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Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

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Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by slstock on Tue Oct 02, 2018 12:55 pm

Pre notes



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.

http://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
http://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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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by slstock on Tue Oct 02, 2018 1:04 pm

18 people suddenly appeared from nowhere in the forum as soon as this was posted !  
Hope atleast this time some people will make some comments/ feedback to keep this a active discussion. More the people aware of what is wrong with CSE more chances to make it right.


Last edited by slstock on Tue Oct 02, 2018 1:15 pm; edited 1 time in total

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by stockback on Tue Oct 02, 2018 1:14 pm

I think Highly effect to hitan hutan policy...

hitan hutan Policy is highly effect to FDI. then Rs devaluation process speed up.


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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by mymoney on Tue Oct 02, 2018 1:19 pm

Thanks SLSTOCK, I read and understood, But Personally I'm in very upset mind because my fundamental shares going down day by day..., and my huge loss is accumulating day by day... , I'm not even seeing my PF...

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by slstock on Tue Oct 02, 2018 1:28 pm

mymoney wrote:Thanks SLSTOCK, I read and understood, But Personally I'm in very upset mind because my fundamental shares going down day by day..., and my huge loss is accumulating day by day... , I'm not even seeing my PF...

I understand as all of us genuine investors are very upset and even furious.

Well as explained in the post  why do you think such is happening?

In India with market PE of around 20 and Rs devaluation worser than us , market is  still up.

At CSE? Why are ever performing companies with fundamental trading at PE of 3-4?

Is it a Global issue ?
Is it the government fault only?
Or is there another issue?

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by mymoney on Tue Oct 02, 2018 1:43 pm

slstock wrote:
mymoney wrote:Thanks SLSTOCK, I read and understood, But Personally I'm in very upset mind because my fundamental shares going down day by day..., and my huge loss is accumulating day by day... , I'm not even seeing my PF...

I understand as all of us genuine investors are very upset and even furious.

Well as explained in the post  why do you think such is happening?

In India with market PE of around 20 and Rs devaluation worser than us , market is  still up.

At CSE? Why are ever performing companies with fundamental trading at PE of 3-4?

Is it a  Global issue ?
Is it the government fault only?
Or is there another issue?

I think some initial push from government funds must need to wake up the CSE..., otherwise can small investors (like us) alone do this ? Why this government not care of CSE at all ?

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by slstock on Tue Oct 02, 2018 1:59 pm

stockback wrote:I think Highly effect to hitan hutan policy...

hitan hutan Policy is highly effect to FDI. then Rs devaluation process speed up.



Is it just the government policy ( or no policy) ?  


In India with market PE more than double than CSE  and Rs devaluation worser
than us , market is  still up.

At CSE? Why are ever performing companies with fundamental trading at PE of 3-4?

Is it the government fault only?
Is it a Global issue ?
Or is there another issue?


More importantly is there a solution to this mess at CSE ?


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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by The Alchemist on Tue Oct 02, 2018 2:19 pm

Market is down mainly due to this pathetic administration. I wrote about it here on 22nd nov 2014 on a thread if you can locate and said under Ranil, the Market will suffer. as soon as they came in, the attacked the stock market in parliament (JKH), funny budgets and supergain taxes, bond scam, china policy etc were a disaster. they had and have absolutely no plan. they ran around to Davos, Conferences, invited Harvard chaps, FDA talk but zero results. Exports and FDI poor show. Now Ranil is blaming Trump, Fed, Trade Wars, Meetomulla garbage collapse, Drought & Floods and anything under the sun.  
Ranil and his lackeys are useless. all there economic policies are backfiring. the 10,000 wage increase was absurd. we simply could not afford it. Then the car imports ? now case of closing stable door after horses bolted. 25,000 cars were imported in august totally usd 900 mill dollars.
Our twin deficit problem is well known even when they came in. budget deficit, and current account deficit.
and now a oil shock may cost us usd 2 bill more ?

