Sri Lanka’s EPF stock portfolio soars in Dec, outperforms market

ECONOMYNEXT- The listed equities portfolio of the Employees’ Provident Fund (EPF), a superannuation fund of private sector worker savings, has grown 10.03 percent to 66.3 billion rupees in the December quarter despite a passive management.

The only movements in the portfolio during the quarter were 362.8 million rupees in Seylan Bank voting and non-voting shares through a rights issue. The Laugfs Power shares moved from the unlisted equities to the listed portfolio.

Even discounting for these two movements, the EPF portfolio had grown 9.4 percent during the quarter, outperforming the market.

The All Share Price Index of the Colombo Stock Exchange had grown 7.28 percent during the same period.

The stock market continued its positive momentum experienced since May during the final quarter of 2019, buoyed by the Presidential elections and wide tax cuts which followed, especially for the construction industry.

The LOLC Holdings Plc investments by the EPF added 810.73 million rupees to the portfolio, the highest in absolute terms, with a growth of 43 percent.

The stock price of LOLC, a non-bank financial group, boomed in December following the firm divesting its Cambodian microfinance subsidiary PRASAC to a Korean bank for 603 million US dollars.

The highest gain in the portfolio came from ACL Cables Plc, a construction material manufacturer, appreciating 50.92 percent or 114.6 million rupees.

The fund’s largest investment is in Commercial Bank (8.79 billion rupees), and the counter fell 3.16 percent during the quarter, impairing 286.9 million rupees.

Meanwhile the second largest investment, in Sampath Bank, gained 6.14 percent, adding 357.6 million rupees and the third largest Hatton National Bank Plc grew 11.89 percent, adding another 715.8 million rupees to the portfolio.

Although the portfolio gained in December, it is still lower than the 83.7 billion rupees in investments made when initially buying shares.

Most of the shares were bought pre-2011, when the EPF stopped stock market investments following allegations of third party dealers pumping stocks and dumping to the superannuation fund.

The EPF re-entered the market in May with purchases in telco Dialog Axiata Plc and the knit fabric manufacturer Teejay Lanka Plc , giving a boost to a stock market which was reeling from the Easter Sunday terror attacks.

The then governor Indrajit Coomaraswamy had said that the EPF did not divest loss-making stocks as the market multiples were low.

Impairment losses totaling billions of rupees have been made, with the largest losses made on Carson Cumberbatch Plc, Bukit Darah Plc and Colombo Dockyard Plc.

The EPF had not sold such stock in the December quarter as there were no market participants who were willing to buy large parcels, Central Bank Deputy Governor H. A. Karunaratne said on Thursday.

The fund has set a target of doubling its investments in stocks to 6 percent of its total assets, as government requirements for debt funding falls in the future.

Around 93 percent of EPF investments are in Treasury bonds.(Colombo/Feb03/2020)