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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.
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