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Colombo second worst stock exchange in the world

The Colombo Stock Exchange has seen a dramatic reversal from being the world’s best performing stock exchange to the second worst ahead of the Dhaka exchange in Bangladesh.

According to country stock exchange data compiled by Bespoke Investment Group based on year-to-date performance of leading indices as of January 26, 2012, Sri Lanka had the second worst performing stock exchange which fell 7.94 percent, ahead of Bangladesh which fell 14.66 percent.

“Of the 78 countries analysed, 59 (75 percent) are in the black for the year, while 19 are in the red.  Twelve countries have posted double digit gains already in 2012, with Argentina leading the way at 18.11 percent.  Russia ranks second with a gain of 13.70% percent followed by Hungary in third and Greece (yes, Greece) in fourth,” Bespoke Investment Group (BIG) said.

“The US currently ranks 33rd on the list with a gain of 4.73 percent year to date.  The US ranks fourth among G7 countries behind Germany (10.88 percent), Italy (6.77 percent) and France (6.44 percent).  The UK has been the worst performing G7 country so far in 2012 with a gain of 4 percent.

“Last year the BRICs were significant underperformers versus the rest of the world, but they’ve bounced back so far in 2012.  As mentioned above, Russia is up 13.70 percent year to date, which is the best of the BRICs.  Brazil ranks second with a gain of 10.92%, India isn’t far behind at 10.50 percent, and China ranks fourth with a gain of 5.44 percent.

The once-best performing stock exchange in the world, which grew 125 percent in 2009 and 96 percent in 2010, registered an 8.46 percent dip last year as controversy rocked an already overvalued market, analysts said.

Influential investors were successful in having the then Director General of the watchdog Securities and Exchange Commission (SEC) Malik Cader removed from his post and promoted as an advisor in the Treasury. SEC Chairperson Ms. Indrani Sugathadasa resigned soon after as a ‘matter of principle’. The watchdog had been clamping down on market manipulation and malpractice.

Limits on broker credit and price bands were also introduced to cool down what many thought to be an overheated market. Also, several actions had been taken against market offenders.

The slump in the Colombo Stock Exchange was put down to over regulation by some players in the market.

The removal of the Director General towards the end of last year resulted in a brief rally but the market soon fell.

Later, brokers who had been clamouring for a relaxation of credit restrictions had their request granted when the SEC relaxed limits, effectively releasing Rs. 5 billion in to the market. As expected, the market rallied for a while, only to fall again.

Yesterday (Jan. 31) the market fell 1.07 percent after a few days of closing in positive territory. Year-to-date, the All Share Price Index had fallen 6.26 percent.

Brokers say the exchange is plagued by deep-rooted problems. Foreign inflows would also be needed to create funds for the market to grow.




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