Net foreign inflows top Rs. 20b mark; shift towards 3-year high

Further exposing locals’ lack of confidence, foreign net inflows into the Colombo Stock Exchange have topped the Rs. 20 billion mark as of Friday, prompting analysts to forecast that if the trend continues 2017 may end with a record or even challenge the all-time high levels.

Total net foreign inflows into both the primary and secondary market amounted to Rs. 20.3 billion year to date compared to Rs. 2.28 billion for the entirety of 2016 and Rs. 383.5 million (in the secondary market). 

The continued bullish sentiment from foreign investors is likely within the next few weeks or months to enable the CSE to eclipse the 2014 total net inflows of Rs. 21.7 billion. Analysts said that if factors driving foreign interest improve further 2017 may even challenge CSE’s all-time record inflow of Rs. 38.6 billion achieved in bullish 2012 since the current year has nearly six more months. 

In 2013 net inflows amounted to Rs. 22.7 billion. Since 2012, only 2015 saw a net foreign outflow amounting to Rs. 5.3 billion.

The market’s Price Earnings Ratio remains attractive at 11.49 times as against 12.37 times in 2016 and 17.98 times in 2015 whilst in 2014 it was 19.66 times.  “The current PER suggests there is room for buying and foreigners have been more bullish on selected stocks. It is disappointing locals continued a ‘wait and see’ attitude as well as a lack of overall confidence on future upside of equities,” analysts noted. 

For example, foreign investors have remained net buyers for the 19th consecutive week since February 2017, according to Acuity Stockbrokers.

Year to date the Colombo stock market is up by over 7% in terms of the All Share Price Index and nearly 10% in terms of S&P SL 20 Index. 

The gains are impressive given the fact that the ASI had declined by 9.7% and 5.5% respectively in 2016 and 2015 whilst S&P SL was down 3.6% and 11.3%.