Analysts said recent developments regulations coupled with effects of the global turmoil trickling down to the local market has diminished investor confidence.
The stock exchange suspended two firms, Pelwatte Sugar and Hotel Developers which were named in an expropriation law which was passed Wednesday in parliament.
Pelwatte Sugar said in a stock exchange filing that it is awaiting instruction from the Treasury and was unable to comment on the implications of the bill.
Hotel Developers, a state controlled firm, where Colombo Hilton is operated was also listed for expropriation in its entirety.
Foreigners are heavily on the side. Turnover levels have dipped drastically indicating a serious liquidity crisis, analysts said.
The ASI to date is down by 6 -7 percent while the Milanka has taken a major plunge of nearly 35 percent, said Udith Wickramasinghe, at Lanka Securities.
‘Unless there is an artificial liquidity injection or a relaxation of credit rules is done to boost market, the crisis will deepen further,’ Wickramasinghe said.
Analysts say foreigners are unlikely to return to the market for at least another two years mainly due to the global crisis and local investors lack the liquidity to drive the market.
Prices of blue chip counters such as JKH, HNB, Sampath Bank, DFCC have dipped nearly 40 percent, negatively impacted by foreign selling, he said.
Among the counters that gained today is Sampath Bank, up Rs 2.00 at Rs 214.00 but volume remains thin at 8,600 shares only.
Lube firm Chevron has gained Rs 2.80 to Rs 173.00 levels.
Share price of CTC which declared an interim dividend of Rs 10.00 is up Rs 24.90 trading at Rs 428.90 levels.
Vallibel One is trading further below its issue price of Rs 25.00 at Rs 24.40 levels. Expolanka is moving at Rs 9.80 while Softlogic has dipped to Rs 18.00 levels.
The sole crossing by mid day took place on index heavyweight JKH as 250,000 shares changed hands at Rs 193.00.
The All Share Price Index (ASI) by mid day is up marginally 0.12 percent (7.56 points) at 6,309.31 while the Milanka which tracks the 25 most liquid shares on the bourse is also down 0.09 percent (5.11 points) to 5,629.14.
Turnover is low at just over 211 million rupees by mid day. Trading on JKH pumped in the bulk of Rs 72 mnfollowed by Commercial Bank non-voting shares which generated six million rupees. Chevron follows closely with Rs 5.8 mn.
Panasian Power tops volume with 707,000 shares trading, followed by Amana Takaful with 678,000 shares. Seylan Merchant Bank saw 438,900 million shares trade.