Monday’s turnover was the lowest in more than three years with investors keeping away from the market due to prevailing sluggish market condition and Tuesday being a Poya holiday. Foreign participation saw an increase from last week.Wednesday saw the market posting a modest turnover of around Rs. 378 million. Bond markets saw most maturity yields edging higher.
As we explained in our previous column, the Colombo bourse sought direction last week as well amidst the Central Bank cutting Sri Lanka’s economic growth projection from 8 percent to 7.2 percent in 2012.
However on Friday the Colombo bourse saw a foreign inflow of about US $ 14 billion as the state controlled Employees’ Provident Fund sold its entire stake in John Keells Holdings; which was over 8 percent; to Khazanah Nasional Berhad, a sovereign wealth fund controlled by the Malaysian government.
The Colombo Bourse was badly seeking direction during the last week, and even during the week before, given uncertaninty prevailing in the country’s macro economic situation as well as the political front. In fact the bourse was heading nowhere and seemed stagnant 5, 400 index level. Those so called high networth individuals (HNWs) and the retailers who had burnt their fingers following the HNWs but never learning a lesson, were also silent.
Although it was a short week with only three market days, it was a devastating one for the Colombo bourse. The main All Share Price Index (ASI) fell 5 per cent week-on-week to crash below 5, 400 points with the developments in the country’s overall economy.
Rising interest rates and uncertainty associated with the LKR triggered panic selling in the bourse, resulting in many small timers losing their hard -earned money.
Now who else is there to blame? Earlier it was the banks which did not lend enough money to the Stock Market. So the Central Bank directed all the commercial banks to remove the 5 percent restriction on margin lending. Then it was the regulatory restrictions on broker-credit. The Securities and Exchange Commission (SEC) last week removed these restrictions and allowed the brokers to lend 3 times of their adjusted capital, increasing the amount of credit in the market by Rs.5 billion. Alas, the market is still in red! Ain’t it a puzzle?
Last week the Colombo bourse gave a display of what the expected relaxation on rules pertaining to broker-credit would look like with the trading of highly speculative warrants of Environmental Resources Investment PLC (ERI). It was rumoured that influential parties wanted to play the ERI warrants and in fact the share became the number one turnover contributor for the last couple days.
The Colombo Stocks Market commenced the New Year 2012 on a lackluster note bringing forward the weak sentiments from the previous year. ASI declined by 143.90 points WoW (-2.37%) and ended at 5,930.52 while sensitive MPI dipped by 146.01 points (-10.31%) to close at 5,083.15. Average daily turnover of the week was Rs.387.5mn.Foreign participation stood at 19.9% of the total market activity and at the end of the week foreign investors were the net sellers with a net foreign outflow of Rs.154.4mn.