Forced selling continues

Hi freinds,

Got this from Capital trust. Reasons for the drop of prices

Market Reaches A Low Not Seen In Recent Times Due To Forced Selling By Margin Providers & Brokers!!!
Margin providers are under tremendous pressure from regulators to carry out forced selling of client portfolios where the margin provided is in excess of 50%. Brokers are subjected to similar pressure to effect forced selling unsettled open positions after T+5. The cumulative effect of these two market participants going on a forced selling spree was seen in the market during the first couple of days of this week. Yesterday’s ASI close was the lowest since January 11th, 2011 and the MPI close was the lowest since September, 15th 2010!!! Strong company specific fundamentals and the robust economic fundamentals are definitely not reflected in the market performance.

One day all these things may come to an end and fundamentals may drive the market. This cannot go on indefinitely.

Thats why we should buy only from our own pocket. getting margins from margin providers or brokers is really dangerous. your capital can be vanished in no time.

I'm trying not to buy now. it is most hardest thing i'm doing now. i can't hold my breath to see my favorite counters at 20% discount.
but, forced selling continued.. then margin calling came to maintain 50% margin.

wait.. wait few days my dear me..

How come forced selling issue has come up so suddenly. Are they expecting and preparing for something more dreadful in the next weeks and months?

All these broekers give massive credit when market is bullish (More than 50%). when market starts to drop they start to force sell. When market continuosly droping anyway 50% credit increasing with the drop of prices. Then again they will force sell.

We hate or not big fish should come and push the market to save small investors like us. Thats what I feel. Ove to u

since SEC has warn few broker firms to reduce their credits otherwise it may cause to cancel their licenses. mainly forced selling going on with big fellows who has bulk millions of credits. on the other hand, when market came down our PF values also downing, then margin providers are warned to keep the margin of 50%. then "margin call occur". when some counters coming down drastically, fear attacked investors tend to sell at less loss and stop loss.
those overall market condition tend to downward where specially lot of investors, funds are being cautious and sitting back.

-this is my personal view only, i didn't get any inside information regarding above credit clearance. -

Credit clearing is there for sure if we obserev.

I checed with Capital Trust, JB, JKSB, ASIA all said the same. Also they mentioned international pressure for the country also affecting market temporary. They are expecting this will be recover after few days.

xmart wrote:since SEC has warn few broker firms to reduce their credits otherwise it may cause to cancel their licenses. mainly forced selling going on with big fellows who has bulk millions of credits. on the other hand, when market came down our PF values also downing, then margin providers are warned to keep the margin of 50%. then "margin call occur". when some counters coming down drastically, fear attacked investors tend to sell at less loss and stop loss.
those overall market condition tend to downward where specially lot of investors, funds are being cautious and sitting back.

-this is my personal view only, i didn't get any inside information regarding above credit clearance. -

Those investors, funds are being cautious and sitting back have to return ...once the issue is over,..... no need to panic and sell at a loss if there is no credit to clear... I would wait and see.

Ammiable,

I have to clear around 1.9MN to broker, I'm going to settle it. One of my good freind agreed to lend me for that purpose.

What you think about PAP? My idea is to keep till it pass 8.00/9.00. Cos i bought at 8.

Please share your thoughts

actually, I do not have PAP . when the market recover all stocks need to recover. No body sells at a loss once this is over. All stocks need to return to normal levels after few days.

Eg, LOLC should come back to at least 120. Many colleted above 120. I never sell below the purchased price.

So if this is small remnants of 50% credit that was cleared few months ago, what about the other big, full and round 50% that has to be cleared in 25% in another 3 months and the rest in 3 months.
And why did it come a issue right now?

Suthar wrote:Credit clearing is there for sure if we obserev.

I checed with Capital Trust, JB, JKSB, ASIA all said the same. Also they mentioned international pressure for the country also affecting market temporary. They are expecting this will be recover after few days.

You mean the international pressure is temporary and will recover in a few days?

Duke,

* I think this forced selling happens for the credit balances whco has exceed the 50% of the portfolio value. What I also feel is when small shares started picking up (e.g. PAP, TESS, SEMB,ATL,FLCH) most retailers bought them on credit to get quick returns. But things changed and all these shares went down. As a result they have to settle credit at T+5 days.

