Sri Lanka's post-war economic boom is only just beginning. The potential here goes well beyond a boost in tourism. Adjusted for
inflation, economic growth could be close to 8% this year, up from an average of 5% in the prior decade.
inflation, economic growth could be close to 8% this year, up from an average of 5% in the prior decade.
Bond market strategists are now expecting Sri Lanka's credit rating to be revised upward next year, The Wall Street Journal in a year end analysis on Sri Lankan economy on 30th December reported
Following is the text of the report:
In the 19 months since the nation's civil war ended, stock prices are
up nearly 250% and the rupee up 6%. Government debt is also in high
demand: The difference between yields on a Sri Lankan
dollar-denominated bond due in 2012 and similar U.S. Treasurys is just
3.5 percentage points, data from Barclays Capital show. A year ago,
that was spread closer to 6%.
The potential here goes well beyond a boost in tourism. Sri Lanka's
location within East-to-West shipping lanes is promising, and large
areas of farmland and coastline in the northeast can be developed now
that fighting has ended. The government, meanwhile, recently
implemented tax cuts and other reforms aimed at boosting foreign
investment. Adjusted for inflation, economic growth could be close to
8% this year, up from an average of 5% in the prior decade.
Bond market strategists are now expecting Sri Lanka's credit rating to
be revised upward next year. Investors, though, have already taken
things a step further: Moody's says the market-implied rating on Sri
Lanka's sovereign debt is Ba1, three notches above where the agency
currently rates the country and only one level below investment grade.
But Sri Lanka is still far from investment grade, in large part
because of government debt racked up over three decades of fighting.
This debt stood at a whopping 86% of gross domestic product last year.
On "debt affordability" Moody's rates Sri Lanka higher only than
Lebanon and Jamaica. Rising commodity and food prices could make
efforts to cut this debt tougher if domestic investors demand the
government pay higher yields to compensate for inflation. About 40% of
spending in next year's budget is allocated for interest payments.
Stocks face a possible headwind too. As many as 60 companies could
conduct initial public offerings next year, says Yolan Seimon, head of
research at John Keells Stock Brokers in Colombo. Many of these deals
will be small, but the rush is still substantial given that there are
only 240 companies currently listed. Anyway, Seimon says, with stocks
now trading at 14.9 times expected earnings, price gains will likely
average 20% to 25% a year, tracking profit growth.
Investors turning up now, seeking the triple-digit returns of recent
years, will find that ship has sailed
Following is the text of the report:
In the 19 months since the nation's civil war ended, stock prices are
up nearly 250% and the rupee up 6%. Government debt is also in high
demand: The difference between yields on a Sri Lankan
dollar-denominated bond due in 2012 and similar U.S. Treasurys is just
3.5 percentage points, data from Barclays Capital show. A year ago,
that was spread closer to 6%.
The potential here goes well beyond a boost in tourism. Sri Lanka's
location within East-to-West shipping lanes is promising, and large
areas of farmland and coastline in the northeast can be developed now
that fighting has ended. The government, meanwhile, recently
implemented tax cuts and other reforms aimed at boosting foreign
investment. Adjusted for inflation, economic growth could be close to
8% this year, up from an average of 5% in the prior decade.
Bond market strategists are now expecting Sri Lanka's credit rating to
be revised upward next year. Investors, though, have already taken
things a step further: Moody's says the market-implied rating on Sri
Lanka's sovereign debt is Ba1, three notches above where the agency
currently rates the country and only one level below investment grade.
But Sri Lanka is still far from investment grade, in large part
because of government debt racked up over three decades of fighting.
This debt stood at a whopping 86% of gross domestic product last year.
On "debt affordability" Moody's rates Sri Lanka higher only than
Lebanon and Jamaica. Rising commodity and food prices could make
efforts to cut this debt tougher if domestic investors demand the
government pay higher yields to compensate for inflation. About 40% of
spending in next year's budget is allocated for interest payments.
Stocks face a possible headwind too. As many as 60 companies could
conduct initial public offerings next year, says Yolan Seimon, head of
research at John Keells Stock Brokers in Colombo. Many of these deals
will be small, but the rush is still substantial given that there are
only 240 companies currently listed. Anyway, Seimon says, with stocks
now trading at 14.9 times expected earnings, price gains will likely
average 20% to 25% a year, tracking profit growth.
Investors turning up now, seeking the triple-digit returns of recent
years, will find that ship has sailed
0 comments:
Post a Comment