📈 Sri Lanka Stock Sell-Off 'Overdone' Amid Middle East Tensions, Say Analysts

• Equities & Currency: Sri Lankan stocks are down ~17% in US$ terms YTD—largely driven by external West Asia conflict rather than domestic structural issues—compared to Pakistan's minor 1% decline. The Sri Lankan Rupee has also weakened, but market reactions appear overextended given the country's broader economic recovery post-2022 crisis (lower inflation, improved political stability). • Valuations & Asset Outlook: Market momentum early this year was strong before regional geopolitical friction hit asset prices. Valuations across both equities and fixed income are now near cyclical lows, creating attractive entry prices for investors. Higher interest rates in fixed income further support entry opportunities. • Key Drivers: Analysts note that primary headwinds remain external and geopolitical. Once Middle Eastern tensions subside, Sri Lankan financial markets and regional peers are expected to regain upward momentum.