Colombo Stock Exchange crashes.

bloomberg Chart-ASI-Crash

Colombo Stock Exchange (CSE) has experienced dramatic decline today. Most investors are blaming this is due to recently introduced 10 percent daily trading price band rule. This was done to save investors from few stock price manipulators. There were incidents that bankrupt companies sky rocketing their prices. Ultimately small investors get burnt their fingers.

Although the speculative stocks were the hard hit among the losers it has spread to blue chips later. People who bought shares with borrowed money (Margin Traders) will have to face heavy losses. When margin providers ask to deposit short falls in investor’s margin accounts they have to do it urgently or face for force selling. If this happens (Force Selling) the market drop will get worse.

But we feel sharp quick drop is better than continued slow declines over couple of months. If market drop 100 to 200 points daily it will start to stabilize later part of this week.    
 
At the end of today’s trading ASI was down by 202.21 points (-3.99%) to close at 4862.86 while MPI lost 210.30 (-3.65%) to end the day at 5549.15. Turnover was 1.29 billion rupees. 

There were 178 losers & only six gainers for the day. Aitken Spence Plc lost 72 to close at Rs 1803.00 while The Nuwara Eliya Hotels Company was down by 60.00 to close at Rs 600.00. Nestle Lanka Plc was declined by 68.80 to close at Rs 621.20.

Lanka Ashok Leyland was the top gainer today to close at Rs 3600.00, up 200 rupees. HDFC was up by 2.50 to end the day at Rs 310.30.                                                                                                                          

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