Valuations at Colombo stock market are attractive: Moody’s subsidiary Copal Amba
Friday, 6 June 2014 00:40
Moody’s subsidiary Copal Amba Sri Lanka Country Head Chanakya Dissanayake enlightened participants at the Investor Forum in London about the prospects for investing in Lankan equities.
He said valuations at the Colombo stock market were attractive on a regional perspective. “Colombo’s All Share Index is still trading at a low valuation as against Colombo’s peers. I would say valuations are still subdued despite stronger growth outlook,” he added.
Dissanayake also said that foreign investors have an excellent diversification opportunity in Sri Lanka given the low correlation to global events. It was revealed that the QE 3 tapering led sell off had a minimal impact on the CSE’s All Share Index compared to BRIC and other emerging markets. The relevance of continued net foreign inflows was also emphasised.
On the macro side, Dissanayake said exchange rate stability was a strong positive for foreign investors as Sri Lankan currency fluctuation had been the lowest among regional peers over the past 12 months.
Sri Lanka has also seen significant improvement in the trade deficit due to the recovery in key export markets. Another redeeming feature is the improving Balance of Payments and strong expansion in reserves. Furthermore, Foreign Direct Investments have almost tripled over the past three years, with infrastructure accounting for the highest share.
Dissanayake said low inflation and lower interest rate regime were ideal catalysts for an equity re-rating in Sri Lanka.
With regard to attractive sectors which foreign investors can focus on, he said banking and finance as well as conglomerates were attractive. The latter provide exposure to key growth sectors in the economy.
In terms of general risks on Sri Lanka, Dissanayake said reversal of the global economic growth trajectory especially in key export markets was one. Another was significant energy price shocks that could reverse the Government’s ability to maintain turnaround in CEB and CPC through market price adjustments. Unfavourable weather patterns could also lead to food price inflation and increase the cost of power generation.