deals and wise investments
The billion-rupee deals that are taking place on the stock market,
like the acquisition by John Keells of a controlling stake in Asian
Hotels, and the initiative taken by local investors is indeed heartening
and a sign the market is maturing, although it still has a long
way to go in terms of size, liquidity and effective regulation.
Size undoubtedly matters in the emerging globalised world of business.
The acquisition of Asian Hotels means John Keells is getting bigger.
We need bigger conglomerates to survive and compete in the globalised
consider it an encouraging sign that indices are appreciating on
strong volumes and quite a bit of foreign participation. No doubt
the black money that has come into circulation with the tax amnesty
played some part in this raging bull run. But the involvement of
both local retail investors and blue chip conglomerates indicates
the growing confidence in the market underscored by strong economic
fundamentals, both country and corporate, which are products of
the peace dividend.
enthusiasm for stocks by investors big and small is all the more
reason why there should be more vigorous efforts to ensure fairplay
and transparency in the market, which was shocked by the unprecedented
insider dealing scandal at the Securities and Exchange Commission.
Although investors have been fired up by the fantastic corporate
performances being reported there are still lingering doubts about
the accuracy of some of these results.
Tales of doctored
accounts and window-dressing to make them look better than they
actually are continue to do the rounds, and keep reviving memories
of scandals in more mature markets such as Enron in the US and even
our own ones like the insider dealing fiasco at the market watchdog
and the fraud at Pramuka. There is still a strong belief that this
market is far from fair and that, given the incestuous nature of
Colombo's small business community, there still is a lot of insider
dealing and other irregularities taking place which market regulators
are unable to catch.
It should not
be forgotten that we still have among the Commissioners of the SEC
those who seem to believe that 'eminent' people do no wrong and
should not be investigated even when there is some suspicion of
wrongdoing. Given the scandal that rocked the organisation and prompted
the resignations of its two top officials the SEC surely needs to
clear the air about such attitudes and possible conflicts of its
commissioners. After all, this is a case where the Attorney General
himself found fault with the Commissioners for trying to ignore
is that small-time investors with an inadequate knowledge of the
market and of listed companies are likely to burn their fingers
by making foolish investments driven by the herd instinct, while
foreign investors, usually regarded as the more savvy, make profits
at their expense. Brokers themselves have drawn attention to the
"indiscriminate" buying by small investors. They have
warned that in the stampede for shares investors are buying even
stocks that are fundamentally weak such as hotels that are deep
in the red.
In the past
it has been noted that foreign investors and so-called high net
worth locals tend to be better readers of market movements, either
because of their sophistication and experience or inside knowledge,
and have a better track record of buying low and selling high. The
exuberance that is driving the bull run should not blind investors
to the dangers inherent in any market, especially one that is as
small as the CSE and in a country as volatile as ours.