Sri Lanka’s largest pension fund EPF return to Colombo Stocks

May, 19, 2019

Analysts say EPF dialed Dialog for a 55 Mn Block at Rs. 9 per share on Friday


Sri Lanka's largest pension fund that has piled up money to the tune of over Rs. 2.3 trillion from the private sector workers’ savings Employees' Provident Fund (EPF) has returned to the country’s only capital market Colombo Stock Exchange (CSE), Sri Lanka’s Central Bank Governor Indrajit Coomaraswamy had told reporters amidst benchmark index – Colombo All Share Price Index (ASPI) hitting seven year lows.


"The EPF has bought shares in one company last week," Governor Coomaraswamy had told reporters recently, whilst analysts also highlights that a large parcel of country’s Malaysia based Axiata controlled mobile operator Dialog Axiata’s 55,314,469 voting shares were brought via using the EPF funds at Rs. 9 per share in 35 trades.


The market turnover hits Rs. 1.38 billion recording over Rs. 1.07 billion domestic purchases, witnessing a second day rally after April 21st , 2019 Easter Bombings that witnessed a continues crash in several sessions. Meanwhile analysts pointed out that EPF’s entrance is necessary to provide required oxygen for a market upturn amidst a lower bank interest regime that was announced and directed by Prime Minister to Central Bank few days ago.


Colombo Stock Market witnessed three crossings of Dialog in parcels of 31.9 million, 15.08 million and 8 million shares, whilst Dialog Axiata’s all trades contributed over Rs. 500.45 million to the market turnover on Friday the 17th May 2019. Further 787,694 shares of John keels (JKH) also changed hands via a crossing at Rs. 135.50, however whether the JKH quantity’s buyer was also EPF was unknown.


However, Sri Lanka’s Central Bank Governor had said that the EPF policy does not allow him to disclose the new investment, and had told reporters that one of the main reasons for the EPF to enter the secondary stock market was due to the market currently being at a seven-year low, following a market crash after Easter Sunday bombings.


Reports quoted analysts notes adding that on May 16, Sri Lanka's stocks were valued at a price to earnings multiple of 8.3 times on historical earnings, though banks and some other firms are taking a beating, with forward multiples set to fall, though there are value stocks to pick.


“Stocks have been hit by political unrest, liquidity shortages and a slowing economy” analysts notes.


"The Monetary Board has approved the EPF Investment Committee to purchase shares in a small list of companies, which will be added to as time goes on," Governor Coomaraswamy had told reporters adding that the investments will be made cautiously.


“The Monetary Board has approved the Investment Committee to invest up to 6% of the portfolio in equity." Governor Coomaraswamy had said.


Financials outline that as at the end of year 2018, around 92% of the Rs. 2.3 trillion EPF was invested in government securities, 3.3% in equity, 1.9% in corporate bonds and 1.5% in fixed deposits. The fund had been growing by around by Rs. 300 billion a year, while government borrowing requirements are shrinking, according to Governor Coomaraswamy.


Analysts outlined that Governor Coomaraswamy’s comments hinted that fresh funds amounting to over Rs. 62 billion may flow to Colombo Stock time to time.


However Governor Coomaraswamy had said that new investment policy framework is still being finalized, and they are adding new things to it from time to time.


"We can't invest more in fixed deposits, because that may interfere with our monetary policy stance. That narrows the options we have for investment." Governor added.


- Reporting by Devendra Francis

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