In an exclusive interview with The Nation (published in detail on Page 5 of the GAIN), Karunaratne, who himself is a Chartered Chemist by profession said that Newton’s theory which states that ‘for every action there is always an equal and opposite reaction’ could be linked to explain the current plight of the stock market.
“There are so many factors for the downturn. What goes up comes down and what goes up fast has to come down in equal speed. It’s simple Newtonian physics and that is what is happening to certain stocks that are trading without fundamentals in the market today,” Karunaratne, who tendered his resignation to the Secretary to the Ministry of Finance and Planning, Dr. P B Jayasundera on Friday around 2.30 pm, told The Nation.
Other reasons he cited were the high interest rates, weak economic parameters and the low liquidity available.
“For example, last year Rs.42 billion
was sucked by the market through Initial Public Offerings (IPOs) alone where most of those IPOs were grossly overvalued. This was where poor retail investors got really sucked into it and were played out. In addition, another Rs.19bn was foreign outflows. So the market is now suffering from a severe cash shortage,” he added.
Amidst the controversy surrounding the resignation of Karunaratne, the capital market was last week eagerly speculating his successor. Names that have been doing the rounds are the Chairman of the Sri Lanka Tourism Development Authority, Dr. Nalaka Godahewa, Chairman of Bank of Ceylon Dr. Gamini Wickramasinghe, prominent businessman and fund manager Asanga Seneviratne and Former SEC Chairman and Attorney at Law Dr Dayanath Jayasuriya.
However, it has also been learnt that a 75-strong staff at the SEC have written to President Mahinda Rajapaksa urging him not to accept Karunaratne’s resignation letter. In another development, Sanjay Kulatunga, one of the SEC commissioners has also tendered his resignation on Friday.