FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka


Submit PostSubmit Post
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post



Latest topics

» Kind of behavior traders engage in when they are frustrated and want their money back from the market. Stock market for beginners
by lal62 Today at 7:40 am

» Maldives records over 100,000 tourist arrivals in first 35 days of the year
by target1 Today at 4:36 am

» Many positives for Next week
by madukp Today at 3:22 am

» EXPO EXPO EXPO
by Gowri123 Today at 12:35 am

» GLAS will be winner with Super Gain.
by Eranga87 Yesterday at 9:50 pm

» still I believe this
by 100Bill Yesterday at 9:21 pm

» SUNSHINE HOLDINGS PLC (SUN.N0000)
by ErangaDS Yesterday at 8:19 pm

» Investor sentiment - will there ever be a recovery?
by xhunter Yesterday at 7:49 pm

» Let's have a stop-loss strategy to maximize investment returns in stock market
by EquityChamp Yesterday at 7:19 pm

» Daily Foreign Transactions
by Pradeep90 Yesterday at 6:56 pm

» Norway -> biggest shareholder of NDB
by Bakkabwoi Yesterday at 6:42 pm

» DIPD/HAYC/HAYL
by samaritan Yesterday at 5:41 pm

» කොටස් මිල දී ගන්න මෙය හොඳම කාලයයි – රාජ්‍ය අමාත්‍ය කබ්රාල්
by samaritan Yesterday at 5:07 pm

» IS it right time to stick to warren buffett's most famous saying ???
by Mr. X Yesterday at 4:02 pm

» CSE - The World's best performer!
by Vishwanarth Yesterday at 2:42 pm

» Best Broker
by Wickyz Yesterday at 2:32 pm

» Game Changed! SUPER GREEN
by Karthick Yesterday at 12:24 pm

» Blue Diamond
by thavam_Eu Yesterday at 12:07 pm

» GALORE OF GOOD NEWS TO THE CSE
by Bakkabwoi Yesterday at 11:58 am

» TRUE VALUE OF LANKA ALUMINUM INDUSTRY (LALU)
by Trading Jockey Yesterday at 10:26 am

EXPERT CHRONICLE™

ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube

CHRONICLE™ NEWS PRODUCTS

FINANCIAL CHRONICLE™

Views & Reviews, Analysis, Evaluations, Discussions, Gossip and Hot Tips relating to Sri Lankan companies listed on the Colombo Stock Exchange (CSE)
Contribute




DAILY CHRONICLE™

Latest news and articles published in Newspapers, Websites, Blogs and other online news sites relating to business and investments in Sri Lanka
Contribute



ECONOMIC CHRONICLE™

This is a section that provide news, views, analysis, predications relating to Political and Socio-Economic factors and how such activities affect the Stock Market and other economic activity of the Country.

Contribute




EXPERT CHRONICLE™

This is an exclusive section for Expert Articles which will help member to share knowledge through comments and responses of the members. All members are allowed to reply and make comments to these articles.

Contribute


Submit Post


CHRONICLE™ YouTube

Youtube Videos and other visual presentations relating Stock market and other investment advise submitted by members or other contributors.

Contribute


Submit Post


කොළඔ කොටස් වෙළඳපොළේ වංශකථාව
කොළඔ කොටස් වෙළඳපොළේ ලැයිස්තුගත සමාගම් කොටස් ගැන තොරතුරු¸විශ්ලේෂණ¸සාකච්ඡා¸ කටකතා¸රසකතා යන සියල්ල අපේම සිංහලෙන් කතා කළ හැකි ‘කතා මණ්ඩපය’

