The story of Sri Lanka over the past few decades was the war that raged between Tamil separatists and the Sinhalese government. Ever since the war ended last year, foreign investment has been surging in, mostly to equities listed on the countries small but thriving stock exchange. The Colombo All-Shares Index has risen 50% in 2010, the second most of any stock market globally. It rose 100% last year. Investors, most of who are from China, remain bullish and confident in light of government-led market reforms, infrastructure spending in war torn areas, and the presence of the IMF in the country.
Arpitha Bykere, Senior Research Analyst at Roubini Global Economics, is optimistic about Sri Lanka's economy but addressed a few issues that the post-war boom leaves unresolved. "Foreign investment needs to go into the real economy" rather than the relatively small stock exchange, she said. "It all depends on how soon the government can liberalize certain sectors." One sector Bykere likes is textiles, where as she pointed out costs are still low, even in comparison with other markets in Asia.
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