At what level of ASI the bubble started?

@Chinwi wrote:This is my personal view, looking at the problem in a different way. Do not change your own ideas and actions.

There was not a bubble. !

PER was reaching 20 and 25.
Still I believe there was not a bubble. !

BTW, I do not think PER of 20-25 is bad for a good company in a new country anticipating and showing a rapid progress ( over 8 %) in coming years.

All will depend on the progress of the country as a whole. The current turmoil is artificial. !

@Antonym wrote:

@Academic wrote:

Opinions are thoughts. No thought is write or wrong. What is important here is expressing it logically. + from me too.

By the way Chinwi, it is evident that foreigners are still selling since mid 2010. Don't you think current downturn is partly due to foreign selling pressure? If they are selling even before market started declining (before September) , they should have a sound reason to do so. What do you think?

If valuations were the only criterion, foreigners would actually be buying now. In my opinion, foreigners have been selling ever since they realized the nature of our market (rampant insider trading, manipulation, etc.).

Some foreign funds are like the breeze; they blow in when they sense an opportunity - and blow out when they've made their money.

@wis wrote:What chinwi describes IS exactly a bubble. May be the thing is when you're inside the bubble you don't see you're inside a bubble. You're completely away from reality. That is what a bubble is. Non existent money changing hands always going up and up.

People think something extraordinary will happen after the war. People who have invested in the market are very optimistic. People forget the past. In 2007 when the war was still there, Sri Lankan growth rate was around 7 1/2.

Wait a minute that's almost the same as the current after the war. With all these talks, with all these developments. How did that happen? Because although the country had war on one side, this country went on like any other, just like Israel or whatever country that had wars.

Other thing is I have read in many places that the CSE does not represent the Sri Lankan economy. When the economy grows the CSE company performance would go down because it's not these 200+ companies in the race. New hotel projects are coming up all the time. How will that affect the current star hotels listed in the CSE. Will they be overbooked? Check how many agrochemical companies are there in Sri Lanka? Check how many shipping contruction companies are there in Sri Lanka? See how many food companies doing really great but no listed in the CSE? Check how many motor companies are there not listed in CSE? How many manufacturing companies are there? Only 30? For every company that is listed in the CSE there are dozens of competitors not listed. And many are coming up through direct foreign investment. They are competition to the CSE listed companies.

I think in reality our country is at a bit above the 2007 environment.

@Market Sucker wrote:our market is too illiquid to have a bubble,and also still big guys hold the key operations in share trading,so we individual selling millions cant form a bubble...

@Chinwi wrote:This is my personal view, looking at the problem in a different way. Do not change your own ideas and actions.

There was not a bubble. !

Brokers were giving credit to the clients and they earned good interest for it. Most of the times the sellers did not withdraw money from the system , they bought some other shares. Hence the pseudo money created and grown inside the system. Brokers happily charged interest for the credit they gave without paying corresponding interest to anyone.

At the mean time, some got cash flow from margin facilities given by banks. It is acceptable because real money is involved.
Some people like me maintained "zero debt to the broker" policy most of the times. ( Unfortunately all got the same punishment)

PER was reaching 20 and 25.
Still I believe there was not a bubble. !

The bubble was suddenly found in the system when the SEC asked to settle the credit.

Now we have to find real money from outside to pay for the portion of artificial money created inside the system. Normally if a system is running well without any outside interference , artificial portions are sustained without any trouble to the system. ( If these portions are maintained within limits.)

If there was no pressure to pay by cash then there will be no bubble at the moment. Because no one wanted to sell their holding in rapid way to create a pressure.

The real bubble will be created when the prices do not match with the economic capability, other available instruments local and overseas, the background of the country etc.

Somehow, this exercise by SEC prevented forming a real bubble.

BTW, I do not think PER of 20-25 is bad for a good company in a new country anticipating and showing a rapid progress ( over 8 %) in coming years.

All will depend on the progress of the country as a whole. The current turmoil is artificial. !

@Market Sucker wrote:

@Market Sucker wrote:our market is too illiquid to have a bubble,and also still big guys hold the key operations in share trading,so we individual selling millions cant form a bubble...

how much CDS accounts we have

now see how much accts in Bangladesh

Individuals opened 355,000 share-trading accounts with brokerages in the last six months,( September 3, 2007)


i agree that we need to taken account the work force percentage to get the real values,im sorry i didn't taken those numbers.

but my thinking is that too many uneducated retailers will ruin the market

@insidertrader wrote:I don't get it. What chinwi describes is a bubble. If not can anybody give an example what a bubble is?
Issue was SEC didn't act proactively enforcing law and order from the beginning. At least now SEC should be firm.

@ADP wrote:I think the sec has done the right thing by imposing credit restrictions and gradually deflating what would have definitely (In my opinion) turned out to be a nasty crash of the market. The question were we in a bubble or were heading there can be a point of debate, but if you had a system that allowed people to buy without the actual purchasing power (cash to back their purchase) the unrealistic increase of stock prices cannot be avoided.

• As a result of unregulated credit in the market we all had to pay a higher price for our shares.
• People have more “money” to manipulate shares.
• And when they have to pay for what they bought WE all have to pay the price.

As to why there is a foreign outflow COULD be in preparation for the interest rate hike that would be needed to reign in inflation that is going to hit the US. At present the fed’s interest rate is zero and near zero for other instruments. The “emerging” markets played there role for a couple of years and now its time for the foreign funds to head back home when interest rates are about to go up.

It would be better if we go through this credit clearance and get it over with. Many people specially the small timers have taken hits and sold the clear the credit they owed. Its not fare to them to change the rules of the game once the game has been started.

