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Net foreign outflow tops Rs. 10 b

Aug 23, 2011 4:34:52 PM - www.ft.lk

Net foreign outflow from the Colombo Bourse has now topped the Rs. 10 billion mark on the back of Rs. 26.3 billion in 2010 prompting analysts to call for urgent and aggressive promotion overseas given Sri Lanka’s positive post-war growth opportunity.

It was pointed out that except for two events organised by those other than the CSE or SEC in June, the Colombo stock market as a high potential investment location hadn’t been effectively or aggressively marketed globally since 2007 i.e. nearly 4 years ago. The last Colombo Stock Exchange (CSE) driven exercise was a road show in Singapore in 2007 whilst the same venue was picked by a SEC-initiated event in late 2009. The CSE road show in Singapore was preceded by two successful exercises in Dubai and Abu Dhabi followed by Australia and New Zealand in 2005.
These initiatives also targeted expatriate Sri Lankans who have wealth for investments.
Analysts lamented that since the end of the war two years ago, not a single comprehensive road show had been held overseas except for a Heraymila Investments/Securities organised event in Dubai and a London Stock Exchange arranged conference in London in June. However for the latter event there was involvement by officials from the SEC and CSE.
“Based on macro-economic fundamentals and high 8% growth it is fair to describe that Sri Lanka has the best investment story to tell the world. We saw how successful results can be when the US$ 1 billion Sovereign Bond issue was marketed via road shows despite gloom and doom in the rest of the world,” analysts pointed out. The Government’s Bond Issue drew heavy appetite with bids worth US$ 7.5 billion received. This was largely attributed to effective selling on the part of the Central Bank and lead managers to the issue as well as upgraded rating by agencies.
“Colombo Bourse has been Asia’s best performing market for two and a half years running yet lack of organised marketing of Colombo among overseas funds has led to the country and its growth story missing in the radar of fund managers,” analysts opined. With 125% return in 2009 and 96% in 2010, Colombo apart from being Asia’s best was world’s second best and the high returns also made Colombo the most consistent best performer.  Even midst sharp correction this year and the bearish run, Colombo has remained Asia’s second best and seventh in global ranking until recently.
Though there has been a concerted effort by either the CSE or the SEC, individually some broking firms have done private road shows both locally and abroad showcasing some of their select clients. Among those who have done such exercises are John Keells Stock Brokers in partnership with Credit Suisse, CT Smith Stockbrokers, IIFL Securities Ceylon Ltd., TKS Securities and Capital Alliance.
Industry sources said that aggressive marketing of Colombo is important since medium to long term foreign investors are critical for the sustenance of the Bourse as well as take up some of the future and big ticket new listings.
Some of those who have conducted or participated in overseas exercises emphasised that when presented with Sri Lanka’s growth story there is spontaneous interest by foreign fund managers but the small size of the market as well as low liquidity issues prevent active investments on their part.
The few of the foreign investments that have taken place so far include only some of the large cap and liquid blue chips and this too because of wanting to have some exposure to South Asian markets.
“In a critical analysis Colombo (Bourse) needs to scale up in tandem with aggressive promotion overseas,” analysts pointed out. Others also said that greater interests from Lankan expatriates can be generated if the CSE is more proactive and supportive of those who are keen to promote investing in equities back home.
“The pro-Sri Lankan Diaspora can be an immediate conduit as they are quick to realise the potential and there is no hard selling required,” they added.