Sri Lanka markets 18 month bull-run, driven nearly 85 percent on local liquidity will soon run out of steam if foreign investors don't join the action, a senior official at Bartleet Mallory Stockbrokers said.
"The way the figures are, about 80 percent is a local driven market," Eraj Wijesinghe, chairman of Bartleet Mallory Stockbrokers (BMS) said.
"We just can't go on the foreign funds need to coming in, foreign investors coming in for us to get into the international arena."
BMS last week struck a strategic partnership with Religare, an Indian based asset management company which bought a 50 percent share for over 10 million dollars.
The bourse, once a sleepy index is now the toast of the region, second only to the Mongolian Index as the world's best performing market.
However despite the euphoria and high fives at the end of another record breaking day is still flying below the radar of foreign investors.
Year to date there was a net foreign outflow of 14.7 billion rupees.
State controlled pension funds who shunned on investing equities just over two years ago are now the big investors. They already have controlling or near controlling stakes on several leading commercial banks and blue chip stocks.
Analysts say the market is now showing signs of slowing down.
On Monday, Sri Lankan stocks in early morning trade on Monday passed 7,000 points mark for the first time in history, but could lost momentum due to investors cashing-in to cover margin trades, brokers said.
"There is a possibility the market will slowdown in the coming weeks due to new regulations on credit effective from January next year, while some investors took profits," Thakshila Hulangamuwa, vice president at Asha Phillip Securities told LBR.
"Due to a lack of participation we won't see turnover levels improving from the current range of four to five billion rupees."
Market watchdog the Securities & Exchange Commission effective from January 01, 2011, has banned all stock brokering firms granting credit to customers in fear of possible systemic risk in future.
Sysmatic risks arise when stock brokering firms default on transaction settlements.
The current trade settlement system is based on T (time) 3 or times plus three where transaction have to be settled within three working days.
This allows day traders to buy and sell securities for millions of rupees on credit, if the brokering firm is willing to take the credit risk.
--Riyad RiffaiLBR,Monday 27 September 2010
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