Brokers seeking help to stop CSE decline
Sri Lankan stockbrokers are seeking certain concessions and incentives from the capital markets regulator in a bid to put the brakes on the fast deteriorating stock exchange.
In this regard, the Colombo Stockbrokers Association (CSBA) will give their suggestions next week in writing to the Securities and Exchange Commission (SEC) on how to arrest the stock market’s decline, officials said. This came back on an urgent meeting the SEC called last week where the brokers had a discussion with the regulator on the current market status after it suffered major losses amid concerns over the new coronavirus spread.
The proposals include a relaxation in the margin providers’ facility, relaxations in the minimum shareholder funds for brokers and getting state institutions to invest in the Colombo Stock Exchange (CSE) which has been on a massive decline, prompting the CSE officials to impose a circuit break or temporary halt on the market on three occasions last week owing to the S&P Index going below 5 per cent.
It saw trading temporarily suspended thrice for 30 minutes on Tuesday, Thursday and Friday after the S&P SL20 index dropped below 5 per cent. Trading was suspended for the first time in 2008 when the S&P Index fell below 5 per cent. Also on Thursday, Wall Street trading was halted for the second time in a week after the S&P 500 fell 7 per cent within minutes of the market opening.
Local rating agencies said the pandemic as of now hasn’t impacted the country’s sovereign rating but noted that it has affected most of the globe with the US GDP forecasted to fall by 4 per cent in the second quarter and to stagnate in the third. “There’s still so much we don’t know about the coronavirus, which makes the possible economic fallout actually uncertain, for both Sri Lanka and the rest of the world. It is also difficult to totally isolate one factor — in this case, a virus outbreak — from all else happening in the world that can shock the markets or hurt economies,” a rating agency official told the Business Times.
Last week saw growing fears about the COVID-19 pandemic resulting in crash in oil prices with share markets in Europe and Asia also plummeting in one of the worst weeks for stocks since the 2008 financial crisis, analysts said. The CSE has fallen 1,035 points since the start of this year with Rs. 4.4 billion net selling during this period.