Dec 30, 2010 (LBO) - Sri Lankan stocks closed lower Thursday after recovering from sharp losses in early trade on panic selling by investors confused over a regulator order for brokers to force-sell equities of buyers in default, brokers said.
The All Share Price Index closed at 6,614.13, down 0.49 percent (32.79 points) while the more liquid Milanka index dipped 0.34 percent (24.15 points) to close at 7,050.68, according to stock exchange provisional figures.
Turnover was two billion rupees.
"The All Share Price Index dropped as much as 100 points in the first two hours of trading reacting adversely to the Securities Exchange Commission provision of force-selling of portfolios remaining unpaid for longer than T+5," a broker said.
The ASI plunged 116 points (-1.7 percent) and Milanka 101 points (-1.4 percent) in mid-morning trade after the order on forced-selling by the market regulator, SEC, at the start of the day's trading, before recovering, brokers said.
"Panic driven retailers drove the market down initially but the patient value stock collectors benefitted from today’s index swing. This continues to show CSE’s over dependence on credit," Nikita Tissera of SC Securities said.
The SEC issuing a statement said it granted stock brokers two extra days from January 01, 2011 to force-sell securities of buyers who are in default of the usual settlement period of three days to recover their funds.
The statement said stockbrokers will be granted an additional two days (T+5) to force-sell securities of buyers which are in default of settlement by T+3 in order to recover the monies owed to them by defaulting clients.
SEC officials clarified the statement saying investors have time till June 30, 2011 to clear existing portfolios acquired through credit from brokers and need not be in a hurry to liquidate positions.
The SEC directive giving brokers two extra days to force-sell securities of buyers in default of the usual settlement period of T+3 applies to new trades after January 03.
Bairaha Farms closed at 303.40, up 13.20 with over 500,000 shares traded and Three Acre Farms closed at 88.80, up 4.10 with over a million shares done.
Dialog Axiata stocks were heavily traded and it closed at 11.80, down 0.20 cents with over 7.2 million shares changing hands. Five million shares crossed in a private deal at 12.00 rupees.
Sampath Bank closed at 269.90, down 0.80 cents while DFCC closed at 200.00, down 1.20 rupees. Commercial bank closed at 260.50, down 2.00 rupees with 1.1 million shares done.
source - www.lbo.lk
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