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One of the highly acclaimed analyst of the stock market in Sri Lanka Murtaza Jafferjee says the current performance in the Colombo Stock Market is a “bubble” and is expected to burst thus creating a huge market fall out.
However he says it is difficult to say when the “bubble” will burst.
He said the current market performance is taking place purely on “wild speculations” and added that there is no link between what the companies do and the share prices going up.
Jafferjee who is also the Chairman of the J B Securities (Pvt) limited said
“Asset values are inflating beyond any rational or intrinsic valuation”
He added “Vast scale manipulation is taking place which is carried out by few market participants”
He also said everybody wants to make quick money
Jafferjee cautioned that the new investors will get burnt very badly in the present circumstances.
Speaking to www.news360.lk he also reminded a old Walls Street saying which goes as “bulls make money, bear make money, pigs get slaughtered”
Asked what advise he would give the investors Jafferjee said “Take the profits when you can”
He further said “This is the time to take profits and go”
However Jafferjee says this should be done on a selective basis and advise the investors to take 50% of his investment out and leave the rest in the market for the future.
Referring to his comments on the current market situation where the turnover, share prices and indices are recording high levels, Jafferjee said some are “optimistic”, some are “pessimistic”, and I am “realistic”.
Colombo Stock Market saw its All Share Price Index reaching over 5000 mark last week and the highest number of transactions per day during the week.
Turnover during Friday reached Rs. 5.3 billion.
Report By: Prasanna C. Rodrigo / Contact him on: news360@sltnet.lk
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I am afraid that Murtaza Jafferjee is right on the basis of fundamentals both economic and company fundamentals. Sooner or later the market must correct itself. Such correction has not taken place because of the excessive liquidity that flows to the market. Government institutions like the EPF, ETF Bank of Ceylon and NSB are investing in the market. They must undoubtedly be in the market for market development. But they must behave like investors not like speculators or bureaucrats. Like the Foreign Funds and institutional investors they should go on fundamentals. If they did they would not have bought some of the shares they bought at such high prices. Also the amount of money invested should be what can be sustained on the basis of their revenue or income for if they curtail their net purchases they may bring down the market.
The stockbrokers promote the high expectations on the basis of utterly optimistic projections for earnings in the future. Stock market in Sri Lanka is driven by sentiment and liquidity. If either changes dramatically the market will do what Murtaza has prognosticated.
too much money chasing too little shares. as long as interest rates remain low and there is little or no private sector investment elsewhere in the country, prices will continue to move up and the bubble will expand to unmanageable proportions!
what then is 64,000 dollar question !?