Funds of Franklin Templeton held around 290 billion rupees in government securities, out of 304 billion rupees of securities available to foreign investors, according to published data.
“The exposure to a single party is more than 95 percent, raising questions about risk management capacity of the central bank,” a market analyst said.
The government has proposed to reduce the amount of treasury bills and bonds available to foreign investors to 10 percent from 12.5 percent of total outstanding, in 2016, as per the budget proposals presented by the finance minister last month.
This proposal is likely motivated by the volatility Sri Lanka experienced in foreign fund flows this year, especially in foreign ownership in government securties.
In some cases, the Franklin Templeton fund owns 59 percent of a particular bond. In the case of the January 5, 2021 bond, the fund holds 44 billion rupees worth out of the 75.7 billion rupees outstanding and available to both local and foreign investors.
“We should look at diversifying and bringing this down to 10 to 15 percent to a single party, which means encouraging other foreign investors,” the analyst said.
Sri Lanka’s 10-year treasury bonds currently offer around 9.3 percent. In comparison, US 10-year treasuries yield 2.2 percent.
“This offers excellent profit opportunities, with over 100 percent return available through trading in Sri Lanka bonds,” the analyst said.
“We also need to be nice to Mark Mobius,” the analyst added, referring to the fund manager of emerging market funds of Franklin Templeton.
Sri Lanka has experienced a balance of payments deficit this year and the rupee has depreciated against the dollar after foreign investors sold around one billion dollars worth of bonds in the last 12 months. This was tied to perceptions of uncertainty in international markets.
The island raised 1.5 billion dollars through an sovereign bond in October at 6.85 percent which is expected to have pushed up foreign reserves to 8 billion dollars in early November.
Franklin Templeton Investments has assets under management of around 800 billion dollars in over 150 countries.(LBO)