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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » No Banking Rally? It is a Myth?

No Banking Rally? It is a Myth?

Go down  Message [Page 1 of 1]

1No Banking Rally? It is a Myth? Empty No Banking Rally? It is a Myth? Tue Feb 08, 2011 10:41 pm

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I doubts having a baking rally based on following arguments.

  • Good performance of banks were foretasted in advance and price appreciation of many BFIs were took place in January with anticipated results of December performance.

  • It is BFI sectors that significantly contributed to bull runs in 2010, so shares appreciated in advance for 2010 performance (though dropped slightly in November 2010.)

  • Most importantly, as BFI had best price appreciations in 2010 bull runs, it is reasonable to expect many debts (credit purchases) may include BFI shares. Thus there would be significant selling pressure in coming weeks as 50% of debt has to clear by March end.

  • In addition to that due to some reasons that I have mentioned previously on this forum ( http://forum.srilankaequity.com/t341-market-behaviour-of-next-week-up-or-down#1656 ), the market may go down . If it happen, BFI also tend to go down.


Therefore, there may be only one rally that can expect. That is the rally to hell (up to March 31).

Any other different view?

This is my opinion, just shared with you. DO NOT TAKE INVESTMENT DECISIONS ON THIS ALONE.

2No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:07 pm

mono

mono
Vice President - Equity Analytics
Vice President - Equity Analytics
But.....

1) no one knew about the budget being so much BFI friendly. the budget alone should 10% in profit increase to these companies.

2) like u said most of the banking rally gains have withered away. most of these stocks have lost a good 20-30% of their value so alot of them are over sold. And also there are some strong bull trends forming in several banks. MBSL, PABC to name two. SEYB also had a good trend but it's sort of going haywire. And banks have tried to break out a couple of times already.

3) beleive it or not our banks are undervalued. some of our largest banks are undervalued NDB, DFCC & SEYB( provided we can trust their books) are trading at two times their book value when the norm is to trade at 3-3.5. these guys have lots of capital that is just starting to get invested. so their future earnings isn't quite reflected in their prices. The problem here was that our dumb ass conservative private sector wasted 1 & 1/2 years to start investing and expanding their businesses. so these banks have a lot of capital lying around with no real investment coming in. it's only now that people are starting to invest heavily in the country's future and this growth everyone is talking about is only now getting into gear. so it's only now that these banks are starting to give out large sums of loans and starting to set up future income.



Last edited by mono on Tue Feb 08, 2011 11:38 pm; edited 1 time in total

3No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:34 pm

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
well NDB was went up to 410 to 415 level in end of Sep 2010 period, after that they declared a dividend ( interim ) of Rs. 4/- but it finding it difficult to catch 375 level even any idea. But when NDB was 410 to 415, JKH also touch 360, that also again find it difficult to pass 300.

Well coming all the members comments

4No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:37 pm

RDS

RDS
Manager - Equity Analytics
Manager - Equity Analytics
No Banking Rally? It is a Myth? Moz-screenshot-2No Banking Rally? It is a Myth? Moz-screenshot-3Banking sector as @ today. see PBV

NDB
SEYB
CFIN
DFCC

No Banking Rally? It is a Myth? Bfi_se10


- @JKSB -

5No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:40 pm

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
how to compare this with the price level, just explain in brief, thanks in advance

6No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:41 pm

godswen

godswen
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I have enough banks in my PF and MBSL is the recent add, Unfortunately banks run seems put aside now and retailers might follow hotels in the coming days. Huge interest on hotels, I thought banks would move earlier than hotels! :/

7No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:49 pm

mono

mono
Vice President - Equity Analytics
Vice President - Equity Analytics
@Gaja wrote:how to compare this with the price level, just explain in brief, thanks in advance

generally good banks trade at around 3 to 3.5 times its' book value.

P/BV = Price/book value

so for NDB P/BV is 2.1 which means it's undervalued.

The reason we look at P/BV in banks instead of EPS is that banks are fundamentally capital providers so the more capital you have at your disposal the more capital you can give out and more money you can generate in the future by giving those as loans and earning from interest. so that is the top indicator of future earning.

Provided our inflation is kept in check some of these big banks will make a sure shot killing in the next five years.

8No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:52 pm

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
PER 11E, PER 12E, P/BV(TIMES) All are lower to NDB when comparing with others & with sector. and it is a good sign for NDB. Is my understanding is right Mono

9No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:56 pm

jaya


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Don’t post lies just because of you want to collect Banking shares which will be impressive results to be delivered soon and on line to start any minute very near future.
Our traders are intelligent enough to find out if any share price had recently increased or not.
E.g. SeyB X last September around 60/= now 50/= MBSL 65/= now 54/= rest of other also same.
Do not fool the poor guy’s sake of your hunting.

10No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:57 pm

mono

mono
Vice President - Equity Analytics
Vice President - Equity Analytics
@Gaja wrote:PER 11E, PER 12E, P/BV(TIMES) All are lower to NDB when comparing with others & with sector. and it is a good sign for NDB. Is my understanding is right Mono

yep!

