Massacre of the rich and the innocents

By Elton P. Ebert

Margin calls may have been the cause of the massacre of the High Net worth investors who utilise borrowed capital, as well as the small player using his own capital onThursday when billions of rupees were wiped off in value at the share market.

Unfortunately this coincided with the initial trading of the big IPO, Peoples Leasing Co, which had roped in a few first time investors. One can imagine their feelings after the first day’s transaction price. It is reported that some unsavoury comments were made to some brokers who pushed them into large investments into the IPO. Interestingly most of the veteran investors told the brokers that they will "go slow on this". This devastation was extended further on Friday erasing further value off the market. To add to the confusion there was an error trade relating to 1200 shares in Distilleries which caused a trading halt erroneously due to the Milanka Price index exceeding the 5% depreciation on Friday.
Some of the prices recorded before the trading halt were - Citrus Leisure Rs.40, Aitken Spence Rs.100, and Asian Hotel Properties Rs.74 but most significantly that of Distilleries at Rs.100 which caused so much uncertainty.

The market however staged a minor recovery during the second half of trading, maybe realising this error. Analysts believe that the ASI which depicted strong support at the 6000 mark could have held on further if not for the debacle of Peoples Leasing Co. which added to the list of IPO casualties. At its initial trading on Thursday over four million shares were traded,the highest level being Rs.18.30 and the lowest price Rs.17.

A major escalation was effected in Kandy Hotels Co. (1938) PLC subsequent to its massive sub division of 35 shares for 1 existing share announced on Wednesday, reaching the peak level of Rs 300 for the week, but slipping into erosion along with the depression in the market and ending at Rs.264.80. J.L.Morison Sons & Jones in which a sub division was announced last week moved similarly into depression.

The only stock to remain unaffected by the devastation was the foreign favourite, JK Holdings which was the main support to the turnover. The usually active group, Panasian Power, HVA Foods and Piramal Glass were traded in subdued numbers. The Lankem group initiated a strategic investment in excess of Rs. 770 million for purchase of the well situated Galle Fort Hotel (Pte) Ltd.

Changes in directorates – Blue Diamond Jewelery Worldwide PLC saw some major changes.
W.G.M.B.Ranaweera resigned as Chairman/Managing Director; W.A.D.Y. Perera was appointed Chairman/Managing Director; W. K. Galagoda resigned as Director; Ms K.N. Gunawansa resigned as Director. G. de Kretser resigned as Deputy Chairman/Executive Director and reverted to his former position as Working Director. K.V.D.D.A. Dias changed from Joint Managing Director to Working Director while M.M.N.Priyantha changed from Joint Managing Director to Working Director.

Asia Capital PLC; Stefan Andrew Abeyesinhe was appointed a Director of the board on 18th November 2011. York Arcade Holdings PLC; A. Rajaratnam was appointed chairman on 16th November 2011
The turnover for the week of Rs.5.2 billion was an improvement over the figure of Rs.4.5 billion last week. Both indices took severe punishment; The All Share Price Index was 335.26 points or 5.4% lower to finish at 5805.76 while the Milanka which was under turbulence due to an error lost 296.63 points or 5.5% to close at 5052.91.

http://www.sundaytimes.lk/111127/BusinessTimes/bt41.html

All these days I was holding on to KHC with a massive loss. not much volume on the board to dipose. my patience paid off. got rid of it with a profit after the sub division announcement.

With the extensions,refurbishments and the new joint venture announcement I was exepecting this announcement for sometime.

I still dont understand what difference does that makes when the share get subdivided and for the prices to increase on announcement. only the qty changes value doesnt change theoritically.

Will this share go through what WATA and RICH going through after sub division

Hawk Eye wrote:All these days I was holding on to KHC with a massive loss. not much volume on the board to dipose. my patience paid off. got rid of it with a profit after the sub division announcement.

With the extensions,refurbishments and the new joint venture announcement I was exepecting this announcement for sometime.

I still dont understand what difference does that makes when the share get subdivided and for the prices to increase on announcement. only the qty changes value doesnt change theoritically.

Will this share go through what WATA and RICH going through after sub division

When a share gets subdivided it will become more affordable to investors. That is why with a subdivision announcement price of a share goes up.

For example if a price of a share is Rs. 500, then very few can purchase it and even if you want to purchase there may be other good alternative counters in the market. So with sub division it will become more affordable and investors would want to purchase in the future. So before the sub division price will go up since investors expect that there will be high demand for the share at sub divided price.

However with the speculators madly running here and there the increase of price may go beyond the real value or the theoretically expected values. So after the sub division price may go down to unwanted levels with investors suffering losses. Good examples are SPENCE and AHUN.