Aberdeen Standard Investments Head of Asian Debt says positive on longer term outlook for SL

Aberdeen Standard Investments, the largest active manager in the UK and second largest in Europe,  Head of Asian Sovereign Debt, Fixed Income – Asia Kenneth Akintewe says he remains positive on Sri Lanka’s long-term outlook despite politics and upcoming elections.

Akintewe’s personal views, recapping key findings from a recent visit, has been posted on www.aberdeenstandard.com/en/insights-thinking-aloud/article-page/letter-from-sri-lanka. 

The article assesses the current state of the economy and political instability as well as various challenges. 

However, Akintwewe says: “Even taking into account the political backdrop and election risks in 2020, we remain positive on the longer term outlook for Sri Lanka, supported by improvements in policy coordination, infrastructure development and strategic geographic advantages.”

He also notes that, compared with some of the other frontier and even core bond markets in Asia, Sri Lanka has a relatively liquid market. Foreign ownership is low, having been around only 5% as it is an off-benchmark trade for most investors and one that requires a significant amount of due diligence. 

“The local currency market is primarily domestically driven, which gives it a lower correlation and some resilience in the face of some of the external shocks that have hit broader emerging markets,” he said.

“At the levels the market has traded at in recent years, an investor has more than adequately been paid to take risk. And therefore, even taking into account some anticipated currency depreciation, Sri Lanka has delivered some of the stronger returns in the region,” he added.

He noted that the sequencing of Presidential, General and Parliamentary elections, which are all due around the same time, will have important implications for political outcomes. “Uncertainty is likely to crescendo through 2019 and as a bond investor, we are bracing ourselves for a messy and complicated election cycle ahead. Investors should be mindful of appropriately managing risk during this period, but also be on a lookout for opportunities that elevated uncertainty will likely create,” he added.