11No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:57 pm

RDS

RDS
Manager - Equity Analytics
Manager - Equity Analytics
Mono - Whats the PBV of banks in other countries or Asia region, any idea?

Is this common factor for anywhere(3-3.5 PBV)?

12No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Tue Feb 08, 2011 11:59 pm

godswen

godswen
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Isn't DFCC a bit overvalued right now? Question

13No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Wed Feb 09, 2011 12:03 am

RDS

RDS
Manager - Equity Analytics
Manager - Equity Analytics
@jaya wrote:Don’t post lies just because of you want to collect Banking shares which will be impressive results to be delivered soon and on line to start any minute very near future.
Our traders are intelligent enough to find out if any share price had recently increased or not.
E.g. SeyB X last September around 60/= now 50/= MBSL 65/= now 54/= rest of other also same.
Do not fool the poor guy’s sake of your hunting.


Understand yr thoughts
Take all things as positive, if he didn't post this post we will not talk about these facts, personally i add some knowledge, hopefully others too.

14No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Wed Feb 09, 2011 12:59 am

salt

salt
Vice President - Equity Analytics
Vice President - Equity Analytics
Valuation
▲▼ Company name▲▼ Price-to-book ratio▲▼
500180 HDFC Bank Limited 4.28
532174 ICICI Bank Limited 2.17
500010 Housing Development Fi... 4.77
500112 State Bank of India 2.02
8306 Mitsubishi UFJ Financi... 0.72
8316 Sumitomo Mitsui Financ... 0.85

Click here and scroll down to see the competitors - you can select whatever the ratio, for comparision such as PBR/ PER..etc
http://www.google.com/finance?q=BOM%3A500180

Company name▲▼ Price-to-book ratio▲▼
1288 Agricultural Bank Of C... 2.48
3988 Bank of China Limited 1.78
0939 China Construction Ban... 2.52
3618 Chongqing Rural Commer... 2.93
0998 China CITIC Bank Corp.... 1.62
1988 China Minsheng Banking... 1.45
3328 Bank of Communications... 1.98
3968 China Merchants Bank C... 3.23
1398 Industrial and Commerc... 2.50
601288 AGRICULTURAL BANK OF C... 1.99
0005 HSBC Hldgs. plc (Hong ... 1.52

HSBA HSBC Holdings plc 1.55
HBC HSBC Holdings plc (ADR) 1.54
0005 HSBC Hldgs. plc (Hong ... 1.52
BARC Barclays PLC 0.74
RBS Royal Bank of Scotland... 0.32
BNS The Bank of Nova Scotia 2.57
WFC Wells Fargo & Company 1.46
DBK Deutsche Bank AG 0.86
601988 Bank of China Limited 1.65
JPM JPMorgan Chase & Co. 1.04
ITUB4 Banco Itau Holding Fin... 3.07


15No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Wed Feb 09, 2011 6:56 am

anu

anu
Manager - Equity Analytics
Manager - Equity Analytics
Good inputs.
Consider the following:

1. BFI shares mostly will not be very volatile like chicken shares, but very good for medium / long term.
2. As per the budget, corp. tax has been reduced from 35% to 28%; Financial VAT has been reduced from 20% to 12%. This 8% difference will have to be kept in a fund with CBSL which will generate interest at a stipulated rate, which is tax free. The fund to be used for lending in sectors identified by CBSL.

3. Financial sector will be very active with the post-war boom and deliver sustainable growth.

NDB has a very good capital adequacy and attractive PBV. But they don't seem to use it to the maximum to increase business and this was a complaint from some shareholders for sometime.

Amongst the young banks, I would say NTB has a very good potential to outperform others as they are in a solid position to launch from what they are with good background support. Banks are to increase capital position upto 5Bn, probably by 2015. NTB is already above it. Banks like PABC are now below 3Bn in capital position and they may have to go for rights issues, diluting share value.

16No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Wed Feb 09, 2011 7:37 am

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Thanks all posters for their sleepless effort to educate retail investors.

Return on any investment opportunity depend on two factors.

1. The difference between market price and intrinsic value (the degree of undervaluation).
2. Possibility of converging undervaluation (price appreciation) during the investor's holding period (in this case within in coming weeks).

My main concern in the post is the second factors. Though there are undervalued stocks in the market, will the market provide a conducive environment to appreciate their prices?

Can you justify why an undervaluation, if any, likely to converge in this market in short-rum, in the current market context? I saw yesterday investors didn't have much confidence in the market (once it started dropping, it dropped drastically, this is a "Alu yata gini" situation), in my opinion. Any other different view/argument?



Last edited by Academic on Wed Feb 09, 2011 7:45 am; edited 1 time in total (Reason for editing : improved readability)

17No Banking Rally? It is a Myth? Empty Re: No Banking Rally? It is a Myth? Wed Feb 09, 2011 7:59 am

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
I am expecting and well come this kind of participation for all shares, than fighting between the members

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