Capital Markets
From The Report: Sri Lanka 2019
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After a positive second half of 2017 Sri Lanka’s capital markets experienced considerable headwinds in 2018, with a variety of external and internal factors behind the buffeting. The impacts of macroeconomic issues, increasing competition in terms of investment options, political uncertainty, turbulence in global energy prices and moves by the US Federal Reserve could be seen in both equity and bond markets. As 2019 got under way foreign outflows continued, while bond spreads widened – both signs of challenges ahead. This left many key companies undervalued and demand for long-term bonds high, as investors looked for more secure havens in the country’s debt market. As the year progresses, many see prospects for a turnaround, particularly if moves to expand and deepen the market begin to take hold, and the overall economy grows within the government’s structural reform agenda. This chapter contains an interview with Dilshan Wirasekara, CEO, First Capital Holdings.

Articles from this Chapter

Overview

Riding the tides: External and internal factors lead to caution and opportunities
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After a positive second half in 2017 Sri Lanka’s capital markets experienced considerable headwinds in 2018, with a variety of external and internal factors behind the buffeting. The impacts of macroeconomic issues, increasing competition in terms of investment options, political uncertainty, turbulence in global energy prices and moves by the US Federal Reserve could be seen in both equity and bond markets. As 2019 got under way foreign outflows continued, while bond spreads widened –…

Interview

Road to recovery: Dilshan Wirasekara, CEO, First Capital Holdings, on mitigating the risks of volatility and securing investment
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Interview:Dilshan Wirasekara How has domestic volatility impacted capital flows, and how can market players mitigate this risk? DILSHAN WIRASEKARA: Sri Lanka has experienced significant shifts in interest rates and exchange rates, in addition to high levels of foreign debt and a debt-to-GDP ratio of almost 80% that led to major volatility in the domestic market. These conditions in 2018 were unfavourable for raising sovereign debt overseas, as rating agencies downgraded the country’s credit…

Analysis

At a crossroads: Amid state-led economic and public investment reforms, market returns look positive
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Sri Lanka’s third quarter 2018 GDP growth dipped to a record eight-year low of 2.9% – compared to 3.3% in the third quarter of 2017 and 3.7% in the second quarter of 2018 – leading to a cumulative expansion of 3.3% for the first nine months of 2018, which was expected to continue to the end of the year. The struggle was primarily evident in the industrial segment, which rose by a mere 1.8% year-on-year (y-o-y), while over the first nine months of 2018 the agriculture and service sectors…

Analysis

Secure investments: Despite a challenging environment for the market, bond yields are expected to be bullish over the medium term
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Ahead of a $1bn sovereign bond maturing in January 2019, Sri Lanka went through a major political crisis during the fourth quarter of 2018, which led to an extensive legal battle. Despite economic data indicating no serious threat to inflation and private sector credit, the heavy liquidity shortage in the market and the uncertain political environment resulted in a spike in domestic yields by 200-250 basis points (bps). Credit ratings agencies Moody’s, Fitch and Standard & Poor’s…

Overview

Indexed growth: Inclusion in global indices often results in a greater flow of funds to capital markets, but it is just one aspect of the economic picture
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The period of easily raising funds from abroad seems to be coming to an end for emerging markets around the world. Amid rising interest rates in the US and increased competition for capital flows, portfolio managers are becoming more selective with where they invest. One way for developing nations to ensure that their financial markets can continue to attract foreign funds and remain sustainably liquid is by being included in well-regarded benchmark indices. In addition to drawing in fund managers, inclusion on such indices requires meeting specific standards that show that the participating countries apply certain regulations and best…

Overview

Indexed growth: Inclusion in global indices often results in a greater flow of funds to capital markets, but it is just one aspect of the economic picture
OBG
plus

The period of easily raising funds from abroad seems to be coming to an end for emerging markets around the world. Amid rising interest rates in the US and increased competition for capital flows, portfolio managers are becoming more selective with where they invest. One way for developing nations to ensure that their financial markets can continue to attract foreign funds and remain sustainably liquid is by being included in well-regarded benchmark indices. In addition to drawing in fund managers, inclusion on such indices requires meeting specific standards that show that the participating countries apply certain regulations and best…