Sanjeevi JAYASURIYA
Local retail investors are dominating the capital market now as foreign investors are seeking developed markets for investment opportunities.
“There has been a net outflow of foreign investment from the CSE in 2010 and also in the first two months of 2011. However, this has not transformed into a significant net outflow of investments from the country, Colombo Stock Exchange Chairman Nihal Fonseka told Daily News Business.
“The net outflow is because as a wholesome foreign investors have invested in private placements or switched to other assets such as fixed income securities which is now open to them for investment,” he said.
“Condominium properties has not seen sharp increases in the last couple of years. One of the biggest drawbacks that foreigners refer to is the low level of liquidity of the market as a whole and many of the shares that are traded. Foreigners have the option of investing in many markets and they will evaluate from time to time as to which markets are likely to give greater future value,” Fonseka said.
“Our market has gone up about four times in value in two years and they may naturally want to lock in some profits and switch to other assets in Sri Lanka or elsewhere where they expect a greater upside. They will come back as new sizable issues come to the market and they can get reasonable quantities of shares,” he said.
Foreign investors are moving away from emerging markets which are currently richly priced to developed markets such as US, UK and Europe that are showing signs of coming out of the recession. This has nothing to do with the Sri Lankan market in particular, Heraymila Securities Limited (HSL) Chief Executive Officer Ravi Abeysuriya told Daily New Business.
Bargain hunters are swarming to Japan because of the recent drop in the Nikkei due to the geo-socio-economic situation unfolding in Japan. Foreign investors are also afraid of global inflation and high interest rates, as interest rates have been moving up in key emerging markets in Asia such as China and India as well as in Latin America, he said.
“The reason for foreign investors to look outside Sri Lanka is because our market is richly priced compared to other regional markets at present”.
The net foreign outflows are largely due to developed markets being more attractive and investors seeing more upside in those markets.
“When it comes to local retail investors, they have a limited choice - invest in low yielding deposits or take some risk and invest in the capital market”.
“This is why our market is dominated by retail investors at present,” Abeysuriya said.
source - www.dailynews.lk
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