Editorial

The galloping stock market

Published

4 years ago

2021/01/24

The Colombo stock market has been galloping like nobody’s business these past several days with little or no rational explanation of why this is so in the context of a pandemic-hit business downturn. Among the reasons that have been proffered by brokers and analysts for this surge in confidence of market players, and they have increased substantially in recent months according to the CSE, is that interest rates are plunging. Investors who could earn as much as 12 or 13 percent or more on fixed deposits not so long ago, have to be now satisfied with marginal returns way below the prevailing rates of inflation. They are thus attracted to a stock market which is now performing better than most others in the region.

But the surge on the Colombo market is not supported by foreign or institutional buying which knowledgeable people say is necessary to sustain the current momentum. In fact there has been a steady outflow of foreign funds from Colombo in recent months and there has been no stemming of this flow. Although various authorities have more than hinted that institutions like the Employees Provident Fund and the Insurance Corporation will be back in the market in the short term, this does not appear to have come to pass.

Little wonder. There have been a plethora of allegations about pump and dump and market manipulation that institutional fund managers will be reluctant to open themselves to fresh accusations. This would mean a safe ‘do nothing’ philosophy unless they are ordered to enter the market. We do not know whether there is political or any other directions on what state-controlled entities should do with regard to stock market investment today. But we do know that this has happened in the past. It has been rightly urged that the EPF is only the guardian of the private sector retirement fund it manages, and not its owner. The fund belongs to its members who, together with their employers, make monthly contributions to it as a retirement saving. It must therefore refrain from speculative investments like stock trading is the conservative viewpoint.

The contra-argument has also been adduced. The EPF has long been a captive lender to the government. Government borrowing would naturally ease as the economy grows and there was official thinking within the Central Bank that it made sense to invest in private sector growth areas through the stock market as a long-term strategy. This was done to some degree that was admittedly small. Those who read the annual reports of listed companies, and even their quarterly financial reports listing their top twenty shareholders, will know that that the EPF has substantial stakes in many blue chip companies. There must be a lot of unrealized capital gains in the EPF portfolio where the pluses will outweigh the minuses although the fund cannot always back winners. If its members get an annual dividend ahead of inflation on their individual holdings in the fund, nobody can reasonably complain.

The benchmark All Share Price Index of the CSE has already topped its all time high and the upward momentum continued as this is being written on Friday. Where it will end, nobody can say. It is certainly a good thing for the country that many small investors are entering the stock market which is now retail driven. A completely new class of investors have today entered a field which not so long ago was the exclusive preserve of the rich. Massive turnovers in the billions are being recorded on the CSE every day and stockbrokers who had a lean time as the Easter bomb and the pandemic hit forcing market closure for a long period, would now be laughing all the way to the bank. While the market and its players can bask in the current sunshine, it is very necessary to attract foreign investors back to the CSE. This will undoubtedly be a formidable tasks but a bull run such as that which ongoing can be a factor that can prove persuasive.

Ranjan Ramanayake

The Chairman of the Elections Commission went on public record that Ranjan Ramanayake, the actor politician, who has now begun serving his term of four years rigorous imprisonment will not lose his parliamentary seat for six months. But the attorney general has said otherwise and the elections boss has subsequently stated that what he had expressed is a personal opinion. However that be, the Ramanayake issue remains very much alive in parliament where his Samagi Jana Balavegaya colleague, Harin Fernando sported a black shawl last week and said he will continue to wear it until Ranjan returns. Parliamentarian M.A. Sumanthiran, who defended Ramanayake in the Supreme Court also spoke up for the actor saying he was privileged to appear in court “for a clean, honest politician and I’m proud of that.”

The Speaker is yet to rule whether the convicted MP is entitled to attend parliament and promised to announce his decision in three weeks. Readers know that other prisoner-parliamentarians have previously attended sessions, but what will happen in this instance remains an open question in the short term. While most people believe that there is no appeal from a Supreme Court determination and a presidential pardon is the only way out, a contrary view relative to this matter has also been expressed in the context of the International Convention for Civil and Political Rights (ICCPR) to which Sri Lanka is a signatory.

In parliament last week Sumanthiran drew attention to the fact that Sri Lanka has failed to enact legislation for contempt of court although some work in that regard had been done. Expressing the view that the term imposed on Ramanayake was unprecedented and exceptionally severe, he drew attention to a serious lacuna in the law which has resulted “in an unprecedented injustice to an honest Member of Parliament.” Ramanayake has consistently refused to apologize for the offence over which he was charged; his parliamentary colleague, Lakshman Kiriella, also last week referred to the conduct of two former chief justices, although under the protection of parliamentary privilege. Such reference had obvious implications in the context of what Ramanayake said.

