Business Times

Stock market learns to cope with price curbs

Colombo’s stock market has learnt to cope with the controversial price curb rule imposed by the market regulators, but the new rule is slated to be done away with next week, informed sources said.“The Securities and Exchange Commission (SEC) at its next commission meeting falling on Wednesday will be taking a decision on these lines, but other measures to control market manipulation to curb wild price hikes would be enforced,” an informed source told the Business Times.

This came on the back of some market players complaining that the 10 % price band or curbs which restricts price movements up or down, was enforced more than two weeks ago after sharp price increases in some stocks being manipulated by some traders and brokers.

“The price band is only a first step. This needs to be refined. Some have learnt to work their way around this rule as we saw during the past few days with less liquid shares which are high priced,” a broker noted.

He said these shares are arguably more prone to manipulate with the present price curb.
The Colombo Stockbrokers Association (CSBA) sent their representations on price curbs to the SEC on Tuesday morning, but SEC officials said that it’s disappointing. Some brokers say that this rule is necessary, but with a higher band.

Nikitha Tissera, Head of Research Sampath Securities agreed, saying that the 10% band is not adequate for an exchange to function smoothly. “We did see quite a few stocks dormant as they couldn't reach equilibrium price because of the imposed trading band.

These shares needed to break the band for completely legit reasons,” he said. He noted that many countries operate with market trading bands and it does play its role in maintaining stability, but a band as low as 10% has serious liquidity implications on market trading. “The CSE at least needs to lift the bands for a company when an announcement is released,” he added.

Colombo shares saw bullish sentiment and crossed 5,500 points (All Share Index)on Thursday with high buying interest in hotel sector shares, but saw some profit-taking on Friday which brokers said was a correction that was due after four days of a bull run.

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