Positive Points

Rapaport · 1 Positive Points Sun Feb 12, 2012 1:44 pm

Rapaport

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The main changes in the recent past,

1) Diminishing foreign reserves due to sterilized intervention ---> Allowed to free float finally! This will reduce imports and reduce pressure on BOP but increase inflation in the short term.

2) Rising interest rates ---> Pressure will reduce due to currency free float. Will increase interest margins for banks and thus increasing their earning. More deposit mobilisation and less import demand due to cost escalation.

3) Spiralling fuel prices in the global arena but supported by detrimental subsidies by the govt ---> A welcome increase in diesel thereby reducing massive loss incurred by CPC and cutting off govt subsidy and money saved for govt.
Feb 11, 2012 (LBO) - Sri Lanka has steeply raised the price of diesel partially correcting chronic mis-pricing between refined fuels in a move that could also help reduce loans taken by petroleum distributors and stabilize a weakening exchange rate.
According to Central Bank data, refined Diesel was 132.94 dollars a barrel (95.79 rupees a litre) kerosene was 131.6 US dollars a barrel (94.80 rupees a litre) and petrol was 125.3 dollars a barrel (91.01 rupees a litre).
Finally CPC making profit??

4) Inflow of Foriegn investment to CSE ---> This should improve with devaluation of rupee and falling stock market and increasing market valuations and earnings.

5) Possible entry of $800 million from IMF giving cushion to foreign reserves and possible borrowing of private banks and private firms bringing in more dollars. It will also make more sense for newer FDI projects to enter the SL market. This in turn should reduce pressure on the rupee.

6) Increasing tourist arrivals with more investments in this sector.

7) Battered CSE with punishment to JUNK stocks like GREG. Increasing instituitonal interest and HNWI interest in fundamentally sound, good value blue chip counters. Collection in JKH, COMB and other big counters noted. Market PER according to Bloomberg is 11.5X and Asia Sec 13X, CSE 13.9X. This value to improve with good positive earning results and falling market. Market is also nearing heavy resistance around 4800-5200 level.

8 ) Improved rules from SEC - SEC to tighten private placement rules and form retailers association to protect retailers. However appointment of DG is delayed and must happen soon.

9) Lack of interest and exorbitant valuations have helped to slow down IPO's and ensuring IPO's are properly valued.

Please add more positive points and major negative points.

Cheers!

Last edited by Rapaport on Sun Feb 12, 2012 4:47 pm; edited 2 times in total

sriranga · 2 Re: Positive Points Sun Feb 12, 2012 1:52 pm

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Thanks a lot Rapaport sharing your valuable thoughts.

One of the negative point which I feel (may be wrong) is we are not controlling our emotions.(May be due to lack of fundamental knowledge in the trade?)

Roboticfx · 3 Re: Positive Points Sun Feb 12, 2012 2:35 pm

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Thanks rapapart! Very Happy

greedy007 · 4 Re: Positive Points Sun Feb 12, 2012 2:58 pm

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Battered CSE with punishment to JUNK stocks like GREG. Increasing instituitonal interest and HNWI interest in fundamentally sound, good value blue chip counters. Collection in JKH, COMB and other big counters noted. Market PER according to Bloomberg is 11.5X and Asia Sec 13X, CSE 13.9X. This value to improve with good positive earning results and falling market. Market is also nearing heavy resistance around 4800-5200 level.

Top Positive point at this moment.

hariesha · 5 Re: Positive Points Sun Feb 12, 2012 4:19 pm

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Rapaport, Good summary. An highly appreciative one. I also believe market will be bottom out soon. And there are lot of + things happening, that we can be satisfied. In March we do have to face a hurdle, HR summit, but most probably nothing will happen against Sri Lanka, this is most visible by increasing of foreign inflows.

Buy looking at the valuations an upward movement is imminent. Important thing is not to erode capital by panic selling.

