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Tuesday, 18 July 2017 00:00
By Nisthar Cassim
T. Rowe Price, a global investment management organisation with $861.6 b in assets under management, is upbeat on Sri Lanka’s future prospects and it is walking the talk by doubling exposure in listed equities with appetite for more.
The investments in Sri Lanka are via its T. Rowe Price Frontier Markets Fund and Asian Equity Fund, and its Vice President Oliver Bell who was in Colombo last week said the Fund’s optimism was reflected by the fact that it was overweight on Sri Lanka.99
The Frontier Markets Fund started investing in Sri Lanka about two years ago following the election of new Government. However, the increase in the Frontier Markets Fund’s exposure from 5% to 10% had been during the past six months and Bell hinted it would grow further.
Overall via the two funds, T. Rowe Price has invested $ 80 million in listed equities. Rowe Price also owns approximately $ 350 million of Sri Lankan related debt in the Group’s emerging fixed income funds.
The T. Rowe Price Frontier Markets Fund seeks to identify long-term market leaders in countries on the cusp of rapid development. Currently the fund invests in 24 developing countries globally with $ 360 million assets under management as at 13 July. The Group has dedicated Emerging Markets equity assets of $ 21.7 billion as at end March.
The fresh optimism on Sri Lanka is spurred by what Bell described as emerging signs of better policy coordination and implementation, especially after the mini-Cabinet reshuffle.
“What is happening now is ideally what should have happened two years ago,” noted Bell, who is also Rowe Price Group’s Lead Portfolio Manager and Chairman of the Investment Advisory Committee for the T. Rowe Price Middle East and Africa Equity Strategy and also the Frontier Markets Equity Strategy.
“When we originally came, just like the nation, we had a lot of hopes and expectations. The first Budget being populist was understandable with expectations of a follow-up business-friendly Budget. However Sri Lanka has had several challenges during the past two years and more recently drought followed by floods have posed additional difficulties,” he said.
“Nevertheless it appears the Government is committed to improve the economy’s prospects, which in turn will help corporate earnings. From that perspective we are bullish,” emphasised Bell, whose Frontier Markets Fund takes a 10-year long-term view.
“We expect positive changes in the upcoming Budget and greater clarity. We also look forward to greater coordination in policy and implementation,” said Bell, adding his latest visit showed signs for more optimism.
“With natural disasters likely to dent growth in 2016, next year looks more promising,” he said, adding that the IMF program was positive for Sri Lanka and comforting for investors.
Along with CT CLSA Securities, Bell met Deputy Economic Affairs Minister Dr. Harsha de Silva and Central Bank Governor Dr. Indrajit Coomaraswamy, apart from a host of companies in which the Fund has invested as well as some of the prospective companies.
According to Bell, Frontier Markets Fund has exposure to listed equities in 24 countries and finds Sri Lanka the most positive as valuations are very cheap with a host of well-managed companies whose stocks are attractive with good growth potential.
“The banking sector is relatively cheap and there are several other sector stocks which are reasonably priced,” revealed Bell, who finds construction, telecom and consumer goods among promising sectors.
“For us Sri Lanka has been the ‘longest overweight,’” said Bell, who notes many investors haven’t realised the full potential of Sri Lanka whilst the country on its part is yet to maximise from the post-war potential.
“If the Government starts delivering, investor confidence – both foreign and local – will rise significantly,” added Bell.
He also pointed out that Sri Lanka stands to gain if it can better harness its strategic geographic location with greater integration with giant India and China, which are big growth markets. “Sri Lanka should grab the opportunities arising from its locational advantage. With greater integration, Sri Lanka can be a conduit for China and India and a growth hub for South Asia as well,” he added.
Bell acknowledges that local investors have been subdued but understands their confidence is picking up.
“Politics is noise and too much of it unfortunately lets buying of good companies cheap. The market appears to have reacted to this noise. Ideally politics must align with economy more. If this happens Sri Lanka can be on a good growth path,” emphasised Bell.
Seemingly seeing signs of such alignment taking place and with hope of it gathering momentum in the near term, Bell said: “The Frontier Markets Fund is investing today so as to reap better returns as the economy takes off.”
According to Bell, T. Rowe Price believes many frontier market economies are experiencing a common long-term path to prosperity. “Despite what is often heard in the press, there is currently more peace across the world than at any other time in history – with only a handful of conflicts occurring. This has allowed democracy to take hold in an increasing number of frontier outposts, with politicians incentivised to make widespread economic improvements in order to stay in power,” said Bell, who has two decades of investment experience.
“These economic reforms often lead to an influx of foreign investment, which in turn leads to strong economic growth and provides a tailwind to the corporate sector where we can find many exciting investment ideas. We aim for long-term capital growth by investing in a diverse portfolio of high quality companies from across the entire frontier universe,” emphasised Bell.
Prior to joining the firm in 2011, he was Head of Emerging Markets Equities Research at Pictet Asset Management (the institutional asset management arm of Pictet & Cie, the largest private bank in Switzerland), where his responsibilities included managing several funds, as well as a team of analysts.
During his time at Pictet, Bell was directly responsible for managing investments in the emerging Europe, Middle East and Africa region as part of the global emerging markets and the standalone Middle East and Africa portfolios. Bell also managed the Global Emerging Markets High Dividend Yield Equity Strategy. Bell holds the Investment Management Certificate (IMC) and has a Bachelor of Science Degree from Exeter University.
Founded in 1937, T. Rowe is a global investment management organization with $861.6 billion in assets under management as of 31 March. It is focused on delivering global investment management excellence that investors can rely on-now and over the long term. T. Rowe Price’s disciplined, risk-aware investment approach focuses on diversification, style consistency, and fundamental research.
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