A Second Look

A stock excuse

LIKE any other stock market in the world, our stock market too records upward and downward movements.

On November 16, the day prior to the Presidential election, the All Share Price Index and the Milanka Price Index considerably moved up reversing a declining trend which prevailed during the previous week.

There should always be a reason for the market to perform either positively or negatively. However, on this particular day the reason behind the market performance was something strange. The reason was a newspaper report. It was not just a newspaper report but a baseless one.

The newspaper said that the LTTE allowed the people in the areas under its control to use their votes. The report did not have concrete evidence to say that the LTTE actually did so.

In fact, according to the same report the LTTE spokesman had said that there was no change in its earlier decision to boycott the Presidential elections. Nevertheless, the indices moved up and the analysts seemed to believe that the poor investors bought that story.

What happened the next day? It was revealed by the media, including the pro-LTTE web site, that the newspaper report was a false one. The market performed negatively and the analysts said that investors had again reacted to the latest news reports.

It is hard to believe that investors could easily be misled by a baseless news report and risk their valuable money. If what the analysts said about the reaction of the investors was true, sooner or later they would also start making investment decisions based on what they dreamt on the previous night.

If anybody loses from short-term swings in the market, it is only those who have speculatively invested their wealth in trading stocks in the hope of quick capital gains.

Therefore, it is the duty of analysts to educate the investors by providing them with reliable information. It is only the lack of such information could lead the market to react in an unrealistic manner.

The Past President of the Institute of Chartered Accountants of Sri Lanka and the South Asian Federation of Accountants, Ajith Nivard Cabraal reportedly expressed disappointment that the market had reacted negatively following the election of the new President.

He said that it was not fair to assume that the newly elected President, Mahinda Rajapakse, and the political parties that supported him are not investor friendly.

If that is so who is responsible for propagating such a myth. Some fair minded analysts think that the market crashed the day the election results were announced due to the vigorous campaign against the UPFA by some biased analysts, businessmen and the sections of media which supported them .

The result of the just concluded Presidential election reflects the aspiration of the majority of the people in the country who were free to exercise their franchise.

The outcome of the election is that they accepted the political leadership and the economic policies of the United People's Freedom Alliance.

Does the investor community too form a part of that same population? Or, has it alienated itself from the general public? These questions can be answered only by someone who looks at things objectively.