Post-election bull-run in stocks delivers outsize Rs.60bn in MTM gains to EPF: Almas Equities

The post-election bull-run in equities last year was estimated to have given an outsize boost to the value of the equities component of Employees Provident Fund (EPF) portfolio, lifting the total fund value which is disproportionately dominated by the government securities, according to Almas Equities (Pvt) Limited.

A breakdown of the investment portfolio of the EPF, the largest superannuation fund in Sri Lanka with assets under management exceeding Rs.3.8 trillion as of 2023, showed only less than 3.0 percent is invested in listed and unlisted equities.

A further breakdown of the listed equities portfolio by Almas Equities, a stock brokerage firm operating out of Colombo estimated a marked-to-market (MTM) gain of Rs.60.05 billion between September and December 2024, lifting the market value to Rs.148.72 billion by December 31, 2024.  

However, it said this was under the assumption that there had been no changes in the portfolio between the three months.

EPF’s equities portfolio consists of 66 listed stocks, of which 50 have gained in their share price during this period, total gains of which have been offset to a degree by the balance 16 entities whose share prices have declined.
Sri Lanka’s stocks have delivered an eye-popping 49 percent gains in its broader All Share Price Index in 2024 on top of a 25 percent gain in 2023, delivering back-to-back jumps of 25 percent of more gains for two consecutive years.

Much of the gains in 2024 came in the aftermath of the Presidential elections on September 21, 2024 which handed a resounding victory to the National People’s Power, ending the months-long political uncertainty which gripped the market’s ascent since the first four months of last year.   

Provision deal between the bond holders and the government announced a couple of days before the Presidential elections, effectively brought the bond restructuring to a successful conclusion, taking away another remaining overhang on the equities, in particular the banking sector stocks due to its outsize exposure to bonds among the local investors.

EPF’s exposure to the banks already remains at high levels and the banks’ stocks have delivered robust price gains, driving the gains in the overall stock market.

Meanwhile lower interest rates also helped continued ascent in the stock values as the lower borrowing costs enhance the future value of the cash flows generated by the companies. 

With stocks up by another 6.0 percent or more so far this year, the investors and the analysts expect the equities to deliver another year of double digit gains supported mainly by the robust earnings from the companies, helped by lower interest rates and continuous growth in the economy.  

This could further enhance the value of the equities component of the total investment portfolio of the EPF, generating more returns for the fund participants.

The Central Bank at its unveiling of its policies for 2025 and beyond held at the beginning of the year said it would expect to diversify EPF’s investment portfolio to provide secure and stable returns for its members. 

Source : Daily Mirror