All this is perceived to impact listed companies somewhat due to inflation, taxes, finance cost, NPL, bad debts etc. left to be seen.

sorry for the rambling thoughts, but to summarize, our present market situation is primarily due to the incompetence, initiative and policy of the current regime, compounded by externalities like weather which affected our GDP in last 2-3 years, and now oil, trump, fed, US economy, trade wars & sanctions which we have little control over but planned for better as they were fairly well known earlier.    

but stock prices are cheap on a historical basis and state institutions (may not neccesary be EPF :-) will enter sooner rather than later.

Stocks Prices are in my humble opinion bottoming out fast.
But stock picking is key. you hv to do a impact assesment on COGS, Sales, Taxes, Dollar, inflation etc. some sectors may feel the pain more than others.  

If you have em, smoke em, but not on credit and tell me what to buy at these prices.

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by Seyon on Tue Oct 02, 2018 3:33 pm

Thanks slstock for timely post to encourage.

I am on buy side these days. this is a good opportunity.

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by yellow knife on Tue Oct 02, 2018 4:17 pm

Its a good sign to see much participation taking place with this thread.

Now I don't think that anyone has valid reasons to not to agree with the points SLS clarifies on Foreign Sales. Its not the Fed Rate hike but the LKR devaluation that promotes exodus of foreigners from CSE.

Wether its foreigners or locals we often driven by Herd Mentality. We just do what others do. When someone else is selling I am also selling. When someone else is buying I am also buying.

Now the problem is Why Not You Buy when fundamentally there are many gems. When its hard to identify Gems, everyone is analyisng to find hidden Gems. Now Gems are obvious. But no one is buying.

Why?

Because EPF is not buying, because foreigners are selling, because HNVIs are not active and we have enough reasons.

these are the best times to buy.

People value shares from two perspective.

1. Based on Fundamentals. (Ref. CDB ratios as explained by SLS above)

2. Based on " What I think the value others are valuing".

Since the second type of people are more , it gives ample of opportunities for type 1 of above.

Thanks SLS for this timely post.

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by slstock on Tue Oct 02, 2018 4:18 pm

The Alchemist wrote:Market is down mainly due to this pathetic administration. I wrote about it here on 22nd nov 2014 on a thread if you can locate and said under Ranil, the Market will suffer. as soon as they came in, the attacked the stock market in parliament (JKH), funny budgets and supergain taxes, bond scam, china policy etc were a disaster. they had and have absolutely no plan. they ran around to Davos, Conferences, invited Harvard chaps, FDA talk but zero results. Exports and FDI poor show. Now Ranil is blaming Trump, Fed, Trade Wars, Meetomulla garbage collapse, Drought & Floods and anything under the sun.  
Ranil and his lackeys are useless. all there economic policies are backfiring. the 10,000 wage increase was absurd. we simply could not afford it. Then the car imports ? now case of closing stable door after horses bolted. 25,000 cars were imported in august totally usd 900 mill dollars.
Our twin deficit problem is well known even when they came in. budget deficit, and current account deficit.
and now a oil shock may cost us usd 2 bill more ?

All this is perceived to impact listed companies somewhat due to inflation, taxes, finance cost, NPL, bad debts etc. left to be seen.

sorry for the rambling thoughts, but to summarize, our present market situation is primarily due to the incompetence, initiative and policy of the current regime, compounded by externalities like weather which affected our GDP in last 2-3 years, and now oil, trump, fed, US economy, trade wars & sanctions which we have little control over but planned for better as they were fairly well known earlier.    

but stock prices are cheap on a historical basis and state institutions (may not neccesary be EPF :-) will enter sooner rather than later.

Stocks Prices are in my humble opinion bottoming out fast.
But stock picking is key. you hv to do a impact assesment on COGS, Sales, Taxes, Dollar, inflation etc. some sectors may feel the pain more than others.  

If you have em, smoke em, but not on credit and tell me what to buy at these prices.

There is no question this Government ( more like Ranil) economic management is not good and there is no plan .

However we also need to agree that  the foundation for this debt mess was create by  previous government.

