Investors are now beginning to realize that market decline is a natural phenomena but was an opportune moment to enter the market and thus far the quickest way to make more than average gains, top stock market analyst said.
“The market enjoyed peace dividends and then a substantial decline due to global and macro economic factors. This is a natural phenomena which every prudent text book investor would have been well aware of. Time has now come for investors to adopt a more prudent approach towards the stock selection instead of chasing behind rallies and leveraging their portfolios in anticipation of higher returns" Frontier Capital Partners Ltd CEO Nishan Sumanadeera told LBT yesterday.
Investors need to identify value stocks, based on fundamental analysis and Value For Money (VFM) approach involving analysis of strength and weaknesses, future growth potentials, opportunities and threats applicable to respective businesses.
Although the current market sentiments remain still volatile due to many factors including staggering inflation, domestic expenditure and volatile commodity prices, Sri Lanka has enormous potential in terms of future growth. High fiscal deficit , domestic spending and over-dependency of external borrowings still remain a concern with Sri Lanka’s high debt to GDP ratio of over 70 percent and FDI to GDP ratio of less than 5 percent.
“Sri Lanka’s capital market represent only fraction of its national assets. The total market capitalization of the Colombo Stock Exchange (CSE) is less than US $ 20 billion representing less than 30 percent of country’s GDP.
The private sector is likely to contribute with more than 20 percent growth in earnings and Gross Domestic Product (GDP) growth expected to be in the range of 8 percent, reflecting the future potential he said adding that Sri Lanka’s land bank of 65,000 square kilometers which can easily be valued over US$500 billion requires more than average return on assets (ROA) to spark the economy into the next level”. Sri Lanka also has “high growth, attractive labour costs and a unique strategic geographical location that could be the opportunity for the future, especially in all types of hub and port activities.”
Sumanadeera pointed out that the Stock Market is now in the stage of consolidation and Colombo’s investor sentiments will be no longer be influenced by IPO’s, illiquid trading or irrational market behaviours which had been a hallmark during the last bull run. In future, investors are likely to be more prudent and likely to make their investment decisions based on corporate earnings and asset values. We are likely to a witness an uptrend of growth in stocks and blue chip shares during the next stage.