By Sanath Nanayakkare
Investors are mostly putting their money in very short term investments eying maturity-yields as they still find it hard to guess how the financial year 2016 is going to turn out for Sri Lanka in terms of investment prospects, The Island Financial Review learnt yesterday from Dimantha Mathew, Manager - Research, First Capital Equities (Pvt) Ltd.
"In the wake of this trend extending into the New Year, 2016 may not herald the ideal first or second quarters for investors looking for the quick fix, the easy answer, the magic formula or hot investment tips. However, if the government's envisaged construction projects start pumping money into the economy between first and second quarters, a construction-led growth could come to the rescue in the second half, renewing hopes of a more predictable, a more tangible business and investment outlook in which the investors will roll over their money" Dimantha noted.
Speaking in a broader manner, Dimantha said," Basically, 2016 may turn out to be a tough year with, interest rate hikes, increasing funding-costs and the weakening rupee. The slowly but steadily rising inflation will add to this unwelcome mix. The government will look to borrow funds from local sources rather than foreign credit lines. This will invariably push funding costs higher for the private sector. We may see T-Bill rates going up to around 10% in 2016. As a consequence of increased funding costs, corporate entities' volumes, earnings and profits could be affected, which is not a healthy development. The 1st quarter will see an economy dependent on domestic consumption which places pressure on importer dollar demand. As the government has to also deal with the balance of trade issue, either the exchange rate or the interest rate will have to take a beating," he pointed out.
Investors are mostly putting their money in very short term investments eying maturity-yields as they still find it hard to guess how the financial year 2016 is going to turn out for Sri Lanka in terms of investment prospects, The Island Financial Review learnt yesterday from Dimantha Mathew, Manager - Research, First Capital Equities (Pvt) Ltd.
"In the wake of this trend extending into the New Year, 2016 may not herald the ideal first or second quarters for investors looking for the quick fix, the easy answer, the magic formula or hot investment tips. However, if the government's envisaged construction projects start pumping money into the economy between first and second quarters, a construction-led growth could come to the rescue in the second half, renewing hopes of a more predictable, a more tangible business and investment outlook in which the investors will roll over their money" Dimantha noted.
Speaking in a broader manner, Dimantha said," Basically, 2016 may turn out to be a tough year with, interest rate hikes, increasing funding-costs and the weakening rupee. The slowly but steadily rising inflation will add to this unwelcome mix. The government will look to borrow funds from local sources rather than foreign credit lines. This will invariably push funding costs higher for the private sector. We may see T-Bill rates going up to around 10% in 2016. As a consequence of increased funding costs, corporate entities' volumes, earnings and profits could be affected, which is not a healthy development. The 1st quarter will see an economy dependent on domestic consumption which places pressure on importer dollar demand. As the government has to also deal with the balance of trade issue, either the exchange rate or the interest rate will have to take a beating," he pointed out.
Concluding on a positive note Dimantha said. "However, with the government's planned construction projects hopefully streaming money into the economy between 1st and 2nd quarter, the construction industry and allied enterprises will spur the economy to a noticeable degree injecting fresh hopes towards the 3rd and 4th quarters".
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