Monday, 22 April 2013
LSL Market Review 22nd Apr 2013
Interest on blue-chips helped shore up most of the losses caused by profit taking on small and mid-capped counters. Commercial Bank continued to witness private deals as foreign appetite seems to be focused on banking counters. Retail investors once again proved its thirst for speculation on Colombo Land & Development.
ASI lost 9.82 points (0.17%) to close at 5,872.43 and the S&P SL20 index gained 2.26 points (0.07%) to close 3,338.38. Turnover was Rs. 885.3Mn.
Top contributors to turnover were Commercial Bank with Rs. 374.8Mn, Colombo Land & Development with Rs. 51.1Mn and Browns with Rs. 35.0. Most active counters for the day were HVA Foods, Colombo Land & Development and Citrus Leisure warrant 19.
Notable gainers for the day were Ceylon leather Products warrant 13 up by 23.5% to close at Rs. 4.20, Citrus Kalpitiya up by 16.7% to close at Rs. 7.70 and Citrus Waskaduwa up by 13.6% to close at Rs. 7.50. Notable losers for the day were Amana Takaful down by 6.3% to close at Rs. 1.50, Lanka Milk Foods down by 5.1% to close at Rs.106.20 and Namunukula Plantations down by 3.6% to close at Rs. 81.00.
Cash map for today was 52.42%. Foreign participation was 24.7% of total market turnover whilst net foreign buying was Rs. 390.7Mn.
Sunday, 21 April 2013
Investment Portfolio Management and Portfolio Theory
Portfolio theory is an investment approach developed by University of Chicago economist Harry M. Markowitz (1927 - ), who won a Nobel Prize in economics in 1990.
Portfolio theory allows investors to estimate both the expected risks and returns, as measured statistically, for their investment portfolios.
Markowitz described how to combine assets into efficiently diversified portfolios. It was his position that a portfolio's risk could be reduced and the expected rate of return could be improved if investments having dissimilar price movements were combined.
In other words, Markowitz explained how to best assemble a diversified portfolio and proved that such a portfolio would likely do well.
There are two types of Portfolio Strategies:
A. Passive Portfolio Strategy:
A strategy that involves minimal expectational input, and instead relies on diversification to match the performance of some market index.
A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities.
B. Active Portfolio Strategy:
A strategy that uses available information and forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly.
Moreover, there are three more types of Portfolios:
1. The Patient Portfolio:
This type invests in well-known stocks. Most pay dividends and are candidates to buy and hold for long periods ...
Perhaps forever!
The vast majority of the stocks in this portfolio represent classic growth companies, those that can be expected to deliver higher earnings on a regular basis regardless of economic conditions.
2. The Aggressive Portfolio:
This portfolio invests in "expensive stocks" (in terms of such measurements as price-earnings ratios) that offer big rewards but also carry big risks.
This portfolio "collects" stocks of rapidly growing companies of all sizes, that over the next few years are expected to deliver rapid annual earnings growth.
Because many of these stocks are on the less-established side, this portfolio is the likeliest to experience big turnovers over time, as winners and losers become apparent.
3. The Conservative Portfolio:
They choose stocks with an eye on yield, as well as earnings growth and a steady dividend history.
Whichever strategy or type you will use, managing successful portfolios are a bit like cultivating gardens!
Portfolio theory allows investors to estimate both the expected risks and returns, as measured statistically, for their investment portfolios.
Markowitz described how to combine assets into efficiently diversified portfolios. It was his position that a portfolio's risk could be reduced and the expected rate of return could be improved if investments having dissimilar price movements were combined.
In other words, Markowitz explained how to best assemble a diversified portfolio and proved that such a portfolio would likely do well.
There are two types of Portfolio Strategies:
A. Passive Portfolio Strategy:
A strategy that involves minimal expectational input, and instead relies on diversification to match the performance of some market index.
A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities.
B. Active Portfolio Strategy:
A strategy that uses available information and forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly.
Moreover, there are three more types of Portfolios:
1. The Patient Portfolio:
This type invests in well-known stocks. Most pay dividends and are candidates to buy and hold for long periods ...
Perhaps forever!
The vast majority of the stocks in this portfolio represent classic growth companies, those that can be expected to deliver higher earnings on a regular basis regardless of economic conditions.
2. The Aggressive Portfolio:
This portfolio invests in "expensive stocks" (in terms of such measurements as price-earnings ratios) that offer big rewards but also carry big risks.
This portfolio "collects" stocks of rapidly growing companies of all sizes, that over the next few years are expected to deliver rapid annual earnings growth.
Because many of these stocks are on the less-established side, this portfolio is the likeliest to experience big turnovers over time, as winners and losers become apparent.
3. The Conservative Portfolio:
They choose stocks with an eye on yield, as well as earnings growth and a steady dividend history.
Whichever strategy or type you will use, managing successful portfolios are a bit like cultivating gardens!
Although the fruits of one's labors do not appear immediately, it is essential to maintain discipline and vigilance while focusing on the eventual harvest.
Discipline and vigilance must always characterize your management style. Stick to a core strategy with a low-risk profile, reflecting a more disciplined, value-oriented and diversified approach.