K.Haputantri · 6 Re: Positive Points Sun Feb 12, 2012 4:21 pm

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Rapaport wrote:

8 ) Improved rules from SEC - SEC to tighten private placement rules and form retailers association to protect retailers. However appointment of DG is delayed and must happen soon.

?Can you elaborate on retailers association. Will SEC organise this or any other group. However, this is a long over due one.

By the way I could add the following to the list;

* Uncertainty & inconsistancy in macro economic policy making due to various authorities uttering various conflicting things.
* Anti-investment policies such as "Appropriation of Loss Making .... Act"
* Bleak world economic out-look + internal issues of Moldives.
* Turning a blind eye to wide-spresd manipulation in the share market while crucial appointments in CSE are delayed.
* Inaction by the SEC on apparant misleading prospectuses/future growth forecasts of promoters of recent IPOs which grabbed millions of rupees of innocent investors just like daylight robbery.

Rapaport · 7 Re: Positive Points Sun Feb 12, 2012 4:28 pm

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Thanks guys!

Haputantri,
SEC is on a path to bring in stricter rules and bring in discipline so i feel things and trust amongst investors will improve. Also SEC is more careful and takes time to implement things now than sudden short sighted haphazard changes.

I think the govt very clearly understands the implications it faced due to the expropriation bill. It may be partly due to Ego factor that the bill was pushed ahead, but i dont feel such a stupid action will occur in the future. The expected FDI in end of last year also did not materialise (As mentioned by Deputy CB govenor, Mr. Dheerasinghe) and maybe due to the bill.

Currently it looks like the treasury and those in the govt are more cautious than the Central bank and this has even received THUMBS UP from certain opposition members.

Cheers!

Rapaport · 8 Re: Positive Points Sun Feb 12, 2012 4:39 pm

Rapaport

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Some factors which must be now closely watched,

1) There is pressure to increase the electricity tariffs. Since SL has high rates in Asia, i think the government should be careful in implementing new tariffs since it will hurt all industries and it plays a major role in costing of products, and the electricity component is already too high. Renewable energy must be encouraged to the max. Eg: Wind Power.

2) There is pressure to increase motor vehicular taxes due to rapid rise in registrations and road congestion, plus pressure on BOP. However i feel the registrations have now reached a plateu and people will shy away further from motor vehicles due to rise in fuel price, interest rates and impending rise in cost of living. Also shift of vehicle importation to Hambantota will imapct cost of vehicles. Rupee devaluation further hits cost of importation. the majority of imports is Bikes and Three wheelers suggesting poor people and lower middle class have bought new vehicles and this is beneficial for their growth. The vehicle taxes must be maintained.

3) Mihin air should be scrapped and the two aircraft given to Sri Lankan which anyway is looking for aircraft and has an established route and client base.

4) With rising cost of living, fuel price hike and many protests, govt may be compelled to increase salaries but i feel this can be acheived by saving money from fuel subsidy being scrapped off and increase revenue to treasury. CPC must look to modernise its refinery.

5) Possible decrease in interest rates in the near term or stabilisation at current rate. Decrease in rates may attract funds back to CSE.

6) Loss of revenue from tea exports due to middle east conflict. High tea sector wages and increase in loss for tea companies.

Cheers!

Last edited by Rapaport on Sun Feb 12, 2012 4:43 pm; edited 1 time in total

Kumar · 9 Re: Positive Points Sun Feb 12, 2012 4:42 pm

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K.Haputantri wrote:

Rapaport wrote:

8 ) Improved rules from SEC - SEC to tighten private placement rules and form retailers association to protect retailers. However appointment of DG is delayed and must happen soon.

?Can you elaborate on retailers association. Will SEC organise this or any other group. However, this is a long over due one.

.

forum.srilankaequity.com/t15808-sri-lanka-newspapers-sunday-12-02-2012

CSE.SAS wrote:
SEC to help retailers form Association
By Duruthu Edirimuni Chandrasekera
The Securities & Exchange Commission (SEC) is gearing to help form an investors' association for the retailers under the auspices of the SEC in a bid to give a voice to the small and madcap investors, the SEC's top official said.

