Sep 08, 2011 (LBO) - One of the biggest players in Sri Lanka's stock market has poured scorn on its stock brokers, saying they don't give proper advice, cannot be trusted and are ignored by most investors.
"In Sri Lanka nobody trusts or believes brokers," declared Nimal Perera, deputy chairman of Vallibel Finance and a director of a host of other firms and investment advisor to Dhammika Perera, a big investor in the Colombo bourse.
"That's because our stock brokers do not giving proper advice and they don’t have the knowledge to do so."
Nimal Perera and Dhammika Perera, who are not related, have been behind some of the biggest deals on the bourse in recent years and acquired control of several firms, some of which are being brought under Vallibel One, a holding company.
Nimal Perera spoke as a member of the panel at the 8th LBR LBO CFO FORUM which had as its theme 'CSE: A Blood Bath or a Gold Mine', held on Tuesday at Ceylon Continental Hotel with a large gathering of corporate executives.
"I never trust brokers," Perera said. "I don’t take their advice. They are not capable of advising."
He said most investors on the Colombo Stock Exchange don’t read research reports of stock brokers.
"I have never read any research," Perera said. "I'm the biggest online trader in Sri Lanka. I don’t get brokers' advice."
About 70 percent of investors on the CSE trade on their own and not on the advice of stock brokers, he said.
"Ninety-five percent of stock brokers are also investors," he added. "When they invest, they can't advice small investors not to buy."
Perera likened the CSE to a casino, a view shared by some analysts.
Sri Lanka's market regulators recently expressed concern and acted to curb extraordinary price volatility and speculation on the CSE by imposing curbs on buying on credit and price bands.
The regulators acted after the stock market shot up to record highs, making it Asia's best-performing bourse for two successive years, following the end of the island's 30-year ethnic war in May 2009.
"In Sri Lanka it's like gambling," Perera told the LBR LBO CFO FORUM. "People are making money and people are losing money.
"Shares are shares - there are no dud shares. It's like betting - if you win, you win; if you lose, you lose."
Stocks however need not be a zero-sum game as over time indices move up.
source - www.lbo.lk
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