Many fund managers moving out of frontier markets like Sri Lanka

Many fund managers moving out of frontier markets like Sri Lanka
By Nathan Wills
This year has seen the best start to the year for shares in developed economies in over 20 years. The US S&P 500 index has rallied 7.1%, the London based FTSE 100 has rallied 3.8%, the Australian based ASX 200 has rallied 4.1% and the Japanese Nikkei 225 index has rallied 9.4%. To put this into perspective the Sri Lankan market has fallen by 9.8%.

The eight worst performing share markets for the year have all been frontier markets such as Sri Lanka, Nigeria and Bangladesh. Frontier markets are now trading at their lowest valuations since 2008 versus the emerging market shares of countries such as Brazil, Russia, India and China.

Falling valuations reflect concern that growth in the smallest economies, which expanded about 20 % slower than larger developing nations on average during the past three years, won't accelerate in 2012. Many institutional fund managers are reducing their exposure to these frontier markets including Sri Lanka.

The price-to-reported earnings ratio for the frontier index, comprised companies with an average market value of $2.6 billion, dropped to 10.7 from 16 a year ago and trades at a 10 % discount to the emerging-market measure, made up of companies with a mean market capitalization of $12 billion.
"On a purely tactical basis, we have actually reduced exposure in frontier markets," Antoine van Agtmael, who oversees about $7.1 billion as chairman of Ashmore EMM in Arlington, Virginia told Bloomberg news.

"The larger, more liquid markets offered relatively more compelling investment opportunities."
Some of the reasons for institutional fund managers moving out of frontier markets is the perceived macroeconomic risk and liquidity risks associated with frontier markets. Frontier markets have smaller economies and worse rankings on gauges of business climate and corruption than emerging markets. They also have lower trading volumes, which make it more difficult for investors to sell shares.
Liquidity is one of the key issues with less than $15 million worth of shares traded on average on the Colombo Stock Exchange during the past month, compared with $12 billion on the Shanghai Stock Exchange in China, the biggest emerging market, according to data compiled by Bloomberg.
Other issues that fund managers perceive when investing in Sri Lanka are based on the increase in inflation and thus an increase in interest rates. This has been brought about by the government increasing petroleum prices this month and adding a fuel surcharge on electricity bills. Higher fuel costs and the rupee's devaluation to its lowest level since April 2009 have stoked inflation and prompted the central bank to raise interest rates for the first time since 2007.

Arjuna Mahendran the Singapore-based head of Asia investment strategy at HSBC Private Bank, which oversees about $500 billion sums up the sentiment of fund managers in relation to investing in frontier markets like Sri Lanka. He told Bloomberg, "I wouldn’t buy them immediately, I will probably wait until the end of the year once the tightening is complete, Because they are small, they tend to be really volatile, a little bit of money can pump the market up very fast, and vice versa."

http://www.sundaytimes.lk/120304/BusinessTimes/bt08.html

I can still remember someone gave me - reps (when we used to have rep system) when I said this long time ago.

Devaluation of the currency against dollar & stronger dollar made so many fund managers to pull out from the emerging market.

Can't accept this.Provide evident s please.What are the shares they sold this year,Who are existing.?Everyday foreign buying is high.Can't expect any different this week also.No need to panic because of these articles.Waitttttttttttt. .CSE EKE RASA DANNO HARA NOYATHI.Whether they are foreigners or locals.

This person was the BOI head under the previous deleted regime and those days his views were totaly different.There are some politicaly mortivated statements which are not much relavant to CSE behaviour.

Everybody knows that large foreign funds have nothing to do in small markets like us. But there are some small and medium scale foreign investors who like trading/investing in emerging economies Coz they know that companies in emerging markets are growing faster in the early years of their life circle. So small investors consider that is a good oppotunity to make money rather than playing in matured economies. Naturaly large fund managers look for large economies and small foreing invetors play in small markets as they do not have sufficient funds to invest in large internationaly reputed blue chips like TOYOTA or COKA COLA.

Those who are interested in developing small economies are still play in Srilanka as well. During the first 2 months of this year foreign net inflow in CSE exceeds Rs. 2.2 Bn. This is a good evidence to prove my view .May be some of them are now sideline untill present Geneva issue is tactfully tackled. We as srilankans have no doubt and well confident that this issue could be sort out with the support of our freindly countries.According to media a large number of countries have already come forward to support us.

Therefore we shoud not get shocked with this kind of misleading news.

Rajaraam wrote:This person was the BOI head under the previous deleted regime and those days his views were totaly different.There are some politicaly mortivated statements which are not much relavant to CSE behaviour.

Everybody knows that large foreign funds have nothing to do in small markets like us. But there are some small and medium scale foreign investors who like trading/investing in emerging economies Coz they know that companies in emerging markets are growing faster in the early years of their life circle. So small investors consider that is a good oppotunity to make money rather than playing in matured economies. Naturaly large fund managers look for large economies and small foreing invetors play in small markets as they do not have sufficient funds to invest in large internationaly reputed blue chips like TOYOTA or COKA COLA.

Those who are interested in developing small economies are still play in Srilanka as well. During the first 2 months of this year foreign net inflow in CSE exceeds Rs. 2.2 Bn. This is a good evidence to prove my view .May be some of them are now sideline untill present Geneva issue is tactfully tackled. We as srilankans have no doubt and well confident that this issue could be sort out with the support of our freindly countries.According to media a large number of countries have already come forward to support us.


Therefore we shoud not get shocked with this kind of misleading news.

Well said freind.Yes misleading,People who comment saying these things are correct are misleading general public.Like the UKboy(big bear).Remember one day you have to dump the shares for retailers.If you guys keep going no retailer will be left.

Rajaraam wrote:Naturaly large fund managers look for large economies and small foreing invetors play in small markets as they do not have sufficient funds to invest in large internationaly reputed blue chips like TOYOTA or COKA COLA.

This statement doesn't make any sense. Large foreign fund will invest in stock markets because there's nothing to buy in this tiny market. But how come small investors cannot go for the same stock market? Anybody can buy a Coca Cola share.

UKboy wrote:I can still remember someone gave me - reps (when we used to have rep system) when I said this long time ago.

yes my friend i can remember very well .i think rajitha was leading the negative rep pack and in those days this forum and CSE is full of excitement and surprises . Bears vs Bulls and some cat fights .

rishanpossitive wrote:
Well said freind.Yes misleading,People who comment saying these things are correct are misleading general public.Like the UKboy(big bear).Remember one day you have to dump the shares for retailers.If you guys keep going no retailer will be left.

In the stock market the opposite of big bear is big bull (translation: maha gona)

Everyday we cant play the same game.Now market is going to steady...still some people want to buy the shares at same price which they have brought two weeks before.