Though Sri Lanka’s share market isn’t doing well, its share valuations are very attractive, which is why foreign investors are coming in, a fact that investors should take cognizance of, a top company executive says. Local investors should also invest in ‘fundamentally sound’ stocks (like their foreign counterparts),” Ashok Pathirage, Chairman Softlogic Holdings Ltd told the Business Times.
He noted that the Colombo share market isn’t doing well because the economic fundamentals aren’t in place. “Relaxing or tightening regulations isn’t the answer. Investor confidence has to come in, interest rates need to drop. The rupee depreciation is hurting the economy. These are the reasons that the stock market is not doing well,” he explained.
He said that foreigners are buying shares 30% less in value now, as opposed to a year ago. “This is why they’re active in the market,” he added.Analysts say that the depreciation of the Sri Lankan rupee will have a slight effect mainly on Softlogic’s retail businesses (automobile, branded apparel and consumer electronics) in the short run. Mr. Pathirage still maintains that retail is the key area for the group, while admitting that there are challenges as well in this segment such as a drop in consumer purchasing power. “But this has been negated somewhat, as at the moment we only cater to the top bracket. Their spending power hasn’t really dropped.” He added that rupee depreciation together with the interest rate hike has dropped consumer confidence, but insisted that these are all temporary.
The company set foot in the consumer electronics market by acquiring Uni Walkers in 2006, which has been structured to carry out retail segment operations, which includes a wide range of consumer electronics, branded apparel and furniture. Mr. Pathirage added that October will see their new Mother Care store at Duplication Road open and a multi brand store will also be opened during the same month at Havelock Road.
When asked about their plans for a branch of UK retailer Debenhams, he said that it is currently on hold as they need to yet find a suitable space of 30,000 square feet. The policy rate hike which took place has also curbed the high credit growth environment, somewhat slowing down Softlogic’s finance sector and the company plans to sell down some of the 95% of shareholding in Asian Alliance in time. Mr. Pathirage added that the sector that has been deeply affected by the duty increases is their automobiles.
He said that Softlogic plans to penetrate the computer and home appliances space on a multi brand – multi product strategy, ranging multi product strategy, ranging from a basic radio set to air conditioner, while possessing an island-wide distribution network.