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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Who says credit is bad??

Who says credit is bad??

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1Who says credit is bad?? Empty Who says credit is bad?? Fri Dec 02, 2011 1:59 pm

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
it's the way in which the system runs.

https://www.youtube.com/watch?v=tj2s6vzErqY&feature=player_embedded

2Who says credit is bad?? Empty Re: Who says credit is bad?? Fri Dec 02, 2011 2:05 pm

Tiger

Tiger
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Credit at 5-7% interest rates ok, anything above 10% is a killer. What broker firms want is to grant credit at around 20% interest and make a killing out of poor investors.

Finally not only a huge loss but also they will saddled with huge amount of debt as well.

3Who says credit is bad?? Empty Re: Who says credit is bad?? Fri Dec 02, 2011 2:44 pm

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
None says it is bad but all agrees that too much of it is extremely harmful.

4Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 8:52 pm

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
@Kithsiri wrote:None says it is bad but all agrees that too much of it is extremely harmful.

But the present problem is not enough. So it is necessary to take some steps to increase credit.That is the need of the day.

5Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 9:39 pm

Aamiable


Vice President - Equity Analytics
Vice President - Equity Analytics
Credit is good for long term investment in infra-structure projects and so on….. Generally stock market is a place where people invest excessive funds and savings. More credit for stocks means bigger bubble, CSE can’t afford to absorb more blunders…… It is extremely good for broker firms to give credit and force sell later on and earn from both ways.... investors,.... nations economy and the CSE is not benefited.,,, Disastrous for investors and CSE...Earlier also CSE crashed due to excessive credit,... rather than inflating the bubble with credit CSE need to attract more liquid funds and investments, when there is more credit investors seem to be kicked and chased away from stock markets….. There are much better ways of attracting investments by improving investor confidence….

6Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:12 pm

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
Amiable,
Yes, There is a point. If anyone use credit facility wihout self descipline he/she will have to bear it's cost as well. In any business it is the same. But I find no business in the world without credit system. Even most of our HMWIs play with lot of credit. They bargain and get facilities from banks at a competive rates. Small timer could get credit easily only from the broker.In CSE too that was not a serious issue until SEC started to intevene. But SEC made it. we didn't have a problem in share dealing Until credit limits was introduced . After credit rules were established market started to crash. Therefore poor investors couldn't sell their shares as planned and hence they failed to settle their dues in time. That is how force selling started.
In any economy all sectors including retail.wholesale,manufacturing,imports,agriculture,services are running with credit as an important component. Even the Governments including USA, are planing their budgets with credit as a useful component. So How can we expect a credit free stock market?

7Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:19 pm

Aamiable


Vice President - Equity Analytics
Vice President - Equity Analytics
USA is a highly developed nation...far above rest of the world....they have reserves to feed the entire world...we have onehighway...they have paralal highways connecting cities.. if one is congested change to another... their problem is excessive spending....rich are extremly rich ... spend trillions on scientific reseach......ours is a developng nation.....



Last edited by Aamiable on Sat Dec 03, 2011 10:28 pm; edited 2 times in total

8Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:22 pm

monash

monash
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Personally i believe increase of credit limit is not good. Especially at CSE. It will give wonders on short term, but on long term it has adverse effects. Because at CSE there is no control over the frauds and manipulation done by HNWI. so it will lead to another credit bubble which destroy retailers.

9Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:27 pm

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Both extremities - no credit and full credit - are bad. Credit should be allowed with proper regulation. There should be a certain period and method to clear the credits but T+3 and T+5 rule should be abolished.

10Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:28 pm

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Well said!
Too much Credit is not needed on investing on stocks.
Look around you and there is a vast amount of money changing hands and regulators should be able to rope them in with attractive terms than creating un-sustainability.

11Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:29 pm

Aamiable


Vice President - Equity Analytics
Vice President - Equity Analytics
T3 T5

You mean force selling at the end...one day it has to be settled...

12Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:35 pm

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
@Rajaraam wrote:Amiable,
Yes, There is a point. If anyone use credit facility wihout self descipline he/she will have to bear it's cost as well. In any business it is the same. But I find no business in the world without credit system. Even most of our HMWIs play with lot of credit. They bargain and get facilities from banks at a competive rates. Small timer could get credit easily only from the broker.In CSE too that was not a serious issue until SEC started to intevene. But SEC made it. we didn't have a problem in share dealing Until credit limits was introduced . After credit rules were established market started to crash. Therefore poor investors couldn't sell their shares as planned and hence they failed to settle their dues in time. That is how force selling started.
In any economy all sectors including retail.wholesale,manufacturing,imports,agriculture,services are running with credit as an important component. Even the Governments including USA, are planing their budgets with credit as a useful component. So How can we expect a credit free stock market?

