Stock
market likened to a casino
While stock prices soared on the Colombo bourse last week, an equities
analyst warned that there were serious underlying problems that
can bring the whole market down.
"Internal
ethical issues, insider dealing, front running and kick backs, crowd
the market," Amal Sanderatne, the CEO of Frontier Research,
said.
"We will
soon see the repercussions of the lack self-regulation among participants,"
he told a seminar conducted by the Sri Lanka Economic Association.
"This pattern cannot be sustained. The equity market is like
a casino and has got worse."
Sanderatne said
he takes a more cautious view of the market. "Our equity market
does not have the human capital resources to meet the rest of the
conditions of the Regaining Sri Lanka document. There is a shortage
of qualified people, and investing in human capital is absolutely
critical."
Sanderatne
also said, "The advice given to the investors is of poor quality
which has resulted in speculative investment decisions." He
said he strongly believed that during the past 10 -15 years the
level professionalism has lost its mark in the equity market.
"Nothing
much is being done to develop the equity market" he said adding
that the amount spent on research is less than five percent. "The
Sri Lankan equity market being a hub in this region may not be possible
anytime soon," he added.
The Colombo Stock Exchange announced the All Share Price Index (ASPI)
passed the 1,400-point level and reached its highest ever point
on Thursday while the Milanka Price Index (MPI) crossed the 2,500-point
level for the first time in its history.
The ASPI closed
at 1,423.5 and the MPI closed at 2,568.8. The ASPI moved up by 35.4
points (2.5 percent) for the day and the MPI moved up by 91.0 points
(3.6 percent), making it the first occasion when both indices reached
an all-time high on the same day.
The Rs. 1.3
billion turnover on Thursday was the fourth highest daily turnover
in the CSE's history. Total turnover so far for the whole year reached
Rs. 60 billion. The average daily turnover of the CSE now stands
at Rs 308.1 million compared with an average daily turnover of Rs
147 million in 1994.
The ASPI has
recorded an unprecedented growth of 74.6 percent for the year, making
the CSE one of the best performing stock markets in the world. This
is the highest growth of the ASPI for a given year, surpassing the
61 percent growth recorded in 1993. The MPI has recorded a growth
of 86.8 percent for the year. |