Investors now looking at alternative asset classes – Market analysts

By Jithendra Antonio

Though Colombo Stock Exchange had been a top performer during 2009 and 2010, it has failed to maintain its momentum mainly due to the regulator’s interventions, analysts said.

Analysts also opine that funds available to invest in the local capital market have been diverted to numerous other investment categories.

Speaking on market movements and investor sentiments, Head of Frontier Capital Partners Nishan Sumanadeera said, Colombo stock market investors are now looking at alternative asset classes to invest and diversify the capital gains they made from the CSE, as there are investment opportunities due to the booming economy.

“Frequent regulatory changes had also made investors move away from the market and recent IPO’s had taken away large chunks of funds from the market” he pointed out, adding that people are in the lookout for more investment opportunities such as green field projects and direct venture capital investments.

Another investment analyst from the unit trust industry noted that several licensed commercial banks including Commercial, HNB and Seylan which had announced rights issues, will also take away nearly Rs.26 billion from available funds that are to be absorbed by Colombo’s hot stocks.

He said, although the same strong run had been witnessed in high value counters such John Keells (JKH), Carsons (CARS), credit supply had been only facilitated to the retail stocks in the Colombo bourse.

“I think, though they have extended the credit clearing period, the same settlement cycle had been there as rules had directed brokers to limit providing credit facilities beyond the settlement day (after three days of the original transaction date).”

He also said it is surprising to note that several brokers had and are still facilitating negative net worth investors by extending credit facilities further .

 “However overall credit exposure had come down from nearly Rs.6 billion” he pointed out.

Although regulator has extended clearing off broker provided credit till end of this year, market is unable to move forward, as small time investors have now become poor after a thrashing by regulator rules since last October, an analyst said.

Yesterday, the Colombo’s All Share Price Index (ASPI) rose slightly and closed at 7,446.69 points while the Milanka Price Index (MPI) closed at 6,878.45 points recording a turnover of Rs.3.83 billion. There were 95 listed gainers and 103 listed losers during the day.

source - www.dailymirror.lk