Firms with a monopoly in their respective industries and those who are less geared will survive the global recession which will hit Sri Lanka eventually, according to a capital market authority. "Less geared firms such Nestle’s, Caltex and Ceylon Tobacco Company will weather the storm. Also firms like Colombo Dockyard Plc, Cargills, ACL Cables and Ceylon Oxygen which have a monopoly will remain strong when the economic impact of the global credit crunch hits is," Hasitha Premaratne, Head of Corporate Finance, Brandix Lanka said, addressing the Colombo Stock Exchange (CSE) seminar on the ‘Impact of the Global Economic Turmoil on the CSE and the Way Forward’ held early this week.
He noted that Sri Lanka has a limited vulnerability to the world economic turmoil, 'but it is not in a comfort zone.'
He said the sectors that are 'less affected' are firms in healthcare, power generation, property owning, oil palms and the established telcos.
He said that when the costs increase, telecom usage will be more – 'because with job cuts people will be idle'!
"We are yet to see the full economic impact of the global turmoil. There will be an increase in budget deficits across the globe and there will be less donor assistance to developing nations," he noted. He said for Sri Lanka, the foreign impact of the global turmoil is not significant because the country's capital account is closed. "So global financial institutions crashing will not affect the country significantly, as the exposure is less, but the banking system will see a foreign currency liquidity issue."
He said the lack of foreign investment flow to the country could have on adverse impact. "This will cause a widening balance of payment, adding pressure on the rupee. It will also decrease the activity in the CSE," he said.
"Now we see panic selling coming in. This is more to do with the lack of investor confidence, less foreign support to the CSE, less funds towards investments and also the 'wait-and-see-approach' by the investors," he added.
He also noted that all in all, listed company fundamentals may not be badly affected due to the global turmoil given the trend in the price decreases in these firms.