Foreign exodus out of Sri Lanka’s capital markets continues in 2019

January 12, 2019 (LBO) – Foreign institutional selling out of Sri Lanka’s bond and stock markets continued at a brisk pace in the first two weeks to start 2019.

After the crippling US$1bn of net outflows from Sri Lanka’s bond and stock markets in 2018, 2019 has seen Rs11bn net outflows from stocks and bonds already.

Foreign outflows from stocks and bonds accelerated from Sri Lanka as a result of a constitutional crisis which the country’s speaker termed a “coup without guns.” The crisis has now been resolved, but political uncertainty remains with a lingering presidential election expected in the next 12 months or sooner.

Outflows have been cited by the Governor of the Central Bank Indrajit Coomaraswamy as being one of the main factors that has caused Sri Lanka’s currency to significantly depreciate in 2018. The Governor in recent comments indicated that the Sri Lanka Rupee was undervalued, highlighting that it is trading below the “real effective exchange rare (REER).”