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| Sunday, 27 November 2005 |
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Bourse will react to new situation by Elmo Leonard The Colombo stock market has been dipping and climbing, dropping and attempting to claw itself up, beginning a few days before the presidential elections, on Thursday, November 17 and continued to the end of last week. Emotions are your worst enemy in the stockmarket, according to Don Hays. There has been a huge growth in the volume of securities, traded on exchanges around the world. Volumes generally rise most strongly during bull markets, when share prices are rising strongly, according to a reference book, Essential Finance put out by The Economist, and meant for sale in India, Pakistan, Bangladesh, Sri Lanka and Nepal. Today, the sentiment in the Colombo Stock Exchange (CSE) is different. A bear market is one that is experiencing a sustained fall in the prices of securities; the opposite of the bull market. Markets anticipate events in the real economy, so a bear market usually occurs when investors scent the onset of a prolonged downturn in economic activity. Likewise, share prices may begin to rise again even though the economy remains depressed, because the market detects signs of an eventual recovery. Chairman CSE, Eraj Wijesinghe said he saw the stock exchange as a place where there is, first the man who wants to raise money, the second, the investor and third, the player. Some players are highly speculative, rendering the market dramatically active. It is such activity which draws people to the exchange. Wijesinghe says that people must look at a stock exchange in terms of investment for savings, and those who participate must look at the various fundamentals that go towards making the right decisions. In Sri Lanka we have in the past few years developed a large base and that is why the market is nearly 80 percent local investor driven. We have also seen that with the uncertainties in the last few years, as the ethnic issues, political uncertainties and the tsunami - the market had wild fluctuations. This is an underlying strength we have in the market, Wijesinghe said. The behaviour of the market in the past few weeks prior and post presidential elections is natural and reflects the sentiments of the investors. There is no doubt that in the next few weeks the market would react according to the new situation, in relation to the decisions taken by the new President Mahinda Rajapakse and his cabinet. The new budget would also naturally have an impact. All in all, what we see is that an investor must take a view of what he/she perceives would happen in the future and then participate in the market, Wijesinghe said. Immediately after the presidential election there was a 14 percent drop in the market. Then, a slight tracing of 3 to 4 percent, but, the situation is now stagnant and people are watching to see the next moves by the government, Wijesinghe said. When will the market bottom? Frankly, when investors stop asking the question. - Richard Bernstein. |
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