Contribute

Twitter Feeds
POPULAR COMPANIES
A

ABANS ELECTRICALS PLC

ACCESS ENGINEERING PLC Hot

ACL CABLES PLC

ACL PLASTICS PLC

ACME PRINTING & PACKAGING PLC

AGSTAR PLC

AITKEN SPENCE HOTEL HOLDINGS PLC

AITKEN SPENCE PLC

ANILANA HOTELS AND PROPERTIES PLC

ARPICO INSURANCE PLC

ASIA ASSET FINANCE PLC

ASIA CAPITAL PLC

B

BAIRAHA FARMS PLC

BALANGODA PLANTATIONS PLC

BIMPUTH FINANCE PLC

BLUE DIAMONDS JEWELLERY WORLDWIDE PLC

B P P L HOLDINGS PLC

BROWNS BEACH HOTELS PLC

BROWNS INVESTMENTS PLC

C

CARGO BOAT DEVELOPMENT COMPANY PLC

CENTRAL INDUSTRIES PLC

CEYLON COLD STORES PLC

CEYLON GRAIN ELEVATORS PLC Hot

CEYLON TEA BROKERS PLC

CEYLON TOBACCO COMPANY PLC

CHEVRON LUBRICANTS LANKA PLC

COLOMBO FORT LAND & BUILDING PLC

COMMERCIAL BANK OF CEYLON PLC

CITRUS LEISURE PLC Hot

COMMERCIAL CREDIT AND FINANCE PLC

D

DANKOTUWA PORCELAIN PLC

DFCC BANK PLC

DIALOG AXIATA PLC

DIALOG FINANCE PLC

DIPPED PRODUCTS PLC

DISTILLERIES COMPANY OF SRI LANKA PLC

DUNAMIS CAPITAL PLC

E

EAST WEST PROPERTIES PLC Hot

EASTERN MERCHANTS PLC

EXPOLANKA HOLDINGS PLC

E-CHANNELLING PLC

F

FIRST CAPITAL HOLDINGS PLC

G

GALADARI HOTELS (LANKA) PLC

GUARDIAN CAPITAL PARTNERS PLC

H

HATTON NATIONAL BANK PLC

HAYLEYS PLC

HAYLEYS FABRIC PLC

HAYLEYS FIBRE PLC Hot

HEMAS HOLDINGS PLC

HIKKADUWA BEACH RESORT PLC

HNB ASSURANCE PLC

HVA FOODS PLC

J

JANASHAKTHI INSURANCE COMPANY PLC

JOHN KEELLS HOLDINGS PLC Hot

JOHN KEELLS HOTELS PLC

L

LANKA ASHOK LEYLAND PLC

LANKA IOC PLC

LANKEM CEYLON PLC

LANKEM DEVELOPMENTS PLC

LAUGFS GAS PLC

LAUGFS POWER LIMITED

LOLC FINANCE PLC

LOLC HOLDINGS PLC

LUCKY LANKA MILK PROCESSING COMPANY PLC

M

MELSTACORP PLC

N

NATIONAL DEVELOPMENT BANK PLC

NATION LANKA FINANCE PLC

NESTLE LANKA PLC

O

ORIENT FINANCE PLC

OVERSEAS REALTY (CEYLON) PLC

P

PANASIAN POWER PLC

PEOPLE'S LEASING & FINANCE PLC

PIRAMAL GLASS CEYLON PLC

PRIME FINANCE PLC

R

RAIGAM WAYAMBA SALTERNS PLC

RENUKA AGRI FOODS PLC

RENUKA CAPITAL PLC

RENUKA HOLDINGS PLC

RICHARD PIERIS AND COMPANY PLC

RICHARD PIERIS EXPORTS PLC Hot

ROYAL CERAMICS PLC

S

SAMPATH BANK PLC

SEYLAN BANK PLC

SIERRA CABLES PLC

SINGHE HOSPITALS PLC Hot

SMB LEASING PLC

SOFTLOGIC HOLDINGS PLC

SOFTLOGIC LIFE INSURANCE PLC

SRI LANKA TELECOM PLC

SWISSTEK (CEYLON) PLC Hot

T

TEEJAY LANKA PLC

TESS AGRO PLC

THREE ACRE FARMS PLC

TOKYO CEMENT COMPANY (LANKA) PLC Hot

U

UNION BANK OF COLOMBO PLC

V

VALLIBEL FINANCE PLC

VALLIBEL ONE PLC Hot

VALLIBEL POWER ERATHNA PLC

W

WASKADUWA BEACH RESORT PLC


You are not connected. Please login or register

FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Brokers, equity research found wanting

