Saturday Aug 23, 2025
Saturday Aug 23, 2025
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| Asia Frontier Capital Fund Manager Ruchir Desai |
Asia Frontier Capital Fund Manager Ruchir Desai last week said that the fund had increased its allocation in Sri Lanka’s equities market, citing attractive valuations, stronger-than-expected economic growth, and an improved outlook for political stability.
The fund has invested in Sri Lanka since 2013-14 and has made the country its second-biggest holding, Desai said, speaking at the Invest Sri Lanka Forum in Singapore last week.
“Last year, GDP growth was 5%, the International Monetary Fund (IMF) was expecting about 3%, and in the first quarter of this year, it was 4.8%. So, all the indicators have been quite positive for the country. That has been one of the driving factors for us to increase allocation to Sri Lanka. But besides that, I think just valuations were very attractive for the last few years because of what happened from a macro and political perspective,” said Desai.
He highlighted that Sri Lanka endured multiple shocks over the past five years, ranging from the Constitutional crisis in 2018 and the Easter Sunday attacks in 2019 to the pandemic in 2020 and the political and economic crisis in 2022.
“So, even though there’s been decent economic growth for the last 12 months, 2025 will be the first year of a full economic recovery with political stability and economic stability. So, if you take a longer-term view, I think the next three to four years should be pretty good for Sri Lanka,” he said.
Desai noted that the Colombo Stock Exchange had seen a significant re-rating since bottoming out during the crisis. Banking and consumption are two areas the fund expects to benefit most from the recovery.
“And as the economy started recovering, you saw loan growth recover. And I think the banking sector in general has still some way to run,” he said.
He added that rising incomes and recovery in domestic demand would support consumer-oriented companies.
“So, if Sri Lanka does 4-4.5% GDP growth in the next three or four years, you’re going to see domestic consumption come back in a pretty strong way, which was quite subdued for the last few years. So I think many companies in the consumption-focused sectors look quite interesting from a listed equity perspective at this point in time,” he said.
