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Thursday, 19 April 2012 - 19:57
10% 'price band' on stocks lifted
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Sri Lanka's Securities and Exchange said it was lifting a 'price band' imposed on volatile stocks with immediate effect, but will continue to monitor the market and to re-impose it if needed.

The so-called 'price band' was slapped on when Colombo stocks, especially illiquid ones with weak fundamentals, zoomed during a credit bubble fired by loose monetary policy, which saw an increase in credit-backed margin trading and related activities.

Stocks have since come down from their highs, and interest rates are also rising, after the credit bubble finally ended in a balance of payments crisis which caused liquidity shortages.

Securities fraud and asset price bubbles increase during periods of low interest rates and excess liquidity in the banking system.

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