US investors ignore politics; Own over 50% of Lankan Govt. debt

Monday, 6 December 2010 00:47 - - {{hitsCtrl.values.hits}}

By Deepal V. Perera

Despite the upheaval in diplomatic relations between Sri Lanka and USA due to ‘Diplomatic Cable Leaks’ by Wikileaks, the US remains Sri Lanka’s number one investor due to the latter’s investments in Government debt, amounting to over US$1 billion.

According to the Central Bank, Sri Lankan Government debt comprising Treasury bonds, Treasury bills and sovereign bonds stands at US$ 2 billion, out of which over 50%, amounting to over US$ 1 billion, has been invested by parties based in the USA.

A Central Bank official told Daily FT that these investments had come to Sri Lanka via US-based private investors, numbering over 300. He also said that Sri Lanka managed to attract US investments in bonds due to the bank’s initiative in conducting promotional activities in the USA by means of seminars and road shows.

In early September this year, when the Central Bank launched the 10-year US$ 1 billion Sovereign Bond, global investors – mainly from USA – responded positively and the issue was closed within 14 hours, attracting excess demand by US$ 6 billion.

The Central Bank noted that in September Sri Lanka finalised a US$ 1 billion 10 year Sovereign Bond issue with a coupon rate of 6.25% and it was the third international sovereign bond offering, following issues in 2007 and 2009.

The positive response clearly underscored the high global investor confidence based on the recent progress and future prospects in the Sri Lankan economy, following the end of the conflict. At the issue, orders were received from 362 investors globally.

By geographic distribution, 52.5% of the bonds were allocated to investors in the United States, 25% to investors in Europe and 22.5% to investors in Asia. By investor type, 85% of the bonds were allocated to fund and asset managers and the balance to pension funds, insurance companies and banks.

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