Sri Lankan equities have dropped disproportionately due to global conflict despite the island’s underlying economic stability.
Market analysts and investment fund managers in Colombo confirmed that local stocks have fallen by roughly 17 percent in US dollar terms this year as Middle East tensions unsettle international investors.
The sharp decline comes alongside a weakening rupee, even though Sri Lanka’s economic fundamentals have improved significantly since the 2022 financial crisis.
Fund managers pointed out that regional peers such as Pakistan have experienced far smaller drops of around 1 percent over the same timeframe.
AFC Asia Frontier Fund manager Ruchir Desai said that external geopolitical headwinds rather than internal structural flaws are driving the current downturn.
He noted that lower inflation and increased political stability would have pushed Sri Lankan shares upward had foreign conflicts not intervened.
Meanwhile, Capital Alliance Group chief executive Kanishke Mannakkara said that local assets are now trading near cyclical lows, creating attractive entry points for investors across stock and fixed-income markets.
He emphasised that current market valuations offer viable long-term opportunities as interest rates adjust.
Both financial experts concluded that local markets are poised for a strong recovery once Middle East instability cools and international risk sentiment normalises.
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