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a)As many people don't give feedback to a post that takes long time to research and present , I will try to keep this short as possible , though I can write much more.
b) In my last post I tried to explain why our market is like this. But not many people understood the key points raised.
https://forum.lankaninvestor.com/t10722-should-cse-be-like-this-whose-fault-is-it
So whose fault is it? Are we digging our own pit?
Are you to blame too ? You decide !
c) So in this post will tell straight out 2 main reasons why CSE is like this when it shouldn't.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Fed Rate Hikes , Rs Devaluation and effect of CSE.
I see no one at Government or media discusses the real reason Foreigners withdraw.
Let me just say I have significant exposure to the USA system. So with what I know
let me explain exactly what is happening.
Fed Rate hikes is not the reason for any Foreign withdrawals.
Fed Reserves is the Central Bank of US. The Fed rate hikes only effect the banking system and US economy.
It DOES NOT effect a normal American or a Fund much ( except when taking loans).
Do you know STILL how ridiculous US Bank Savings rate are ?
It under 0.10% yearly ! YES 0.10%. Even FD or Mutual fund are so much lower
than SL. No ordinary/average person can live on Bank Saving in US.
So do you think , when interest rates are 10% in Sri Lanka anyone would withdraw funds to invest in US to get much lower gain?
No. So the issue is elsewhere
~~~~~~~~~~~~~~~~~~~~~~~~~~
There are 2 reasons foreigner withdraw [/b]
1) Rs Devaluation is #1 reason .
Let take an example.
Nick from USA buys 100 shares of JKH at market price of Rs 150.
At that time $ is Rs 150
As foreigner he has to convert US$ to Rs to invest in CSE.
Total cost Rs 15000. US $100.
Lets say JKH drops to Rs 130.
Now Nick ( just like us ) has lost Rs 20 - 14% over JKH.
The issue gets much greater and becomes a double blow when Rs Devalues.
Example .
Say $ is Rs 170 now.
JKH is Rs 130 now.
Do you see it ? Nick has lost 14% from JKH drop from Rs 150 to 130.
He also loses another 14% ( since Rs devalued from Rs 150 to 170).
To him the total loss is nearly 30%. worse than us.
That why in a falling Currency Market foreigners withdraw. It NOT due to FED Rate hikes.
2) Reason #2 : Mess is due to CSE also going down and not up.
a)
Vietnam market is up about 25% in 12 months.
Their Market PE is 18+. Btw our CSE is 9+
Vietnam Government is only expecting a planned 2% currency devaluation this year.
This helps further.
So how much did Foreigners withdraw from Vietnam this year?
NONE. Instead there is INFLOW of $1.2 Billion ( to be checked)
CSE out flow is about $36 Million so far. ( peanuts btw the way)
That $1.2 Billion inflow to Vietnam vs $36 Million outflow to Sri Lanka.
See the point ?
b) Lets take India.
Indian currency depreciation is far worse than SL Rs.
So according to what I explained before did foreigner withdraw more money from India?
Yes over $350 Million this year ( 10 times more than SL).
But here comes the real story why CSE is like this .
See what I said about India in the post
https://forum.lankaninvestor.com/t10722-should-cse-be-like-this-whose-fault-is-it
Indian market is still up over 11% for the year?
Market PE is around 20.
Sri Lanka is PE of 9+.
Yet Indian Market is up . How ?
Indian Local investor are filling in the shoes of the foreigners and buying even in relatively overvalued market.
At CSE?
c) Also added to $ devaluation and CSE rotting , US stock markets are booming.
So foreigners naturally would invest in US and other markets.
3 Strikes to Sri Lanka
i) Rs devaluation with no plan
ii) CSE being let to rot even with one of the lowest market PEs in the region
( directly compare with India as explained) .
iii) No incentives , lack of policies and bottleneck for companies to perform better .
Even when you find a company like CDB for example which is trading at PE of less than 3 and BV of 0.6 no one cares to make prices meet fundamentals ( well I saw directors atleast buying nowadays). In India ?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~``
In my last post I said EPF and other Local funds are needed to step in. Maybe they read this forum. Since then CB governor has indicated EPF will start buying soon.
Sooner the better before it get worse Mr Coomaraswamy. It already too late
QUESTION FOR YOU"ll
1) Do you think the $35 million or so, the foreign outflow so far, is big?
Are there Billionaires in SL who has more money than that themselves!
2) Do we always need foreigners to make CSE active and give us market direction ?
3) Is there a way CSE can be rescued ( to depict it fundamental worth) ?
Finally I reiterate what I said in my last post
How to reverse this negative market?
1) Stop freaking selling specially your Valuable shares at ridiculous prices.( some are at 5 year low)
You will get poorer due to no patience and some cunning person will get richer thank to you.
2) Stop spreading unnecessary market negativity for your selfish gains.
Political uncertainty my foot. If so why has LFIN being not effected and declared Rs 11 dividend
and their assets are ever improving. I saw even GREG declared the highest dividend of their life.
Why has COMB, NDB, SAMP and many other companies performing so well?
3) Let market positivity build based on FACTS. Not Stupid FEARS and negativity.
How about letting these foreigner do what they are doing in
Vietnam , India and Bangladesh ( somehow those market are up 20-40% with 2 years )
4) Don't Buy on Credit ( I have made that mistake)
5) If the SL Government cares at all about CSE, let the state Funds starts buying into value shares.
This is the time for EPF to make killing if they buy at all time low prices and hold for longer term.
(Not like in 2010 when they buy highest and waste public money!)
6) Institutions, Funds and Banks/Companies needs to start buying Value shares step by step.
