COLOMBO: Fitch Ratings said it was confirming a ‘B+f’ rating of Ceylon Dollar Bond fund which invests in dollar denominated government, bank and corporate debt. Fitch Ratings-London/Colombo-28 February 2017: Fitch Ratings has affirmed Ceylon Dollar Bond Fund’s International Fund Credit Quality Rating at ‘B+f’ and Fund Market Risk Sensitivity Rating at ‘S5’. The fund is managed by Ceylon Asset Management (CAM).
The affirmation of the ‘B+f’ International Fund Credit Quality Rating is driven by the weighted-average rating factor (WARF), the fund’s rating distribution and its investment guidelines. The fund has a limited investment space, as it only invests in US dollar bonds issued by the government of Sri Lanka (B+/Stable), licensed banks in Sri Lanka and Sri Lankan corporates that are rated by an international rating agency. This restricts potential investments to 15 listed issuances totalling around USD10bn as well as Sri Lanka Development Bonds (SLDBs) of around USD4bn. SLDBs are unlisted, unrated US dollar bonds issued by the government domestically. The affirmation of the Fund Market Risk Sensitivity Rating is driven by the market risk factor as well as Fitch’s consideration of qualitative factors, such as the fund manager’s ability to extend duration above current levels if it sees fit. The rating also reflects Fitch’s conservative assumptions about potential volatility in emerging market debt.
The fund’s portfolio comprises of four bonds – all rated ‘B+’ – that have been issued by the entities detailed above and is mainly exposed directly to government and to government-guaranteed debt. The fund currently has a large cash balance (19% of portfolio), which the manager expects to invest in the near-term and maintain around 5%-6% of the portfolio in short term US-dollar fixed deposits in a licensed commercial bank in Sri Lanka.
