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Editorial

The galloping stock market

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The booming Colombo Stock Exchange (CSE) last week, after a two-year Covid-impelled silence, hosted its first news conference to share with the media what its chairman, Mr. Dumith Fernando, called a “fantastic story.” He was not exaggerating even slightly. The CSE’s performance last year was more that extraordinary by any standard with several historical highs established in all the indicators that matter. These included the heights reached by both the broader All Share Price Index (ASPI) and S&P 20 measuring the performance of the more liquid and better rated stock. There was also the daily average turnover, which even in highly depreciated rupee terms, that not long ago was computed in the millions is now running into billions. On top of that, there was the equity capital raising initiatives of companies seeking new listings on the trading boards of the exchange. Once upon a time, the CSE laboured might and main to persuade companies to list. But now, companies are jostling in the queue to obtain a quotation and these, without exception, have been several times over-subscribed on the opening day itself. Such successes mean millions, if not billions, of rupees of zero cost capital for newly listed companies.

The story goes on. There are those whispering or derisively labeling the current surge in the stock market as looking very much like something out of Ripley’s Believe It or Not – a “phantom market,” as the CSE boss put it, that is not supported by fundamentals. Such suspicion is inevitable in the context of a rapidly declining economy but with a paradoxically booming stock market running alongside. Fernando easily demolished that contention. There are many reasons, he said, for what the exchange calls the “quantum leap” in the market last year. Not the least among them is the plummeting deposit interest rates now down to single digits. People who once squirreled away their savings in banks or much higher interest paying but riskier finance company fixed deposits, have now found that the CSE has opened possibilities of much better returns in a scenario of plunging interest rates. No wonder then that a new class of investors, far removed from the business savvy high net worth persons who traditionally invested in what they judged as ‘good’ company shares, have become active in the stock market. The old guard looked for a steady dividend stream and capital appreciation in the longer term. Some of them did trade their shares making tidy, if not super, profits. But a large number held their stock over the longer term. The new investors are a different kettle of fish. They are looking for quick, often instant, trading profits, seldom investing in the longer term.

Today there are droves of what the market calls ‘retailers,’ – relatively small investors with little capital to play with, attracted to the CSE like moths to light. They see many possibilities to earn themselves some good money in the stock market and a record number of new investors, most of them 40-years or younger, have opened trading accounts. Today market players don’t have to visit share-broker offices and wrestle with all kinds of paper work to become active traders. They can do it all from their homes or offices armed with no more than one of those ubiquitous smart phones that many own today. Both brokers and the CSE itself are digtized and offer a modern trading platform nearly on par with what is available in more advanced markets.

Records established by the CSE last year includes the number of new listings up on the trading boards. Dumith Fernando said at the news briefing that last year, mainly in the latter part of 2021, there were as many as 13 initial public offerings. All of them attracted stunning investor interest being oversubscribed, sometimes several times over, on the opening day itself. Analysts confirm that many of these shares gained from their issue prices when trading commenced days later though there was at least one exception. But the general picture was instant profit for many small investors whose trading strategy is to take profit and invest funds realized in selling shares in new shares where they believe further profit is possible. They grumble about inadequate allocations due to the high demand for the shares on offer. But issuers generally tend to be fair to small investors.

Brokers say that the same share is often bought and sold, by a single punter, who will do multiple transactions in the course of a single trading day. Like betting on horses, gambling on a stock exchange is not without risk. But the fact that new players keep entering the market by the day suggests that the risk is much less than at the races and one player’s success attract many new players into the market. Where retailers are concerned, the herd instinct is very much in evidence with interest in a single counter drawing hordes of players into it, rightly or wrongly. The CSE website is full of notifications of the attention of listed companies being drawn into unusual trading activity in their shares. The inevitable response is that the company is unaware of any undisclosed price sensitive information that may have attracted unusual investor interest. Brokers say that low-priced shares may attract interest in a market where an upward trajectory as seen here was all too evident in recent weeks.

How long the carnival will last is anybody’s guess. But there are many putting their money where their gut instincts tell them that there’s more to be made.



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Editorial

Restoring dignity of legislature

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Tuesday 17th May, 2022

There has been a severe erosion of public faith in all three branches of government, albeit to varying degrees. The less said about the executive, the better; it has become a total failure. The scales of justice are tilted in favour of politicians in power and their kith and kin, and rogues walk free, as a result. The legislature has become a huge liability, and one sees hardly any difference between it and the Mattala International Airport.

The country is mired in an unprecedented economic crisis, but the legislature apparently does not care two hoots about people’s suffering. Parliament should have convened a few days earlier to discuss ways and means of resolving the worsening crisis and restoring social order, but the Speaker’s request to the President to summon Parliament urgently went unheeded. The party leaders were also not keen to have Parliament convened before 17 May. Instead, they had some meetings themselves; they are all hat and no cattle. Even when the House is in session, its members are busy settling political scores instead of addressing national issues. Some sensible MPs have called for a course correction, warning that the people are so incensed that they might even set Parliament on fire. Their warning should be heeded if trouble is to be averted.