[/color]
a)As many people don't give feedback to a post that takes long time to research and present , I will try to keep this short as possible , though I can write much more.
b) In my last post I tried to explain why our market is like this. But not many people understood the key points raised.
https://forum.lankaninvestor.com/t10722-should-cse-be-like-this-whose-fault-is-it
So whose fault is it? Are we digging our own pit?
Are you to blame too ? You decide !
c) So in this post will tell straight out 2 main reasons why CSE is like this when it shouldn't.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Fed Rate Hikes , Rs Devaluation and effect of CSE.
I see no one at Government or media discusses the real reason Foreigners withdraw.
Let me just say I have significant exposure to the USA system. So with what I know
let me explain exactly what is happening.
Fed Rate hikes is not the reason for any Foreign withdrawals.
Fed Reserves is the Central Bank of US. The Fed rate hikes only effect the banking system and US economy.
It DOES NOT effect a normal American or a Fund much ( except when taking loans).
Do you know STILL how ridiculous US Bank Savings rate are ?
It under 0.10% yearly ! YES 0.10%. Even FD or Mutual fund are so much lower
than SL. No ordinary/average person can live on Bank Saving in US.
So do you think , when interest rates are 10% in Sri Lanka anyone would withdraw funds to invest in US to get much lower gain?
No. So the issue is elsewhere
~~~~~~~~~~~~~~~~~~~~~~~~~~
There are 2 reasons foreigner withdraw [/b]
1) Rs Devaluation is #1 reason .
Let take an example.
Nick from USA buys 100 shares of JKH at market price of Rs 150.
At that time $ is Rs 150
As foreigner he has to convert US$ to Rs to invest in CSE.
Total cost Rs 15000. US $100.
Lets say JKH drops to Rs 130.
Now Nick ( just like us ) has lost Rs 20 - 14% over JKH.
The issue gets much greater and becomes a double blow when Rs Devalues.
Example .
Say $ is Rs 170 now.
JKH is Rs 130 now.
Do you see it ? Nick has lost 14% from JKH drop from Rs 150 to 130.
He also loses another 14% ( since Rs devalued from Rs 150 to 170).
To him the total loss is nearly 30%. worse than us.
That why in a falling Currency Market foreigners withdraw. It NOT due to FED Rate hikes.
2) Reason #2 : Mess is due to CSE also going down and not up.
a)
Vietnam market is up about 25% in 12 months.
Their Market PE is 18+. Btw our CSE is 9+
Vietnam Government is only expecting a planned 2% currency devaluation this year.
This helps further.
So how much did Foreigners withdraw from Vietnam this year?
NONE. Instead there is INFLOW of $1.2 Billion ( to be checked)
CSE out flow is about $36 Million so far. ( peanuts btw the way)
That $1.2 Billion inflow to Vietnam vs $36 Million outflow to Sri Lanka.
See the point ?
b) Lets take India.
Indian currency depreciation is far worse than SL Rs.
So according to what I explained before did foreigner withdraw more money from India?
Yes over $350 Million this year ( 10 times more than SL).
But here comes the real story why CSE is like this .
See what I said about India in the post
https://forum.lankaninvestor.com/t10722-should-cse-be-like-this-whose-fault-is-it
Indian market is still up over 11% for the year?
Market PE is around 20.
Sri Lanka is PE of 9+.
Yet Indian Market is up . How ?
Indian Local investor are filling in the shoes of the foreigners and buying even in relatively overvalued market.
At CSE?
c) Also added to $ devaluation and CSE rotting , US stock markets are booming.
So foreigners naturally would invest in US and other markets.
3 Strikes to Sri Lanka
i) Rs devaluation with no plan
ii) CSE being let to rot even with one of the lowest market PEs in the region
( directly compare with India as explained) .
iii) No incentives , lack of policies and bottleneck for companies to perform better .
Even when you find a company like CDB for example which is trading at PE of less than 3 and BV of 0.6 no one cares to make prices meet fundamentals ( well I saw directors atleast buying nowadays). In India ?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~``
In my last post I said EPF and other Local funds are needed to step in. Maybe they read this forum. Since then CB governor has indicated EPF will start buying soon.
Sooner the better before it get worse Mr Coomaraswamy. It already too late
QUESTION FOR YOU"ll
1) Do you think the $35 million or so, the foreign outflow so far, is big?
Are there Billionaires in SL who has more money than that themselves!
2) Do we always need foreigners to make CSE active and give us market direction ?
3) Is there a way CSE can be rescued ( to depict it fundamental worth) ?
Finally I reiterate what I said in my last post
How to reverse this negative market?
1) Stop freaking selling specially your Valuable shares at ridiculous prices.( some are at 5 year low)
You will get poorer due to no patience and some cunning person will get richer thank to you.
2) Stop spreading unnecessary market negativity for your selfish gains.
Political uncertainty my foot. If so why has LFIN being not effected and declared Rs 11 dividend
and their assets are ever improving. I saw even GREG declared the highest dividend of their life.
Why has COMB, NDB, SAMP and many other companies performing so well?
3) Let market positivity build based on FACTS. Not Stupid FEARS and negativity.
How about letting these foreigner do what they are doing in
Vietnam , India and Bangladesh ( somehow those market are up 20-40% with 2 years )
4) Don't Buy on Credit ( I have made that mistake)
5) If the SL Government cares at all about CSE, let the state Funds starts buying into value shares.
This is the time for EPF to make killing if they buy at all time low prices and hold for longer term.
(Not like in 2010 when they buy highest and waste public money!)
6) Institutions, Funds and Banks/Companies needs to start buying Value shares step by step.
[/color]
Last edited by slstock on Thu Oct 04, 2018 11:54 pm; edited 10 times in total
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