Dlr repatriation snags dissuade foreign investors
Foreign investors in the Colombo stock market have complained to the market operator and the regulator on repatriations of funds from their stock sales being unprecedentedly delayed.
The Colombo Stock Exchange and the Securities and Exchange Commission are getting complaints regularly, officials said. They said both institutions are working very closely with the Central Bank in this regard.
It is a dire situation right now where even US$ 50,000 cannot be obtained from a bank, a stockbroker representing some foreign funds told the Business Times. He added that one fund had waited nearly six weeks to send their money back. One foreign investor who had made $250,000 had to tell his bank to make payment in batches of $50,000. Frontaura Global Frontier Fund in its August 2021 monthly comment to its stakeholders said it experienced up to more than a months’ delay in receiving its sales proceeds after it exited its positions. The fund said its exit was set off by the looming multiple, yet interrelated crises in the country’s currency, balance of payments, foreign reserves, fiscal deficit and debt levels. “We’ve seen this movie many times in different countries and the usual warning signs are flashing here,” it said.
“Many foreigners have stock quantities to sell but they don’t. Some want us to arrange the required dollars before selling which is a tough task. It has become a real dilemma,” the stockbroker said. Many stockbrokers dealing with foreign investors confirmed this saying that there is no point of them selling as they cannot get that money out because banks don’t have dollars. But the whole of last year and most of this year foreigners have been net sellers. Banks simply do not have the required dollars. The Central Bank sold $424.71 million last month recording the highest for any month, to defend the rupee.
“It is an absurd situation. Bankers say that there aren’t any restrictions in giving dollars out, but they don’t have the cash in hand on demand. It takes at least a month to settle,” he added.
Issues relating to the forex crunch and the general economic situation have made foreign investors shed their local holdings in the share market, a second analyst said. He pointed out that despite the stock market hitting record highs, foreign investors could not wait to get out. “They sold at half the current prices in their respective stocks.”
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