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CSE continues downward spiral 

23 Feb 2022

 
  • Trading halted for 30 mins twice within an hour
  • ASPI downby 415 points, S&P SL20 by 178 points
  • LOLC, Expo, Browns, Hayleys contribute to loss
  • Market effect is due to domino effect on margin selling : Stock Brokers Assoc. 
  BY Shenal Fernando Trading on the Colombo Stock Exchange (CSE) was halted for 30 minutes on two separate occasions yesterday (23) after the circuit breaker was tripped when the Standard & Poor's Sri Lanka 20 (S&P SL20) index fell initially by 5.0% at around 11.17 a.m. and subsequently when the S&P SL20 index fell by 7.5% at around 12.13 p.m. Yesterday is the second day this week where trading in the CSE was halted due to the tripping of the circuit breaker in terms of the Securities and Exchange Commission (SEC) directive dated 30 April 2020. By the end of the trading day, the all share price index (ASPI) had fallen by 415.83 points (3.59%) to 11,176.47 points from 11,591.37 points. Initially, the ASPI fell by around 793 points to an intraday low of 10,797.81 by 1 p.m. before recovering by over 500 points over the next hour. However, the market was unable to sustain the recovery and subsequently fell by over 150 points during the last 30 minutes of the day. A similar share price movement was observed in the S&P SL20 index which had fallen by 178.86 points (4.54%) by the end of the day from 3,936.67 points to 3,758.10 points. The S&P SL20 index fell by over 5% during the first hour of trading, falling by over 200 points and continued falling after trading commenced. Subsequently trading was once again halted after the S&P SL20 index fell by 7.5% compared to the previous day's close. Following the recommencement of trading the S&P SL20 index  reached an intraday low of 3,600.06 points, down by over 330 points from the previous day's close before showing a sharp recovery, gaining 230 points over next 1 hour. Speaking to The Morning Business on Monday after the market closed, President of the Colombo Stock Brokers' Association (CSBA) Jaliya Wijeratne stated that the current market reaction is due to the domino effect of the margin selling observed earlier a few weeks backs, and that as a result, proper buying is not being observed as investors are waiting for a signal before entering the market. There is the possibility that some investors are predicting that companies will record lower earnings during the current quarter due to the effect of the power outages in the country. Regardless, he was confident that until interest rate goes back to around 15-20%, there will not be a significant outflow of money from the market. He further stated that considering the current macro-economic factors, it is highly unlikely that the government will release its policy of import restrictions in the near-term. Therefore, listed companies will continue to benefit from their increased earnings due to import substitution. The biggest contributors to the fall of the ASPI yesterday were LOLC Holdings PLC (LOLC) with 43.26 points, Expolanka Holdings PLC (EXPO) with 40.36 points, Browns Investments PLC (BIL) with 36.96 points, and Hayleys PLC (HAYL) with 15.95 points. Despite the severe bloodletting in the market, there was a healthy turnover of Rs. 4.5 billion with over 188.5 million shares traded. The most active shares in the market yesterday in terms of number of trades were EXPO with 5,583 trades, followed by BIL with 5,363 trades, LOLC Finance (LOFC) with 2,484 trades, and LOLC with 1,684 trades during the day.     


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