Foreign fund says Sri Lanka now one of its top picks

AFC Asia Frontier Fund Co-Fund Manager Ruchir Desai on Tuesday delivered an upbeat assessment of Sri Lanka's capital market outlook, noting that the country is entering one of its most promising phases in a decade, with political stability, macroeconomic recovery, and undervalued equities creating "a strong platform for growth."

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Speaking at the Sri Lanka Economic Summit organised by The Ceylon Chamber of Commerce, Desai said he has tracked Sri Lanka's market since 2014, alongside other frontier and emerging markets such as Bangladesh, Pakistan, Vietnam, Kazakhstan, and Georgia.

He noted that while Sri Lanka went through a prolonged period of turbulence between 2018 and 2023, the country now stands out for having regained both political and economic stability; conditions he described as the most critical prerequisites for sustained investor interest.

Desai said he increased the Fund's allocation to Sri Lanka soon after visiting the country in November 2022, at what he noted as the "bottom" of the crisis.

"Valuations at that time were among the cheapest in the region, with the market trading at roughly four times forward earnings," he said, adding that, since then, the AFC Asia Frontier Fund has made Sri Lanka its second-largest country allocation, benefitting from both rising prices and a deliberate increase in exposure due to improving macro fundamentals.