Rush to invest in Colombo bourse
The stock market is on fire, fuelled by investors’ giddy hope about cheap valuations and a fair amount of FOMO (fear of missing out) on this party.
The sharp sell-off by foreigners in mid May that saw local HNWIs (high networth investors) and retailers scrambling to collect stocks at a decade old cheap prices - so cheap, that all dormant Central Depository System (CDS) accounts at the Colombo Stock Exchange (CSE) since January last year, have been reactivated.
The Business Times found out that 2,080 CDS accounts which have remained inactive since January 1, 2019 have been reactivated after May 11. “Many, who have had accounts that were not active, were reactivating their accounts,” Dumith Fernando, Chairman, and Asia Securities told the Business Times noting that the many that they saw were returnees to the market.
Dimantha Mathew, Head of Research at First Capital, said that new accounts – as much as 705 which were opened by local investors May 11 to May 27 – were mostly by doctors, accountants, salaried employees and lawyers. He said that many Sri Lankans working abroad also opened accounts.
Brokers noted that some high networth individuals also opened accounts.
After recording negative returns on May 11 and 12, when reopening the market for trading following an extended closure due to the COVID-19 pandemic, the All Share Price Index and the S&P SL20 Index have made consistent gains on trading sessions that have followed. CSE’s S&P SL20 index during the week starting May 18, recorded two new all-highs for the percentage gain in the index within a day.
Mr. Fernando noted that pent-up selling rush by the foreigners has mostly gone now. He expected net foray selling to continue but not at the earlier prices or the sizes that they were willing to sell in mid May. “There will not be any indiscriminate selling,” Mr. Fernando noted.
However, locals who entered the stock market did so for short-term gains, some brokers pointed out.