02 September 2010

Sri Lanka Bonds Out Perform BRIC Bonds in International Capital Markets - Survey by JP Morgan Chase and Co

01st September 2010, www.island.lk

After the end of a thirty year old war last year, Sri Lanka’s sovereign bonds have out performed bonds from Brazil, Russia, India and China (BRIC) in international capital markets according to a survey carried out by JP Morgan Chase and Co, which augurs well for US$ 1 billion sovereign bond issue later this year, a report by Bloomberg newswire service said.

"Sri Lankan debt has returned 39 percent since May 18, 2009, when the government defeated Tamil Tiger rebels, according to JPMorgan Chase & Co.’s EMBI Global Index. That compares with 12 percent in China, 22 percent in Brazil and 26 percent in Russia. Company bonds of India, which doesn’t have a dollar-sovereign issue, delivered gains of 26 percent," Bloomberg newswire said in a report filed August 30.

Bloomberg said BRIC economies accounted for about 40 percent of the world’s foreign-exchange reserves and its population. "The Colombo All-Share Index of shares climbed 177 percent since the war ended, the world’s best performer, while the rupee strengthened 2.2 percent to 112.65 per dollar," it said.

The government is planning to issue a US$ 1 billion Eurobond issue later this year to retire short term domestic debts and meet short term foreign loan commitments.

State banking giant Bank of Ceylon was appointed to manage the sovereign bond issue along with HSBC, Bank of America Merrill Lynch and the Royal Bank of Scotland. These three banks were recently appointed by the government as advisors to Sri Lanka’s efforts to improving its sovereign rating to investment grade. Their term as advisors would last four years. Ten international investment banks had vied for this position.

According to Bloomberg investors were seen to be bullish on Sri Lanka’s next debt issue.

"Demand for bonds from countries like Sri Lanka is still high," said Milan-based Francesca Di Cesare, who helps oversee $10 billion of assets including 2015 Sri Lankan debt at Aletti Gestielle SGR SpA, as quoted by Bloomberg newswire, "Investors struggle to find this paper."

Bloomberg also quoted a portfolio manager Jetro Siekkinen, who oversees $7.8 billion of assets including Sri Lankan 2015 debt at Aktia Asset Management in Helsinki who said, "Demand will be strong and I will definitely be adding on to my holding. The sales should be successful in this kind of yield-hungry environment," he told Bloomberg.

The Central Bank is observing radio silence as per US Securities and Exchange Control laws and officials are not permitted to comment on the upcoming issue, let alone announce its issue date, until and after the offer is closed.

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