The Ceybank Unit Trust, the country’s leading unit trust, has said in a mid-year report that recent military gains in the North "could pave the way to a reduction in hostilities," and held out the hope that investor sentiment could change with investors ready to re-look at opportunities, both direct and via the Colombo Stock Exchange.

"This in turn would benefit your fund and in this context that we have made investments in your fund. We are confident of riding out the short term aberrations to achieve commensurate returns for your investment in the medium and long term," Ceybank’s CEO/Executive Director C. Sathkumara and its General Manager M.T. Perera has said in the report.

The six months under review covering the period April 1 to September 30 had seen the net asset value of the Ceybank Unit depreciating 2.11% but the fund had outperformed both the All Share and Milanka market indices during the period under review.

Ceybank’s total net assets as at September 30 stood at Rs.2.26 billion maintaining market leadership in the unit trust industry.

Rising dividend income had pushed up the fund’s gross income to Rs.44.4 million from Rs.42.2 million a year earlier although net income after tax, was marginally down to Rs.23.6 million from Rs.23.9 million during the comparative period the previous year.

Ceybank had realized capital gains of Rs.103.4 million through the sale of some of its shares despite the market decline during the period under review. This capital gain was Rs.29.1 million over that recorded in the comparative period the previous year.

The market value of the Ceybank’s portfolio was up to Rs.2.26 billion as at September 30 from Rs.2.21 billion at the end of the last financial year on March 31, 2008.

The managers said they were fully invested as at September 30, 2008 but contemplated "maintaining a reasonably high level of equity exposure" in line with the fund’s income and growth objectives.

Such investments would be done by changing asset allocation to investments in short-term fixed income securities to enjoy the benefit of prevailing high interest rates.

The managers said that Ceybank’s investments are diversified across fundamentally strong stocks with a medium to long-term outlook in hotels, telecommunications, manufacturing and plantations.

The managers expected these stocks to perform well in the medium term and add further value to Ceybank units.

Discussing the future outlook, they said that the Lankan economy had generally been resilient but it would not be prudent to place high expectations on short-term economic growth due to the current global financial crisis and its effects on the economy which was expected to grow around 6% in 2009.

"The challenge would be to attract new investments to the country," the managers said. "While 2008 recorded two large investments into SLT and AMW through the stock market, the government has found it increasingly difficult to raise funds internationally, by offering its gilt edge securities."

They made the point that although there will be a positive impact from the declining global crude oil prices, the drop in other commodity prices like tea and rubber are expected to adversely impact the balance of payments.