Excessive share price increases in low-float stocks warrant effective oversight: analysts

By Hiran H.Senewiratne

Trading activities at the Colombo Stock Exchange (CSE) indicated mixed reactions yesterday while low- float company LOLC Development Finance and Nestle Lanka dominated the market, stock market analysts said.

“The market managed to remain positive as those companies attributed in a positive way. However, this development calls for some regulatory control for low- float companies that would make unexpected price appreciation, otherwise it would give a wrong picture about the stock market”, stock market analysts said.

All Share Price Index up by 11.27 points and S and P SL20 down by 19.66 points. Turnover stood at Rs 1.95 billion with two crossings. Those crossings were reported in Alliance Finance, which crossed 1.2 million shares to the tune of Rs 90.6 million and its share price traded at Rs 75.50 and Lion Brewery 100,000 shares crossed for Rs 54 million and its share price traded at Rs 540.

In the retail market, top five companies that mainly contributed to the turnover were Nestle Rs 257.3 million (214,600 shares traded), LOLC Rs 148.4 million (352,700 shares traded), Browns Investment Rs 122 million (19.7 million shares traded), Expolanka Rs 105.6 million (2.1 million shares traded) and Royal Ceramic Rs 93.5 million (2.53 million shares traded),

During the day LOLC Development Finance contribution to the turnover was Rs 835,000 from trading of 4125 shares. The contribution to the All Share Price Index was 22 points. Its share price startered trading at Rs 164 at the end of the day it moved to Rs 205. This was a 35 percent or Rs 41 increase. Other low float companies are Nestle and Associated motor Finance. Nestle share price started trading at Rs 1118.75 at the end of the day it shot up to Rs 1200, which was  Rs 81.25 or seven percent price appreciation The company contributed 10 points to the All Share Price Index.

Associated Motor Finance witnessed 50 percent price appreciation, without any price sensitive reasons. Its share started trading at Rs 414.75 and at the end of the day it moved up to Rs 622. During the day 62.5 million share volume changed hands in 18865 transactions.