Brokers, equity research found wanting

Go down  Message [Page 1 of 1]

1Brokers, equity research found wanting Empty Brokers, equity research found wanting Mon Sep 17, 2012 1:17 am

sriranga

sriranga
Co-Admin
* Helped ‘mafia’ undermine credibility of the bourse

A few good women and men. "Many stockbrokers haven’t plied their trade well; having instead focused on the easy money of the mafia to drive prices up and then convince gullible retailers, or better still, pension funds to take over the junk. Investment banks also haven’t been held to account for the tosh they pass around labelled research," says an insightful article appearing in a new financial magazine ‘Echelon’ titled ‘A Crisis of Trust’.

The article quotes several leading and respected professionals in the country’s capital market sector and shows how broker firms contributed to the status-quo, where many now seem to think all is well with the stock exchange now that it is back among the top performing bourses in the world.

Following are excepts from the article:

"Over the past year, crimes affecting Colombo’s small stock market have seriously eroded confidence in its integrity. Scandal after scandal has dogged the market and the apparent erosion of the, regulator’s ability to act independently in the face of blatant market manipulation, insider trading and challenges to its authority have all contributed to the crisis. The crisis has been exacerbated by economic hardship, rising interest rates and confidence sapping general deterioration in law and order.

"This crisis had been unfolding for some time due to a number of reasons. Under siege, the regulator has been unable to crack down on insider trading. Excessive credit to unwary investors, governance issues at state controlled investment funds with exposure to the stock market and a complex web of self interest and nepotism have all contributed to eroding trust in the market. However in the analysis the role some investment advisors or stock brokers have played in exacerbating the crisis perhaps deserves greater scrutiny than it has received.

"Violating rules here has no expense. If you violate something there has to be consequences. When there are none and you get away with it easily, people take that route, because human greed is always there- everybody wants to make money and that’s where things go wrong.

"When it becomes apparent that leaders have a wonky moral compass and are flip flopping on values - those publicly preached and privately practiced - the message of those behaviours are transmitted to the rest of society and quickly become part of the culture.

"The past few years have not been kind to many equity research analysts. For a start most investors didn’t care to check what analysts thought because the market saw an unprecedented boom. Secondly and more embarrassingly their false and rosy predictions about the sustain-ability of a bubble have left them red faced. However not everybody got carried away. A few brokering houses, investment banks and independent equity research units did advice clients to run for the door but only a few, mostly mutual funds, were willing to listen to sane voices.

"Tackling the crisis of trust be-devilling equity analysts and the market is complex due to several reasons. Firstly during the bubble the primacy of investment banking and brokerage sales to profit was so great that integrity of research departments were compromised by traders and financiers keen not to offend clients.

Market wide credibility has been eroded after analysts fell over each other to recommend the IPO’s of Soft logic Holdings and Expo Lanka. Forecast EPS for Softlogic Holdings for 2012 by Asia Wealth, CT Smith, John Keells Stockbrokers, BMS and Lanka Securities ranged from Rs2.98 to Rs1.7 for the year, but the actual was Rs. 0.66 a variance of up to 450%. Its oversubscribed IPO was priced at Rs29 a share which now trades at Rs9.40. Similarly some analysts offered a rosy outlook for Expo Lanka IPO of Rs14 a share. Forecast by John Keells Stock, Asia Securities, Heraymila, CT Smith and BMS were 190% to 148% above the actual. Expo Lanka shares are now trading at less than half the TO price at Rs. 5.90. Market needs a bit of credibility, which it lost especially after some of the recent IPOs.

"To be fair, analysts are often young graduates looking for a kick start to a capital markets career and are usually an underequipped lot. Because of the subjugation by overbearing investment bank chief executives, the whole industry of equity research has lost its aura, its credibility and ability to influence markets.

"Of course there have been whimpers of protest about the perils of pump and dump and advice to ‘only invest in fundamentally strong counters’ but that falls far short of good advice. Any confident analyst would have encouraged clients to significantly reduce equity exposure or be heavily underweight on stocks. But the young bucks had not seen a market cycle in their careers and certainly lacked the experience to make a bold call. They also seem to have been hired for just those reasons; to profit from their incompetence.