Friend don't take it negatively, I am in the opinion if there were no changes on the credit system and if it were allowed as previously there, then the results would have very dangerous now!

Well what i observe was still most of the players in the CSE goes beyond shares with out even knowing what they do, when the credits were allowed on the wish of the brokering firms our friends at broker firms said nice stories to the new comers and encourage them to buy on the credit? But how many of them clearly explain to the new comers the negative impact of the credit and things like force selling?

If you think our investors are had the self descipline then they should have avoided several purchases at higher prices, but do you thing that have it, at least leave them to lose there own money and without facing critical problems with Credit as well

13Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:42 pm

monash

monash
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@rijayasooriya wrote: Credit should be allowed with proper regulation.

This will never happen @ CSE mate. everywhere corruption in Sri Lanka. So don't expect these. Smile

14Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:47 pm

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
@rijayasooriya wrote:Both extremities - no credit and full credit - are bad. Credit should be allowed with proper regulation. There should be a certain period and method to clear the credits but T+3 and T+5 rule should be abolished.

I Started investment in 2002 and those days onwards this T + 3 business is there, and even now i follow it properly. So i didn't see any problem on it.

As for the Credit i Have an Margin Account with one of the Banks and there charge is 13 to 14% of which i feel reasonable.

Now there is another facility available with another bank, where they are giving term loans against shares but you can't trade those shares if you are not settled the loan, so its suitable for long term investors and they charge maximum of 13%. So that also i feel reasonable

But any of the investors are here if you thing after taking the facility at more than 20% and with two way transactions charges if you can make profits go ahead!

15Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 10:48 pm

Aamiable


Vice President - Equity Analytics
Vice President - Equity Analytics
As far as economy, CSE and investors are concerned positive attitudes....for broker firms this may be otherway around...

16Who says credit is bad?? Empty Re: Who says credit is bad?? Sat Dec 03, 2011 11:15 pm

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
We get credit from our broker for past 6-7 years.However we or the CSE or Broker didn't have any problem untill SEC intervene on credit system . But all of a sudden when SE Cenforced rules some members were unable to settle before the cedue date and heavy force selling started.

They prvide credit at 14%. But from Dec. it will be 15% due to increasing bank interest rates.

17Who says credit is bad?? Empty Re: Who says credit is bad?? Sun Dec 04, 2011 12:00 am

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@Gaja wrote:
@rijayasooriya wrote:Both extremities - no credit and full credit - are bad. Credit should be allowed with proper regulation. There should be a certain period and method to clear the credits but T+3 and T+5 rule should be abolished.

I Started investment in 2002 and those days onwards this T + 3 business is there, and even now i follow it properly. So i didn't see any problem on it.
T+3/T+5 rule is not good for investment.It promotes gambling.Inexperience retailor will definitely burn their finger because of this rule and brokers will be benefitted.Investers should be given adequate period to settle their credit or If they are not creditworthy then do not give credit.

18Who says credit is bad?? Empty Re: Who says credit is bad?? Sun Dec 04, 2011 9:17 am

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
I agree that there should be limits on the Amounts & repayment Times and most importantly assessing each investors Credit worthiness.
Start with a low percentage with a limited repayment period and gradually increase them to sustainable levels (not 300%), according to individuals past track records.

19Who says credit is bad?? Empty Re: Who says credit is bad?? Sun Dec 04, 2011 11:27 am

insidertrader


Manager - Equity Analytics
Manager - Equity Analytics
When I took the housing loan, the bank came and checked the property. I had put it as mortgage, so if I cannot pay the credit they will take the property and sell it recover the credit. I had to get approval of the plan and if it cannot change from the plan. I had to go to a medical test at a place given by the bank. I had to take life insurance. And so on. Why all these things?

Imagine brokers giving housing loans. Wouldn't that be great? Very Happy

I guess Sri Lankan stock investors don't have electricity, water or telephones at home. If they have, they wouldn't have paid the bill after 2 weeks or whatever and the electricity board etc. would have cut off the services. And then Sri Lankan investor would be blaming the electricity board, water board, phone company why they force cut the services. Very Happy

20Who says credit is bad?? Empty Re: Who says credit is bad?? Sun Dec 04, 2011 11:32 am

bakapandithaya

bakapandithaya
Vice President - Equity Analytics
Vice President - Equity Analytics
We can use credit for panic stocks in short term

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