Sri Lanka’s financial analysts advocate for increased exposure to equity investments
A recent Chartered Financial Analysts (CFA) webinar held in Sri Lanka recently has reportedly noted that corporate earnings of listed companies have grown by around 30% in the third quarter (Nov-Dec 2020) of this financial year and panelists have advocated for increased exposure to equity investments given the current policy dynamics.
The growth in corporate earnings has been driven by low-interest rates and changes in the way the economy functions while import restrictions have caused a considerable rise in the activity of local players in the construction materials sector, local media reports have stated.
Logistics providers have seen considerable growth in revenue and profitability as freight rates have increased exponentially and with the advent of work from home, there has been a boom in refurbishment and the purchase of consumer electronics, the state owned Daily News reported.
These issues were discussed last week at the CFA webinar titled, ‘Will Sri Lanka’s Markets Bounce Back? Or was super January, a flash in the pan?’
Director/CEO Softlogic Invest Niloo Jayatilake has been of the view that investors would be better served by equity investments than fixed-income alternatives.
Jayatilake has been quoted as saying, “The backbone of the whole thing is the low-interest rates. In the history of the stock market, I haven’t seen daily turnover consistently going over Rs 10 billion. It showed that there was money out there. With the money printing and the low-interest rates, there was all this money chasing equity. With the clear government mandate, people were waiting for a catalyst to come in to rejuvenate the market and that is what happened in January.”
Principal NDB Zephyr Kanishka Perera has said, “Low-interest rates will continue for another couple of years at least.” Perera acknowledged the meteoric rise of Expolanka. He said, “Freight rates have increased substantially. What used to cost US$ 1,200 is now costing about US$ 4,000.”
Perera has been bullish about continued growth in corporate earnings. He has noted, “Some part of it may be sustainable over the long term.”
Chief Strategist Capital Alliance Udeeshan Jonas has said, “Companies like Singer did really well. There was a lot of demand for work-from-home equipment.”
Jonas has further stated that the banking sector has significantly underperformed the market. He has said, “We saw 35% of banks’ loan books being classified as debt moratoriums with payment delayed. We will see a lot of it end on March 31.”
The call for increased exposure to equity investment is indicative of the economic expansion in Sri Lanka. The country’s economy has shown great resilience to external and internal challenges through the years and is once again on the path to becoming a business hub in the South Asia following the challenges posed by the global Covid 19 pandemic. Foreign businesses/investors should therefore explore business/investment opportunities in Sri Lanka.
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