Is this Crisis due to SEC’s Over Regulations or Illiquidity

try to attract investments..giving credit is not a solusion... investments would come in 2012.

I had indicated the possible worst bottom in this char months ago.
laka's values matches with it. See the area marked with a Blue curly bracket

https://i.servimg.com/u/f46/16/66/37/07/market11.jpg

aj wrote:When an investor (may be a foreign fund) want to invest in these stocks, they don't just look at the final profit number or the PE ratio broker reports show. That's how Sri Lankan investors invest. Sri Lankans haven't seen PE ratios like 11, 12 for a while. They thought PE 20s were fairly valued number while anything under 19 was undervalued.

For real investors they check how that profit has come and whether the company can do it consistently over the next years. That's where Sri Lankan companies fail. Look at the stocks with PE under 15 and you'll see the profits came by selling their assets or negative goodwill or giving a higher value for a property they control. These are not profits. For an extreme example, there is a company which sold one of their hotels and showed profits. Some companies wound down companies they own. Even the ones you think are very undervalued, if you look at the numbers closely you'll see the profits are not growing and the expenses are growing. When you give a PE 15 or even 25, there is a reason for doing that. That you expect 'growth'. But almost all of the reputable companies you see don't have that.

That is where CSE fails. The stock prices don't even come close to the core business growth. Other than the manipulated market issue, that's the main reason foreign funds are exiting. You have to blame the company directors.

Aj, sometimes when I read your post I feel you are an extreme bear But there is certainly truth in what you say above, that some companies show inflated profit through games and how the real analysts will look at it negatively.

But, I think if one believes in investment ( with patience), one's job is to identify the few good in the mud and slowly collect. We cannot say all shares at CSE is totally overvalued and crap though they are many which fit the bill.



Side note about foreigners:


CSE is a very small market. Whole market capitalization is significantly below even certain individual companies at NYSE. ( Just look at Exxon for example) .


Though small, CSE is still very much reliant on foreigner inflow whether it is good or bad. Foreign funds buy early ( opposite to us) and sell when their targets are accomplished , when companies are overvalued, or maybe simply when they need money. There might be foreigners who bought at dirt cheap before the boom CSE and now exiting for one of the reasons I mentioned above. So ot is important identify why at times foriegner are selling certain share. If the company you hold is solid do not panic. They maybe exiting for profit.

Also note at the same time foriegner usually will buy higher market capitalization and higher liquid companies. Unfortunately most of these companies at CSE maybe not bargains yet for them to buy back. But it does not mean there are no good shares at CSE

One fine day , hope we will not be so dependent on foreigners. But right now there things we can learn from them like when to enter and exit market.

laka wrote:Simply we need cash inflows for Blue Chips to make them liquid. Since local investors are suffering with lack of cash,we highly need foreign inflows. It’s better if we could avoid foreign selling and exit. Expropriation Bill also adversely affects to discourage foreign participation.CSE and Stock Brokers have to do more road shows in abroad to attract them.

I can not understand this policy.If our market is attractive why we should go after foreigners ? Do we want to give them an oppurtunity to invest now and then sell it to us later with a huge profit ? What will happen ? Our money will flow out from our country.Is it beneficial to our country ?
Who are the local investers who lack money ? We should motivate our local investers and at the sametime government funds can invest now.If this is a golden oppurtunity why do we hand over it to foriegners ?
I raised this issue several times in this forum but only few seems to be interested.

rijayasooriya

We need about a trillion. If the ETF fund is fully invested in stocks problem solved. But that never happens.

Stockmate wrote:rijayasooriya

We need about a trillion. If the ETF fund is fully invested in stocks problem solved. But that never happens.

If that trillion is invested by foreigners how much money will flow out of our country when they exit ?

Stock markets are open to all. we also can invest in other markets. When we exit with a profit some money flows out from those markets too. But our market can not exist without foreign money as the local money that flows in to the market is less. last IPO barrage devoured much of it. They are locked up in IPOs. Later IPOs lost ground as inflow of money was low.

Stockmate wrote:rijayasooriya

We need about a trillion. If the ETF fund is fully invested in stocks problem solved. But that never happens.

