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Wednesday, June 22, 2011

Foreigners sell over Rs.26 billion in 2010

By Jithendra Antonio

A net total outflow of foreign funds worth Rs.26.3 billion had taken place for the year 2010, in once best performed Colombo Stock Exchange, the latest annual report of the Securities and Exchange Commission outlines.

“The total outflow of foreign funds for the year was Rs. 26.3 billion, most of it is believed to be due to profit taking as a result of the prevailing rally in the CSE” stock market watchdog SEC says in its operational review adding that some foreign investors may have considered the Price to forward earnings ratio (P/E) of 25 times relatively expensive for an emerging market such as Colombo Stock Exchange.

While Sri Lanka’s market watchdog at all times remained vigilant, effectively monitoring trading movements and focusing on policy measures that should be introduced to ensure market integrity, foreigners were net sellers in the Colombo Stock Market in the year 2010.

The report further outlines that average daily foreign purchases stood at Rs.388.7 million whilst sales stood at Rs.499.5 million, generating a net daily outflow of foreign funds worth approximately Rs.110.8 million.

Meanwhile SEC Director General Malik Cader stressed that in July 2010, prices of 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,” Malik Cader pointed out adding that although the market reacted negatively immediately after imposing the price band, it recovered gradually within a short period of time.

According to Cader, Prior to imposing the price band from January 1 to
August 4 (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,” Cader notes adding that 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.

Almost half the way in 2011, as at June 20, Colombo Stock Market data showed that market capitalization at Rs.2.4 trillion and year-to-date performance at 6.1%.

source - www.dailymirror.lk