US financial crisis unlikely to hit Sri Lanka badly: experts

October 2nd, 2008 - 6:16 pm ICT by IANS  

Colombo, Oct 2 (IANS) The current financial crisis in the US, which has affected several banks and other financial institutions around the world, is unlikely to hit Sri Lanka’s financial market very badly, according to economic experts and professionals in that country.Although Colombo Stock Exchange during the past one week has shown a downward trend due to the global financial crisis, stock brokers here say such changes in the share market were “very common and expectable”.

Senior stock broker of the First Guardian Equities Mohandas Thangarajah said Sri Lanka’s financial market would be affected “only if the foreign investors and fund managers pull out their shares from the stock market here”.

“Though the number of foreign investors is small, it might still hit the financial market here if they decide to pull out their investments. At the moment, we do not see that happening,” Thangarajah said.

He added that current US market crisis, unless recovered forthwith, might inflict some negative impact on Sri Lanka’s apparel and tea industry exports in time to come.

R. Nadarajah, a retired bank executive, said the chances of Sri Lanka getting affected badly due to US financial crisis “are very remote, because we do not depend largely on foreign investments to sustain our economy”.

“There will be some hiccups here and there, but it would not cause major ripples in the financial system here,” Nadarajah told IANS, recalling that Sri Lanka’s tiny economy successfully withstood the Southeast Asian economic crisis of late 1990s.

Noting that the US crisis was causing “ignorable negative impacts” in the stock market during the past one week, he said Sri Lanka’s stock exchange did not function based on fundamentals, “but on daily sentiments”.

“Therefore, the negative behaviour of the Colombo Stock Exchange at the moment is not an unexpected one. It will soon return to normal if the local companies maintain their financial stabilities,” he said.

Nadarajah, however, cautioned that since the US crisis has hit several banks, it might make the people all over the world lose faith in banks, especially in the financially unstable private sector banks.

“If those financially unstable private sector banks could maintain the statutory requirements such as the liquid assets and capital adequacy ratio, then they too can face successfully the global market ups and downs,” he said.

Retired economic professor of the Jaffna University, N. Balakrishnan, said the financial market in Sri Lanka’s economy “is relatively small, so is the impact”.

“Unless the global financial crisis further deepened in future, there was no danger for Sri Lanka. I think we are benefited with being a small country here,” Balakrishnan said.

Tags: , , , , , , , , ,

Posted in South Asia |