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Market Waits For SEC’s List

Sep 18, 2010 3:12:41 PM - thesundayleader.lk

The market is adopting a “wait and see” attitude in regard to the list that the Securities and Exchange Commission (SEC) would publish tomorrow, in a new initiative, as to what stocks the regulator construed were allegedly subject to price manipulation.
Such stocks only would be subject to the 10% price band (which hitherto was applicable across the board) for a period of 15 market days. Such lists would be published daily, effective from tomorrow.
A market source who didn’t want to be named alleged that despite the band which was effective till Friday, before being superceded by the new regulations, stocks were still being manipulated, mainly by retailers without any money, with the connivance of some broking houses.
This used to take place in “day trading” on margins, where margins provided in certain cases allegedly exceeded the 100% band, he said. The other “market moving” regulation to watch is that when from next year, broking houses would be debarred from providing credit to investors beyond “T + three days,” the source said.
Such credit,  if to be extended, to be given by only margin providers and not broking houses.
The market is currently not operating under the classical economic theory of “demand and supply” because of such manipulations, he said. These new rulings however would allow the market to be run on economic fundamentals, he alleged.
Meanwhile, the bourse continued with its bull run on Friday, with the benchmark ASI gaining by 105.26 points (1.69%) and the more sensitive MPI by 127.32 points (1.96%) on a turnover of Rs. 3.9 billion.
Stocks are being mainly driven up, across the board, by high networth individuals and retailers, the source said.
Among the stocks that were profusely traded were Seylan Bank (six million shares), MBSL (three million shares), Dialog (12 million shares-inclusive of foreign interest), Hemas (3.1 million shares) and Reefcomber (seven million shares).
Foreign interest in selected stock, such as Commercial Bank, NDB, Sampath Bank, Aitken Spence and Distilleries were witnessed in last week’s trading, he said. Interest in the financial sector, which has been one of the key drivers of the bourse last week, is on speculation that Budget 2011 would see the removal of the Financial Services VAT, the source said.(See also page 37)