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Thursday, August 5, 2010

Lanka stock market & retail traders in panic as controlling body hits ‘directives’ sapping their vital lifelines, Int'l investors stirred

By Joseph Thavaraja

Colombo, 5 August (Asiantribune.com): In a drastic measure to stop share price manipulation in the Colombo Stock Exchange (CSE), Sri Lanka’s Securities and Exchange Commission (SEC), the controlling body of the CSE has slapped two ad hoc measures, but in the process has also driven panic into the market.

The two directives are ‘capping trade price increase at 10%’ and stopping the all forward trading (which are vital) beyond one day!

The investors and brokers are now in panic mode. Some stopped taking new orders until ‘further notice’ but some brokers are too busy tied on their international call lines at this moment (10.30 am local time) as foreign investors, specially short term and day trade- stirred by the directives, began consulting local brokers. Their concern is whether to move their million dollar short term share investments elsewhere—market sources said South East Asian capitals are being considered ‘as preferred’ for the ‘short time retrieve.’

SEC has slapped a new 10% trading band –in that, on a given single day of trading, the price of a share will not be allowed to increase or decrease by more than 10% of previous day’s closing price. It also suspended forward trading that goes beyond the trading day. Thus, any Good Till Date (GTD) and Good Till Cancelled (GTC), which are vital for short term and day traders.

The SEC rules come in the wake of suspension of selected shares from the trading floor from Tuesday 3. SEC halted trading of shares of ERI (GREG.W’s, except GREG.N), Dankotuwa Porcelain (DPL), Blue Diamonds (BLUE), and Touchwood Investments (TWOD) due to unusual increase in their prices from July 29 to August 3 period.

“The 10% band and forward trade stop have cut the oxygen line of day traders and short term traders and retail investors and. This step therefore will be negative on short term international investors who command high volumes” a medium net worth investor who wished to remain anonymous, told AT. “Market manipulation should be stopped, which we agree. But not on 10% level. Realistic levels is 30%-40%” he added saying “Even medium and low volume and retail investors are in trouble anyway since only the high net worth investors can get through directives such as this since they have longer sustaining powers which retail investors do not”.

source - Asian Tribune