Is ASI heading to 6500 level???

mra · 1 Is ASI heading to 6500 level??? Tue Jul 19, 2011 2:19 pm

mra

Manager - Equity Analytics

Posts : 271
Equity Stars : 5094
Reputation : 7
Join date : 2011-06-22
Location : Colombo

Is ASI heading to 6500 level???

dinusha.kiwulegedara · 2 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 2:27 pm

dinusha.kiwulegedara

Senior Equity Analytic

Posts : 69
Equity Stars : 4837
Reputation : 11
Join date : 2011-05-06

YES

That's true my broker said It could be dropped around 6500.. level

Genting · 3 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:06 pm

Genting

Senior Manager - Equity Analytics

Posts : 349
Equity Stars : 5291
Reputation : 46
Join date : 2011-02-21

I think we may see another 50 point drop tomorrow and then bouncing back on the other day. It may not go to 6500 level. even if its goes it may not stay there that long.

This is my view and I am not an expert.

shaankh · 4 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:14 pm

shaankh

Manager - Equity Analytics

Posts : 144
Equity Stars : 5048
Reputation : 0
Join date : 2011-02-01
Age : 50
Location : London

will come down to less than 5000. then foriegn fuds will come

Genting · 5 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:17 pm

Genting

Senior Manager - Equity Analytics

Posts : 349
Equity Stars : 5291
Reputation : 46
Join date : 2011-02-21

shaankh wrote:will come down to less than 5000. then foriegn fuds will come

Academic · 6 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:26 pm

Academic

Senior Manager - Equity Analytics

Posts : 454
Equity Stars : 5428
Reputation : 103
Join date : 2011-01-23

Genting wrote:I think we may see another 50 point drop tomorrow and then bouncing back on the other day. It may not go to 6500 level. even if its goes it may not stay there that long.

This is my view and I am not an expert.

Truth is bitter. Realizing bitterness is even more bitter.

ASI was below 3000 in late 2009 when the bull run started. By now ASI has increased more than by 2 times. Do you think companies in the CSE have improved operational performance (after removing non-recurring capital gains) to justify ASI 6500?

Last edited by Academic on Tue Jul 19, 2011 11:22 pm; edited 2 times in total (Reason for editing : early 2009 corrected as late 2009)

Genting · 7 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:44 pm

Genting

Senior Manager - Equity Analytics

Posts : 349
Equity Stars : 5291
Reputation : 46
Join date : 2011-02-21

Academic wrote:
Truth is bitter. Realizing bitterness is even more bitter.

ASI was below 3000 in early 2009 when the bull run started. By now ASI has increased more than by 2 times. Do you think companies in the CSE have improved operational performance (after removing non-recurring capital gains) to justify ASI 6500?

You have raised a really good point

Shall we have small survey to find out what should be the correct ASI to represent the correct status of the companies?

Most of us must be having EPS of each company and we can use nominal PE ratio to find out the nominal market price of those shares and then find out what will be ASI.

Once cannot do it alone, few of us can get together and share the calculations.

Light of Hope · 8 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:59 pm

Light of Hope

Vice President - Equity Analytics

Posts : 1014
Equity Stars : 5881
Reputation : 59
Join date : 2011-04-04

Academic wrote:

Genting wrote:I think we may see another 50 point drop tomorrow and then bouncing back on the other day. It may not go to 6500 level. even if its goes it may not stay there that long.

This is my view and I am not an expert.

Truth is bitter. Realizing bitterness is even more bitter.

ASI was below 3000 in early 2009 when the bull run started. By now ASI has increased more than by 2 times. Do you think companies in the CSE have improved operational performance (after removing non-recurring capital gains) to justify ASI 6500?

most of the fundamental stocks have come down comparatively, more than the ASI. Thanks illiquid runs and penny stock runs, ASI still managing to stay up there. if the ASI to drop further more to justify company earnings, I am scared to think where will the fundamental stocks end??? probably at levels where they were, when ASI was 3000???

wiki · 9 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 4:18 pm

wiki

Assistant Vice President - Equity Analytics

Posts : 687
Equity Stars : 5692
Reputation : 41
Join date : 2011-02-03
Location : Colombo

Academic wrote:

Genting wrote:I think we may see another 50 point drop tomorrow and then bouncing back on the other day. It may not go to 6500 level. even if its goes it may not stay there that long.

