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Sri Lanka's EPF enters stock market with blood in the streets

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  • Sri Lanka's EPF enters stock market with blood in the streets

    ECONOMYNEXT - Sri Lanka's 2.3 trillion rupee state-managed Employees' Provident Fund, has returned to the Colombo Stock Exchange, Central Bank Governor Indrajit Coomaraswamy said with the benchmark index hitting seven year lows.

    "The EPF has bought shares in one company last week," Governor Coomaraswamy told EconomyNext.

    The governor said that EPF policy does not allow him to disclose the new investment.

    Coomaraswamy said one of the main reasons for the EPF to enter the secondary stock market was due to the market currently being at a seven-year low, following a market crash after Easter Sunday bombings.

    On May 16, Sri Lanka's stocks were valued at a price to earnings multiple of 8.3 times on historical earnings, though bank and some other firm are taking a beating, with forward multiples set to fall, though there are value stocks to pick, analysts say.

    Stocks have been hit by political unrest, liquidity shortages and a slowing economy.

    Coomaraswamy declined to name the stock EPF was buying, though there was speculation that Dialog Axiata, Piramal Glass or John Keells Holdings may have been the target.

    "The Monetary Board has approved the EPF Investment Committee to purchase shares in a small list of companies, which will be added to as time goes on," Coomaraswamy said.

    "The investments will be made cautiously. The Monetary Board has approved the Investment Committee to invest up to 6 percent of the portfolio in equity."

    At the end of 2018, around 92 percent of the 2.3 trillion rupee fund was invested in government securities, 3.3 percent in equity, 1.9 percent in corporate bonds and 1.5 percent in fixed deposits.

    The fund was growing by around 300 billion rupees a year, while government borrowing requirements are shrinking, Coomaraswamy said.

    "We can't invest more in fixed deposits, because that may interfere with our monetary policy stance," he said.

    "That narrows the options we have for investment."

    Coomaraswamy had in the past described the Sri Lankan stock market as going through a 'fire sale'.

    The EPF largely stayed off the market, except for some sporadic sales, after coming under fire for being a 'buyer of last resort' around 2011 in particular at peak valuations amid charges of corruption by dealers. (Colombo/May17/2019)

  • #2
    That one company must be JKH

    I guess cat jumped out of the sack..............


    • #3
      Finally some welcome news! Unlike the previous entry, this time EPF has entered at very attractive valuations so hope it can bring back some much needed confidence into the market.


      • #4
        technically dont jump in to JKH, better wait for at least 130 for a rebound
        "The best values today are often found in the stocks that were once hot and have since gone cold"


        • #5
          I heard EPF bought DIAL today is it true


          • #6
            We want them to buy more and do more!
            "The best values today are often found in the stocks that were once hot and have since gone cold"


            • #7
              Originally posted by Lahiru86 View Post
              I heard EPF bought DIAL today is it true
              Yes .



              • #8
                They are going to buy LVEF too @ 7


                • #9
                  CSE and CBSL Heads on Bloomberg. Demutualisation will complete within 1 year. The Draft is sitting in parliament to be passed. Disgusting why taking so long. As there are many things need to be done after it gets through.
                  "The best values today are often found in the stocks that were once hot and have since gone cold"


                  • #10
                    Govt. defends EPF return to markets

                    8 June 2019

                    JVP argues Govt. should reveal returns on specific investments to reassure public

                    The Government yesterday sought to reassure lawmakers on the new measures that have been taken to secure Employees Provident Fund (EPF) investments in the Colombo stock market, and insisted that the fund will not be misused.

                    The Government also pointed out money in the EPF carries a State guarantee.

                    Leader of the House Lakshman Kiriella, responding to JVP MP Anura Kumara Dissanayake’s question on Government plans to invest EPF money in the stock market again, held the decision-making is the responsibility of the Central Bank of Sri Lanka.

                    “The responsibility of the Trust is held with the Monetary Board of the Central Bank of Sri Lanka in accordance with clause 5 (1) e of the Employees’ Provident Fund Act No 15 of 1958. So, the Monetary Board holds the responsibility of the investments and the returns,” said Kiriella, rejecting any political involvement in the decision.

                    “The EPF takes part in the Primary Auctions and winning competitive bids, in order to fulfil the Government’s monetary requirements. Therefore, 95% of the investment basket of the EPF includes government securities. The decision-makers who take the decision to invest do not provide such information to third parties. The reinvestment basket of the EPF gets updated every three months and gets published on the website,” he added.

                    According to Minister Kiriella, the CBSL is carrying out a forensic audit on concerns raised in the report submitted by the Presidential Commission to investigate into questionable bond transactions, and the findings will be made available soon.

                    Highlighting the EPF’s profitability by investing in selected options, the Minister said: “In 1998, the return on investment was Rs. 9.27 million, in 1999 it was Rs. 43.55 million, and was Rs. 82.53 million in 2000. In 2001 the RoI was Rs. 114.4 million. The RoI was Rs. 236 million, Rs. 706 million, Rs. 438 million, Rs. 912 million, Rs. 439 million, Rs. 224 million, Rs. 347 million, Rs. 1663 million, Rs. 2678 million, Rs. 3016 million, Rs. 5598 million, Rs. 4065 million, Rs. 4714 million, Rs. 2993 million, and Rs. 3894 million in 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, and 2018 respectively.”

                    However, MP Dissanayake rejected the Government explanation on the EPF re-investment options. “During the past, by investing EPF money in the stock market, controversial investors made money. EPF money was invested in failed companies. There is enough evidence on the use of EPF money to make money for controversial investors. By investing EPF money, the capital losses are incurred. It is better if the Government can show the investment and the Return on Investment (RoI) as a percentage,” said MP Dissanayake.



                    • #11
                      The JVP need to adapt, they will not progress with this mindset. Needs a Leader who is more in touch with real world.
                      "The best values today are often found in the stocks that were once hot and have since gone cold"


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