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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Would Rupee depreciation encourage foreign investors to invest more in CSE

Would Rupee depreciation encourage foreign investors to invest more in CSE

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Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
Rupee depreciation has made shares cheaper for foreign investors.
Eg. If 'X' ltd ( a foreign fund) invest US $ 1000 (at the current rate of US $ 1=Rs. 120)they could get Rs. 120,000 and if they invest total amount in 12/- Rupee share they can buy 10,000 shares. Under the previous situation for US $ 1000 ( before the Budget at the Exchange rate US $ 1= Rs. 108/-) they could get only Rs. 108,000(US $ 1000x 108=Rs. 108,000)and therefore they could have bought only 9000 shares if we consider the price of the share was same. It is almost equal to a 10% discount for foreigners compared to local investors.
Hence depreciation of rupee looks like a very strong factor to encourage foreign investment in CSE.
What are your views friends?

sriranga

sriranga
Co-Admin
Certain extend in CSE.

http://sharemarket-srilanka.blogspot.co.uk/

Gainer

Gainer
Associate Director - Equity Analytics
Associate Director - Equity Analytics
This good news for foreign investors, more foreign investors will come to sri lanka to invest in the CSE.

troy

troy
Moderator
Moderator
Nobody invest to keep forever. so what happens when they want to sell. They will receive less dollars, isn't it?

Foreigners don't like this depreciation of rupee to continue. But it seems to be dollar again settling in 115 level in next few days simply because Sri Lanka as a country cann't afford $ to go (sustain) even until 120. (mind you we heavily rely on imports-even for food)

so foreigners will be benefited from the situation. they will buy heavily now(when rupee weakens) and sell off with multiple profits(even ASI hover around 5000 in comming days (when rupee getting stronger)

Anyways they will win..

bakapandithaya

bakapandithaya
Vice President - Equity Analytics
Vice President - Equity Analytics
@troy wrote:Nobody invest to keep forever. so what happens when they want to sell. They will receive less dollars, isn't it?

Foreigners don't like this depreciation of rupee to continue. But it seems to be dollar again settling in 115 level in next few days simply because Sri Lanka as a country cann't afford $ to go (sustain) even until 120. (mind you we heavily rely on imports-even for food)

so foreigners will be benefited from the situation. they will buy heavily now(when rupee weakens) and sell off with multiple profits(even ASI hover around 5000 in comming days (when rupee getting stronger)

Anyways they will win..

xaclty, when they sell ,they wil rcve less amt compared 2 previous occations

illuminati


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
One side of the story. Explain the opposite as well. i.e when they sell ?

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
@illuminati wrote:One side of the story. Explain the opposite as well. i.e when they sell ?

Yes, you have a point illuminati. Lets see what will happen when they sell. If they had bought 9000 shares at 12/-(for Rs. 108,000)before budget (when the exchange rate was US $ 1= Rs. 108/-) they have spent US$ 1000.(1000x108=Rs. 108,000)Now if they decide to exit without a loss they will have to await till price goes up to 13.30-13.40 level.Coz now they need Rs. 120,000 to get US $ 1000.(120,000/9000= 13.33) So foreigners are reluctant to sell below 13.30/13.40 level as they dont like to make a loss and therefore selling pressure of the particular share would become lower. Hence, there is a chance to increase the price of such shares.

troy

troy
Moderator
Moderator
@bakapandithaya wrote:
@troy wrote:Nobody invest to keep forever. so what happens when they want to sell. They will receive less dollars, isn't it?

Foreigners don't like this depreciation of rupee to continue. But it seems to be dollar again settling in 115 level in next few days simply because Sri Lanka as a country cann't afford $ to go (sustain) even until 120. (mind you we heavily rely on imports-even for food)

so foreigners will be benefited from the situation. they will buy heavily now(when rupee weakens) and sell off with multiple profits(even ASI hover around 5000 in comming days (when rupee getting stronger)

Anyways they will win..

xaclty, when they sell ,they wil rcve less amt compared 2 previous occations

Not exactly. My point is rupee will get stronger in the next week through indirect CBSL interventions. So foreigners can sell and get more dollars even the price of a share doesnt go up. (just through currency appreciation)

Tiger

Tiger
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Whether the rupee is appreciating or depreciating doesn't matter so long as there is no abrupt volatility, like that we see in SL. When managing global funds they can hedge the currency risk through market mechanisms but when there are sudden policy decisions depending on whims and fancies of politicians and naive officials that cannot be hedged.

mra

mra
Manager - Equity Analytics
Manager - Equity Analytics
Would encourage the foreigners for sure, but the bottom line of depreciation is too early to predict even though cabrall says lab lab story. so if they buy now and while exiting if the Rs. further depreciate means loss for them..

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
@mra wrote:Would encourage the foreigners for sure, but the bottom line of depreciation is too early to predict even though cabrall says lab lab story. so if they buy now and while exiting if the Rs. further depreciate means loss for them..

You are right, majority of foriegners may await till exchane rate is stabilised. How ever depricition would insentivise for foreiners to buy. Isn't it?

mra

mra
Manager - Equity Analytics
Manager - Equity Analytics
@Rajaraam wrote:
@mra wrote:Would encourage the foreigners for sure, but the bottom line of depreciation is too early to predict even though cabrall says lab lab story. so if they buy now and while exiting if the Rs. further depreciate means loss for them..

You are right, majority of foriegners may await till exchane rate is stabilised. How ever depricition would insentivise for foreiners to buy. Isn't it?

No. incentive for them if they sell now. they may get 6-7 % higher than local traders. not to buy due unstable ER.

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
@mra wrote:
@Rajaraam wrote:
@mra wrote:Would encourage the foreigners for sure, but the bottom line of depreciation is too early to predict even though cabrall says lab lab story. so if they buy now and while exiting if the Rs. further depreciate means loss for them..

You are right, majority of foriegners may await till exchane rate is stabilised. How ever depricition would insentivise for foreiners to buy. Isn't it?

No. incentive for them if they sell now. they may get 6-7 % higher than local traders. not to buy due unstable ER.

Yes in Rupee terms. But if they want to get back for every US$ 1000 they have to pay Rs. 120,000/=If we assume that they have bought money before the last budget they could have got only Rs. 108,000 for US$ 1000. So they will lose if they want to getout at this point. Therefore even they sell they will have to reinvest in another counter.

mra

mra
Manager - Equity Analytics
Manager - Equity Analytics
@Rajaraam wrote:
@mra wrote:
@Rajaraam wrote:
@mra wrote:Would encourage the foreigners for sure, but the bottom line of depreciation is too early to predict even though cabrall says lab lab story. so if they buy now and while exiting if the Rs. further depreciate means loss for them..

You are right, majority of foriegners may await till exchane rate is stabilised. How ever depricition would insentivise for foreiners to buy. Isn't it?

No. incentive for them if they sell now. they may get 6-7 % higher than local traders. not to buy due unstable ER.

Yes in Rupee terms. But if they want to get back for every US$ 1000 they have to pay Rs. 120,000/=If we assume that they have bought money before the last budget they could have got only Rs. 108,000 for US$ 1000. So they will lose if they want to getout at this point. Therefore even they sell they will have to reinvest in another counter.

Yes. right. i'm referring to sell only. not sell and exit. of course they will sell and buy on bargain counters. but for new foreign entry at 120/- level, they might wait and see till ER become stable.

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