CSE : dips a colossal Rs. 349 billion from a high market capitalization on March 12th.

With the Bourse reeling owing to Rs. 194 billion loss in market capitalization year to date, the Board of Directors of the Colombo Stock Exchange (CSE) has decided to impose “Market Halt” effective from January 2, 2009.

CSE said that in the event the Milanka Price Index (MPI) (or the index that may replace the MPI in the future) drops 5% within the day from the previous market day’s close, a “Market Halt” be imposed on all equity securities for a period of 30 minutes.

CSE said market wide index based circuit breakers are imposed by stock exchanges to halt trading of equity securities in order to provide a “cooling off” period when there is an unusual movement in the index.

It noted that the Broker Firms may cancel any pending orders during the “Market Halt”. However, Broker Firms cannot enter new orders or amend pending orders during the “Market Halt”.

The Colombo bourse has failed to recover thus far due to a multitude of global and local factors. Apart from the impact of the global financial crisis with investors pulling out of emerging markets, high interest rates and inflation along with poor prospects for economy and company earnings have ensured a lackluster market.

Whilst the market capitalization on Monday amounted to Rs. 503.7 billion, down by 38.6% or Rs. 194.4 billion, in comparison to CSE’s peak figure of Rs. 835.3 billion achieved on March 12, 2008, the dip is a colossal Rs. 349 billion.

Colombo which used to be one of world’s best performing markets has year to date seen the ASPI down by 39% and MPI by 47%.

Incidentally the Rs. 31 million turnover on Monday, was the lowest since Rs. 22 million recorded on November 29, 2004.

However Sri Lanka is not alone in crash of markets. The World Bank yesterday said that the initial effects of the global financial crisis in South Asia were sharp corrections in regional equity markets. Bourses in India, Pakistan, and Sri Lanka dropped 57 percent, 39 percent, and 35 percent, respectively, over the year through mid-November (and 66, 50, and 39 percent, when measured in U.S. dollars).

Notably in Pakistan, curbs on the sale of equities were imposed in August, effectively preventing the exit of existing investors and discouraging potential new investors.

Equity sell-offs and ‘flight-to-quality’ contributed to significant currency depreciation in some countries, with local currencies in India, Pakistan, and Nepal7 falling by 21 percent,

30 percent, and 21 percent, respectively, against the U.S. dollar, over the year through mid-November. The Sri Lankan rupee depreciated by nearly 2 percent when the Central

Bank allowed the peg against the U.S. dollar to adjust at end-October 2008.

Central Bank criticizes S&P move to downgrade Sri Lanka's rating
Monday, December 15, 2008, 17:10 GMT, ColomboPage News Desk, Sri Lanka.

Dec 15, Colombo: Sri Lanka's Central Bank today criticized the Standard & Poor's Ratings Services (S&P) decision to lower Sri Lanka's sovereign rating saying that the comments by S&P are factually incorrect, logically untenable and grossly misleading.

The S&P downgraded Sri Lanka’s rating from 'B+' to 'B' citing its declining foreign currency reserves and the high fiscal deficit. S&P also lowered Sri Lanka’s foreign currency debt rating from 'B+' to 'B'. S&P said the rating outlook is stable.

In response Central Bank said in a media release that it is quite disappointing that S&P has apparently not realized that the decline in foreign exchange reserves is a global phenomenon under the present international financial crisis.

The downgrade caused the rupee to fall 0.2 percent to close at 111.78 while shares at the Colombo Bourse fell 2.17 percent.

The Bank said Sri Lanka experienced a decline in foreign exchange reserves in October and November 2008 due to the supply of foreign exchange to the market mainly to meet higher oil bill payments and to allow the outflows of Treasury bonds and bills.

CB said S&P has not given any recognition to the fact that the overall budget deficit of the country declined gradually in the recent past from about 10.8 percent of GDP in 2001 to around 7.0 percent in 2008 and has simply neglected the country’s achievements.

Central Bank clarifying the financial constraints said the S&P has overlooked many favourable developments in the Sri Lankan economy and S&P’s decision is viewed as being arrived at without proper assessment of current developments and future trends of the country.
Trading Monday
15 Dec, 2008 16:20:27
Sri Lanka shares slide on low volumes
Dec 15, 2008 (LBO) - Sri Lankan shares fell 2.17 percent Monday with a single transaction in Chevron Lubricants Lanka accounting for almost half the meagre trading volume of 55 million rupees, brokers said.

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The All Share Price Index shed 33.87 points to end at 1,527.51 while the more liquid Milanka lost 2.93 percent (50.92 points) to end at 1,687.95. Turnover was 55 million rupees.

Brokers said 96 stocks, including most heavyweights, were down for the day with only 17 up.

Chevron Lubricants Lanka closed at 90 rupees, down 75 cents, with a block of 282,500 shares changing hands at 91 rupees.

The transaction added 26.2 million rupees to the day's turnover.
end:
When Mahinda Rajapakse was installed as President on November 17, 2005, the stock market was at 2550, and now lost 40% of it's capital value, as well as a 20% depreciation against the US dollar, and more than 40% on the Euro dollar.