This is my view and I am not an expert.

Truth is bitter. Realizing bitterness is even more bitter.

ASI was below 3000 in early 2009 when the bull run started. By now ASI has increased more than by 2 times. Do you think companies in the CSE have improved operational performance (after removing non-recurring capital gains) to justify ASI 6500?

Is it always necessary to improve operational performance by two fold to justify price index at this particular moment. Cant it be justified by future earnings..

duke · 10 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 4:41 pm

duke

Senior Manager - Equity Analytics

Posts : 552
Equity Stars : 5514
Reputation : 86
Join date : 2011-03-14

wiki wrote:Is it always necessary to improve operational performance by two fold to justify price index at this particular moment. Cant it be justified by future earnings..

When you buy a coconut for planting do you pay for coconuts for couple of years of harvest. No. You just pay the price of the coconut. At the moment CSE stocks are like that. You're paying for years of harvest at the present price levels.

UKboy · 11 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 5:50 pm

UKboy

Senior Vice President - Equity Analytics

Posts : 1943
Equity Stars : 7325
Reputation : 391
Join date : 2011-02-08
Location : Earth

duke wrote:
When you buy a coconut for planting do you pay for coconuts for couple of years of harvest. No. You just pay the price of the coconut. At the moment CSE stocks are like that. You're paying for years of harvest at the present price levels.

Good point Duke,
Some investors like to think that all the complanies at cse have only 1000 shares per counter to trade.
So they buy the shares well in advance to aviod the last minute rush.

sanjeewa88 · 12 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:17 pm

sanjeewa88

Manager - Equity Analytics

Posts : 190
Equity Stars : 4990
Reputation : 18
Join date : 2011-06-25
Age : 35
Location : Colombo

Is there a correct way to calculate the over valued level of ASI?

( I meant something scientific or statistical)

Academic · 13 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:24 pm

Academic

Senior Manager - Equity Analytics

Posts : 454
Equity Stars : 5428
Reputation : 103
Join date : 2011-01-23

wiki wrote:Is it always necessary to improve operational performance by two fold to justify price index at this particular moment. Cant it be justified by future earnings..

Wiki you have a valid point. Future earnings can justify share prices. That is why I didn't say operating performance should be doubled to double ASI. We may look at macro changes and form expectations on future performance and value shares. That is what happened from 2009 May through 2010 September. And the market has proven the expectations formed didn't realize so far (for example look at BFI and hotel sectors excluding their one time gains). This is, partially, one reason for this decline. Therefore we expect companies to show year-over-year (YoY) growth in performance in order to extrapolate future performance (as speculation period is over). That is why I say current performance is important. See g is a key input for P/E calculation.

Tailing P/E = (1-b)*(1+g)/(r-g)

Forward P/E = (1-b)/(r-g)

Where: b, r and g are retention ratio, required rate of return and growth rate. And g = ROE*b

duke wrote: When you buy a coconut for planting do you pay for coconuts for couple of years of harvest. No. You just pay the price of the coconut. At the moment CSE stocks are like that. You're paying for years of harvest at the present price levels.

I do not agree with you. The parable buying a coconut is not comparable to purchasing a share. By purchasing a share you get exposure to future events of the company. So you buy not only present but also future (even you are a day trader, once purchased a share, you are exposed to any positive or negative events happen in the company until you sell it). That is current value of a share partly depends on future events that would happen in future.

However buying a share is comparable to buying a coconut estate. When you purchase a coconut estate you buy the exposure to future coconut price fluctuations too. If you have any idea into price of one acre of a coconut estate and a bear land you would realize my argument. Even after adjusting for current harvest and wood value of coconut trees, there is a premium on coconut estate. The concept is much more clear if you think of a tea estate.

In nutshell, share valuation is futuristic, however, futuristic view should be backed by current performance or solid arguments, not just mere speculation like we had during last couple of years.

Last edited by Academic on Tue Jul 19, 2011 7:48 pm; edited 1 time in total

JennyFunny · 14 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:35 pm

JennyFunny

Senior Manager - Equity Analytics

Posts : 452
Equity Stars : 5234
Reputation : 12
Join date : 2011-05-20
Age : 33
Location : Colombo

yea lets try and do a ASI fair value calculation survey..

