Sri Lankan chamber holds discussion on investing in Asia in the ‘new normal’
The International Chamber of Commerce (ICC), Sri Lanka in association with the Daily FT, Boston Consulting Group (BCG) and CIMA had recently organised a discussion on ‘Investing in Asia in the New Normal’ to discuss the changing investment climate in the world following the Covid 19 pandemic and the new opportunities emerging in Asia.
ICC Chairman, MasterCard Worldwide Executive Chairman Ajay Banga has been quoted as saying, “Digitisation has become a common word during the pandemic with digital now getting ingrained in the new normal.”
However, he has further noted that this widespread adoption of digitisation can also lead to a digital divide where Small and Medium Enterprises that do not have access to the relevant digital infrastructure might witness a slower recovery compared to their more digitally enabled counterparts.
He has reportedly noted, “Asia remains mission critical as it is home to nearly 50% of the world’s population and has fairly economically sound markets. These are markets that the world ignores at its own peril.”
According to BCG Managing Director and Partner Mayank Jha, “The investment mix in Asia today is very different from what it was five years ago. There has been a clear fall in cash holdings and a shift towards equities.”
In India, the share of financial savings has been increasing over the years with mutual funds, provident funds, and equities showing the highest growth. However, when it comes to mutual fund penetration, many Asian countries lag their global counterparts, the Daily FT reported.
For example, mutual fund assets as a percentage of GDP are at 120% in the United States and 81% in France. The same metric for India, China and Sri Lanka is 13%, 13%, and 2%, respectively, which suggests that a lot more needing to be done to develop Asia’s investment markets.
“This ballooning of sovereign debt was inevitable,” Former Governor of the Central Bank of Sri Lanka Dr. Indrajit Coomaraswamy has been quoted as saying.
Meanwhile, NP Capital Ltd. Chairman Nimal Perera has stated, “For traditional fixed-income investors, a low-interest rate environment means that they now need to look at other investment avenues. Equities is an option that is being actively considered.”
AIA Group Market Economist, Group Investment, Herve Lievore has reportedly said, “World-wide, we are in a low yield environment, and, while there might be potential for slightly higher nominal yields, the chances remain minuscule. In such an environment, technology can offer new avenues for investments.” He has further said that while it might be prudent to expect some drawdowns, these are likely to be short-lived.
When it comes to discussing new investment avenues and trends, Eric Roeder, UNESCAP Asia Pacific, has been quoted as saying that impact investing, especially via Environment, Social, and Governance (ESG) filters, is now becoming increasingly popular. “Younger investors are particularly interested in investing in companies that do not pose a greater risk to the environment,” he has added.
Addressing the forum, Colombo Stock Exchange Chairman Dumith Fernando has said that in the long-term they are likely to shift focus to impact returns. “The traditional efficient market theory is two dimensional as it expresses the relationship between risk and return. However, impact adds a third dimension, one that needs to be quantified in a common language,” Fernando has added.
DCS Singapore Ltd. CEO Saman Wimalaratne has reportedly observed the changes in investment trends and expects them to continue in this decade as well.
Post Covid economic development has placed much focus on the potential opportunities in the Asian region. It is in this backdrop that Sri Lanka becoming a hotspot for business/investment opportunities as the country is fast becoming a business hub in the South Asian region given it’s geographical positioning in the Indian ocean. The many trade agreements as well as trade concessions enjoyed by the country have further boosted Sri Lanka’s attractiveness as a business/investment destination. Given Sri Lanka’s bilateral and trade ties with South Asian countries, foreign businesses/investors could look at setting up base in Sri Lanka to engage with other countries in the region.
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