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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » CB Raises Interest Rates by 50basis points

CB Raises Interest Rates by 50basis points

+2
jayathu
EquityChamp
6 posters

Go down  Message [Page 1 of 1]

EquityChamp

EquityChamp
Moderator
Moderator

Will this be the final nail on the coffin for CSE which is already on a serious state? Sad

jayathu


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Damaging news double down on your long term portfolio n exit from your trading portfolio

EquityChamp

EquityChamp
Moderator
Moderator

I think all are set to make 2016 even more tougher than 2015. But what to do. We have to live and our life should go on. I predict the 1st half of 2016 will going to be extremely stressful for all the investors so be prepare to do some yoga or go for a walk every evening while keeping an eye on growth stocks who will be emerge as winners in the future.

Brinthan

Brinthan
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

BAD NEWS TO SHARE MARKET....HEAVY SUPPORT FOR
ASPI       6 SadSadSad

Gainer

Gainer
Associate Director - Equity Analytics
Associate Director - Equity Analytics

Nothing matter and Behind this Good News Wait for that

Joe007


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics


It is true that interest rate hike is not a good news for stock market at any time. Now interest rates are going up continuously which shows the economic instability clearly due the lack of funds available in the local and also deteriorating reserves at central bank.

The system of interest rate hike is going other side when comparing developed countries. There they increase the rate to increase the inflation. When they see the possibility of deflation they never increase also think about reducing furthermore to allow the money to flow effectively in the local economy.
But in Srilanka , interest rate hike is going upside down due th many reasons.
1) previous government's projects with no return. Such as property investment happened in Spain in a big scale.
2) too much debt for the country. So central bank have no option.
3) too much corruption and very hard to recover stolen funds from politicians like a tradition.
4) no investor confidence and SGT was a wrong idea and unacceptable. See how CTC has affected very very badly specially its NAV.
5) unable to cut down imports and increase exports
6) unable to maintain the purchasing power of rupees. Normally it is good to bring down the currency to bring foreign investment , increase in exports and cut down of imports. But instability of rupees continuously make everyone stay away to avoid losses for just brining the funds into the country.
7) Srilanka economic market is very small and when comparing devaluation of rupees is too much. We can't expect too much foreign funds into the small economic market and we are still struggling.
8)l central bank's reserves are deteriorating and make everyone anxious about default. Eg - Greek Crisis.
9) interest rate hike and possible future hike in the US.
Manymore reasons to write..

My opinion to improve
------------------------------
1) must privatise any loss making enterprises without affecting the national security.
2) must bring quick and serious judgement for those who involved corruption with the help of international to bring the country corruption free and confidence.
3) should stop any projects which are not going to give us short or medium term until economic conditions improve.
4) there are lots of corruption involved in the export and it should be tackled.
5) must bring tight law to cut down imports without any questions. See all parliamentarians want tax free permits to import vehicles. Very bad example to the nation and very selfish.
7) government should go for low interest loan to pay off higher interest loan taken by the previous government. There was a massive fraud and commission earned illegally from previous government.
8)must lease some of its land or properties to foreign investment and must not sell free hold. They had been sold free hold many times.
9) if they can try atleast there will be a improvement then we can go next step....

If they don't improve
--------------------------
1) most investors will exit in the stock market regardless of any performance of companies. Imagine what will happen if there is a real problem in the country's economy???? I don't want to say that.... Example- Greek stock market.
2) most investors will move their wealth to safer investment due to the rate hike of interest and walk away stock market. If this happens, there will be difficult to sell our stock like now due to the lack of buyers. Then think what will happen?????
3) even investment in the financial system is also involved risk if there is a economic crisis. Also their guarantee for deposits are very low. So most people will move for safe haven investment.
4) most people don't understand that the stock market is the back bone of the country's economy. Also stock market is showing the healthy of any country's economy. Most people think that stock market is like horse race or casino in the gambling.

That is the reason the stock market is affected all the times if there is any news locally or internationally because it is the back bone of the country's economy. in other way that stock market is the victim of country's economy because it is representing the country's economy.

Conclusion
---------------
Interest rate hike is like a cancer for country like Srilanka whether you accept it or not. The death is confirmed but don't know when.

Gainer

Gainer
Associate Director - Equity Analytics
Associate Director - Equity Analytics

“This will give a policy direction that the interest rates are on the way up. So that’s the signal to the market. This will ease the policy uncertainty little bit,” said Colombo-based Frontier Research analyst Shiran Fernando. - See more at: http://www.ft.lk/article/526628/Policy-rates-see-50-basis-points-hike#sthash.OtwfPl3c.dpuf

Joe007


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Dear Gainer,
I hope that you have lots of knowledge in economic conditions believing that you live abroad. But your comments are not expressing to be honest.

I have good knowledge in economic conditions in the world comparing stock markets.

VALUEPICK

VALUEPICK
Expert
Expert

Many countries still want to keep their interest rates at historically low levels. New Zealand was one of the developed countries which raised interest rates first. After that they are continuously cutting their interest rates now again.  Even Australia likes to keep their interest rates low. Some countries prefer to keep negative interests rates as well.
 
Examples: Sweden and Japan
 
Customers on those countries might try to find opportunities in other asset classes including stock market.
 
What we can we see in global market is gradual rise in interest rates in the coming years. That also depends on the situation of the global economy. Otherwise, they might keep interest rates low for number of years. If global economy improve further, then we can expect higher inters rates environment most probably in 2018/19.
 
Even in Sri-Lanka we cannot expect era of over 20% interest rates. This may be first interest rates hike for 2016. Even Fed might have cautious approach to their rates hikes.
 
In short, low interest rates environment and negative interest rates environment could stay number of years in many countries although there could be some ad hoc( made or happening only for a particular purpose) rate rise time to time in few countries. Many countries cannot raise interest rate in big percentage due to global economic situation now.
 
Stocks to watch in global market 

  • Stocks which can break their 52 weeks high and all time high due to positive earnings outlook
  • Target companies which can generate cash and keep less debt in their books
  • Dividend champions
  • Stocks in defensive sectors
  • Stocks which are going to benefit most in the new environment
  • Companies which use their debt and cash smartly to fund their businesses.
  • Companies(industries) having less debt in their book in the event of higher interest rate environment   in 2019/ 20

Finally, in every situation there are winners in global markets. We were having all types of political and economic issues in global markets such as two world wars, regional wars, balance of payment crisis, credit crisis, banking crisis, Greek and euro crisis, interest rates volatility, commodity bubbles, sub prime crisis and other serious political crisis etc. Still global stocks markets are having bull markets while having selloff, correction and volatility time to time. Best part is some countries which downgraded by some analysts and rating agencies due to political and economic issues are outperforming other market even now. Eg: Pakistan 
 
Even intelligent investors made huge capital gain in the Greek market as well. For example Investors who bought junk-rated Greek bonds in January 2012 earned twenty times more than owners of top-rated German debt at the end of 2012. Investors made money on Greek securities as well.  The Athens Stock Exchange Index climbed almost 30 percent in 2012.
 
Stock market is a different animal to broader economy. The stock market and economy are two very different things.
 
http://business.financialpost.com/investing/investing-pro/how-to-beat-interest-rate-uncertainty-if-youre-investing-in-stocks
 
How to beat interest rate uncertainty if you’re investing in stocks

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