CSE Chief tells Singapore investor forum Sri Lanka will bounce back stronger

CSE Chairman Ray Abeywardena

Colombo Stock Exchange (CSE) Chairman Ray Abeywardena this week said Sri Lanka’s equity markets post Easter Sunday terror attacks will bounce back stronger than it was before.

He made this optimistic view during his address at the Invest Sri Lanka forum in Singapore attended by nearly 100 fund managers and investors.  It was organised by the CSE and the Securities and Exchange Commission.

“As we continue with our effort to create positive outcomes for the Sri Lankan capital market, it will not be long before we bounce back, stronger than we were before,” Abeywardena said. 

He said the forum aimed at offering a perspective on why investors from around the world, especially those with an investment interest in Sri Lanka, should remain optimistic about the country’s future. 

“Our observation so far is that foreign investors have read this risk perhaps more factually and objectively. We have continued to see buying interest in certain sectors by global funds,” the CSE Chairman revealed, adding that since the 23 April, the market has witnessed a net foreign inflow of 1.7 billion. 

“This is a clear indication of the confidence that foreign investors have in our market, that they are cognizant of the valuations and the tremendous upside the market affords and are prepared to invest now to maximise their returns,” Abeywardena said. 

“We have also witnessed an overwhelming level of support from the rest of the world who have reaffirmed their solidarity with Sri Lanka during the past month, and more importantly, an effort to continue to work with Sri Lanka on socio-economic development,” the CSE Chairman added.

Following is the full text of Abyewardena’s address. 

‘Invest Sri Lanka,’ is a series of events organised by the Colombo Stock Exchange and the Securities and Exchange Commission of Sri Lanka, to promote foreign investment in the Sri Lankan Stock Market, and to showcase investment opportunities in leading listed companies in Sri Lanka.

This is the third occasion that we are hosting an ‘Invest Sri Lanka’ forum in Singapore, following very successful forums in 2014 and 2018.

It is exactly a month to date that heinous crimes took place in Sri Lanka, shaking a nation that had seen almost 10 years of peace following 30 years of civil strife. It is in such a backdrop that we decided to go ahead with today’s program and not postpone this event that we had planned two months ago. I must place on record my deep appreciation to the Hon. Minister Eran Wickramaratne, the Central Bank Governor Dr. Indrajit Coomaraswamy, the SEC Chairman Ranel Wijesinha, the heads of the listed firms and you, our valued investors, for not even for a moment backing down on our initial plans of having this forum today, where we want the world at large to take cognizance that Sri Lanka, which has displayed ample resilience throughout 30 years of war, once again wishes to send out a clear message that, though the initial shock was indeed a setback for the equity market, it will not be long before we bounce back, stronger than we were before.

As we continue with our effort to create positive outcomes for the Sri Lankan capital market through today’s event, our hearts and thoughts go out to those who are grieving the loss of their loved ones in Sri Lanka. 

We are here today to offer you all a perspective on why we believe that investors from around the world, especially those with an investment interest in Sri Lanka, should remain optimistic about our country’s future. 

The response by the Sri Lankan Government and the Security Forces to the terrorist attacks have been commendable and with immediate action taken to destroy the terrorist cells and avoid further incidents

Since the turn of the new millennium, markets and investors around the world have dealt with the realities and impacts of global terrorism. Terrorist attacks in France, Belgium, Bangladesh, Bali, the Madrid train bombings and several attacks in Kenya over the last five years have had their own impact on volatility in their respective markets. Many researches done on the impact on domestic and global financial systems as a result of terrorist acts indicate that markets in affected countries have bounced back sooner than expected. In fact, the immediate aftermath of these events have offered investors excellent investment opportunities, if entered into at the right time. 

During our research on similar terrorism-related incidents in the past and their impact, we have come to realise that economies and markets affected by acts of terrorism have bounced back fairly soon after the incident. 

Our observation so far is that foreign investors have read this risk perhaps more factually and objectively. We have continued to see buying interest in certain sectors by global funds.

We have also witnessed an overwhelming level of support from the rest of the world who have reaffirmed their solidarity with Sri Lanka during the past month, and more importantly, an effort to continue to work with Sri Lanka on socio-economic development. 

Some of the largest foreign governments and corporations during the past month have pledged their support for Sri Lanka. The Millennium Challenge Corporation of the US Government recently pledged development aid to Sri Lanka and just last week, the Chinese Government granted funds towards strengthening national security in the country.  The IMF program, as you will hear later on, is back on track with the resumption of the Extended Fund Facility and the World Bank extended more funds to improve local services. The SEC Chairman, the CEO of the CSE and I experienced this outreach and solidarity in London week before last, when we signed an MOU to list Sovereign Debt on the LSE and the CSE. It was quite apparent to us, that the rest of the world is rooting for Sri Lanka to get back and up stronger than before. 

Since 23 April 2019, the market has witnessed a net foreign inflow of 1.7 billion. This is a clear indication of the confidence that foreign investors have in our market, that they are cognizant of the valuations and the tremendous upside the market affords and are prepared to invest now to maximise their returns.

The CSE at the moment trades at a discount compared to most frontier markets at a market PE of 8.28 times and a Price to Book Value at 1.02 times. Whereas global equity markets remain reasonably expensive, CSE offers value opportunities to generate attractive returns over the long-term, complemented by the growth potential of our listed companies. 

In addition, Sri Lanka as a market has traditionally remained more local in character, with a low correlation with developed, and at times, peer frontier markets. Therefore, as the correlation between Emerging and Developed Market securities has converged in recent years, presenting new diversification challenges to institutional investors, the Sri Lankan market offers a truly unique value proposition. 

Furthermore, our regulation and market infrastructure are of internationally accepted standards, with a well-defined regulatory framework governed by a sound corporate disclosure policy for listed companies, which follows internationally accepted IFRS financial reporting standards. Our trading platform is state-of-the-art, supported by the London Stock Exchange Group.

Throughout today, the speakers will enlighten you with greater details on the opportunities that avail you in the Sri Lankan stock market, and on how the Sri Lankan economy will remain resilient despite the set- backs of the last month. We have the participation on this road show of 11 listed firms and I am informed that each of them have a plethora of meetings lined up throughout the day. I wish to thank the CEOs and representatives of these organisations for their unwavering support in ensuring that this event is held today.

I firmly believe that the recent events will only be a temporary setback and will not overshadow the socio-economic progress that has been made in recent years and the future potential of Sri Lanka. I hope that by the end of the event today, you too would have reason to share in this belief.

Finally, your presence here today is a strength to us Sri Lankans and I am grateful to you for taking the time to be with us this morning. I thank our event partners for their endorsement of the ‘Invest Sri Lanka’ initiative and for joining us in this effort to take the message of Sri Lankan resilience to investors, not only in Singapore, but the rest of the world.