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Hefty losses at foreign funds with holdings in Sri Lankan equities

Published 07/29/2022, 02:35 AM
Updated 07/29/2022, 02:40 AM
© Reuters. FILE PHOTO: A woman sits next to her filled domestic cooking gas cylinder after its distribution, amid the country's economic crisis, in Colombo, Sri Lanka, July 23, 2022. REUTERS/Adnan Abidi

(Reuters) - Foreign mutual funds which have exposure to Sri Lankan equities have posted steep losses in their net asset values this year, prompting their fund managers to look for ways to trim their holdings and switch to alternative markets.

According to Refinitiv Lipper, the top eight overseas funds that have exposure to Sri Lanka have dropped 14.8% this year on average. That's a lot better than the Sri Lanka's CSE All-Share index's decline of 38% so far in 2022.

YTD performance of funds exposed to Sri Lankan equities: https://tmsnrt.rs/3S7ST7V

The Tundra Sustainable Frontier Fund A SEK, which had about 3.14% exposure to Srilanka, has lost 10.52% this year, while Harvest Asia Frontier Equity J JPY Acc and Holberg Rurik A declined 9.6% and 14.5%, respectively.

"During 2022, it(Sri Lankan exposure) has negatively impacted our performance by ca 3% (USD)," said Mattias Martinsson, chief investment officer at the Swedish fund manager Tundra Fonder AB. "Our stock-selection in Vietnam and Indonesia has helped us to outperform our benchmark (MSCI FMxGCC Net TR) despite the negative impact from Sri Lanka," he said.

Overseas funds that have holdings in Sri Lankan equities have also faced sharp outflows in the past few months.

The iShares MSCI Frontier and Select EM ETF witnessed $50.12 million worth of net selling in first half of the year, while Coeli Frontier Markets I SEK had outflows worth $19.6 million.

© Reuters. FILE PHOTO: A woman sits next to her filled domestic cooking gas cylinder after its distribution, amid the country's economic crisis, in Colombo, Sri Lanka, July 23, 2022. REUTERS/Adnan Abidi

Sri Lanka is facing its worst economic crisis in seven decades, unable to pay for essential imports such as fuel and medicine due to a severe shortage of foreign exchange.

Money flows in funds exposed to Sri Lankan equities: https://tmsnrt.rs/3vm7Qtk

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