a greater upside.
They will come back as new sizable issues come to the market and they
can get reasonable quantities of shares,” he said.
Foreign investors are moving away from emerging markets which are
currently richly priced to developed markets such as US, UK and Europe
that are showing signs of coming out of the recession. This has nothing
to do with the Sri Lankan market in particular, Heraymila Securities
Limited (HSL) Chief Executive Officer Ravi Abeysuriya told Daily New
Business.
Bargain hunters are swarming to Japan because of the recent drop in
the Nikkei due to the geo-socio-economic situation unfolding in Japan.
Foreign investors are also afraid of global inflation and high interest
rates, as interest rates have been moving up in key emerging markets in
Asia such as China and India as well as in Latin America, he said.
“The reason for foreign investors to look outside Sri Lanka is
because our market is richly priced compared to other regional markets
at present”.
The net foreign outflows are largely due to developed markets being
more attractive and investors seeing more upside in those markets.
“When it comes to local retail investors, they have a limited choice
- invest in low yielding deposits or take some risk and invest in the
capital market”.
“This is why our market is dominated by retail investors at present,”
Abeysuriya said.
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