* Definietly this international pressure will be there till end of the world. But what I mean is the impact to the share market from it will recover soon. Cos as we know once media reduce to talk abou it people will forget this.

Does any one know till when this forced selling will be carried out

seyon wrote:This is not a forced selling, this is correction of ridiculous overvalued stock,

Can u ( as a rational investor) imagine, whether these stocks are fairly valued ?

BLUE -Rs.9
CSF - RS.30
CLND -Rs.55
PAP - Rs.9
ECL- Rs.7
PMB - Rs.35-40

and etc,etc,etc.....

but prices of these shares are not going down.
prices are going down for so called fundementaly strong shares.
for ex : ntb is 64 now. dfcc 155 ndb 158 etc..

Investor99 wrote:Does any one know till when this forced selling will be carried out

Till Friday last week, they said.

econ wrote:

seyon wrote:This is not a forced selling, this is correction of ridiculous overvalued stock,

Can u ( as a rational investor) imagine, whether these stocks are fairly valued ?

BLUE -Rs.9
CSF - RS.30
CLND -Rs.55
PAP - Rs.9
ECL- Rs.7
PMB - Rs.35-40

and etc,etc,etc.....

but prices of these shares are not going down.
prices are going down for so called fundementaly strong shares.
for ex : ntb is 64 now. dfcc 155 ndb 158 etc..

dear econ

dont warry there is a day for those
collect them as fixed deposite

Happy Trading

Freinds,

I checked with 5 broker firms up to now. namely JB,JKSB,ASIA,Capital Trust and Bartleet to get thier ideas about PAP.

What all said is there is huge forced selling happening in the market, specially on shares like PAP and CLND. Reason most of investors has bought them on credit. They wanted to be patient for about one week time to expect the upward trend.

If this story is from one broker i wont belive, but all most all tell the same thing. So i tend to belive.

econ wrote:

seyon wrote:This is not a forced selling, this is correction of ridiculous overvalued stock,

Can u ( as a rational investor) imagine, whether these stocks are fairly valued ?

BLUE -Rs.9
CSF - RS.30
CLND -Rs.55
PAP - Rs.9
ECL- Rs.7
PMB - Rs.35-40

and etc,etc,etc.....

but prices of these shares are not going down.
prices are going down for so called fundementaly strong shares.
for ex : ntb is 64 now. dfcc 155 ndb 158 etc..

Come on econ, See current price...

PAP-5.20
CLND - 40
PMB-27 ( it came down to 23)
CSF -24

seyon wrote:

econ wrote:

seyon wrote:This is not a forced selling, this is correction of ridiculous overvalued stock,

Can u ( as a rational investor) imagine, whether these stocks are fairly valued ?

BLUE -Rs.9
CSF - RS.30
CLND -Rs.55
PAP - Rs.9
ECL- Rs.7
PMB - Rs.35-40

and etc,etc,etc.....

but prices of these shares are not going down.
prices are going down for so called fundementaly strong shares.
for ex : ntb is 64 now. dfcc 155 ndb 158 etc..

Come on econ, See current price...

PAP-5.20
CLND - 40
PMB-27 ( it came down to 23)
CSF -24

But why do we say PAP, PMB... overvalued and some other blue chips are okay. Sometimes if you calculate the real PE ratio removing one time gains and considering if there is space for future growth, most of the blue chips are way overvalued. Take the banking sector shares. The real growth rate has been flat, hidden behind one time gains. Conglomerates have been making ends meet by doing stock trading.

seyon wrote:

econ wrote:

seyon wrote:This is not a forced selling, this is correction of ridiculous overvalued stock,

Can u ( as a rational investor) imagine, whether these stocks are fairly valued ?

BLUE -Rs.9
CSF - RS.30
CLND -Rs.55
PAP - Rs.9
ECL- Rs.7
PMB - Rs.35-40

and etc,etc,etc.....

but prices of these shares are not going down.
prices are going down for so called fundementaly strong shares.
for ex : ntb is 64 now. dfcc 155 ndb 158 etc..

Come on econ, See current price...

