We expect good corporate earnings over next few quarters – CSE Chairman

September, 15, 2020

CSE Chairman Dumith Fernando yesterday (14) stated that he expects better returns from the tourism sector and to post good corporate earnings in the coming quarters, stating that many areas of the economy have bounced back from the COVID-19.

“Since the shutdown of the market in March 20, markets have gone up by about 20%. What is important to understand is that this market still is one of the cheapest markets around the region. So it is trading at a slight discount to book value and why do we feel that this is undeserved and that there is more upside in the market? Of course, we all know that Sri Lanka has been one of the countries with the best management of the COVID-19 situation, with that we are all seeing the bounce-back of the economy. So, most areas of the economy, mainly the tourism sector is doing extremely well. It has bounced back quite well and so we expect good corporate earnings over the next few quarters. On top of that, we have seen interest rates going down very significantly over the last few months. So if you look at the approximate one-year deposit rate at the bank for a fixed deposit now you are getting roughly about 5% or 5.5%, this barely beats inflation. So, your real return actually could be negative on that. So, equity market with dividend yields of about 3%, as well as the valuation upside given that the starting valuations have been low, have been a destination for a lot of savvy investors to come and generate better returns this year,” Fernando said whilst speaking exclusively to Ada Derana first at 9.

Fernando further stated that the low-interest rates are driving investors into the market, whilst foreign investors who exited the emerging markets are now returning.

“With that market, volumes have doubled since last year. We have also seen that there are very large numbers of new investors who have been coming into the market and now we are starting to see the foreign investors who exited the market, as they did with all, frontier and emerging markets are starting to get beyond the buying side as well. So, I do believe that there is still a positive outlook for equity markets and this could be a fairly good investment return that one could expect by participating now.”

The Colombo Stock Exchange (CSE) yesterday (14) stated that the Market has recorded a noteworthy turnaround in recent months, driven by a progress of the indices and improved investor interest.

Since reopening the market on 11 May 2020 following an extended closure as a result of the COVID-19 pandemic, the benchmark All Share Price Index (ASPI) has recorded an 18.97% gain since reopen, and as of 11th September stands at 5,438.91. The S&P SL20 index, which features the CSE’s 20 largest and most liquid stocks has also gained, making a 21.15% gain since the market reopen, closing at 2,359.24 points as of 11th September.