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FINANCIAL CHRONICLE™ » EXPERT CHRONICLE™ » Unnecessary Regulations to do more harm than good

Unnecessary Regulations to do more harm than good

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SNIPO (+)

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Senior Equity Analytic
Senior Equity Analytic
I believe that relevant authorities would look into the market soon (just my thought) as things are getting bearish by the day, and the CSE is becoming less attractive to both existing and potential investors... not only that, even foreigners find it less attractive, and the reason for that is possibly the fact that there are back to back IPOs, and cash gets stuck in those for a while, until those stocks start to trade... Hope the relevant authorities would look into this and get all of us out of this predicament.... Embarassed

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Post Mon Jul 04, 2011 10:48 pm by nkalansu

Hello friends...

It appears that most of the investors find the Colombo Stock Exchange unattractive.

When one go through the recent posts on this forum some members are thinking of going back to the Government Securities Market (TBills / TBonds).

Selling pressure is high and if one go through the foreign buying / selling for the last couple of weeks we can find net selling by the foreigners.

Local retail small time investors have got wiped out and they are with empty pockets due to forced selling in the recent times. These people have not been properly educated on using credit / management of credit to invest. People are going behind junk stocks without any reason at all just because of speculation. Price Bands have not given the expected results.

It appears that unwanted / unnecessary regulations have resulted in CSE unattractive for both local and foreign investors and will post a major problem for development of equity market in Sri Lanka. If investors are not there...then to whom you are going to develop the equity market???

Also it appears that certain authorities are not acting in a forward looking manner. (eg. Too many IPOs - Three IPOs in the month of June! From where these cash come from???).

All these will have a negative impact on government's vision on making Sri Lanka Asia's wonder.

Too much of regulations will do no good at all. Also timing of proposed IPOs should have been properly managed. I feel that they have destroyed CSE.

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Post Mon Jul 04, 2011 11:26 pm by Investor99

Hi Guys / Gals

A lot of shares in the CSE are undervalued and very attractive at the current prices levels.

In my opinion there should be regulations and if the ten percent price band is not there today the market indexes would have dropped further down.
Credit should be allowed in a monitor manner if not there is a high probability of a bubble forming.

The regulators and the regulations should not be blamed, you need to put the blame on the investors who bought the wrong shares at the wrong time and are unable to pay for their purchases as the share price has gone down. So thus are forced to sell the shares at a loss. For this reason you cannot blame the regulations.

Current market is very attractive for long term investors !!!

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Post Mon Jul 04, 2011 11:32 pm by wikum100

@Investor99 wrote:Hi Guys / Gals

A lot of shares in the CSE are undervalued and very attractive at the current prices levels.

In my opinion there should be regulations and if the ten percent price band is not there today the market indexes would have dropped further down.
Credit should be allowed in a monitor manner if not there is a high probability of a bubble forming.

The regulators and the regulations should not be blamed, you need to put the blame on the investors who bought the wrong shares at the wrong time and are unable to pay for their purchases as the share price has gone down. So thus are forced to sell the shares at a loss. For this reason you cannot blame the regulations.

Current market is very attractive for long term investors !!!

when asi falls to 6000 level also ppl might say such and such counters are attactive at that price ...no fluctuations in the mkt means ,,...nobody getting profits but only the bokers...so buying in this maket situation where no one seeing the bottem of it is very dangerous No

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Post Mon Jul 04, 2011 11:47 pm by nkalansu

@wikum100 wrote:
@Investor99 wrote:Hi Guys / Gals

A lot of shares in the CSE are undervalued and very attractive at the current prices levels.

In my opinion there should be regulations and if the ten percent price band is not there today the market indexes would have dropped further down.
Credit should be allowed in a monitor manner if not there is a high probability of a bubble forming.

The regulators and the regulations should not be blamed, you need to put the blame on the investors who bought the wrong shares at the wrong time and are unable to pay for their purchases as the share price has gone down. So thus are forced to sell the shares at a loss. For this reason you cannot blame the regulations.

Current market is very attractive for long term investors !!!

when asi falls to 6000 level also ppl might say such and such counters are attactive at that price ...no fluctuations in the mkt means ,,...nobody getting profits but only the bokers...so buying in the maket situation where no one seeing the bottem of it is very dangerous No

To : investor99

I think it is not good to blame one side "the investor". Investor is the driving force behind the market. Nobody can purchase a stock for a perfect price and there is no such thing called perfect price. Perfect price depends on the risk profile of the investor which means how much of risk an investor is willing to take.

The authorities should look at the interest of both Investor and broker and maintaining healthy credit level at the market. Total elimination of credit will serve no purpose.

If you take a normal business there is some level of credit comes in to play. Otherwise there is no point in putting up Banks and Financial Institutions.

What is happening now is total elimination of Credit / Strict adherence to regulations. Final outcome would be Brokering firms are getting rich. Investors are getting wiped out. When market go down to 5000 level some may say this and that counter is attractive. At that time there will be more and more forced selling....

There must be certain level of credit/ proper management of credit/ proper dialog between investors-brokering firms -regulators, education of investors, proper management of timing of IPOs/rights issues etc.

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Post Mon Jul 04, 2011 11:59 pm by Investor99

Today we are seeing this behaviour in the market because unregulated credit was offered by the brokers.

The 2008 recession also started because unregulated credit was given to house owns in the US which resulted in the bankruptcy of Lehman Brothers.

