Flash Report / Sri Lanka

Sri Lanka Investor Forum - Day 1 Key Takeaways

  • President’s keynote address
  • Charting Sri Lanka’s economic trajectory – panel discussion
  • The Colombo Stock Exchange – towards a quantum leap

Day 1 set the stage, discussing the policy framework for Sri Lanka and the growth trajectory for 2021 and beyond. Sri Lanka’s capital and debt markets, together with a deep dive into the legal framework for FDIs were also part of discussion points for the day. The success of investing in Sri Lanka were further highlighted with a discussion with many International testimonial speakers.

President’s keynote address

  • The Government plans to increase national output from its current level to USD 8,000 GDP/capita by 2030

  • Commitment of maintaining policy stability and consistency amidst a stable macroeconomic environment was highlighted by the President

  • In terms of the Port City, the Government’s vision is to make the Port City a key service hub for one of the fastest growing regions in the world

  • Special legislations are already in place to ensure special incentives and exemptions for businesses with a wide economic impact

  • Building a strong organic culture is a key priority at this juncture. Investments into value adding businesses which can increase the export potential are a key expectation by the government

Charting Sri Lanka’s economic trajectory – panel discussion

  • Panelists identified key themes in SL as 1) ongoing vaccination drive, 2) lower export/GDP compared to historical average, 3) Debt/GDP position and 4) pivotal role the SME sector plays in the country

  • The need for better predictability in policy was highlighted. This was an area policymakers addressed and assured of investor focused policies going forward

  • The need to tackle core issues like high debt/GDP and policy consistency to harness true opportunities in SL was a key theme in the discussion

  • Domestic revenue mobilization, policy changes to improve export earnings/GDP, tole of imports and widening the current export categories were key areas for improvement which were highlighted by the panelists

  • BCG forecasts 4.0% - 6.0% GDP growth for 2021, in-line with CBSL. BCG’s forecast is driven by higher domestic demand, FDIs into Port City and Hambantota and SL’s comparatively better human capital skills

  • CBSL expects reserves to cover 3.0 months of imports by end 2020, having confirmed sources of funding in the pipeline

  • The government plans to restructure underutilized state-run properties and list these, through Selendiva Leisure, a majority state owned entities

  • In conclusion, the need to strengthen the market environment for conducive investments, stable rates and exchange rate were identified as key focus areas

The Colombo Stock Exchange – towards a quantum leap

  • The CSE holds a market capitalization of USD 18bn which is approximately 23% of GDP showing significant upside

  • CSE valuations on a relative basis are very low whereas the earnings outlook is much stronger

  • Performance of the market has been strong relative to emerging and frontier markets; Market is up 60% since the pandemic and YTD 8.3% showing robust momentum

  • Tax environment is favourable; zero taxes on capital gains made in the share market and zero taxes on dividends for foreign investors only

  • The CSE hopes to complete the work on delivery vs. payments in 2021 and the pipeline includes repo trading on debt, multi-currency listings for local companies and introducing gold-based products

  • 2022 incudes rolling out mortgage-backed securities, stock borrow-lending and overnight short selling. Further, the CSE is working on developing a central counter party (CCP) system for the market

  • Plans to launch of ETFs and structured warrants is on the cards for 2023

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