Wise decisions – the game-changer at CSE
The infamous circulars sent by the Colombo Stock Exchange (CSE) have come full circle. Thankfully, they are now in the past and hopefully, lessons learned despite a blame game still being continued by those who were burnt heavily.
What the past has shown is that illiteracy and little knowledge are dangerous and detrimental.
How the future is viewed will change the game. At the risk of repeating the oft-brandished slogan, investors should be ‘wise’ and invest in shares based on performance and value. They should follow social media and WhatsApp groups propagating the future of listed companies ‘cautiously’.
Why is the market down?
This question can be replied to in at least 10 different ways. One such explanation was particularly interesting. “It’s down because those buying stocks without information have learned their lesson. Now they don’t follow the dubious WhatsApp groups,” an investment advisor told the Business Times.
On the broker credit and related issues, it’s important to clarify a misconception; the Securities and Exchange Commission (SEC) does not direct any stockbroker to call for margins. There’s a tripartite agreement between the stockbroker, the investor, and the margin provider.
The margins are called based on the portfolio value and the relationship the client has with the other two parties. If anyone cares to follow, SEC’s Twitter account has ‘all’ the information.
A group of influential investors in the latter part of last week met with Capital Market Minister Ajith Nivard Cabraal for a “wide-ranging discussion”, where broker credit, forced selling and margin facilities were extensively discussed. While anyone can and should be able to meet elected officials, the key shouldn’t be to by-pass authority to ‘get things’ done’.
The fervent hope by those who love this country is that the government like pre- 2015 doesn’t give in to the so-called High Networth Investor (HNWI) ‘pressure’ and bring in the superannuation funds to cut those HNWIs’ losses. Repeat – not to bailout the selfish rogue dealers.
It happened and it can happen.
Readers are sure to recall how these funds owned by the people of this country were in the not-so-long-ago past viewed as a bailout coffer by the then rogue traders and their members colluding with certain stockbrokers and other traders who would fall in line. Together, they were the unstoppable, ultimate dream team sending the CSE to new highs. Until they didn’t.
The popular move then as will be after the horse has left the stable, is to blame the peripheral stakeholders like the media (the widest choice), the market operator, CSE and the market regulator, the SEC.
All this will be negated if the government exercises prudence and caution on the pension funds. This is by no means to promulgate that they shouldn’t invest in the CSE. They should and it’s a desperate need now, but not park the money in the most dubious of stocks and cushion the moneyed guy’s fall.
The market is yet to see CSE’s strategic plan – especially in the lines of attracting new listings.
The good news is that paper gold (an asset that reflects the price of gold while not actually being gold itself; it’s not backed by real metal, so it’s considered to be only on paper) will be introduced in the next few months.
The SEC and the CSE will be hosting the top management in more than 70 companies on Tuesday for an awareness programme on going public.
In other good news, the SEC has had discussions with Sri Lankan embassies on wooing foreign investors to invest in the CSE. At least the positives outweigh the negatives.