• AFC notes strong economic and political stability makes Sri Lanka attractive
• Lower-than-regional tariff makes stock market dip a potential buying opportunity

Sri Lanka remains one of the top country bets despite the recent announcement of a 30% tariff due to its strong economic and political stability, Asia Frontier Capital said.

Asia Frontier Fund Manager Ruchir Desai told Bloomberg that Sri Lanka’s competitive position, particularly in garments and textiles, remains relatively stable compared to regional peers, as the tariff is still lower than in many neighbouring countries.

He said that the robust economic and political stability that the country has achieved over the past year has provided Sri Lanka with a sound platform for stable economic growth over the next few years.

“We would view any negative reaction in the stock market because of this tariff news as a buying opportunity as valuations in Sri Lanka are still below pre-crisis levels even though the country has attained both economic and political stability,” he said.

US President Donald Trump imposed a 30% levy on Sri Lanka this week. The country plans to continue talks with Washington for further reduction in tariffs.

According to Sri Lankan authorities, the average tariff on apparel exports to the US is set to be increased to 42%, with the addition of the 30% tariff from 1 August.

Moreover, Desai does not expect the stock market or the currency to take this news very negatively since the 30% tariff is still better than most garment and textile exporting countries in the region, and is also a relatively big decline from the initial 44%.

The AFC Asia Frontier Fund, which Desai helps co-manage, is among the top-performing, beating 97% of peers in the past five years.