So the credit needs to be regulated, that what the CSE is doing now. I think we have to have patience and faith about the CSE activites.

I think the foreign investors have lost confidence because of many reason and I think one might be the high level of credit in the market.

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Post Tue Jul 05, 2011 12:06 am by nkalansu

@Investor99 wrote:Today we are seeing this behaviour in the market because unregulated credit was offered by the brokers.

The 2008 recession also started because unregulated credit was given to house owns in the US which resulted in the bankruptcy of Lehman Brothers.

So the credit needs to be regulated, that what the CSE is doing now. I think we have to have patience and faith about the CSE activites.

I think the foreign investors have lost confidence because of many reason and I think one might be the high level of credit in the market.

To : Investor99

I totally agree with you that we should regulate the level of credit.

rijayasooriya

Post Tue Jul 05, 2011 12:13 am by rijayasooriya

Level of credits should be regulated.
But this T+5 day is really unnecessary way of regulating credits as it causes forced selling as a result of which market will come down and retailors will burn their fingers. This will generate less attractive market.

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Post Tue Jul 05, 2011 12:13 am by Investor99

Brother nkalansu

Banks are in business today do you think they just give you a loan no you have to provide collateral. There should be some point of understanding between the lender and accepter of credit and I don’t think brokers are allowed to provide credit. If we need to make our market attractive to foreigners I think we need to eliminate the credit like most stock markets in the world.

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Post Tue Jul 05, 2011 12:20 am by Investor99

I think the T+5 is good it will move the share prices on based on organic demand and supply and not unnatural demand and supply of share manipulation.

rijayasooriya

Post Tue Jul 05, 2011 12:24 am by rijayasooriya

Elimination of credits should not be done by giving dead line.It will cause bearish market. This what has happened to our market.
What they should do is,
'DO NOT GRANT NEW CREDIT AND ALLOW THE INVESTERS TO GET RID OF CREDIT WITHOUT FORCE SELLING.'
This will take time but it will not cause this type of disaster.

Tiger

Post Tue Jul 05, 2011 12:30 am by Tiger

My personal belief is that SEC will introduce some form of credit mechanism back in place by 30/9, which would result in another ripple in the market.

I think, one would be able to make more money if he can predict the next rule change in the market than searching for fundermentals.

In fact these days I follow many avenues to snip out the next rule change. My belief is that any credit enhancement news will make market to bounce back at least 5-10%.

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Post Tue Jul 05, 2011 12:31 am by nkalansu

@Investor99 wrote:Brother nkalansu

Banks are in business today do you think they just give you a loan no you have to provide collateral. There should be some point of understanding between the lender and accepter of credit and I don’t think brokers are allowed to provide credit. If we need to make our market attractive to foreigners I think we need to eliminate the credit like most stock markets in the world.


It is wise to study how other developed markets have addressed this credit issue as "Investor99" has rightly pointed out the relationship between lender and borrower.

Also I too agree that brokers are not allowed to provide credit and there should be a separate entity to accept shares as collateral and lend based on that.

I wish our regulators will look into formation of a better system that investors have access to more secure way of utilization of credit than T+5 days (which is a risky option) for the sake of all the stakeholders of CSE.

player

Post Tue Jul 05, 2011 9:07 am by player

no they wont.......if they did finally retailers will suffer for sure,its their strategy,..they will let their relatives to collect much and much,and will introduce foolish regulations.

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Post Tue Jul 05, 2011 10:31 am by Investor99

The market capitalisation of the CSE is very low compared to the other stock markets in the Asian region. In my opinion the IPO would improve this situation and make CSE more attractive to foreign investors

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Post Tue Jul 05, 2011 11:28 am by Investor99

My only hope is that the authorities don’t introduce any amendments to delay the existing unregulated credit issue. I hope they could solve it once and for all or it’s not in the best interest of the stock market in the long run. When you look at the market today there are lots of shares which are overvalued. Foreigners keep away from overvalued markets as there are more attractive markets in the region to invest their money. In my opinion it would be in the best interest of all of us if the unregulated credit provided is cleared. Only the local investors cannot drive this market the foreign investors are a must. Also the CSE is not a place to play around with credit as it can have grave consequences

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Post Wed Jul 06, 2011 9:37 pm by lokuayya

Good theory investor99,
Kill all the retails investors and throw them to foreign lions.make them happy.

Marketinvest

Post Wed Jul 06, 2011 11:11 pm by Marketinvest

Tipical sri lankan regulations. They will do what they want

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Post Wed Jul 06, 2011 11:42 pm by lokuayya

investor99,

Just for curiosity I am asking,You have mention above "eliminate credit like other world markets "
Can you tell us what are the markets that eliminated credit? and how they did it without a making a market crash?


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Post Thu Jul 07, 2011 2:16 pm by Investor99

Actually the regulators should have taken action last year or year before that. I heard the amount of credit in CSE is pretty high.

To lokuayya
In CSE once you place the order through the broker or via the online system and if the shares are purchased it’s directly credit to purchases CDS account. But in most of the other countries the shares are placed in an interim account and only transferred to purchases CDS account after the payment has been made. So if funds are not transferred on the due date necessary action would be taken.

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Post Fri Jul 08, 2011 3:52 pm by mcyi9rt4

thxss for the info i am new to da game enjoy lrning form the experience players

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