You are 100% correct ..That's why we need foreigners.

We need more IPOs. After 2009 what happened was that everybody bid for the same small number of companies. The market was over saturated and then became over priced. We shouldn't do that mistake again. New IPOs must be introduced to stop the existing old stocks becoming overpriced and fat.

To all,
Thanks a lot for your appreciations.

I never expected this kind of appreciations from this forum.

Don't forget we have billions of dollars of foreign inflow to the country. But they don't buy undervalued (in your opinion) stocks but they go for direct investment in the projects. Why buy expensive shares when they can directly invest and harvest the profits.
Just because the PER is under 10 in the broker reports don't think they are undervalued. Check how they came up with those numbers. Local people can be fooled. But the foreign funds can't.

rijayasooriya wrote:

laka wrote:Simply we need cash inflows for Blue Chips to make them liquid. Since local investors are suffering with lack of cash,we highly need foreign inflows. It’s better if we could avoid foreign selling and exit. Expropriation Bill also adversely affects to discourage foreign participation.CSE and Stock Brokers have to do more road shows in abroad to attract them.

I can not understand this policy.If our market is attractive why we should go after foreigners ? Do we want to give them an oppurtunity to invest now and then sell it to us later with a huge profit ? What will happen ? Our money will flow out from our country.Is it beneficial to our country ?
Who are the local investers who lack money ? We should motivate our local investers and at the sametime government funds can invest now.If this is a golden oppurtunity why do we hand over it to foriegners ?
I raised this issue several times in this forum but only few seems to be interested.

I dont think foreigners are absolutely necessary part of any market in the world.

However it’s a very very clear indication that tells us how healthy the market is.
If foreigners keep coming to a market we can assume that market is attractive. When foreigners achieved their targets they tend to leave markets. This process speeds up when a market is over heated or a government introduces unfriendly business polices.

laka wrote:

Stockmate wrote:rijayasooriya

We need about a trillion. If the ETF fund is fully invested in stocks problem solved. But that never happens.

You are 100% correct ..That's why we need foreigners.

I do not say we do not need foreigners.My point is why are we going behind foreigners when market is attractive ? We should motivate our local investers.How many local people have invested in CSE ? I think it is very low as a percentage.They need good motivation and proper guidance.

kama wrote:I wish we had rep system to give you + rep.

People like dindon, amilaela, rajaram, sanjaya351, bakapandithaya, krishanakash, and bla bla bla should read this without daydreaming...

kama,
That means my friend, You also believe ASI would come down to 5000 level and if foreign investment flow is not sufficient ASI would drop to 4000? In that case you all can become winners by selling you PF at your earliest. Why not you do that?

rijayasooriya wrote:

I do not say we do not need foreigners.My point is why are we going behind foreigners when market is attractive ? We should motivate our local investers.How many local people have invested in CSE ? I think it is very low as a percentage.They need good motivation and proper guidance.

I also don't like to depend on foreigners. Since our market capitalization was increased by 400% to Rs 2.2 T, our so called investors can't afford this. CSE didn't have much real cash inflows compared
to such high increase in Market Capitalization. What our HNWI did is changing share parcels with each other rather than entering new money to the system. That's why we should be thankful to
SEC for stop this circle. Otherwise ASI would hit 12,000 and then lead to Bangladesh type Crash...

There should be positive relationship between cash inflows and Market Capitalization.

rijayasooriya wrote:

laka wrote:

Stockmate wrote:rijayasooriya

We need about a trillion. If the ETF fund is fully invested in stocks problem solved. But that never happens.

You are 100% correct ..That's why we need foreigners.

I do not say we do not need foreigners.My point is why are we going behind foreigners when market is attractive ? We should motivate our local investers.How many local people have invested in CSE ? I think it is very low as a percentage.They need good motivation and proper guidance.

According to Wikileaks articles released in the past there are so much money invested in Swiss bank from Sri Lanka.
Why those guys who are loving our motherland do not want to invest in CSE?

kam2011 wrote:
kama,
That means my friend, You also believe ASI would come down to 5000 level and if foreign investment flow is not sufficient ASI would drop to 4000? In that case you all can become winners by selling you PF at your earliest. Why not you do that?

