Thursday, August 11, 2011

Bourse anxious on broker-credit announcement

The Colombo bourse was again up yesterday in expectation of good news that regulators were relaxing their stance on the much argued broker credit issue.

During the Commission meeting which went past 8 pm yesterday, the proposals put forward by Colombo Stock Brokers Association on the broker-credit matter were believed to have discussed and the Securities and Exchange Commission (SEC) is expected to come out with an announcement shortly.

The broker credit saga in the Colombo bourse has quite a long history. It was in November last year the SEC asked the brokers to end client exposure completely on December 31, 2010 and  banned all stock broking firms from providing credit to customers and encouraged banks to provide margins.

The brokers lobbied against the decision and the regulator extended the deadline to the June 30, 2011 adding that by March 31 the brokers should reduce client exposures to 50 percent.

But again in May, even before the June deadline that was set, the market regulator rewarded the brokers with another extension of the deadline on “improved market conditions”, saying that a “majority” of stock broking firms have cut exposure to debtors to 50 percent by March 31.

This extension, which was done due to “representations made by market participants” gave time to brokers to cut 25 percent of exposures to debtors— out of the balance 50 percent— on September 30 and the next 25 percent on December 31, 2011.

In a recent letter to the Securities and Exchange Commission, brokers requested the removal of T+5 forced selling rule and to allow all brokers to lend their net capital which is in excess of minimum net capital requirement of Rs. 35 million.

They also had requested to allow all brokers to transfer the excess net capital in the broking company to the wholly owned margin trading company, licensed and regulated by the SEC, without deducting from the net capital.

Brokers also noted that to the best of their knowledge, most brokering firms presently have proper systems and procedures in place to monitor debtors and had expressed glimpse of hope for a favorable decision speedily, to avert a continuous decline in the market.

property rally continues

The All Share Index closed at 6,819.90, up 69.71 points (+1.03%) while liquid Milaka Price Index closed at 6,143.20 up 35.38 points (+0.58%) with the property sector dominating the market for the second day.

East West properties Plc (EAST) was the top contributor to the turnover at Rs. 258.4 million with heavy trading. EAST continued its rally today where the counter ended in the upper band with heavy buying pressure. EAST closed at Rs.38.10, up Rs.3.40 (+9.80%).

And also Seylan Development Plc (Rs.254.1mn) and Colombo Land & Development Plc (Rs.117.2mn) made notable contributions to the turnover.

 In addition Overseas Reality Plc, Laxapana Batteries Plc and Environmental resources Plc demonstrated active trading.

 Foreign participation accounted to 9.4% of the total market activity. At the end of the day foreign investors were the net sellers with a net foreign outflow of Rs.210.3 million.

source - www.dailymirror.lk

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