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Editorial

Trump’s pound of flesh and bleeding nations

Published

11 hours ago

2025/04/4

Thilina Walpola

Friday 4th April, 2025

US President Donald Trump has jacked up tariffs on imports in the name of making America wealthy again. Yesterday, he signed an executive order, with his usual melodrama, increasing tariffs on goods imported from many countries including Sri Lanka, which will now have to pay as much as 44% by way of tariff on its exports to the US. Claiming that the unprecedented tariff hike is a reciprocal measure, Trump has said the new 44% tariff is in response to Sri Lanka’s 88% trade barriers on American goods. It is a case of a giant competing with a dwarf!

Powerful nations are resilient enough to absorb the US tariff shocks, but the weaker economies like Sri Lanka are bound to reel and even go into a tailspin, causing further destabilisation of the developing world. The US tariff hike will deal a body blow to Sri Lanka’s export sector, especially its garment industry, which is showing signs of recovery. Sri Lankan goods, especially garments, will now be less competitive in the US market. Other Asian garment exporters, such as India, Bangladesh and Vietnam, also have higher US tariffs to contend with but not to the same extent as Sri Lanka. There’s the rub.

A drastic decline in export earnings due to the new US tariffs will invariably lead to a decrease in Sri Lanka’s foreign currency reserves, causing a further depreciation of the rupee, an increase in inflation, job losses, and even socio-political upheavals unless the US takes the fragile condition of the Sri Lankan economy and softens its stand.

President Anura Kumara Dissanayake has appointed an expert committee to study the economic fallout of the US tariff hike and recommend remedial measures. This is a step in the right direction, and it is hoped that the government, together with all other stakeholders, will be able to formulate a mitigatory strategy to cushion the impact of the new US tariffs on the local industries and the ailing economy. Most of all, the government will have to manage the country’s foreign currency reserves frugally.

What the US can gain from the unprecedented hike in tariffs on Sri Lankan exports is negligible, and it will not give any significant boost to the US economy or industries. Is Washington trying to leverage Sri Lanka’s overdependence on the US as an export destination to further its geopolitical interests in a bigger way? Is the Trump administration goading Sri Lanka into a situation where the latter will be left with no alternative but to agree to anything including controversial agreements, owing to its sheer desperation to have the US tariffs on its exports reduced?

If what Trump said, while announcing the new tariffs is anything to go by, he wants to make America wealthy again by creating conditions for the domestic industries to be ‘reborn’. But he has apparently ignored factors like stringent environmental laws, higher cost of domestic labour, increases in raw material costs due to new tariffs, technological competition, etc., which will stand in the way of the US in achieving his dream.

Whether Trump will be able to realise his MAGA (Make America Great Again) goal by resorting to ruthless actions that weaken the economies in the developing world may be in doubt, but one possible outcome of his tariff war, as it were, is not difficult to predict. Extremely high tariffs the US has imposed on imports are at variance with the liberal economic principles and policies it has long championed. Such excessively protectionist measures could undermine America’s global dominance, driving smaller nations to gravitate towards its rivals in search of favourable trade terms. Russia lost no time in offering to help Sri Lanka’s export sector. Other powerful nations are likely to follow suit where the developing countries troubled by the US tariffs are concerned.

Editorial

A welcome judgment

Published

1 day ago

2025/04/3

Sahan Weerasooriya

Thursday 3rd April, 2025

Justice finally caught up with former North Central Province Chief Minister S. M. Ranjith and his sister-in-law Shanthi Chandrasena yesterday, when the Colombo High Court (HC), which heard a case filed by the Commission to Investigate Allegations of Bribery or Corruption (CIABOC) against them in 2021, sentenced them to 16 years RI for having misappropriated Rs. 2.6 million between 2012 and 2014. They were also fined Rs. 200,000 each. The HC judgment must have gladdened the hearts of all those who long for an end to corruption.

The criminal misappropriation of state funds at issue happened during the heyday of the Rajapaksa rule, which became a metaphor for corruption and abuse of power. When politicians are intoxicated with power, they become blind to the consequences of their actions, and enrich themselves as if there were no tomorrow. They usually cover their tracks, but the January 2015 regime change may have prevented CM Ranjith and his sister-in-law, who was his private secretary, from doing so. Their offence, however, pales into insignificance in comparison to what some other members of previous governments have been accused of. Unfortunately, most of those allegations have gone uninvestigated, or escape routes have been opened for the accused in some high-profile corruption cases, which were made to collapse, much to the dismay of anti-corruption campaigners and the public. Thankfully, most of those characters failed to get re-elected last year, and this is something the NPP government can flaunt as an achievement.

Another former Chief Minister––Chamara Sampath Dassanayake––has been remanded for causing a huge loss to the Uva Provincial Council by withdrawing six fixed deposits prematurely in 2016. It is hoped that all allegations of corruption, abuse of power and serious crimes such as murder against the members of previous administrations will be probed thoroughly and the culprits prosecuted expeditiously.

