Good news for investors is starting to build in war-torn Sri Lanka, believes Amid Wadhwaney, portfolio manager and general partner of the Carl Marks Global Value Fund of Carl Marks & Co., New York.
In fact, he's substantially betting on it.
The Carl Marks Global fund - which can invest anywhere in the world - now has 35% in Sri Lanka, up from 19.7% at the end of last year. In comparison, his fund has no holdings in Southeast Asia and nothing even in Europe.
But why is Mr. Wadhwaney so intensely bullish on Sri Lanka? Because, he says, economics and politics are finally turning favorable.
On the political front, a bill is expected to be introduced in Sri Lanka's parliament later this year that could lead to a halt in the country's civil war. Passage of the bill would allow the government to negotiate with the rebel Tamil Liberation Tigers, and ultimately, if approved in a referendum, create a semi-autonomous zone for the Tamil faction.
At the same time, interest rates have fallen substantially. And, ample rains this year aided the important agricultural sector and ensured hydroelectric power generation would not be a problem again this year.
In addition, a big privatization program under way could lead to a doubling of Sri Lanka's $2.6 billion market capitalization in the next 12 to 18 months, said Mr. Wadhwaney.
Although Sri Lanka's stock market already gained 25.9% in dollar terms this year through Sept. 4, Mr. Wadhwaney sees more room for price appreciation. He recommends the brokerage and hotel sectors - hotels because tourism already has started picking up in "this stunningly beautiful country," he said.