Investors plundered by a set of crooks

| by Vickramabahu Karunaratne

( August 26, 2012, Colombo, Sri Lanka Guardian) One does not go to a share market merely to get dividends, where a company distributes a proportion of its annual earnings to the shareholders. Dividends at all times are distributed as a percentage of the nominal/par value of a share. In a sense there is no need of an organised share market for redistribution of shares of an established company. Hence the real purpose of a share market is capital gains-this is where an investor makes a gain by buying at a lower price and selling at a higher price. The price of a share is chiefly determined by the earnings of the company. If a company makes net profit continuously the demand for the share will appreciate causing the share price to rise. By investing in growth companies, over a long investment horizon, will certainly give higher returns than many fixed income securities. All economists admit that some speculation is necessary and unavoidable, for, in many common-stock situations, there are substantial possibilities of both profit and loss, and the risks therein must be assumed by someone. Thus, many long-term investors, even those who buy and hold for decades may be classified as speculators, except the rare few who are primarily motivated by income or safety of principal and not eventually selling at a profit.

Speculating is the assumption of risk in anticipation of gain but recognizing a higher than average possibility of loss. Free market economists maintain that speculation implies that a business or investment risk can be analyzed and measured, hence it is not based on luck or chance; probability could be estimated. Therefore its distinction from the term Investment is one of degree of risk. But not only Marx but also Keynes rejected this view and classified speculation in share market as a form of gambling, which is based on random outcomes. Even if one has the knowledge of the market variations and predicts the ups and downs of the share market, he will get repulsed if the shares are manipulated. No gambler will risk his money in a den where the dice are loaded. Thilak has given the warning to all investors about the Lanka stock market by resigning and explaining why he had to resign. Thilak was one year junior to me at college but we were both members of the senior cadet platoon that won both the Herman Lose and the Millers cup. I do not agree with his politics but I know him as an honest person. Not even Mahinda Raj can push him around as he is doing to others.

Colombo Stock Market

It is clear that the Colombo Stock Market must be freed from undue influence and manipulations to woo investors who are essential for market growth, in a free market economy. This failure shows that the Mahinda regime is loosing faith of local bourgeoisie as well. The Chairman of Sri Lanka’s Securities and Exchange Commission (SEC) Thilak Karunarathne who tendered his resignation said that he decided to resign due to pressure. It is clear that this was due to the immense pressure from pro Mahinda investors whose transactions are being probed by Thilak for securities fraud. He told the media that some brokers and investors had become -so powerful as to influence his resignation. The SEC has been probing ‘pump and dump’ deals where weak stocks were driven up and sold to small investors during a stock market bubble fired by lower interest rates and liquidity from margin loans. In other words the SEC is not even a gambling joint, but a place where investors are plundered by set of crooks, organised by the regime. This is parallel to the attack on provident fund of the private sector workers. All these acts are done under the pretext of Sinhala patriotism and saving motherland from traitors. But the problem for the masses is that the saviour has become the centre of corruption and out right plunder. We have to unite disregarding class differences to fight for freedom and democracy.