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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » My explanation

My explanation

Go down  Message [Page 1 of 1]

1My explanation Empty My explanation Wed Aug 24, 2011 5:53 pm

Max


Senior Equity Analytic
Senior Equity Analytic
I just want to explain what I think might have happened to CSE. As you know CSE is mainly retail driven, and most of the retailers including me joined the stock market during 2008-2010, during the bull/bubble phase where nearly all the stocks were doubling in value every six months, and credit by retailers was used to the maximium. Mind you, even on those days I did stick to the T+3 rule as a principle. But I know many friends of mine who used their credit to the max, and their brokers were also happy as the credit generated an hefty tax for them, as well as most of the new investors were short term and day traders without much knowledge of the market (But I also need to add that most of the stock brokers also don't have any knowledge of the market).

There was a lot of speculation running the market, and many stocks had prices that really should be 5 years into the future.Many people also got credit facilities from their brokers even more than the 50%. it was all good when the market was going up.

But the the SEC came into its senses and brought in the T+5 rule, and took out the credit facilities of brokers. Then the brokers also got angry, and also wanted to show the SEC a lesson (loss of income from credit-exorbitant rates at 25-30%). Force selling started, and when the market goes down, and u have a lot on credit, your losses are amplified. I did not get caught in the credit crunch, but could not avoid going into red as most of the good stocks also crashed, when the market fell as a whole. The forced registering of finance companies (unbelievable price rises after listing) and the multiple IPO's (Mostly loss making, due to private placements which helped the rich become richer) also made the matter worse. There was not enough free money in the CSE to go around.

My loss while investing fairly safely is around 30% of portfolio, while I have friends who have lost nearly 70% due to the credit crunch and force selling cycles.

All of the money we all put was hard earned money. I heard that many retirees also started to invest in stock market as well. Therefore after loosing a lot of money, even when the SEC decided to relax the rule of T+5, and also made credit facility available to brokers, now the retailer is at loss, and doesn't have money and also the confidence he had before. But the stock brokers won, cos now they can again charge exorbitant amounts from their clients who go on credit. But most retailers wont fall in to the same hole again (I hope) or are afraid. So since there are not enough new investors, the market has become stagnant.

these days, most people think that the only way to earn a buck, is to go after speculated shares, as can be observed in the past few weeks. People jump in the wagon of a hitherto unknown, but suddenly high flying illiquid stock, and again lose a chunk when the stock crashes down. And a lot of financial reports these days are leaked out, as we can see, the sudden surges in prices before some financials of companies (But sometimes the financials actually are worse, and the spike in the price is when the Rich people with inside info exit that stock!!!).

Compounding this issue is the jitteriness of our investors, despite the good performances from reputable companies in the cse. Most are making good profits. But still most people chase the speculations, because now they want to recover their losses in one or 2 days!!!. Also One word from channel 4 or hillary or ban ki moon, the market dips by 5%. Also the current world stock markets are also shaky.

So now when you wonder what has happened to the CSE, you have to understand that we all contributed to it, and also for us to get out of this hole, its high time to start investing instead of gambling. Of course the HNWI, Some shady brokers, manipulators with inside news, and the greed inside ourselves will be against this Smile

Hope what I said above made some sense to you guys Smile

Cya, happy investing!!!

2My explanation Empty Re: My explanation Wed Aug 24, 2011 5:59 pm

ssb

ssb
Manager - Equity Analytics
Manager - Equity Analytics
HNWI cant do this forever ,so lets wait and hang on to your counters and lest see how world treat us poor retailers with investing mind (or blind profit mind)

3My explanation Empty Re: My explanation Wed Aug 24, 2011 6:05 pm

seyon


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Hi Max

well said brother,

what to do we have to survive with this mkt, no option.

4My explanation Empty Re: My explanation Wed Aug 24, 2011 6:15 pm

damayanthi

damayanthi
Senior Equity Analytic
Senior Equity Analytic
excellent analysis. absolutely true.

5My explanation Empty Re: My explanation Wed Aug 24, 2011 6:21 pm

invest-abc


Manager - Equity Analytics
Manager - Equity Analytics
Max, well said.

CSE has become a casino a the moment. Also, one other thing to note is that we hardly get any shares moving against the ASI. This shows that individual company performance is neglected by the investors. Everyone is just following the crowd. Furthermore, as you have correctly mentioned speculation is over ruling any other form of investment logic at the moment.

6My explanation Empty Re: My explanation Wed Aug 24, 2011 6:31 pm

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
In Share market Investers' money circulating among investors.And some amount get outflowed as taxes,brokerage and withdrawals by investors.This is compensated by inflow of money as new investment,to some extent to via IPOs,etc.This will maintain a stabilised market for sometime.

When outflow is more than the inflow First market become stagnant and then it would go down making adjustment.I think our market is also in this adjustable phase.This would happen time to time.I think that is how market prevents the total collapse.

I may be wrong but that is my explanation.

7My explanation Empty Re: My explanation Wed Aug 24, 2011 6:38 pm

dsuranjana


Equity Analytic
Equity Analytic
excellent article.100% true

8My explanation Empty Re: My explanation Wed Aug 24, 2011 7:06 pm

Ajith Rajapakse


Equity Analytic
Equity Analytic
Well said!

9My explanation Empty My explanation Wed Aug 24, 2011 7:36 pm

sriranga

sriranga
Co-Admin
I appreciate your honest explanations coming from experience which most of us are having.
My personal opinion, if we stick to the fundamental we can survive.
Going behind rally we need to be clever deciding when to exit, which most of us are failing.
I'm also doing trading in CSE, which before I hate to do with the support of the Support level price and Resistance level price.
10 out of 7 paying back which is not bad.

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

10My explanation Empty Re: My explanation Wed Aug 24, 2011 7:48 pm

Namalaka

Namalaka
Manager - Equity Analytics
Manager - Equity Analytics
Well said Max.. So true..
But according to my believe, punishment should be there from nature for those big manipulators who suck the money of poor retailers.. So let's be patient.. Smile

11My explanation Empty Re: My explanation Wed Aug 24, 2011 8:00 pm

Dinith

Dinith
Equity Analytic
Equity Analytic
This sums up the cycle so far.. its all gloomy forecasts ahead.
Now... makes me wonder... is this the elusive bottom ?

12My explanation Empty Re: My explanation Thu Aug 25, 2011 3:01 am

thambi

thambi
Manager - Equity Analytics
Manager - Equity Analytics
well said bro plus points from me Smile

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