Amidst a backdrop of the recently concluded Presidential election, the upcoming general election, human rights concerns and the GSP + withdrawal by the European Union, the Colombo stock market has seen foreigners as net sellers since the start of this year, analysts said.
They said that this may be due to their individual and customized investment policies which prevent them from looking at Sri Lanka in a more favourable light, or it could also be a mixture of all the above reasons.
Upto end February, the foreign buying in the market was at Rs 11.4 billion with selling amounting to Rs. 16.5 billion.
Srimal Liyanage, a research analyst based in the Gulf with interests in local equities, noted in an e-mail that the foreign selling is mainly due to various investment policies of the (foreign) investors. “They stick to their investment policies and manage their portfolios. It doesn't mean that they don't see a potential in our market,” he said.
However he said that the situation is not that positive to encourage foreigners to Sri Lanka .
“Factors like human rights allegations, high taxation and political issues will act as a deterrent. The other factor to consider is, that now that the local investors have made lot of money in the market, they will be in a more strong position to take risks to invest in short to medium term, (which may not hamper investor sentiment when foreigners are not investing),” he explained.
Jaliya Wijeratne, Director SMB Securities noted that there was a trend of foreign selling exceeding foreign buying seen over the past few weeks, but that fluctuations in foreign participation are quite normal. Charuka Suchendra, Research analyst Asha Phillip said that currently foreigners are the net sellers in the market.
“It is not a good indication for future market behaviour but the current low interest rates in the financial system will direct more funds towards the share market - especially from pension funds,” he added. Sarath Rajapakse, Director Capital Trust said there is foreign selling in the market as the ‘news propaganda’ about Sri Lanka is not as positive.
“This is mainly due to misinformation and the authorities (the government) need to do something about it.
Right now the country is in a better footing than ever and this message need to be ‘strongly’ passed onto the foreign investors,” he added.