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Day by day the CSE is seeing share after share being pushed up for no fundamental reason. It started with BLUE and then gradually spread to other shares. TESS, ATL, SEMB were not spared. Today it was MULL's turn.
Manipulators seem to be able have a casual chat over a cup of tea while instructing their brokers to artificially push a share. By the time they finish sipping their tea, they would have made in excess of 20 million profits within a matter of minutes. When they decide to sell the shares they force sell it down the same way they took it up, thus leaving retailers who jump on board in the greed of profit holding crappy shares that have virtually no hope of ever reaching those levels again.
The danger of this strategy is two-fold
1. Retailers are slowly but surely getting wiped out
2. HNWI and Foreign investors who think the CSE is attractive start thinking twice about entering the market
Point number two is the DANGER.. Once HNWI and Foreign investors realize that there is no potential in a manipulated market, they start pulling out. This is because they cannot sell the shares they buy easily due to poor liquidity AND the fundamentally strong shares that they hold are spiraling downwards for no apparent reason.
WHY are the strong shares going down? Because retailers who hold them are selling them off by hitting the buyer at whatever the cost to go after crappy shares that look like gold mines
What happens as a result? Retail money gets blown out of the market and liquidity further drops. Retailers exit the market in disgust preferring to take the loss and exit, never to look at the market again.
THEN what happens? liquidity further drops. When people start realizing that liquidity is not there, buying starts drying up. then people start selling to recover and convert to cash. more people will leave the market
THEN? With no HNWI participation and foreign clients pulling out and retailers also leaving, there will be no money to buy shares. Liquidity will hit an all time low
THEN.. This will be the beginning of the end of the CSE.
Scary story, but if something is not done fast to rationalize this market, I fear that very bad times are ahead for the Colombo Stock Exchange
Manipulators seem to be able have a casual chat over a cup of tea while instructing their brokers to artificially push a share. By the time they finish sipping their tea, they would have made in excess of 20 million profits within a matter of minutes. When they decide to sell the shares they force sell it down the same way they took it up, thus leaving retailers who jump on board in the greed of profit holding crappy shares that have virtually no hope of ever reaching those levels again.
The danger of this strategy is two-fold
1. Retailers are slowly but surely getting wiped out
2. HNWI and Foreign investors who think the CSE is attractive start thinking twice about entering the market
Point number two is the DANGER.. Once HNWI and Foreign investors realize that there is no potential in a manipulated market, they start pulling out. This is because they cannot sell the shares they buy easily due to poor liquidity AND the fundamentally strong shares that they hold are spiraling downwards for no apparent reason.
WHY are the strong shares going down? Because retailers who hold them are selling them off by hitting the buyer at whatever the cost to go after crappy shares that look like gold mines
What happens as a result? Retail money gets blown out of the market and liquidity further drops. Retailers exit the market in disgust preferring to take the loss and exit, never to look at the market again.
THEN what happens? liquidity further drops. When people start realizing that liquidity is not there, buying starts drying up. then people start selling to recover and convert to cash. more people will leave the market
THEN? With no HNWI participation and foreign clients pulling out and retailers also leaving, there will be no money to buy shares. Liquidity will hit an all time low
THEN.. This will be the beginning of the end of the CSE.
Scary story, but if something is not done fast to rationalize this market, I fear that very bad times are ahead for the Colombo Stock Exchange
