Japanese investments in Govt. bonds via New World Securities top Rs. 6.5 b

By Nisthar Cassim in Tokyo

Japanese investments in Sri Lankan Government  bonds via New World Securities Ltd. have topped the Rs. 6.5 billion mark, with the latter confirming more inflows being likely given strong appetite from the Land of the Rising Sun.

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Relatively a new entrant but powered by experienced industry professionals, New World Securities, which is a trading member of the Colombo Stock Exchange, had by late June attracted over Rs. 2 billion worth of Japanese investments in to Lankan Government bonds. Since then a further Rs. 4.5 billion investments had been successfully promoted bringing the total to Rs. 6.5 billion.

“Given the feedback from our Japanese clients, going forward we see further significant scope to attract more Japanese investments into Government bonds. Amounts we have attracted reflect the growing confidence Japanese investors have in the Lankan opportunity. We are looking at a further Rs. 10 to 15 billion over the next six months,” New World Securities Director and CEO Viraj Malawana told the Daily FT.

New World Securities has a good network in Japan as its founder and Chairman is Japanese investor Takashi Igarashi who holds 27% stake in the venture. 

The breakthrough in luring Japanese investments into Sri Lankan Government debt came after New World Securities in December last year held a successful Sri Lanka Investment Promotion seminar in Tokyo in partnership with Sri Lanka Embassy in Japan as well as separate investor road shows held thereafter.

To reinforce the country marketing the Sri Lanka Investment Promotion Seminar is being repeated once again in Tokyo today.

Malawana on the sidelines of preparation for seminar told the Daily FT that Japanese investors, like those in many other advanced nations, get zero or low return on Government paper, hence opportunities in Sri Lanka especially after the end of the 30-year old conflict have prompted them to consider South Asia’s peaceful nation as an emerging market.

“The fact that Sri Lanka has never defaulted on its sovereign debt as well as the strong affinity to Sri Lanka given strong political, economic, and cultural ties, have improved the country’s profile and prospects in Japan,” he emphasised.

Most of the Japanese investments so far channelled into Government debt by New World Securities are to Treasury Bonds with tenures of over five years whilst there had been Rs. 1 billion worth of investments in Treasury Bills as well.

“Existing Japanese investors in Lankan debt are satisfied with macroeconomic policies in Sri Lanka as well as future growth prospects, hence there is strong appetite,” Malawana said, adding that support from the Central Bank, especially the Department of Public Debt, has contributed to luring Japanese investments.

According to New World Securities, the only concern prospective Japanese investors have is the cap on foreign investments, which is fixed at 12.5% of the total domestic debt. Malawana expressed hope the Central Bank would favourably consider an increase in the limit in the context of improved rating globally for prospects in investing in Sri Lanka.

The entry of Japanese investors in such growing scale to Lankan Government Bonds is a breakthrough, whilst the Central Bank is also keen to improve the diversity of the investor base of Lankan Government debt.

In fact on Tuesday Central Bank Governor Nivard Cabraal, who is due in Tokyo today to attend the IMF World Bank 2012 Annual Meetings, told the Daily FT that during the visit he hopes to meet with investment banks in Japan as part of his ongoing exercise of promoting Sri Lanka to the global financial services community.