The Director General of the capital market watchdog, the Securities and Exchange Commission of Sri Lanka (SEC), Malik Cader says 2010 was a challenging year despite the tremendous boom experienced in the market.
"2010 was a challenging year for the capital market of Sri Lanka. Backed by peace and stability in the country the CSE established new records, demonstrated unprecedented turnover levels and for the second consecutive year was ranked the second best performing stock market in the world. In the face of challenges and uncertainties experienced in global stock markets, our market remained resilient and was able to absorb sudden shocks and fluctuations as a result of the timely measures taken by SEC during the year. A major thrust of our work during the year was to provide a regulatory backdrop which is fair, efficient and conducive to market development," Cader said in the SEC’s annual report released earlier this week.
"Exceptional levels of growth posed formidable challenges in terms of maintaining a disciplined and orderly market. The SEC at all times remained vigilant, effectively monitoring trading movements and focusing on policy measures that should be introduced to ensure market integrity. In view of the regulatory challenges and demands of the share market, the SEC took appropriate policy measures, to promote investor confidence.
"In July 2010, the prices in certain stocks began to rise considerably - not owing to fundamental factors but almost due to sheer speculation and ‘overheating’ in the market. This price volatility that existed in the market necessitated us to impose a 10% (up or down) price band on all listed securities. Although the market reacted negatively immediately after imposing the price band, it recovered gradually within a short period of time.
"Prior to imposing the price band (1st January to 4th August 2010) the All Share Price Index (ASPI) grew by 54% and the daily average turnover stood at Rs. 2.0 billion. Despite the price band the ASPI grew at an encouraging 96% and the daily average turnover was Rs. 2.9 billion at the end of the year. The measures taken in a timely manner reflected the vigilance and effective monitoring and thereby helped to enhance the level of Investor confidence whilst adding further liquidity to the market.
"The SEC made a conscious effort to ensure that the regulatory framework in place facilitates market development
and meets the regulatory challenges of the future. During 2010, the SEC critically reviewed the present SEC Act, with the objective of facilitating the regulation of Demutualized exchanges, facilitating the establishment of a Central Counter Party, Introducing civil sanctions and administrative sanctions to deal with capital market offenders and introducing other provisions to strengthen Investor protection.
New market participants…
"During 2010, the SEC granted licences to 5 stock brokers, 5 investment managers, 9 margin providers, 3 underwriters and 1 stock dealer. They have already commenced operations quite successfully. The SEC is confident that the entry of new market participants will provide greater access and services to investors," Cader said.
source - www.island.lk
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