Analysing the Colombo share market which was down on some days last week, some analysts say that this rally was muted as profit taking emerged on fears of overregulation of the market, while others say that the unprecedented market boom warranted regulator intervention.
“Corrections or pockets of profit-taking occur from time to time in any bull market. Investors should look back and realize that there has never been a correction that has not proven to be a buying opportunity. Therefore, investors should grasp this opportunity to slowly collect fundamentally sound quality equities,” Milinda Ratnayaka, Analyst SMB Securities noted.
Some say that stock markets cannot be looked at daily- as on a daily basis there will be movements up or down, but ultimately company profits and dividend payments will drive the stock market.
“As for Sri Lanka, we have entered a new growth cycle. And we are at the beginning of this new positive cycle. There is more growth to come in terms of the Sri Lankan economy and this will also show in the profits of companies. Therefore, barring any unforeseen event, the Sri Lankan stock market will continue with its positive performance,” Prabodha Samarasekara, CEO NDB Aviva Wealth Management said.
He added that regulation is needed. If you are a long term, fundamentals driven investor, it will have no impact on the decisions on the trades,” he added.
Nikitha Tissera, Head of Research Sampath Securities said that although the market indices were flat it has seen heavy turnover. “It could indicate that the investors are collecting value stocks. Also, the upcoming budget may be one of the reasons that’s making the investors have a 'wait and see’ approach before buying at high prices.”
Another analyst said that the recent regulations will bring about disciplined to the market and reduce volatility. “The regulations are expected to bring in disciplined investment style. With future earnings growth expectations of at least 30% year on year for the next three years, market is expected to strongly rally in line with corporate earnings expectations,” she said, adding that to maintain in the long term a bull run expected at the share market, some sort of regulations are required.
Mano Nanayakkara, CEO Asia Securities said that careful oversight is necessary as the market is in unchartered territory. To err on the side of caution is preferable to being lax and having the innocent and the ignorant pay the price.