"We want to form an investors' association targeting the retailers. There're many such associations but we want to form one where they have a lot of 'clout'," Thilak Karunaratna, Chairman SEC told the Business Times.

He added that SEC will be a facilitator in this exercise. "This will help them fight for their rights," he added. Mr. Karunaratna said that SEC has called the stockbrokers for a meeting on Wednesday, on topics that they want to discuss. "So far they haven't sent us the topics on which they want to discuss," he added.

In response to a question whether the SEC is flexing its muscles pertaining to bringing market manipulators to justice, he said that SEC will do 'what it has to' in risk management. When asked about investors commenting on the SEC commissioners, he said that it's immoral 'to say the least'. "Also to gun (target) particular person/s simply because they are qualified at detecting wrongdoings has to be deplored," he noted.

He stressed that it's not the regulator's job to promote the stock market, an issue the Business Times has also consistently raised as a conflict of interest. "Many think that it's regulator's job to promote the market. The SEC's job isn't promotion, but protecting investors and maintaining a fair and orderly market. In the past we have gone beyond this mandate. Now we feel that SEC needs to educate both the stockbrokers and the investors," he explained, which the Business Times has also urged over the past year.

He added that retailers are mostly ignorant and in order to make a proper investment decision. "They need to be aware of the basics." Mr. Karunaratna noted that the SEC advertised for its director general's post as it could cast a wider net to catch bigger fish. "There were some good applicants, but the number was small (it was only seven applicants). Selecting from this pool wasn't the best."
http://sundaytimes.lk/120212/BusinessTimes/bt24.html

K.Haputantri · 10 Re: Positive Points Sun Feb 12, 2012 4:49 pm

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Thanks Kumar for the info.

cseguide · 11 Re: Positive Points Sun Feb 12, 2012 5:36 pm

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Positive factors
*improved company earnings. will reduce the market PE further.
* marginal credit for foreign participants
*GDP growth rate still maintaining at 8%

lokuayya · 12 Re: Positive Points Sun Feb 12, 2012 5:36 pm

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sri lankan airline had been doing well until it was taken over to fulfill ego problems of our power filled people.(to some extent emirates also responsible for not handling the request of a head of the state tactfully,its a management disaster,air line boss also should not have a too big ego ).
now we are paying to keep it flying though we are still on the ground and now started going underground.

pelawatha sugar was taken over.now according to sources 2000 odd jobs are in danger.if something is not done surely those workers would be thrown to streets.
no doubt , someones ego problems making us starve.
so to pay all these blunders , from next months onward we have to pay high for every thing from school van, plain tea, bread and buns, ..every thing.

the people in power should fight another war with themselves to control their own egos,revengeful acts etc.
otherwise we are people to pay for that.

WildBear · 13 Re: Positive Points Mon Feb 13, 2012 4:04 pm

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-Stocks that depend on export market will be benefited with rupee depreciation. Plantations-Tea,Rubber, Garments-TJL,OGL

-With increase of crude oil prices rubber price will again start upward momentum

Hotel stock's balance sheet will be strengthened with week rupee at the same time can expect higher growth as Sri Lanka may look cheap to foreigners.

-Renewable Energy projects again will get the lime light with rise in Crude oil prices.

wiki · 14 Re: Positive Points Mon Feb 13, 2012 4:36 pm

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Thanks Rapapart

I think ...

Floating of rupee will help to attract foreign fund to the market

Margin call resulted due to GREG.W2 saga is diminishing..

If government fund accept SPEN mandatory offer... there will be money (few billion) to inject into the CSE.

If he decides to release SF and work honestly to give a political solution to the north and east ...there wont be a problem at HR council at Geneva

I think these CB rate hike, floating of rupee and oil price hike took place within short period of time...this make people feel that Sri Lanka is economically ruined.. but it is not. big people make this as a opportunity to full down the market..and collect at the rock bottom....(but this causes vicious margin call)