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Sri Lanka stocks extend losses

Officials from K. Seeds Investments Pvt Ltd (at left) with officials from Commercial Credit and Finance PLC (at right)

Nov 21, 2012 (LBO) - Sri Lanka stocks extended losses, sliding 1.3 percent Wednesday on top a 1.2 percent fall a day earlier with losses across the board with some margin calls also contributing, brokers said. Sri Lanka's stocks have now fallen over 600 points from an early October peak.

Stocks went through a mini rally through August with the speculation of the replacement of former securities and exchange rife in the market. Stock started to pick up in August from an end July level of 4944 to 6005 in early October.

The benchmark Colombo All Share Price Index fell 73 percent to close at 5,360.60 after recovering some intra-day losses. The S&P SL20 Index fell 40.77 points (1.36 percent) to close at 2,951.26.

Index heavy large caps including John Keells Holdings (down 3.90 rupees to 210.10), Aitken Spence (down 7.0 to 118 rupees), Ceylon Tobacco Company (down 3.90 to 704), Distilleries (down 4.90 to 145 rupees) contributed most to the index fall.

Active trading was also seen in Environmental Resources Investments with two 70 million tranches in two warrants traded at around 4.50 rupees and 4.20.

Analysts say ERI is a classic story in Sri Lanka's stock market history. The firm which only had assets, which it said was invested in platinum stock started to trade at increasingly higher multiples to net asset value. Most of the stock was held by promoters.

Its stock price continued to move up with virtually no operating revenues or profits other than capital gains amid asset transfers. It then bought some troubled firms showing revenues but not much profit.

The firm also issued a series of warrants, until new rules were brought to the market. It also came under SEC investigation, which eventually forced the firm to bring back cash into Sri Lanka. The promoters are now exiting.

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