Guardian Fund Management Ltd., which oversees Sri Lanka’s largest listed investment trust, is betting on bank, retail, leisure and construction stocks on optimism the end of the island’s 26-year civil war will bolster economic growth and corporate profits.
The Colombo All-Share Index has more than tripled since the war ended in May 2009 as the economy’s recovery spurred a near ten-fold increase in daily trading volumes.
The gauge rose 96 percent last year, the second-biggest gainer among 90 global indexes tracked by Bloomberg after Mongolia’s MSE Top 20 Index. Companies on the Sri Lankan measure are valued at a price earnings multiple of 22.6 times, Asia’s second-most expensive after New Zealand’s NZX 50 Index.
“With real economic growth rates expected to be in the eight percent range, the whole range of economic activity would be driven by the financial services sector,” said Guardian Chief Executive Officer Ruvini Fernando. Corporate earnings “should show significant improvement, particularly in the tourism and construction sectors, as well as in sectors related to consumer spending like retail and consumer durables,” Fernando said.
Guardian’s $ 330 million equity investment trust portfolio gained 128 percent in the nine months ended December 31, compared with a 77 percent rise in the All-Share.
Colombo-based Guardian is part of Sri Lankan diversified company Carson Cumberbatch and Co., which has interests in breweries, real estate and oil palm plantations, among others.Guardian doesn’t favour stocks “subject to volatility” such as Sri Lankan plantation companies, which are sensitive to weather, commodity prices and wage increases, Ruvini wrote in an e-mailed reply to questions.
She said recent flooding in the country hasn’t spurred any change in her investment stance.
Telecommunications stocks are also less attractive due to the “high level of penetration and intense industry competition,” she said. John Keells Holdings Plc, Aitken Spence Hotel Holdings Plc., Commercial Bank of Ceylon Plc, Cargills Ceylon Plc and Royal Ceramics Lanka Plc are among Guardian’s top holdings in its U.S. dollar-denominated Sri Lanka Fund.
Shares of Keells rose 67 percent in 2010, while Aitken Spence Hotels advanced 177 percent. Sri Lanka Telecom Plc, the island’s biggest fixed-line phone company, lagged behind with a nine percent climb.
source - www.dailynews.lk
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