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Friday Nov 15, 2024
Thursday, 31 July 2014 00:22 - - {{hitsCtrl.values.hits}}
The capital market yesterday saw the launch of the first-ever ‘Ceylon Dollar Bond Fund,’ which will further help attract foreign investments into Sri Lanka.
Conceptualised by Ceylon Asset Man-agement (CAM), the dollar bond is the first to be licensed by the Securities and Exchange Commission (SEC). The dollar denominated unit trust has been licensed with the approval of the Central Bank and the Ministry of Finance.
With the launch of such a product considered a giant step towards internationalising the local investment industry, which has thus far been restricted to rupee investments, foreign investors and BOI companies are now able to invest in the high-yielding Sri Lankan dollar bond, avoiding exposure to currency risk. The bond, for which Deutsche Bank AG is the trustee and custodian, is rated by Fitch Ratings.
Regulated by the SEC Act, Unit Trust Code, Regulations Directives and Guidelines issued from time to time, the product offers an attractive US Dollar net return of approximately 4% to 5% per annum, making it attractive for investments is the absence of barriers to entry and repatriation.
The important initiative was launched at a ceremony chaired by SEC Chairman Dr. Nalaka Godahewa as the Chief Guest.
Calling the CDBF a revolutionary product, Dr. Godahewa said: “The SEC has been ambitious about building the capital market but there have been some issues when launching new products. The lack of infrastructure has been a barrier. To overcome such we need innovative products, similar to the CBDF, to be introduced. If we want to make the capital market a game changer in the development in the economy, we need more companies to aggressively look at bringing out innovative products. That is what will help us go forward.”
CAM Managing Director Dulindra Fernando told the ceremony that the bond is for US Dollar investors who wish to achieve capital appreciation, income growth over a period of time and targets foreign institutions along with BOI-approved companies in Sri Lanka and foreign retail investors.
According to him, the open-ended fund allows withdrawal at any given time and investment without the requirement of a Securities Investment Account (SIA). The minimum investment for the fund is $ 1,000.
However, he pointed out that although the product has been packaged to make Sri Lanka look attractive, bringing it up to scale remains a challenge.
The dollar bond fund is expected to assist enhance current investor base of the local unit trust industry and enable benefits of dollar investment scale which was previously limited to Sri Lankan Rupee.
Sharing the benefits the CDBF brings to Sri Lanka, CAM Director Michael Preiss pointed out that while the product will improve access to international capital, it also helps in terms of name recognition for Sri Lankan issuers.
“The CDBF will assist in the improvement of liquidity and yield curve for Sri Lankan bonds on the Singapore Exchange (SGX) and will lower the borrowing cost for future Sri Lankan Dollar issuers. Also to some extent the rupee will benefit from the CDBF as it allows investors from around the world to participate,” he added. Ceylon Asset Management currently manages the Ceylon Income Fund which is rated ‘A-‘, the Ceylon Gilt Edged Fund rated ‘AAA’ by Fitch Ratings, and three equity index funds, Ceylon Index Fund, Ceylon Tourism Fund and Ceylon Financial Sector Fund.
