Margin providers meet SEC for moratorium

Margin providers met with the capital market regulator, Securities and Exchange Commission (SEC) last week to discuss the moratorium for them amidst heavy margin calls issued to investors.

The discussion centred on what kind of concessions can be given to the margin providers in this crisis to curtail the stock market’s downward spiral. The margin providers were advised to grant concessions based on their relationship with the traders. Many bankers are margin providers along with certain leasing companies and Dialog Finance. Bankers said that with add moratorium the non-performing loans in the capital market sector will not be recognised. But the danger remains that in case of a default how much the margin provider can withstand the shock and how long would it last, analysts added.

The political, social and economic instability in the country will push the Colombo stock market into a dark abyss prolonging a political solution and perhaps see a point of no return, analysts say.

Should the stock market have gained this much is the question on many a mind amidst the unprecedented crisis. Analysts say the current political and economic crisis cannot be broken down and analysed. “It's almost like we have no way out,” an analyst pointed out.

The fuel crisis and the energy crisis are all contributing factors to high inflation. “Inflation is slated to rise over 50 per cent. This means the real returns cannot be preserved,” Srimal Liyanage, Head of Securities, Asset Trust Management (Pvt) Ltd told the Business Times.

He added that this year will not be a good one for the stock market unless a lasting solution for the political crisis is arrived at soon.

GDP growth keeps coming down and there's 'no way' a market can increase in this situation, said an analyst.

He pointed out that the exchange rate depreciation and the tax cut assisted in a one-time gain for certain companies' profitability, but it was just that - a one-time gain. The fact that it was 'heavily' promoted mislead investors, he added.

Also, the share splits in 2020 and '21 further hyped the traders who failed to comprehend that it was just a technical adjustment. Finally social media manipulated and pushed it to a place which it shouldn't have gone in the first instance was what most analysts said. Analysts and stockbrokers the Business Times spoke to over the past three days stressed and reiterated that poor decision-making on the economy front precipitated this crisis.