The Stock Market, A Miracle!

By Ravi Perera

One of the hallmarks of our country, referred to in some circles as the Miracle of Asia, is the ease with which it carries extreme and contradictory situations within its fold. One day the sun is shining and the lucky souls living inside the miracle are heady with optimism. Crackers are lit, garlands placed around opulent necks, speeches are made and all is well under the sun. The next day it is pouring, the roads are under water, roofs are leaking, buses run late and there is despair all around.
Presently the most recognizable symbol of the nation’s aspirations appears to be the game of cricket which is typically shrouded in conspiracies and controversy at the highest level. Politicians are eager to offer the game their patronage. Political children proudly rub shoulders with members of the national team. Businessmen of doubtful repute clamour to run its administration. People who we used to dismiss as unredeemable nitwits get transformed into profound analysts and commentators of this very British game.
And then on a blessed day our brave cricketers overcome a mature foreign team such as the Australians or the South Africans. All stops are now removed. There are no better athletes than us on this planet. Long speeches are made extolling the hidden talents of the lads from the far flung villages. The generally protein deficient diet of a poor rural set up is now given as the sure fire way to produce abiding athleticism. Excited sponsors crash into each other inside the Cricket Headquarters down Maitland Place. All is well once again.
But inevitably a few short weeks later, as in any sport, we make an inglorious exit against a not so fancied team like Bangladesh. Now it is just the opposite. Accusations of bribe taking and match fixing fly all around. It is hinted that Sri Lankans do not have the stamina for a sustained effort. The experts argue that real fast bowlers cannot be produced on the average diet of a citizen in the miracle country, rice, over cooked vegetables and a hint of some protein. It is pointed out that here dairy products are considered a luxury. The cricketing administration is now said to be in sixes and sevens. It is soon expected that the rival groups will take matters to court. It is whispered that even the highest in the land is taking a keen interest in cricketing matters.
If cricket is in the realm of image and aspirations of a nation, the Colombo Stock Market is firmly rooted in terra firma, affecting the pockets of the thousands of investors and other stakeholders. People invest in quoted companies with the idea of becoming partners of a successful business, however small their holding. For their investments to bear fruit several factors, which are very complex in definition, must be in place.
First and foremost the country must be stable and moving forward in an economic sense. There must be in place government policies that support and encourage the specific business to compete effectively in the complex business world. The companies themselves should be well managed and run by people of integrity and ability. And all this must be held together by a fair and transparent legal/ regulatory system commonly acceptable to all parties.
One might say that we may be crying for the moon. Nothing that has happened in this country hitherto gives us reason to believe that such a situation could ever be established in any meaningful way in Sri Lanka. We can only hope that at least a pale shadow of a legitimate system is maintained here. Even that is not apparently there now.
Only a few months back some people were claiming that we were the best performing stock market in the world. The euphoria generated by the end of the three decade war seemed to have fueled a buying frenzy which sent stock prices in this country incredibly high. Now the same guys are mourning that we have the worst performing stock market in the world. Obviously only a miracle can support such extremes.
At the peak of the buying frenzy apparently our total market capitalization reached about  23 Billion US dollars. As we know there are several individuals on this planet whose personal wealth is much more than that. But for an economy of our size, US$ 23 Billion is an impressive achievement. Today the total market capitalization of the Colombo Stock Market is drastically down and is said to be about US$ 17 Billion. The difference is estimated to be close to about 800 Billion Rupees.
In other words, the investors have lost this whopping sum of money in the local stock market in the short span of about one year. Where did these 800 Billion Rupees go? Money which leaves a country considered a miracle surely has only one place to go, the heaven of money. Let it rest there in peace.
But what about the investors who got carried away by the irrational exuberance of our market last year? As we all know markets go up and down. One difference perhaps is that in solid markets the investors can reasonably predict that good companies would eventually do well. But in the Colombo stock market such fundamentals apparently do not matter.
If powerful enough, you can persuade government agencies like the Employers Provident Fund or a Government bank like the National Savings Bank to buy your shares at an inflated price regardless of its actual value. Likewise, insider trading, bribery, political influence, manipulation, corruption, etc. play a decisive role in our market.
It is therefore a miracle, like many other things in this country, that we still call it a stock market.