📈 Sri Lanka Investment Outlook: "Very Compelling" Crisis Reset

Hosking Partners, Sri Lanka’s largest foreign capital market investor, highlights a rare investment window as assets trade well below their long-term potential following the economic "reset." • Market Valuation & Opportunity The scale of capital destruction has left established businesses trading below replacement costs. Foreign participation in the CSE fell sharply post-2020, creating significant valuation distortions that favor patient, long-term investors. • Sector Breakdowns • Property & Hotels: Identified as high-recovery sectors due to limited new capacity and depressed valuations. • Banking & Finance: Private credit contracted from 60% to 40% of GDP, while mortgage credit stands at a mere 2.7% of GDP, signaling massive room for expansion. • Construction & Diversified Conglomerates: Core areas where Hosking Partners deployed capital during the crisis. • Key Economic Indicators • Market Cap: Declined by ~70% in US$ terms during the downturn, allowing for acquisitions at fractions of rebuild costs. • Portfolio Growth: Hosking’s holdings have more than doubled since early 2023, aided by lower inflation and currency appreciation. • Strategic Outlook Sustained progress depends on disciplined fiscal policy and domestic bond market development. Sri Lanka is positioned to benefit from capital scarcity and potential economic integration with India, contrasting with "overcrowded" global tech themes.