Looking at the below video is evident the previous President did not know too much about economic management either ( people around him adviced)


https://www.youtube.com/watch?time_continue=24&v=I1f5I5Leaac


Difference is this government made scams and mistakes for all to see in the open.
The previous government did it hiddenly. ( except for certain rogues and politicos who displayed their stolen wealth in the open)


Now the main question is :

Is
a) Government = CSE ?
b) Is CSE like this totally due to Government fault?
c) Who else is responsible?
d) what can be done to fix this ?

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by Ethical Trader on Tue Oct 02, 2018 5:58 pm

Excellent analysis. Thanks you SLS.

You see what many in the government don't see. It's an eye opener to the authorities who suddenly awoke & resorted to archaic practices (import restrictions) discarded by many modern proven economies.

Politicians should listen to the expert opinions at least now, when it comes to serious economic issues of this magnitude.

If they do not, I wonder whether we should force them to seriously consider a constitutional provision (in the new constitution) mandating them to listen to the experts in the future.

Mandating the authorities to consider professionals when key ministers (like Finance) are appointed and introducing minimum educational qualification for MPs are also necessary if we are to tackle the issue in the future.

We should not allow these donkeys to play around any more.
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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by Senarath67 on Tue Oct 02, 2018 7:21 pm

Thank you very much,sls for the time spent on educating.

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by serene on Tue Oct 02, 2018 9:12 pm

Thanks SLS. Very meaningful and timely post which explains the underline reasons for the doom state of CSE currently.
Hope that the people will fully comprehend what you state here and act accordingly for the betterment of all.
I'm also with a quite a loss at the moment but I stop on blaming the system and take full responsibility for my losses as they were my own decisions. This might enable me to fine tune my strategies in times to come.

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by Yin-Yang on Tue Oct 02, 2018 9:15 pm

Nah!
Devaluation of a currency would not always bring the markets down.

it depends on what type of economy you have.

For example; if the market is in an export oriented economy, devaluation of the currency will boost the stock market. Say, China is going to devalue Yuan by 10%; it will make the stock market move up.

On the other hand, sometimes, making the currency strong might negatively affect the stock market. For example, if Sri Lankan FED decided to increase deposit rate to about 25%, it will strengthen the rupee but make the market collapse.

++++++++++++

Another aspect you would observe in market related forums is;
You would see many negative and panic comments when the market goes down; and many thrilling and euphoric comments when the markets rallying up.

Why?

Because;

people tend to come to forums when they have already bought their shares. Market moving up would make them happy.

On the other hand, those who have not yet invested in the market would hardly post a comment.
Market moving down makes them happy but they would not bother commenting in forums.

++++

Is there anyone here who has bot bought a single share yet!!!!!!!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!????????????????????

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by nihal123 on Wed Oct 03, 2018 12:18 am

ඔබගේ සමබර විශ්ලේෂනය ස්තුතියි slstock ,

ඇත්තටම මටනම් මේ මාර්කට් එකෙන් ඉවත් වෙන්න තරම්හිතුනා. මගේ සමහර යාලුවන්ට, තැරව්කාර ආයතනයන් ගෙන්ම මාර්කට් එකෙන් ඉවත් වෙන්න කියලා තිබුනා. සමහරැ 100%,50% සහ 25% විකුනලා තිබුනා.

"ළිඳට වැටුන එකා ළිං කටින්ම ගොඩඑන්න ඕනෑ" කියමන මතක්වෙලා අල්ලගෙන ඉන්නවා.

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by Yin-Yang on Wed Oct 03, 2018 9:03 am

nihal123 wrote:ඔබගේ සමබර විශ්ලේෂනය ස්තුතියි slstock ,

ඇත්තටම මටනම් මේ මාර්කට් එකෙන් ඉවත් වෙන්න තරම්හිතුනා. මගේ සමහර යාලුවන්ට, තැරව්කාර ආයතනයන් ගෙන්ම මාර්කට් එකෙන් ඉවත් වෙන්න කියලා තිබුනා. සමහරැ 100%,50% සහ 25%  විකුනලා තිබුනා.