PAP-5.20
CLND - 40
PMB-27 ( it came down to 23)
CSF -24

but did you remember they were at very low prices.
for ex' clnd 20, csf 11 , pap 3.70 etc. so still they are trading at higher prices compare to fundementally strong shares.

if you take fundementally strong counters like banks they are going down day by day without any price increase at all.
fo ex ' comb - 275 -> 255 , ntb - 90s -> 60s , samp , 300->250s ,
rich - 15.50-> 12.20 etc..

econ wrote:

seyon wrote:

econ wrote:

seyon wrote:This is not a forced selling, this is correction of ridiculous overvalued stock,

Can u ( as a rational investor) imagine, whether these stocks are fairly valued ?

BLUE -Rs.9
CSF - RS.30
CLND -Rs.55
PAP - Rs.9
ECL- Rs.7
PMB - Rs.35-40

and etc,etc,etc.....

but prices of these shares are not going down.
prices are going down for so called fundementaly strong shares.
for ex : ntb is 64 now. dfcc 155 ndb 158 etc..

Come on econ, See current price...

PAP-5.20
CLND - 40
PMB-27 ( it came down to 23)
CSF -24

but did you remember they were at very low prices.
for ex' clnd 20, csf 11 , pap 3.70 etc. so still they are trading at higher prices compare to fundementally strong shares.

if you take fundementally strong counters like banks they are going down day by day without any price increase at all.
fo ex ' comb - 275 -> 255 , ntb - 90s -> 60s , samp , 300->250s ,
rich - 15.50-> 12.20 etc..

that i am telling these ridiculous shares unexpected price movement killing the mkt,

lets take the eg if the person bought PAP @ Rs.9 or CLND @ Rs.50, and could not sell, What he can do to cover the lost, He has to sell his Fundamental shares to cover the lost or the settlement.

This is a real scenario going on these days.

June 22, 2011 (LBO) - Sri Lankan stocks closed almost 01 percent lower Wednesday with continuous forced selling of client portfolios where the margin provided is in excess of 50 percent, brokers said.

The All Share Price Index closed at 6,927.03, down 0.99 percent (69.61 points) while the Milanka Price Index of more liquid stocks closed at 6,516.06, down 0.84 percent (55.28 points), according to stock exchange provisional figures.
Today’s ASI close was the lowest since January 11, 2011 and the MPI close was the lowest since September, 15 2010.

Turnover was 1.7 billion rupees. There were 52 gainers and 173 losers.

“Who should be blamed for this unwarranted market massacre where the retail investors are the worst affected?” asked Capital Trust Securities Director and Head of Research Sarath Rajapaksa.

He said strong company fundamentals and the robust economic fundamentals are definitely not reflected in the market performance.

Broker credit to clients have been restricted by the Securities and Exchange Commission, the market regulator, amid fears of a stock market bubble and brokers given time till the year-end to clear credit accounts.

Environmental Resources Investment closed at 60.70 rupees, up 30 cents or 0.5 percent.

Brokers said there was no meeting scheduled for Wednesday by the markets regulator on the investigation into the company, contrary to rumours.

Once again, East West Properties was the highest contributor of the day to turnover and closed at 16.30, up 1.20 rupees or 7.95 percent. More than 16 million East West Properties shares were traded generating 254 million rupees.

Brokers said seven million shares of People's Merchant Bank changed hands with heavy buying by high net worth investors and it closed at 27.30 rupees, up 3.40 rupees or 14.29 percent.

Kalamazoo closed at 3,214 rupees, up 714 rupees or 28.56 rupees. Eastern Merchant closed at 1249.90, up 249.80 or 24.98 percent.

Panasian Power closed at 5.20 rupees, down 20 cents or 3.70 percent with more than 22 million shared traded, becoming the most active stock of the day.

Serendib Land closed at 2214 rupees, down 536.00 rupees or 19.49 percent. Lanka Ashok Leyland closed at 4,000 rupees down 800 rupees or 16.67 percent.


The Colombo Fort Land closed at 78.50 rupees down 40 cents or 0.51 percent with a solitary crossing of 250,000 shares at 88 rupees. Aitken Spence Hotels closed at 75.30, down a rupee or 1.31 percent with a single crossing of 01 million shares at 76 rupees.