Business

Stock market crumbles alongside Government

  • Circuit breakers trip twice, again
  • Fifth consecutive day trading halted
  • ASPI now well-below 9,000 points
  • CSE restricts trading hours to two till further notice

 

 

BY Shenal Fernando

The Colombo Stock Exchange (CSE) continued its collapse yesterday (4), with trading in the market halted on two separate occasions after the circuit breaker was tripped when the Standard and Poor’s Sri Lanka 20 (S&P SL20) index fell initially by 5.0% at around 10.32 a.m. and subsequently when the S&P SL20 index fell by 7.5% at around 11.03 a.m. before recovering slightly over the next hour, following the announcement of the resignation of Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal.

Yesterday marked the fifth consecutive trading day where trading in the CSE was halted due to the tripping of the circuit breaker in terms of the Securities and Exchange Commission of Sri Lanka (SEC) directive dated 30 April 2020.    

During the weekend, there were talks circulating that the CSE was evaluating the several requests made by traders to suspend trading in the market for a few days, considering the volatile political and economic environment. 

However, certain Tweets claimed that such a step was rejected at the CSE board meeting held on Sunday (3), and instead, it was announced through a CSE circular that the two-and-a-half hour restricted trading time period implemented last Thursday (31 March) and Friday (1) of the previous week will be continued until further notice.

In the aftermath of the collapse of the S&P SL20 index yesterday by 7.5% during the first hour of trading, many traders expressed their anger on social media regarding the regulator’s refusal to suspend trading in the market until the external environment stabilises.

Following the CSE circular published on Sunday, trading hours in the CSE will be restricted from 10.30 a.m. to 12.30 p.m. until further notice.

Accordingly, the CSE pre-open session will be from 10 a.m. to 10.30 a.m. and the open auction will be at 10.30 a.m. as usual. However, trading, which will commence at 10.30 a.m. after the open auction,  will be stopped at 12.30 p.m.

By the end of the trading day, the All Share Price Index (ASPI) had fallen by 226.88 points (2.68%) to 8,244.55 points from the previous day’s close of 8,471.43 points. Initially the ASPI fell by around 470 points to an intraday low of 8,001.96 by around 11.30 a.m. before recovering by over 620 points over the next 30 minutes following the announcement of the resignation of the CBSL Governor. However, the market was unable to sustain the recovery and subsequently fell by over 350 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 146.11 points (5.16%) by the end of the day from 2,830.93 points to 2,684.82 points. The S&P SL20 index fell by over 7.5% within three minutes of the commencement of trading on the market, falling by over 160 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 2,553.83 points, down by over 270 points. Similar to the ASPI, the S&P SL20 index, also saw a recovery of over 320 points in the aftermath of the announcement of the resignation of the CBSL Governor but failed to maintain this recovery and subsequently fell by over 190 points.