Investors stunned by CSE's snap decision

Touchwood trading suspended

Channa Kasturisinghe

The sudden decision by the Colombo Stock Exchange to suspend trading of Touchwood Investment Ltd., shares on Monday caused panic among investors who heavily invested on the stock last week. Several investors who bought Touchwood shares yesterday gathered at the CSE and protested against this unexpected move by the CSE. They said that they feared the CSE's decision would cause them to suffer heavy financial losses.

"We bought this stock as the Company recorded impressive financial results last year and there was the possibility of a bonus issue. However, the CSE suddenly suspended its trading and now we cannot sell the large quantities we bought," an investor namely M.M.M. Fairooz told the "Daily News" yesterday.

Speculative trading caused Touchwood prices to soar last week making it the highest contribution towards weekly turnover. According to HNB Stock Brokers the counter contributed Rs. 910.3 million towards weekly turnover. The share price rose by a staggering 8.3 percent week on week. The share touched a high of Rs.126.50, closing at 112.50 on Friday.

The unusual increase in the share price and the volume of shares traded caught the attention of the CSE and it had written to the company on Friday inquiring the reason for the new development. The CSE also requested the Company to provide any material information, which might reasonably be expected to affect the price and volume of the company shares.

However, the Company in its reply had informed the CSE that the increase of the share price was not unusual. It has also said that the company recorded a turnover of Rs. 705 million and the profits increased by 28 percent to Rs. 330.9 million.

The company has also informed the CSE that it has approached corporate institutions and high net worth individuals for possible alliances and it was currently negotiating with one of the leading semi-governmental banking institutions with an initial investment of Rs. 300m.

Meanwhile, the CSE announced stock brokers that it is in the process of seeking clarification from the Company regarding the fair value method that it has adopted to value its biological assets. However, the investors said they are unhappy with the ad hoc manner the CSE decided to suspend Touchwood trading.

Fairooz said that he bought the share at Rs. 114 on Friday expecting to make a profit in the following week.

B.F.W Perera, Dushantha Shivanathan and Mohan Sigera three other investors who spoke to the Daily News said a similar story.

"If the CSE had any doubts about the company it could have take this action a long time ago or at least give a warning," they said.

Fairooz also said that a group of investors met senior officials of the CSE and the Securities and Exchange Commission yesterday and discussed the issue. "We are hopeful that the CSE will resume trading of the stock immediately so that we could sell our shares at whatever price," he said.

Meanwhile, some brokers said such ad hoc decisions by the CSE could deteriorate the investor confidence already affected by political uncertainty which prevails in the country.