Parliament always gets its priorities mixed up, and wastes its time and public funds. The recent election of the Deputy Speaker is a case in point. Deputy Speaker Ranjith Siyambalapitya resigned because his party, the SLFP, pulled out of the government. He was re-elected to the same post a few days later. He resigned again on some flimsy grounds. The House is scheduled to elect a new Deputy Speaker, today. No wonder, protesters are trying to march on Parliament.

Prime Minister Ranil Wickremesinghe has said Parliament should have a female Deputy Speaker. One cannot but agree with him on this score. In a male-dominated House, women must be able to have their voice heard. It is hoped that a female MP will be unanimously elected to that post, today, for several reasons.

Women, who constitute more than one half of the Sri Lankan population, are not adequately represented in Parliament or any other political institution; we have only 12 female MPs at present. There should be more women in Parliament as well as the Cabinet. Respect for women is zero in the House. Some MPs have the despicable habit of dragging others’ mothers and wives into their slanging matches, and their speeches are replete with smutty jokes or other forms of double entendre or risqué humour. There are occasions when the men in kapati suits even trade raw filth unflinchingly. The situation is far worse in the local government institutions, where female councillors are not even allowed to exercise their constitutionally guaranteed freedom of expression. They complain that whenever they take the floor, they are greeted with boos and catcalls from their male counterparts. Harassment has caused them to sink their political differences and fight for their rights, together, and they deserve public support for their struggle. We suggest that the misogynists in the garb of people’s representatives who harass female representatives in Parliament, the local councils, etc., be named and shamed besides being made to face disciplinary action.

Prime Minister Wickremesinghe is reported to have decided to form several committees consisting of the MPs of all political parties to explore ways and means of tackling various issues. This idea is sure to find favour with those who want to see the country come out of the present crisis. We believe that there is a need for the appointment of a special parliamentary committee consisting of female MPs to address the issues that affect housewives and other women.

Speaker Mahinda Yapa Abeywardene, like his predecessors, has been struggling to restore the dignity of Parliament, but it is doubtful whether his efforts have yielded the desired results; protesters are demanding that all 225 MPs go home. One can only hope Parliament will get its priorities right, and refrain from turning the election of the Deputy Speaker into a political battle.

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Editorial

Absit omen!

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Monday 16th May, 2022

It never rains but it pours. Sri Lanka has had more than its fair share of misfortunes during recent years, but there seems to be no end to them. A report published by The Hindu says the Indian intelligence has warned that the LTTE is regrouping to carry out terrorist attacks in this country; it must have sent a chill down the spine of every peace-loving Sri Lankan.The Indian media reported that the Defence Ministry of Lanka had initially denied the report in question as baseless, and claimed there was no such threat; it had received no intelligence warning of any such threat. But according to a news item published in this newspaper today, the Defence Ministry says it has sought more information from the Indian intelligence agencies about the warning. It had better act fast; it has a history of dillydallying, making colossal blunders and jeopardising national security. In 2019, it took an Indian intelligence outfit’s warning of a series of bomb attacks for granted, and a group of terrorists carried out the Easter Sunday carnage with ease.

If there is no threat of LTTE attacks, as the Defence Ministry seems to imply, every peace-loving Sri Lankan will be happy, but in dealing with terrorism, a state has to plan for the worst-case scenario if surprises are to be avoided. Terrorists make the most of economic crises, and socio-political upheavals to stage comebacks. There has been irrefutable evidence of attempts being made consistently to revive the LTTE.In January 2022, the Tamil Nadu police busted an international network of ex-Tiger cadres and sympathisers engaged in raising funds for reviving the LTTE. According to The Hindu, in October 2021, the National Investigation Agency of India revealed before a special court in Kochi that ‘two Tamil Nadu natives arrested in connection with the seizure of drugs, were working secretly for furthering the activities of the LTTE under the supervision of leaders of the organisation in Tamil Nadu, Sri Lanka and other foreign countries.’ In 2010, the Indian police arrested three LTTE cadres with more than 5,000 detonators which were to be smuggled into Sri Lanka. Several LTTE cadres have been arrested with arms and explosives in this country as well. In January 2017, the Terrorist Investigation Department arrested four ex-Tigers over an alleged plot to assassinate a TNA MP in Jaffna.What remains of the LTTE may not be so strong as to mount large-scale attacks but some of its cadres may be able to carry out ambushes, political assassinations, and attacks on civilian targets.One can only hope that the Defence authorities will do everything in their power to neutralise possible terrorist threats, and what is feared will not come to pass.

Curiouser and curiouser

Prime Minister Ranil Wickremesinghe has reportedly said the ‘Gotago Gama’ protest should go on, and the government is ready to provide necessary assistance to the protesters. There is absolutely no need for state sponsorship, as it were, for an anti-government protest; and the protesters themselves have rejected the PM’s offer out of hand, for such assistance will be tantamount to the kiss of death for the protest movement. The protesters have asked the PM to ensure that the SLPP goons who attacked them on 09 May are arrested and prosecuted. This demand is nothing but fair and should be granted forthwith.It will be interesting to know the reaction of the President’s Office to the PM’s offer at issue to the protesters. What will happen in case of the protesters achieving their goal—the ouster of the President—and who will stand to gain in such an eventuality?