Academic · 15 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:37 pm

Academic

Senior Manager - Equity Analytics

Posts : 454
Equity Stars : 5428
Reputation : 103
Join date : 2011-01-23

sanjeewa88 wrote:Is there a correct way to calculate the over valued level of ASI?

( I meant something scientific or statistical)

Yes. Estimate values for b, r, ROE for the CSE as a whole. For this you may take average retention ratio in CSE listed companies form their annual/quarterly reports as b. For r you may take TB rate plus a spread. Also calculate average ROE from annual/quarterly reports. Substitute these inputs into the equations in the above post and get the value for P/E ratios.

If corresponding P/Es in the CSE are greater than calculated value market is overvalued and if smaller CSE is undervalued.

Hope this may help you.

JennyFunny · 16 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:46 pm

JennyFunny

Senior Manager - Equity Analytics

Posts : 452
Equity Stars : 5234
Reputation : 12
Join date : 2011-05-20
Age : 33
Location : Colombo

@ Academic..great piece of info..

mono · 17 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:05 pm

mono

Vice President - Equity Analytics

Posts : 1167
Equity Stars : 6281
Reputation : 93
Join date : 2011-01-21
Age : 102

academic i don't buy the overvalued argument one bit. I can name a number of shares that are trading 20-30% below fair-value which keep coming down. If the market is fundementally overvalued the first thing that's going to happen is investors moving money from overvalued shares to undervalued shares. But we're seeing selling across the the board shares which are both over & undervalued. I say credit crunch + IPO & right issues.

Academic · 18 Comparing Current and Justified ASI Tue Jul 19, 2011 8:07 pm

Academic

Senior Manager - Equity Analytics

Posts : 454
Equity Stars : 5428
Reputation : 103
Join date : 2011-01-23

Note I made a correction to equations in the previous post.

Further, if you want to see whether ASI is overvalued follow following steps.

1. Get summation of total earnings in all listed companies for the past year.

2. Substitute into E of trailing P/E equation.

3. Take E to right hand side.

4. The value for P you get now is the justified value for market capitalization.

5. Divide it by base market capitalization. This is the justified value for ASI. ( see how to calculate base market capitalization here http://forum.srilankaequity.com/t6328-how-is-asi-is-calculated#42969 )

6. Compare justified ASI with current ASI and take your decision.

Academic · 19 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:18 pm

Academic

Senior Manager - Equity Analytics

Posts : 454
Equity Stars : 5428
Reputation : 103
Join date : 2011-01-23

mono wrote:academic i don't buy the overvalued argument one bit. I can name a number of shares that are trading 20-30% below fair-value which keep coming down. If the market is fundementally overvalued the first thing that's going to happen is investors moving money from overvalued shares to undervalued shares. But we're seeing selling across the the board shares which are both over & undervalued. I say credit crunch + IPO & right issues.

Yes. You know during last couple of years almost all shares went up without any concern for fundamentals. This loose connection between fundamentals and share prices would disappear as new market participants and the market mature. But surly not overnight! Also among others what you mentioned, sentiments too play a role that may correct eventually, IMHO

ashlee · 20 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:23 pm

ashlee

Manager - Equity Analytics

Posts : 195
Equity Stars : 5082
Reputation : 14
Join date : 2011-01-31

Well I should thank both Academic and Mono for enriching the forum.. There is always something new to learn from your discussions.. I have been in the market for 5 years but my knowledge about these technicals is below average.. This is really good stuff for people like us and the newbies.. Good luck..

RockStock · 21 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:24 pm

RockStock

Manager - Equity Analytics

Posts : 223
Equity Stars : 5115
Reputation : 37
Join date : 2011-01-27

Markets are always intelligent, (not always the investors) In SL as well as globally. When they are over valued then follows the corrections automatically. some times they get over corrected in the same way they have got over heated. Just like a movement of a pendulous. My experience in markets is around 10 years, and I have seen plenty of such pendular movements.
if one can remember the longest bear period from 2007-2009, we know many people/companies who invested in those periods(where others were runing away) earned millions. JKH was below 60 those days with very low P/E.

History repeats and CSE heading another bottom of a sinuous wave and some day will reach the peak as well.

