‘Mafia’ gamed the stock market
By Namini Wijedasa
From one of the best performing capital markets in the world to one of its worst within two years-what the hell happened to the Colombo Stock Exchange?
It is Newtonian physics, says Thilak Karunarathne, chairman of the Securities and Exchange Commission (SEC), dryly: What goes up must come down.
“In 2009, there was euphoria in the country after the war and the market just took off,” Karunarathne explained, seated in his World Trade Centre office with its spectacular view of the ocean. “But some people made use of the opportunity to pump up some of the so-called penny stocks and made a lot of money on that.
Actually, it was artificially pushed up.”
“So, when they say that the market went up by so many percentages in 2009 and 2010, and was the world’s best performing market, it isn’t saying very much about it,” he added, “because it wasn’t really (based on) the stocks or counters where the fundamentals were strong. They were mostly pump-and dump-stocks; mostly, not all.”
When the bubble burst
Naturally, the bubble didn’t last long. “I’m surprised it lasted for two-and-a-half years,” Karunarathne said. This view might be strongly contested in some quarters. But it is not much different to the opinion held by Indrani Sugathadasa, Karunarathne’s predecessor at the SEC. The no-nonsense administrator resigned in December after insisting she “will not compromise on my principles”.
“There is a strong, powerful mafia which controls and manipulates the whole market,” Sugathadasa said last week, in an interview with this newspaper. “There is no way for market forces to play without interference. The market can only be resurrected if we let the market forces to play and to let it adjust.”
What the mafia does, she said, is to manipulate the prices. “It was obvious, it was proved and SEC also had evidence,” she said. “Unfortunately, SEC could not take any action because of certain loopholes in the Act and some other reasons that I can’t explain to you.”
Although she is a retired officer of the Sri Lanka Administrative Service with 33 years of experience, Sugathadasa did not know much about the stock exchange when she was made SEC chairperson. “I walked into the SEC with only general knowledge of the capital market but I came out with a vast knowledge, not only about the fundamentals and concepts but about market manipulation and insider dealing,” she said.
While these malpractices did contribute towards an erosion of investor confidence, the slide of the Colombo Stock Exchange wasn’t exclusively due to insider trading or manipulation Other factors played their part.
Still too expensive Full Story>>>
By Namini Wijedasa
From one of the best performing capital markets in the world to one of its worst within two years-what the hell happened to the Colombo Stock Exchange?It is Newtonian physics, says Thilak Karunarathne, chairman of the Securities and Exchange Commission (SEC), dryly: What goes up must come down.
“In 2009, there was euphoria in the country after the war and the market just took off,” Karunarathne explained, seated in his World Trade Centre office with its spectacular view of the ocean. “But some people made use of the opportunity to pump up some of the so-called penny stocks and made a lot of money on that.
Actually, it was artificially pushed up.”“So, when they say that the market went up by so many percentages in 2009 and 2010, and was the world’s best performing market, it isn’t saying very much about it,” he added, “because it wasn’t really (based on) the stocks or counters where the fundamentals were strong. They were mostly pump-and dump-stocks; mostly, not all.”
When the bubble burst
Naturally, the bubble didn’t last long. “I’m surprised it lasted for two-and-a-half years,” Karunarathne said. This view might be strongly contested in some quarters. But it is not much different to the opinion held by Indrani Sugathadasa, Karunarathne’s predecessor at the SEC. The no-nonsense administrator resigned in December after insisting she “will not compromise on my principles”.
“There is a strong, powerful mafia which controls and manipulates the whole market,” Sugathadasa said last week, in an interview with this newspaper. “There is no way for market forces to play without interference. The market can only be resurrected if we let the market forces to play and to let it adjust.”
What the mafia does, she said, is to manipulate the prices. “It was obvious, it was proved and SEC also had evidence,” she said. “Unfortunately, SEC could not take any action because of certain loopholes in the Act and some other reasons that I can’t explain to you.”
Although she is a retired officer of the Sri Lanka Administrative Service with 33 years of experience, Sugathadasa did not know much about the stock exchange when she was made SEC chairperson. “I walked into the SEC with only general knowledge of the capital market but I came out with a vast knowledge, not only about the fundamentals and concepts but about market manipulation and insider dealing,” she said.
While these malpractices did contribute towards an erosion of investor confidence, the slide of the Colombo Stock Exchange wasn’t exclusively due to insider trading or manipulation Other factors played their part.
Still too expensive Full Story>>>