"Some analysts have also been cosying up to investment banking clients but the practice hasn’t raised howls of protest. In fact it isn’t unusual for analysts here to moonlight as investment bankers deftly switch back to their official role and offer a rosy recommendation on their client’s stock with a wink or a nod.

"Investment banks running the book for IPOs have to be up to scratch with their due diligence. Any IPO almost, is approved by the SEC, but it is the investment bank that does the due diligence, does the valuation and has to make sure there is fair play. Investors also need to get something out of an IPO but if it’s overpriced, the company may benefit in the short term but investors won’t. In a mad frenzy retail investors snapped up any and all IPOs without examining the credential or thoroughness with which investment bankers had dealt with these. Some of those IPOs were overpriced drastically. That’s the issue; the lack of regard for reputational damage.

"This serious breakdown of ethics and the pooh-poohing of that impact by chief executives and managers at investment banks and brokerages is perhaps the second crisis of trust bedevilling equity analysts and investment banks.

"If you look at the EPF portfolio there are lots of speculative or so called junk stocks now. A long term investor should not have that kind of a portfolio, so clearly we see a deterioration of the quality of management. Long term pension funds should have an investment policy statement and strategy in keeping with their mandate. Even if share prices as a whole decline, fundamentally strong companies will continue to be profitable, which isn’t likely to be the case with speculative storks.

"A group of highly leveraged stock traders- referred to by the former SEC Chairman Thilak Karunarathne as a ‘mafia’ - has replaced the regulated institutional investor segment in the market. Traders are leveraged and they look for arbitrage; they are a different segment to retail investors. Traders want to push prices up and dump on the retailers. Retail investors will be much better off investing through mutual funds - which by and large due to their superior fund management skills - bought stocks at their lowest prices and sold most of those shares before the market crashed. In the mutual fund industry, holdings of listed shares have declined to 42% of assets by end 2011 from as high as 60% in 2009.

"There were stocks that were certainly manipulated and some investors were misled, who is to blame for that? More than anyone else it is the guys advising them.

"When companies realise they are about to have a disappointing earnings season, they start avoiding analysts and nosy reporters. When that isn’t working chief executives turn on the charm to mislead analysts, perhaps one reason why none have been known to forecast a profit decline."

The article goes on to suggest that the stock broker community and their research units undergo self evaluation.

The complete article can be read in the ‘Echelon’ available at Keells Supermarkets and bookshops.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=61669

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

anu

anu
Manager - Equity Analytics
Manager - Equity Analytics
Yep...Our investment advisors and stock brokers should have come from cycle repair shops...they are very good at pumping up and give a very elated feeling to the retailers...

lol! lol!

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Frankly, my adviser never suggested me to buy speculative.. years earlier I asked him of BLUE, GREG like shares and he said "no fundamentals"..
Quite honestly I didn't know what fundamentals mean at that time but I guessed it as a guarantee not to proceed.

He was proven right.. If I entered and gained then I;d have been a speculative day trader than a value investor.. And when market started to run on the reverse gear, I'd have been whining too.. Wink

Well.. I no longer know whether we have genuine and educated (most importantly in capital markets) brokers/investment advisors live here..

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
A broker can be an enemy or a friend depending on their ethics. They can take blind followers for a ride if they inflate valuations in their expert research reports. Have we seen this before. YES. look at overvalued IPOs and abnormal future projections in some IPOS.
Some broker to their credit adjust their forecasts when they see changes.

On the other side, we need to note that they might put out a report considering current situations but at the wrong time. I recall brokers who put out buys during last June 2011. They ofcouse went wrong in the short term.
It is upto us to study and determine our the investment period and exit.

5Brokers, equity research found wanting Empty Re: Brokers, equity research found wanting Mon Sep 17, 2012 10:51 am

Sidath

Sidath
Manager - Equity Analytics
Manager - Equity Analytics
I never trust broker research. I read them but don't trust them. I have encountered incidents where they have asked to buy when the their company is selling. Specially IPO's. I do my own basic research.

Sponsored content


Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum