Investing in Lanka’s 10 high performers

The Ceylon Index Fund investing in the Colombo Top 10 Index (CTX 10) has outperformed the stockmarket and other mutual funds to record a growth of 49.2% during 2006.

The 10 companies in the CTX 10 are led by Dialog Telekom Ltd and include John Keells Holding Ltd, Sri Lanka Telecom, Distilleries Company of Sri Lanka as well as Commercial Bank, National Development Bank, Lanka IOC Ltd, Hemas Holdings Ltd, Asian Hotels and Properties Ltd and is rounded off by Hayleys Ltd.

In 2006, the CTX 10 gained 54.6% , while the All Share Price Index (ASPI) recorded 41.6% growth and the Milanka Price Index (MPI) recorded 51.4%growth. The Ceylon Index Fund is managed by Ceylon Asset Management, a joint venture with Bartleet Trans Capital. Chairman of Bartleet Group and former Chairman of the Colombo Stock Exchanged (CSE), Eraj Wijesinghe said, "the market should perform with the momentum of regional markets across South Asia while the Sri Lankan market offers much better value at a Price to Earnings (PE) ratio of 13.95, compared to a P/E of 21.26 in India."

Addressing a media briefing last week, Wijesinghe said the government has forecasted seven percent growth for the country.

Despite the civil war that is raging, Wijesinghe heralded the resilient nature of the economy. He noted that despite this growth, the average person is not benefiting. "They don't have the knowledge or skills to participate in the equity market." However, the CTX 10 is the investment answer to this problem. Wijesinghe pointed out that so far, there are people who have faith in this country as evidenced by the stock market which has not plummeted when negative news hits. "We believe there is something positive ahead. We want to develop the unit trust industry and we want all Sri Lankan to be able to invest and take part in growth."

Michael Preiss, Director and Economic Advisor to Ceylon Asset Management, said Sri Lanka can learn some valuable lesson from the United States such as the way to prosperity is through bringing the stock market to the masses. Preiss feels that the problem with the stock market here is the perception that it is for the rich. "The best way to have long term wealth is through the stock market, especially with inflation rising. If the political situation stabilises, more foreigners will invest in Sri Lanka." He said the US is continuing to grow their capital market and build a strong economy.

Managing Director and Chief Executive Officer of Wealth Lanka Management, Mangala Boyagoda, said he has seen a lot of growth in unit trusts. He feels as if Sri Lankans know how to earn money but they do not know how to invest. "When your purchasing power is reduced, you blame the government. Don't. Blame yourself." The key to overcoming this is awareness.”

"If someone invested in January 2006 and looked at their return on 31 December 2006, they would have seen 49.2% growth," said Sharmini Ratwatte, Chief Executive Officer of Ceylon Asset Management. According to her, people will reap the benefits of the stock market through unit trusts. By purchasing units on the index fund, Ratwatte said they can probably give you a return that can beat inflation. They have had responses from all across the country and she is urging everyone to get involved.