@ADP wrote:I think the sec has done the right thing by imposing credit restrictions and gradually deflating what would have definitely (In my opinion) turned out to be a nasty crash of the market. The question were we in a bubble or were heading there can be a point of debate, but if you had a system that allowed people to buy without the actual purchasing power (cash to back their purchase) the unrealistic increase of stock prices cannot be avoided.

• As a result of unregulated credit in the market we all had to pay a higher price for our shares.
• People have more “money” to manipulate shares.
• And when they have to pay for what they bought WE all have to pay the price.

As to why there is a foreign outflow COULD be in preparation for the interest rate hike that would be needed to reign in inflation that is going to hit the US. At present the fed’s interest rate is zero and near zero for other instruments. The “emerging” markets played there role for a couple of years and now its time for the foreign funds to head back home when interest rates are about to go up.

It would be better if we go through this credit clearance and get it over with. Many people specially the small timers have taken hits and sold the clear the credit they owed. Its not fare to them to change the rules of the game once the game has been started.

@player wrote:dont worry guys,we had a crash in gradually from start of this year until now,now little bit to go to recover back to normal,but cant expect ASI passing 7000 in near days,btw individual stocks will have their own run in these period,so try to identify the share and win

and also dont worry abt crash,bcoz all brokers were advised by SEC to limit big order executions and to tell investors to be not panic,so if you ask your broker to sell your stocks,he will tel bla bla things and will somehow refrain from order execution..

btw dont expect a big bull run try your skill in the market

@Aamiable wrote:

@player wrote:dont worry guys,we had a crash in gradually from start of this year until now,now little bit to go to recover back to normal,but cant expect ASI passing 7000 in near days,btw individual stocks will have their own run in these period,so try to identify the share and win

and also dont worry abt crash,bcoz all brokers were advised by SEC to limit big order executions and to tell investors to be not panic,so if you ask your broker to sell your stocks,he will tel bla bla things and will somehow refrain from order execution..

btw dont expect a big bull run try your skill in the market

Does that mean there is much less selling pressure.

@mono wrote:Unlikely. The fact that the brokers want to meet the SEC in a hurry on Thursday means that there is alot of credit left with no buyers.

@mono wrote:
I think you and i have two very different definitions of gradual. The SEC failed to bring the market gradually down. And given the climate that has been created, by the time the SEC is done with their credit clearing the ASI will be closer to 5500. and that's a conservative estimate. The thing is the smarter people who have sold out are not buying back, we know that the market is in free fall and will be in free fall until at least november why should we commit our funds back in.

The foreign outflow is most probably because there are other markets out there that are more attractive and more liquid. Places like eastern Europe for example are probably more attractive as of now.

@ADP wrote:

@mono wrote:
I think you and i have two very different definitions of gradual. The SEC failed to bring the market gradually down. And given the climate that has been created, by the time the SEC is done with their credit clearing the ASI will be closer to 5500. and that's a conservative estimate. The thing is the smarter people who have sold out are not buying back, we know that the market is in free fall and will be in free fall until at least november why should we commit our funds back in.

The foreign outflow is most probably because there are other markets out there that are more attractive and more liquid. Places like eastern Europe for example are probably more attractive as of now.

@ mono

I am of the view that to spread the credit clearance over a period of one year and couple that with really good earning results (for a majority) of companies and higher investor participation would have been more than sufficient to bring it down gradually.

There are two things I take issue with though,

• The time gap between IPO’s .
• Not releasing any figure on how much credit actually is there to be cleared (I can only ASSUME that the reason this figure is not released is the shier size of the credit outstanding).

We have been reputedly presented with opportunity to clear the credit but have not taken them up. As a regulator the SEC should follow through on the stated time frames of 25% in SEP and 25% in DEC and get this over with.

After that we will have a clean market, one that is fueled by REAL purchasing power and people would be more cautious on gambling and more serious on investing.


Disclosure: I am a “shoe shine boy” and all criticism are welcome as this is all part of my learning experience.

@ADP wrote: ... all criticism are welcome as this is all part of my learning experience.

@ADP wrote:

@mono wrote:
I think you and i have two very different definitions of gradual. The SEC failed to bring the market gradually down. And given the climate that has been created, by the time the SEC is done with their credit clearing the ASI will be closer to 5500. and that's a conservative estimate. The thing is the smarter people who have sold out are not buying back, we know that the market is in free fall and will be in free fall until at least november why should we commit our funds back in.

The foreign outflow is most probably because there are other markets out there that are more attractive and more liquid. Places like eastern Europe for example are probably more attractive as of now.

@ mono

I am of the view that to spread the credit clearance over a period of one year and couple that with really good earning results (for a majority) of companies and higher investor participation would have been more than sufficient to bring it down gradually.

There are two things I take issue with though,

• The time gap between IPO’s .
• Not releasing any figure on how much credit actually is there to be cleared (I can only ASSUME that the reason this figure is not released is the shier size of the credit outstanding).

We have been reputedly presented with opportunity to clear the credit but have not taken them up. As a regulator the SEC should follow through on the stated time frames of 25% in SEP and 25% in DEC and get this over with.

After that we will have a clean market, one that is fueled by REAL purchasing power and people would be more cautious on gambling and more serious on investing.


Disclosure: I am a “shoe shine boy” and all criticism are welcome as this is all part of my learning experience.

@mono wrote:
The problem here is that as it stands you're not going to clear the credit by december unless you're willing to let ASI slide to the mid to low 5000s or possibly lower.

@duke wrote:

@mono wrote:
The problem here is that as it stands you're not going to clear the credit by december unless you're willing to let ASI slide to the mid to low 5000s or possibly lower.

But if that's the real value, why should anybody try to keep it up?
We had 2 years of going over the roof. So it's natural for it to go the other way.