Feb. 16 (Bloomberg) -- Sri Lanka may remove a 10 percent price trading limit on some stocks listed on the Colombo Stock Exchange, according to its chief executive officer.
The bourse planned to introduce a “transparent, Sri Lanka- centric” volatility management mechanism, CEO Surekha Sellahewa said by phone today, without giving a timeframe.
Stocks identified using a formula designed by the exchange are restricted from rising or falling more than 10 percent from their previous closing levels. The Securities and Exchange Commission of Sri Lanka imposed the price caps in September 2010 to curb speculative trading following the end of a civil war against Tamil rebels in 2009. The Colombo All-Share Index surged 125 percent that year and 96 percent in 2010.
“We have recommended to the Securities and Exchange Commission that it can go off if broker credit is managed,” Sellahewa said. “It was brought in at a time when market volatility was out of control.”
The Colombo gauge has slumped 13 percent in 2012, the most among 93 major gauges tracked by Bloomberg, as the central bank raised interest rates, while the government scrapped a currency trading band against the dollar to help preserve its foreign- exchange reserves. The government also raised petroleum prices last weekend, fanning speculation inflation will quicken.
--Editors: Darren Boey, Ravil Shirodkar
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