Corruption usually thrives under powerful governments in this country because huge majorities tend to nurture impunity. Integrity of most Sri Lankan politicians is a mere result of the unavailability of opportunities to line their pockets rather than an unwavering commitment to moral principles. Power tends to have a corrosive effect on scruples, and many self-proclaimed champions of good governance, who come to power, vowing to rid the country of corruption, end up being as corrupt as their predecessors. What we witnessed following the 2015 government change is a case in point. The ‘paragons of virtue’ in the UNP-led Yahapalana camp committed the first Treasury bond scam a few weeks after being voted into power. The present-day leaders who are campaigning hard against corruption were on a political honeymoon with the UNP at that time, and their alliance lasted until the end of the Yahapalana government in late 2019 despite very serious allegations of corruption against that administration.

There is nothing stupider than to rely on individual politicians to rid the country of bribery and corruption. They may have allegations of corruption against their political rivals probed, but it is doubtful whether they are serious about eliminating bribery and corruption. One may recall that having come to power by campaigning mainly on an anti-corruption platform, in 1994, the SLFP-led People’s Alliance government, ably assisted by several other political parties, including the UNP and the JVP, effectively deprived the national anti-graft commission of its suo motu powers, making it dependent on formal complaints to take action. Hence the need for anti-corruption laws with stronger teeth and robust institutional mechanisms to battle bribery and corruption. All existing anti-corruption mechanisms should be given a radical shake-up.

Editorial

Another Mafia

Published

2 days ago

2025/04/2

Sahan Weerasooriya

Wednesday 2nd April, 2025

Petrol was unavailable at some filling stations yesterday as their stocks had not been replenished in anticipation of a petrol price reduction. The government reduced the prices of petrol by Rs. 10. Long lines of vehicles were seen near the fuel stations where petrol was available. Some people delayed refuelling their vehicles until the announcement of the monthly fuel price revision, expecting substantial fuel price reductions in view of the upcoming local government (LG) elections. That too may have led to a marginal increase in the demand for fuel yesterday morning.

There have been numerous instances where speculation of downward price revisions led to fuel shortages. Fuel retailers have become a law unto themselves and do not care to maintain adequate petroleum stocks. A similar situation is bound to occur early next month as the government is expected to decrease fuel prices in view of the upcoming local government elections. So, precautions will have to be taken to foreclose such an eventuality.

There is a pressing need for stringent regulation of fuel retailing to ensure that all filling stations maintain petroleum stocks at the stipulated levels. Noncompliance should result in penalties. Previous governments gave filling stations owners kid-glove treatment for obvious reasons; it was only the businesspeople with political connections who could establish fuel stations, and some of them were family members of politicians. Those who voted the NPP into power expected their interests to prevail over those of unscrupulous businesses, such as rice millers, and fuel retailers, but sadly the status quo remains. NPP leaders flex their muscles and order pre-dawn raids on peaceful protesters just like the Rajapaksa-Wickremesinghe government, but they have no qualms about kowtowing to the exploiters of the public!

Meanwhile, filling stations, save a few, have earned notoriety for various malpractices such as meter tampering and pumping in bursts. Regulatory authorities do precious little by way of conducting regular inspections and calibrations of fuel dispensers, making one wonder whether they are in league with the unscrupulous fuel retailers. The government must put its foot down and take action to safeguard the interests of the public and ensure that fuel consumers get their money’s worth without hassle.

Propaganda and reality

The NPP government has pulled out all the stops in a bid to win the upcoming local government (LG) elections. While it is leveraging everything at its disposal to achieve that end, its propagandists are claiming that it needs to have control of all local councils to be able to serve the public better. They would have the people believe that the JVP/NPP is not controlling the LG institutions at present. But this claim does not bear scrutiny.

Local councils have remained functional although they are without elected representatives. They have been under Special Commissioners (SCs). The SCs report to the Provincial Governors, who are appointed by the President. Thus, all local councils are currently under President Anura Kumara Dissanayake for all intents and purposes.

One can understand why the NPP is campaigning so hard to bag the local councils. It wants to win the mini polls and cement its impressive victories in last year’s national elections. However, the argument that unless the people vote for the NPP overwhelmingly again, enabling it to gain control of all LG institutions, it won’t be able to carry out its pledges, is flawed. That is a propaganda lie.

One may recall that the Colombo Municipal Council remained under UNP control during the UPFA and SLPP governments, but that did not stand in the way of the development of the City of Colombo. The JVP won the Tissamaharama Pradeshiya Sabha in 2002 while the UNP was controlling Parliament and Chandrika Bandaranaike Kumaratunga was holding the executive presidency. Governments have to come to terms with such situations.

All signs are that the government and the Opposition will have to cooperate in many LG institutions, after the upcoming mini polls, for those councils are very likely to be hung.