Another power centre in the government is bound to emerge around the newly-appointed Prime Minister. The government has undertaken to restore the 19th Amendment fully in the form of the 21st Amendment to be brought in. If this pledge is carried out, the President will be stripped of his vital executive powers, and the Prime Minister will become the de facto Head of State; a defeated candidate who has entered Parliament via the National List will become more powerful than the President elected by 6.9 million people! Such a scenario will make a mockery of the people’s franchise.

Welcome to Sri Lanka, a land like no other!

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Editorial

Ranil with president, people or both?

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New Prime Minister Ranil Wickremesinghe told a British journalist at the Walukaramaya temple where he had gone to obtain blessings after being sworn as prime minister for the sixth time in his 73 years that Churchill became Britain’s prime minister in 1939 with only four MPs. He’s become Sri Lanka’s with one! This was typical Wickremesinghe parrying questions with debating flair. He knows European history, perhaps a little better than he knows Sri Lanka’s. But there too he is no neophyte. Hours after his swearing, Ven. Omalpe Sobhitha, today a very visible political monk in the anti-Gotabaya camp declared this was a “deal.” What else can it be? How else can the man who brought the UNP down to zero in the incumbent parliament, and thereafter procrastinated for months in filling their only national list seat before taking it himself become the prime minister of a government not yet into its second year?

What can be the bottom line of any alleged deal? Obviously there will be no chasing Ali Baba and his forty thieves. That said, there will be many who will believe that Ranil is the best man for the present moment. He has more experience than any of his rivals in the political field and he is certainly no fool. His pro-western and pro-business tilt is a given. That perhaps was why one of the earliest congratulatory tweets was from the U.S. ambassador in Colombo. Mahinda Rajapaksa and Namal too were among the early tweeters. Maybe they feel less hounded now. GR obviously would not have made his pick without the confidence that the majority of the SLPP will back his choice. That however may not be unanimous. Vasudeva Nanayakkara for instance cannot be expected to support a UNP prime minister. But there are many that can be influenced by office; others by protection and not a few must watch their backs. Aiyo (or Cheerio) Sirisena can tilt either way; but however that be, he will not he able to chart the course for the whole group of SLFP MPs. Also, will Sajith Premadasa who has clearly dropped a catch by procrastinating in taking an offer he now feels he should not have refused be able to hold his group together?

There are capable, untainted MPs in the SJB with the ability to selflessly serve a national revival government that the country desperately needs. Wickremesinghe will be glad to have them. But whether they will chance their future political careers by serving a government created by a political horse deal remains to be seen. Public opinion is near unanimous that what GR has done is in the Rajapaksa interest including his own. Anybody coming on board will not be cheered. No doubt many Pohottuwa MPs, bleeding from the blows that their personal property have taken from the ugly turn of what was at first an idealistic, non-violent protest to get the Rajapksas out of the national polity, will now do what’s best for themselves: protection from further attack and, perhaps, compensation down the road. They will remember REPIA (Rehabilitation of Property and Industries Authority) that followed Black July 1983 when victims were compensated.

That Gotabaya must go remains the national demand and it is unlikely (if not impossible) that the president has appointed a prime minister who is out for his blood. Mahinda Rajapaksa, before he succumbed to lunacy and let loose an organized horde on the Galle Face protesters appeared confident of his numbers in parliament. Despite all that has happened since, the likelihood is that the no confidence vote against the president, like the touted impeachment, remains a long shot. If that is the way the process unravels and the outcome favours Gotabaya Rajapaksa, then Ranil Wickremesinghe is home and dry. But for how long is an imponderable in the context of what cinema-goers brand as a “fast breaking serial.”

The Colombo stock market reacted positively to the political developments with both the broad based All Share Price Index and S&P SL20 covering more liquid shares gaining sharply on Friday on a respectable turnover. That, of course, does not mean that investors are now confident that Sri Lanka has turned the corner and is back on track towards regaining political and economic stability. Stock indicators are volatile and their signals are for the day; not even for the short term. Important considerations on whether a new prime minister and government are going to be good for the country will include the external view. The West is likely to favour present developments and India may fall in line. Whether China will come on board is an open question.

Soon after his swearing, Ranil Wickremesinghe said that the Galle Face protests will be allowed to continue as at present and there will be no interference. But hours before he said that police warned over loudspeakers on the green that a curfew was on and nobody was permitted in public places. But they didn’t enforce their threat. Already burnt by their tepid response to the Temple Trees horde setting upon the ‘Gota Go Home’ crowd, the Rambukkana shooting and perhaps what happened to SDIG Deshabandu Tennekoon, the cops were pussyfooting. But the ‘clear the green’ announcement would not have been made without clearance from the top. Now there’s a ‘lay off’ order from the new PM. So let’s wait and see how events unfold.

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