I don't like to realize my huge losses.Further I don't like day dreaming also..





[/quote]

I think coz 4 da problem is SEC over regulation

bakapandithaya wrote:I think coz 4 da problem is SEC over regulation

No. You should be thankful to SEC for over regulations. otherwise ASI is now below 5,000.
If possible pls read ful article.

laka wrote:

bakapandithaya wrote:I think coz 4 da problem is SEC over regulation

No. You should be thankful to SEC for over regulations. otherwise ASI is now below 5,000.
If possible pls read ful article.

I already read da article. u mean price band, credit clearance are favourable for cse. Then y foreigners are running out. Im sure these regulation reduced mkt manipulation & good 4 investors. But 4 da downtrend, SEC is responsible

bakapandithaya wrote:
I already read da article. u mean price band, credit clearance are favourable for cse. Then y foreigners are running out. Im sure these regulation reduced mkt manipulation & good 4 investors. But 4 da downtrend, SEC is responsible

Simply in last September they realized that cash position of mkt is not sufficient to face such
400% increased mkt capitalization.That's why they did like that since they are educated than u and me.Foreigners are running are running out because they know future is worse than present..
When you see foreign inflows of atleast Rs 2Bn , this is the time to buy...
IMO we need more than Rs 10Bn inflows

laka wrote:

bakapandithaya wrote:
I already read da article. u mean price band, credit clearance are favourable for cse. Then y foreigners are running out. Im sure these regulation reduced mkt manipulation & good 4 investors. But 4 da downtrend, SEC is responsible

Simply in last September they realized that cash position of mkt is not sufficient to face such
400% increased mkt capitalization.That's why they did like that since they are educated than u and me.

they may b educated than u. i agree. How u say than me?

bakapandithaya wrote:

they may b educated than u. i agree. How u say than me?

Sorry for making Judgment A Book By Its Cover..

kama wrote:

kam2011 wrote:
kama,
That means my friend, You also believe ASI would come down to 5000 level and if foreign investment flow is not sufficient ASI would drop to 4000? In that case you all can become winners by selling you PF at your earliest. Why not you do that?

I don't like to realize my huge losses.Further I don't like day dreaming also..

[/quote]


kama, Read following link. Is it not a day dreaming?


http://forum.srilankaequity.com/t7766-mori-is-it-valued-more-than-4000#5278

kama wrote:I wish we had rep system to give you + rep.

People like dindon, amilaela, rajaram, sanjaya351, bakapandithaya, krishanakash, and bla bla bla should read this without daydreaming...

Aah,Is that so? From when did you change your mind? Have you stop your promotion.
Read one of your posts which has a possibility to misguide small investors.Dont you think so?

http://forum.srilankaequity.com/t7208-brwns-investments#49142

laka wrote:

bakapandithaya wrote:

they may b educated than u. i agree. How u say than me?

Sorry for making Judgment A Book By Its Cover..

Bakapandithaya knows all

Thank you very much! This is a totally worth reading article. It actually slightly changed the way I thought about the current market situation.
Your hard work and willingness to share is highly appreciated! Keep up the good work.
Cheers!

problem is SL investors have a very short time investment time horizon, while funds have long term. When market is dominated by short term investors the long term investors tend to stay out until things settle down. The minimum time horizon of a long term investor is 3 years. No long term fund will invest in a market dominated and run by speculators.

I;m not saying speculators are not important, but they should not dominate the market.

I feel that no market can sustain a bull run over a longer period of time unless the funds come in. Otherwise we will be chasing rainbows like credit relaxation or removal of price band, all which will only give a temporary boast to market.

This is my humble opinion.

Hi laka

Thanks for sharing good informative thread, after some time i read whole discussion.

Is there any way to find the ratio of net real money to virtual money in market appreciation or depreciation?I mean net real money inflow or outflow?
we only know the changes in market capitalization but the net real money involved is not known.
If we calculate in daily basis by summing up multiplication of volumes and net change of prices it is possible, but manually it is difficult.