Equity market poised for growth as reforms anchor economic outlook

Lynear Wealth Managing Director Dr. Naveen Gunawardane explains why current recovery differs from the past Predicts inflation, interest rates to stabilise with fiscal discipline and no money printing, driving investments to equities Says despite recent rally, equity valuations remain attractive; earnings growth upside 20-25% Past current account surpluses artificial, this time is different Urges Govt. to stick to reforms post IMF program Recommends unit trusts for SL expats who cannot repatriate funds

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THE largest private investor in the Colombo Stock Exchange Lynear Wealth Management Managing Director Dr. Naveen Gunawardane recently said Sri Lanka's equity market is entering a period of structural change as Government reforms take hold and macroeconomic conditions stabilise.

"Sri Lanka has recently gone through a couple of structural reforms, which are going to make the macro environment very different from what we've seen in the past, certainly since, for example, 2008 or 2009," he said, sharing his perspectives on why the current economic recovery was different from the past at the Invest

Sri Lanka Forum held 12 August in Singapore organised by the Colombo Stock Exchange and Securities and Exchange Commission of Sri Lanka.

The introduction of the Public Finance Management Act and the Government's commitment to running a primary surplus will underpin this shift.

For decades, the country has run large primary deficits, forcing the Central Bank to finance Government spending. That contributed to cycles of interest rate hikes of 500 to 600 basis points in short periods, even outside crisis conditions. "What's going to happen in the future is that we will see a lot more stable interest rates, and that has huge implications as a domestic manager in terms of hazard allocation decisions," Dr. Gunawardane said.