- Retailers Plagued By “Humpty Dumpty” Syndrome
The bourse “egged” on by a “mafia” continued with its “rise and fall” syndrome, this time caused by the Carson Cumberbatch Group of Companies, a market source told The Sunday Leader.
The market which rose by 225.19 points (the benchmark ASI) on Monday (February 14) over that of the previous day’s (last Friday’s) close, but also fell by a similar number (204.03 points) the following day Tuesday due to the activity of this Mafiosi, the source said.
“They buy certain selected stocks, push their prices up, and then dump it, sometimes on the same day, making a clear profit,” he said. For instance the shares of Ceylon Guardian, a Carsons company, went up to Rs. 450 on Monday, only to fall to Rs. 390 the following day, wiping out Rs. 60 of its value in a day, he said.
More often than not it’s the retailers who get caught to this trap, the source said. If a retailer had bought, say 1,000 shares of Ceylon Guardian shares on Monday at Rs. 450 a share, expecting it to go up further, but with its fall the following day, he would have had lost Rs. 60,000; the source said.
This is also called “suicide bombing” he said. A lot of retailers as a result have lost their life’s savings in the bourse, the source said. Day trading (ie buying and selling shares the same day) was introduced to the stock market by the regulators during the time of the war to boost activity in the bourse which was going through a bad patch then. But its relevance now is questionable.
The market is dominated by day trading. “Those days one hardly saw the value of a stock losing by Rs. 100 in a day, but it’s now a common occurrence,” the source said. Retailers are to be blamed for allowing themselves to be entrapped by this hype, he said. When asked whether a Bangladeshi type of riotous occurrence could also overtake Colombo, the source however said that it was unlikely because Sri Lankans were by and large “more educated and more peaceful.” Investors, retail investors in particular of the Bangladeshi bourse have gone on a riot after its bourse which rose sharply last year, having had begun to lose steam this year, resulting in several investors losing their savings. Due to the “low” interest regime prevalent in the local market currently, investors have a perception that they could get a better return by investing in the stock market. S. Jeyavarman, CEO NAMAL, a fund that has exposure to both the equities and Government securities markets, recently told this reporter that a number of investors were living off the interest they get from their deposits. But they have been badly hit after deposit rates have fallen from 15% to 5%, he said Meanwhile the source said that when one look at the sheer turnover values in the Colombo bourse, it does not seem to require any foreign participation. Turnover on Tuesday was Rs. 4.4 billion, while on the previous day Monday it was Rs. 5.3 billion. Friday it was Rs.1.9 billion, Wednesday and Thursday were holidays.
With palm oil prices fetching “premiums” in international markets, that helped to push Carsons’ and related company stocks up at Monday’s trading, another source said. Carsons have their palm oil plantations in Malaysia and Indonesia. News that a new Carson company which carries their palm oil stock, incorporated in Singapore and to be listed in the Singapore Stock Exchange also gave a thrust to the Carson Group at Monday’s trading, he said. Carsons holding company is Bukit Darah, a locally listed company which holds 46% of Carsons’ shares. The bourse on Monday also saw a billion rupee worth of Hatton National Bank shares comprising some four million shares being bought by foreigners, with the sellers also being foreigners. The bourse has been experiencing net foreign outflows these days. On Friday, trading was sluggish, mainly driven by retailers which pushed turnover up to the Rs. 1.9 billion with high net worth individual activity in John Keells Holdings, which the source attributed as a mechanism to push its share price up.