Stock Exchange’s Price bands foil capital market bubble
By Lalin FERNANDOPULLE
The Securities and Exchange Commission of Sri Lanka (SEC) will review
price curbs imposed on sto ck prices of the Colombo Stock Market (CSE),
said a SEC source on Tuesday.
He said the SEC will consider whether the price bands could be
applied to the entire market or introduce multiple bands in stock
prices. “The SEC had to impose the price bands on stock prices to avert
a capital market bubble that would have eventually led to economic
mayhem in the country”, he said.
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A reader’s
observation ...
MARKET ON A BULL RUN DESPITE
HINDRANCES!! However, as the controversy rages about the
recent 10 per cent rules and the suspension of certain
companies, all those concerned, even the stock brokers have
forgotten about the absurd DAY ORDERS ONLY rule.
This is in place of the GTC
orders i.e. five days orders. Now this creates five times of
the workload for the Stock Exchange and the brokers. To make
it clearer still when a client gives a GTC order it lasts
five days. But now under this rule, an order has to be keyed
in five days instead of in one day.
Now why is the CSE trying to
increase its workload? Is it to harass the investing public? |
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Trading in progress at the Colombo
Stock Exchange |
Share prices surged far beyond the real value following bullish
trading at the CSE, a phenomenon observed in recent months. The price
restrictions led to a crisis in the CSE followed by protests from
brokers and capital market participants.
Director Financial Service Academy, SEC, Dr. Dissa Bandara said the
price curbs were criticised due to lack of awareness among stock brokers
and investors.
“The price caps imposed by the SEC on share prices have served the
purpose and market participants will understand that unnecessary
anticipation has no value”, he said.
Dr. Bandara said the intervention by the SEC was timely as it helped
avert a major catastrophe in the capital market which would have led to
an economic crisis.
“The price bands will help streamline trading at the CSE and place
the share market on a solid growth path. The CSE recorded an all-time
high on Tuesday”, he said. The All Share Price Index was up 114.50
points (2.21%) against a 15.09 points gained by the Milanka with 103
gainers outpacing 70 losers.
“The growth of the Sri Lankan capital market has been hampered due to
the slow response rate among investors.Investors need to be trained to
make informed decisions”, Dr. Bandara said.
Capital Market analysts said the share prices shot up to
unprecedented levels due to either manipulation or unnecessary
speculation.
Senior banker and capital market analyst Mangala Boyagoda said there
should be measures in the CSE to penalise those who take undue advantage
but it should not be to penalise the entire market.
“CSE should encourage more companies to list in the stock exchange
and ensure that they follow regulations”, he said.
Rakshitha Perera of Bartleet Stock Brokers Ltd. said while the price
curbs limited the upside potential of the market it also helps investors
to pause and check the fundamentals before buying stocks. Investors
should buy stocks based on the value of the company. They should look
into the speculative counters and inquire. “Could prices surge without
an increase in the company’s earnings”. SEC sources said that market
manipulation is an offence and added that steps will be taken to trace
such attempts and penalise offenders. The prime objectives of the SEC
are to maintain an orderly and fair capital market and to protect
investors.The share market operates based on the sentiments of the
investors. |
