The end of the conflict in May 2009 put Sri Lanka on the map for Frontier Market (FM) investors, according to experts.
Frontier Markets, an economic term is commonly used to describe a subset of emerging markets that are the smaller and less accessible markets of the developing world and is classified as frontier based on three criteria; economic development, market size and liquidity, and market accessibility.
Don LaGuardia, Principal LR Global at a CEO Breakfast meeting organised by the Institute of Chartered Accountants on Wednesday said that there’s a rise in optimism about Sri Lanka as the 125 % stock market appreciation in 2009 (second highest in the world), up 270% since the end of the war, is a strong indicator of its potential. “Increase in stock market volumes from $5 million a day to recently $20 million a day with the total market capitalization now approximately $20 billion has put Sri Lanka on the map,” he said.
He added that there were six Initial Public Offerings (IPO) since the beginning of 2010 and that IPO’s on average have been 10 times oversubscribed with a first day performance of approximately 65% appreciation.
He also noted that there’s a large remittances boost (8% -9% of GDP) and strong economic growth prospects. “The Central Bank of Sri Lanka forecasts GDP growth of 7-8% for the next two years and there’s an educated, low cost labour force and one of the highest literacy rates in South Asia which attracts FMs here,” he said,.
“The construction boom following the integration of the North & East (N&E) with the rest of the country is what I’m interested in as the N&E accounts for 10-15% of population, 30% of land mass and 50% of coast-line,” he said, adding that the country’s growth will be bolstered by a construction boom as the North and East reintegrate and increasing tourist arrivals.
He added that the future growth drivers in the country are built on value addition to the global supply chain, tourism and playing catch up for 30 years of infrastructure spending.