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Thu, 30 October 2014 21:11:31
Sri Lanka stock price band bolstered investor confidence: regulator
21 Jun, 2011 06:19:43
June 21, 2011 (LBO) - A 10 percent upward and downward price band imposed by Sri Lanka's capital markets regulator after unusual price movements in some stocks helped strengthen investor confidence, the Securities and Exchange Commission said.
Indrani Sugathadasa, chairperson of the Securities and Exchange Commission of Sri Lanka (SEC) said in July 2010, the SEC introduced the price band to arrest volatility in the market.

"The price band came into effect after prices of certain stocks were seen rising without being backed by sound fundamentals," she said in her annual report for 2010.

Imposing a price band was part of reforms that SEC took to bring about a strong level of confidence as well as add further liquidity into the market.

"Without these regulations and shareholder protection, only a few people would have been willing to invest in stocks," Sugathadasa said.

"We believe that one of the main responsibilities of the SEC is to enhance investor confidence drawing more people to be part of the investor community."

Malik Cader, SEC director general, said the price band on listed securities was imposed after the prices of certain stocks began to rise considerably, not owing to fundamental factors but "almost due to sheer speculation and ‘overheating’ in the market".

Although the market reacted negatively immediately after the price band was imposed, it recovered gradually within a short period of time, Cader said.

Before the price band was imposed, from January 01 to August 04, 2010 the benchmark All Share Price Index (ASPI) grew by 54 percent and the daily average turnover stood at 2.0 billion rupees.

"Despite the price band the ASPI grew at an encouraging 96 percent and the daily average turnover was 2.9 billion rupees at the end of the year," Cader said.

"The measures taken in a timely manner reflected the vigilance and effective monitoring and thereby helped to enhance the level of investor confidence whilst adding further liquidity to the market."

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READER COMMENT(S)
7. Nicole Phillips Jun 22
Certain stocks i was monitoring saw 40-50% gain on a single day and further gains in excess of 25% the next day... no underlying reason to explain the volatility.... isnt the price band supposed to kick in even if the price volatility all happens within a single days trading? someone pls correct me if i'm wrong
6. Deiyyo Sakki Jun 22
Agree with both comments. I have noted several reports appearing at lightning speed to fuel a rally in a particular stock.
5. Retailer Jun 21
There are/were well known manipulations in CSE. SEC should stop preaching and start punishing.
4. Against Manipulation Jun 21
Now what manipulators are doing is shot up the price within a day by 50% -60% since there is no price band for price increase within a day. Can SEC do something about this? This is stupid rule....
3. regular small investor Jun 21
Price bands have only placed the small and ordinary investor instead of a protection to a worse condition due to lack of monitoring and upfront liquidity. If not for the price band the market would have grown even better.
2. Nicole Phillips Jun 21
In the past couple of weeks there have been certain shares which have had unexplained price volatility far in excess of 10% but the price band never kicked in... makes one wonder...
1. Investor Jun 21
Instead of tinkering with rules, which crafty players will always find ways around, the SEC should take strong punitive action against manipulators who are still at play in certain shares on the CSE.

Manipulators now gang together to both target shares and spread rumors, and even get favorable reports published in certain news papers and web sites.

The SEC should send a strong signal that it does not tolerate such manipulation, which invariably reduces genuine investor confidence in the market, by punishing offenders severely.