Stockmarket not so rosy

Whatever the mood of the country, be it rosy or gloomy, the press has no end to sunshine stories on their front pages. One sure source of their sunshine stories in the recent past has been the Colombo Stock Exchange (CSE) with its daily rising indices.

This is no doubt news and in fact happy news for a mere handful who make heavy gains by share transactions at the CSE. But those making such gains are wealthy people who deal mostly in high value stocks. The Sunday Times columnist Duruthu Edirimuni in her piece titled “Stock market zooms” brought home this point well.

The point I am trying to focus attention is that the CSE, through its various publicity drives has now roped in a large number of players who are of the middle and lower income groups who think the CSE is the easy place to make money. They will of course realize sooner that later that this is not so and that the CSE is not a playing field for amateurs. I think much of the new entrants to the CSE could well be rich youngsters or poor pensioners. I am myself an old pensioner who had some access to the commercial world as a freelance business journalist before I got interested in the Colombo bourse.

It was my experience that when I wanted to introduce a number of my own friends and relatives, those of my vintage to the CSE, they did not get interested however much I induced them to do so. They said they did not want to take the plunge. This led me to realize that cool headed elderly people with limited resources and no knowledge of how big business works keep away from the CSE.

What does the market mean to me? When the daily newspapers say 8220gIndices tumble at the Colombo bourse8221h, I think I can sell some of my shares at a gain but this is not possible. I have Asia Capital bought at Rs. 19.50, Eden at 18.25, Nation Trust at 28, Equity at 48, AH-OT at 63 and Lanka IOC at 32. All these are purchases made between mid 2005 and mid 2006. Even with today’s boom the above shares are yet below what I paid for them.

This does not mean to say that I did not deal in stocks like the Distilleries or Touchwood. A few hundreds if the former bought in early 2005 at Rs.29.50 were sold for Rs. 44 this year while a couple of hundreds of the latter bought at Rs.11 in 2003 was sold at Rs.44 in 2005. Had I held on to these two stocks alone till now I would have made a handsome gain. So this is the way with share trading in the secondary market.

On IPOs - years ago any IPO was a good thing to invest in. Most of them were priced at par and on the first trading day itself they fetched higher prices enabling a quick gain to the investors. Today’s IPOs are highly over priced and they fetch very low prices in the secondary market.

New investors before plunging into the CSE should be guided by a good stockbroker or at least some one who has long experience in share transactions.