Foreign Investor Confidence builds as demand for Sri Lankan bonds moves upwards

Official data show that foreign investor holdings of Sri Lankan rupee bonds grew by about 1.5 billion rupees to 105.52 billion rupees as of January 2020, up from 104.02 billion rupees a week earlier. Foreign investors have steadily exited since a rate cut in April 2018, and injections of liquidity in August, coupled with a so-called one-sided 'DMC' rule under an International Monetary Fund program.

Analysts have warned that the one-side DMC that tends to undermine the Sri Lankan dollar's credibility quickly pegged, leading not only to unrest among foreign investors in rupee bonds but also to early bill coverage by importers and hold-back exporters.

The rupee was relatively stable in 2019 amid weak credit, but injections of liquidity resumed after July as a policy reversed. Foreign investors held over 450 billion rupees of Sri Lankan bonds at one time.

OSL Take: The latest report launched by the Central Bank of Sri Lanka highlights an essential area of focus in the next five years. The announcement that it would create investments worth Rs. Thirty billion within the next five years is a positive sign for foreign businesses/investors exploring business/investment opportunities in Sri Lanka. They could start exploring investment opportunities in the biodiversity restoration and management sector and even present to the government of Sri Lanka projects that could implement under the program.

Sri Lanka’s economic policies, along with the continuously improving ease of doing business environment, have helped promote the country as an ideal business/investment destination in the South Asian region. Therefore, the proposed issuance of the bond would offer a perfect investment opportunity for the discerning investor.

The call by the Central Bank of Sri Lanka for private investment banks has opened up an investment opportunity for foreign businesses/investors. Sri Lanka’s economic indicators show the country is heading in the right path to development, and the government’s development agenda would also help in this aspect. Therefore, foreign businesses/investors could invest in Sri Lanka without having any doubts. The move by the Colombo Stock Exchange and the South Pacific Stock Exchange to reach a deal to collaborate on market development would serve as a confidence booster for foreign businesses/investors to invest in Sri Lankan stocks.

The Sri Lankan stock exchange has been engaged in continuous improvement programmes and thereby further developed the ease of doing business environment in Sri Lanka. Therefore, given the country’s growing economy and progressive development work, the Colombo Stock Exchange would provide many investment opportunities to the discerning foreign investor.

 VBS/AT/20200303/Z_TB6