"ළිඳට වැටුන එකා ළිං කටින්ම ගොඩඑන්න ඕනෑ" කියමන මතක්වෙලා අල්ලගෙන ඉන්නවා.


What is this Nihal bro!
You're advising on how to invest; but you need to practice that also man.

You should invest only your risk capital in risky investment.
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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by slstock on Wed Oct 03, 2018 10:30 am

nihal123 wrote:ඔබගේ සමබර විශ්ලේෂනය ස්තුතියි slstock ,

ඇත්තටම මටනම් මේ මාර්කට් එකෙන් ඉවත් වෙන්න තරම්හිතුනා. මගේ සමහර යාලුවන්ට, තැරව්කාර ආයතනයන් ගෙන්ම මාර්කට් එකෙන් ඉවත් වෙන්න කියලා තිබුනා. සමහරැ 100%,50% සහ 25%  විකුනලා තිබුනා.

"ළිඳට වැටුන එකා ළිං කටින්ම ගොඩඑන්න ඕනෑ" කියමන මතක්වෙලා අල්ලගෙන ඉන්නවා.



Nihal, it is no shame to feel that way . We all feel such.


Just to think instead of  temporary loses at CSE putting that money in an FD would have easily brought us 12%  make things even worse.

But any Investor, if to be a true  Investor, has to know and take the risk of losing in the short term.  Like in life things go beyond our control at times.  

Dhammika Perera bought HAYL for Rs 380 or something 5 or more year ago.
Now HAYL is Rs 200. But that company has grown and even now owns Singer.  


"ළිඳට වැටුන එකා ළිං කටින්ම ගොඩඑන්න ඕනෑ" කියමන මතක්වෙලා අල්ලගෙන ඉන්නවා.

Sometime  true value of something  ( or even a person ) is ignored by many in life even if it is known.   But there will be a time the true value will/needs to be realized , and then the same people who did not value it will chase it to overvalue it.

Also if someone sells a fundamental share in disgust , maybe the very next day  what happened to SHL or CSEC can happen !  


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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by yellow knife on Wed Oct 03, 2018 12:19 pm

Is there anyone here who has bot bought a single share yet!!!!!!!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!????????????????????


***************************************

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by කිත්සිරි ද සිල්වා on Wed Oct 03, 2018 12:23 pm

Yes. Very Happy
yellow knife wrote:
Is there anyone here who has bot bought a single share yet!!!!!!!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!????????????????????


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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by කිත්සිරි ද සිල්වා on Wed Oct 03, 2018 12:28 pm

Why not we fix Dollar at LKR 200/= and keep it for the next five years? bounce
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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by Ethical Trader on Wed Oct 03, 2018 5:34 pm

Thanks SLS.
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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by slstock on Wed Oct 03, 2018 8:04 pm

yellow knife wrote:



***************************************

Is this a male Vulture or Female Vulture ?
What on earth is that thing sticking out of the Vulture.
I hope it is something decent, else this Vulture can be arrested for indecent exposure
patient or not.



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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by slstock on Wed Oct 03, 2018 8:08 pm

serene wrote:Thanks SLS. Very meaningful and timely post which explains the underline reasons for the doom state of CSE currently.
Hope that the people will fully comprehend what you state here and act accordingly for the betterment of all.
I'm also with a quite a loss at the moment but I stop on blaming the system  and take full responsibility for my losses as they were my own decisions. This might enable me to fine tune my strategies in times to come.


1) Am still not sure many comprehend what was tried to be explain.

2)  Well it okay to blame the system a bit as system is at part fault.
But we public are the ones who create the system and letting it exist.
So yes not only you , but we all are to take ultimate  blame.

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Re: Fed Rate hike , Rs Devaluation PART 2 : Should CSE be like this? Whose FAULT is it?

Post by The Alchemist on Wed Oct 03, 2018 8:19 pm

No point playing the blame game. we have all become utterly disillusioned in the past 3 years. best to look forward. what are we in for ? next year or two. what are the best stocks to buy at current prices. or is it a good time to even buy stock ?

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