Nov 29, 2010 (LBO) - Sri Lanka's Securities and Exchange Commission has extended a deadline to cut credit given by brokers to their clients by six months to June 2011, with half the credit to be cut down by March 2011.
The SEC said it had decided to extend the December deadline following representations from market participants.
Sri Lanka's stocks had gained 120 percent by September partly helped by margin buying and also purchases by a state run pension fund.
The SEC asked brokers who had given credit to clients to cut their positions by December 2010 and transfer remaining positions to licensed margin providers.
Unless corrected speculative stock bubbles can crash steeply having economy-wide implications.
Sri Lanka's stocks traded at over 28 times historic profits at one time, one of the highest in the region.
Analysts say stocks will stabilize one corporate profits catch up.
Lanka Securities, a brokerage said with 92 percent of profits of listed firms out in the September quarter total profits were up 169 percent to 34.5 billion rupees, up from 12.8 billion rupees a year earlier.
A recent budget has also cut corporate profits, but there were other disturbing moves including a Zimbabwe style warning to plantation firms that any uncultivated land will be distributed among the landless.
source - www.lbo.lk
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