Capital market: LKR volatility, top worry for foreign investors

Though Sri Lanka’s capital market presents itself as an attractive proposition through its robust regulatory frameworks, and story of economic resilience in the past five years, the volatility of the Sri Lankan Rupee (LKR) remains foremost in hindering confidence in foreign investment, ACAP Stock Brokers (Pvt.) Ltd. Chairperson Stefan Abeysinghe said yesterday (5), speaking at an APAC Stock Brokers event held in Colombo.

“The biggest worry about the capital market is the currency. One thing with Sri Lanka is that it is on the map. The tourism pitch helps. The hard ones to handle are the currency,” Abeysinghe said, speaking on attracting foreign investment into Sri Lanka by way of its capital market.

Though LKR experienced relative stability in early 2026, as gross official reserves crossed $ 7 billion by the end of February, supported by high worker remittances, tourism earnings, and net foreign exchange purchases by the Central Bank of Sri Lanka – the currency began facing moderate depreciation pressure within the end of the same month, in line with the geopolitical tensions in the Middle East. 

Within March of 2026 alone, the year-to-date depreciation of the rupee against the US dollar reached 1.6%, and within the next month, the rupee’s year-to-date depreciation against the US dollar was 2.9%. By May however, the rupee has relatively remained steady at around Rs. 319 to Rs. 320. 

“As long as we generate enough USD, from tourism and export services, I think we can manage. In the companies that I have been involved in, we’ve been reasonably successful at investing in private equity projects. Our market value is at 1.55 Book, and our PE is 10.5 to 11 – great value,” Abeysinghe added. 

He further explained that Sri Lanka has an advantage over more mature markets due to its market appeal of being a tourist haven.

“In comparison to other markets we are better. There are massive markets so large with so much built in infrastructure that there is no story. Sri Lanka has a story. We have a great opportunity in tourism. A lot of hotels have been entering into the market. Exports and services are something we can further drive forward with.” 

Source: The morning