Stock market intentionally pulled down

The Colombo bourse has seen a 12.5 percent drop in value since January with some market analysts attributing it to the ground situation in the country while others say it’s mainly due to an intentional pull-back of share prices by bargain hunters over the last few months.

The All Share Price Index (ASPI) levelled at 2385 points on Friday, down from 2722 points on the first working day of the year (January 1, 2007), which is a 12.5 percent dip.

A stock market analyst attributed this to bargain hunters who try to pull down the stock market for quick money.

He further pointed out that the John Keells Holdings’ share was trading at Rs. 145 last week whereas now it is trading at Rs. 129. “About two months ago DCSL traded above Rs. 120 and touched a high of Rs. 130, whereas last week it was trading at Rs.90 and now the price is Rs. 80,” he further pointed out.

He added that NDB Bank is now trading at Rs. 164, but two months ago it traded above Rs. 200 and ACL Cables’ share price was pushed to Rs.107 when it was trading above Rs. 150 two months ago. “The value of these companies, whose fundamentals are strong have not changed and I feel the country’s situation has little to do with the market,” he explained. He said that last year the market gained in indices by 41 percent when the country's war situation was escalating.

He said when some investors sell a small quantity (200 to 500 shares) at lesser prices than the trading prices, retailers who are on the edge panic and sell at these prices. “Because of the sluggish market sentiment those who are on the fence sell at lesser prices and the bargain hunters in turn buy these shares at much lesser prices later on,” he noted, adding that the ‘herd instinct’ in the local market also adds to the trend. However, some stockbrokers and stock market analysts, see it otherwise.

“There are always two or three shares that are pulled down artificially, but presently the main variable to pin point at for the share price decline is the interest rates that are ever increasing,” a stock broker said, adding that this situation has a direct impact on the equities market. “The investors prefer to sell stocks at lower prices and lock their money in interest bearing accounts. This is the main reason for this phenomenon,” he explained.