If acadamic was talking only about overvalued stocks like CLND,LOFC,GREG and many hotel stocks etc , then I can agree 100 %. but as mono mentioned there are many undervalued quality stocks with low p/e ratio even you disregard the earnings from non-operating income. My opinion is, at this stage we can't use the blanket statement "CSE is heavily overvalued" which I believe is misleading. we can find plenty of good and great opportunities at CSE

Rstock · 22 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:26 pm

Rstock

Senior Equity Analytic

Posts : 51
Equity Stars : 4827
Reputation : 3
Join date : 2011-04-27

It has to go up after elections, I think. Investor confidence should be the key.

Academic · 23 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:36 pm

Academic

Senior Manager - Equity Analytics

Posts : 454
Equity Stars : 5428
Reputation : 103
Join date : 2011-01-23

RockStock wrote:Markets are always intelligent, (not always the investors) In SL as well as globally. When they are over valued then follows the corrections automatically. some times they get over corrected in the same way they have got over heated. Just like a movement of a pendulous. My experience in markets is around 10 years, and I have seen plenty of such pendular movements.
if one can remember the longest bear period from 2007-2009, we know many people/companies who invested in those periods(where others were runing away) earned millions. JKH was below 60 those days with very low P/E.

History repeats and CSE heading another bottom of a sinuous wave and some day will reach the peak as well.

If acadamic was talking only about overvalued stocks like CLND,LOFC,GREG and many hotel stocks etc , then I can agree 100 %. but as mono mentioned there are many undervalued quality stocks with low p/e ratio even you disregard the earnings from non-operating income. My opinion is, at this stage we can't use the blanket statement "CSE is heavily overvalued" which I believe is misleading. we can find plenty of good and great opportunities at CSE

Who says gems are not there in SL (except Jafna which is a limestone formation). When I say "whole" it is on average. Just calculate and see what is the on average situation. If market is overvalued as a whole, it should go down as a whole. Simple as it is.

Last edited by Academic on Tue Jul 19, 2011 8:54 pm; edited 1 time in total (Reason for editing : Added two sentences.)

gann · 24 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 9:27 pm

gann

Senior Manager - Equity Analytics

Posts : 425
Equity Stars : 5468
Reputation : 86
Join date : 2011-01-27

ASI will stop dropping when you stop selling. simple as that. lol!

remember here at cse you cant short. onlyway the market could go down is by panic selling.

lokuayya · 25 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 10:21 pm

lokuayya

Senior Manager - Equity Analytics

Posts : 307
Equity Stars : 5080
Reputation : 18
Join date : 2011-07-06

@gann , said it correctly ,Investors are selling ,Selling no stop.
Why they are selling,because the fear of credit clearance,diluting fear(rights and ipo).lack of confidence in the system.

Sponsored content

Name*:
Phone number:
Email address*:
Comments*:
* - required fields	Learn

Name*:
Phone number:
Email address*:
Comments*:
* - required fields	Learn

Latest topics

Is ASI heading to 6500 level???

1 Is ASI heading to 6500 level??? Tue Jul 19, 2011 2:19 pm

mra

2 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 2:27 pm

dinusha.kiwulegedara

3 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:06 pm

Genting

4 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:14 pm

shaankh

5 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:17 pm

Genting

6 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:26 pm

Academic

7 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:44 pm

Genting

8 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 3:59 pm

Light of Hope

9 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 4:18 pm

wiki

10 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 4:41 pm

duke

11 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 5:50 pm

UKboy

12 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:17 pm

sanjeewa88

13 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:24 pm

Academic

14 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:35 pm

JennyFunny

15 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:37 pm

Academic

16 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 7:46 pm

JennyFunny

17 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:05 pm

mono

18 Comparing Current and Justified ASI Tue Jul 19, 2011 8:07 pm

Academic

19 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:18 pm

Academic

20 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:23 pm

ashlee

21 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:24 pm

RockStock

22 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:26 pm

Rstock

23 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 8:36 pm

Academic

24 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 9:27 pm

gann

25 Re: Is ASI heading to 6500 level??? Tue Jul 19, 2011 10:21 pm

lokuayya

26 Re: Is ASI heading to 6500 level???

Sponsored content

New topics