ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange transfers illiquid shares with low free float to a second board but no new ‘punitive action’ is being planned, Chief Operating Office Rajeeva Bandaranaike said.
The market heavyweight Commercial Leasing and Finance, which posted profits of 29 cents per share in the six months to September 2021, fell 14.8 percent to 71 rupees on Monday.
Brokers had attributed the fall in CLC to comments said to have been made CSE Chief executive Rajeeva Bandaranaike at an investor seminar in Dubai, about “penalties” for illiquid companies in a new Securities and Exchange Commission Act.
“I never said anything about the new SEC act,” Bandaranaike told EconomyNext.
“What I said was currently there is a way to handle illiquid shares and if there is a violation of public float, they will be transferred to a second board,
“Some are just spreading misleading information.”
The firm has net assets of 3.65 rupees per share. It is priced at almost 20 times net assets at the new price, and is one of several illiquid stocks that had driven up the benchmark Colombo All Share Index with some reporting losses.
Sri Lanka does not have a separate main board index and the All Share is the benchmark.
CLC’s public holding percentage was 0.452 percent at the end of March 31, 2021 according to its latest annual report with 1,301 public shareholders and with a float adjusted market capitalization of 167.2 billion rupees.
CLC is already in the second or Diri Savi board and it is the signal to investors on the companies which maintain illiquid shares, market sources say.
Punters had pushed CLC in the last month making it the most valuable company in the market, accounting for 9.73 percent of the total market capitalization of Colombo Stock Exchange compared to net assets of 23 billion rupees.
On Friday, CLC responding to a bourse query on earlier unusual price surges said “In terms of Sec 8.4 (a) we wish to confirm that there is no undisclosed price sensitive information with the company in relation to Commercial Leasing and Finance PLC.”
Sri Lanka stocks have surged in recent months amid an underlying economic recovery from Covid lockdowns, but also due to low interest rates out of line with domestic credit conditions, which had shattered the balance of payment.
Some businessmen who could no longer operate their businesses amid import controls triggered by monetary printing also put their capital into the stock market. (Colombo/Nov09/2021)