Discipline and vigilance must always characterize your management style. Stick to a core strategy with a low-risk profile, reflecting a more disciplined, value-oriented and diversified approach.
When markets rise many investors feel comfortable just to be participating. But when markets start gyrating investors start taking more critical looks at their portfolios.
On several occasions, stock prices will experience substantial increases or severe declines.
Amidst these ups and downs, follow your strategy, and as a refuge, concentrate mostly on dividend paying stocks and attractively priced companies that are poised for positive change.
Sweating over your portfolio?
You can beat the indexes and funds!
There are three ways to win:
1. Rational Analysis
2. Crystal Ball and
3. Inside Information!
But ...
You'd better leave the last two methods to fortune tellers and spies!
You should always focus on rational financial analysis with fundamental screening and charting.
On several occasions, stock prices will experience substantial increases or severe declines.
Amidst these ups and downs, follow your strategy, and as a refuge, concentrate mostly on dividend paying stocks and attractively priced companies that are poised for positive change.
Sweating over your portfolio?
You can beat the indexes and funds!
There are three ways to win:
1. Rational Analysis
2. Crystal Ball and
3. Inside Information!
But ...
You'd better leave the last two methods to fortune tellers and spies!
You should always focus on rational financial analysis with fundamental screening and charting.
Source:http://www.greekshares.com
Saturday, 20 April 2013
Quote for the day
“As investors, we also always have to be aware of our innate and very human tendency to be fighting the last war. We forget that Mr. Market is an ingenious sadist, and that he delights in torturing us in different ways.” - Barton Biggs
Colombo Bourse sturdy as global stocks witness volatility....
The activities at the bourse regained strength subsequent to the ending of the holiday season. The ASI gained 42.37 points WoW to close at 5,882.3 points (0.7%), whilst the S&P SL20 Index gained 2.58 points WoW to close at 3,336.12 points (0.1%). Indices benefited mainly on the back of the gains made by Colombo Land and Development Company (18.6% WoW), DFCC Bank (3.2% WoW), Lion Brewery (4.5% WoW), Hatton National Bank (2.1% WoW) and Hemas Holdings (7.5% WoW).
Sri Lankan stocks continued to gather momentum during the week recording healthy turnover and volumes where the bourse gained WoW for the third consecutive week. Institutional and foreign participation was strongly rooted in mid and large cap counters, while retail participation was also at a relatively high level during the week presumably owing to the expectations over the downward trend in the market rates. UNESCAP(United Nation Economic and Social Commission for Asia) revealing its 2013 annual report mentioned that the country’s economic growth is expected to be propelled by easing of its monetary policies and fiscal policies whilst key sectors such as agriculture is also expected to improve after the setback witnessed during 2012 due to adverse climate conditions.
World stocks witnessed a volatile ride during the week in light of IMF’s lowered economic growth projections for world economy, which also predicted that US spending cuts could slow the growth of the country and the phase of recovery in EU. MSCI world index reversed its course during the week to close at a dip of 1.2% WoW, ending the continuous rally as the outlook for growth in the global economy waned.
Furthermore, the week marked the earnings season of US companies. As per the data published by the Bloomberg 74% of the 90 companies in the S&P 500 have exceeded the analyst earnings estimates while 50% exceeded revenue projections as at Friday.
Moving to the Colombo Bourse, the week’s turnover level was largely driven by banking sector stocks, of which Pan Asia Bank played a prominent role due to a colossal crossing witnessed on Tuesday. Counter witnessed C. 15% of its issued quantity that accounted 44mn shares being transferred to Japanese investor Bansei Securities Co.Ltd at LKR21. The deal enhanced the year to date net foreign inflow of the bourse to reach LKR7.9bn as at Friday.
Furthermore, representing the banking sector Commercial Bank of Ceylon, Hatton National Bank and Nations Trust Bank also enticed heavy institutional and retail activity to join the top weekly turnover calibre. Reaffirming this Banking, Finance and Insurance sector index witnessed a WoW gain of 0.9% while the diversified sector index also witnessed a WoW gain of 0.3% mainly due to the investor interest witnessed in John Keells Holdings. On the back of these developments, the week saw an
average turnover of LKR 1bn and an average volume of 45.8mn.
Furthermore, Pan Asia Bank, Free Lanka Capital Holdings, Seylan Merchant Bank, Citrus Leisure and Commercial Bank of Ceylon topped the list in terms of volume traded during the week.
The week saw foreign purchases amounting to LKR 2,365.4 mn whilst foreign sales amounted to LKR 1,033.2mn. Market capitalisation stood at LKR 2,253.2bn, and the YTD performance is 4.2%.
Conclusion:
Interest at the Colombo Bourse sustained after New Year festivities...
Activities at the Colombo bourse picked up with New Year festivities drawing to a close whilst some profit taking in blue chip and Banking & Finance stocks was witnessed towards the latter half of the week. Interest in Banking & Finance sector counters continued during the week and took on a different dimension spurred by the steep drop in gold prices witnessed over the week. This raised concerns amongst investors towards Banking & Finance stocks that have high exposure to gold backed loans (i.e.: Pawning).
However our analysis reveals that the impairment losses incurred on pawning is historically low compared to other categories of loans and hence a drop in value of gold is unlikely to lead to widespread defaults due to the sentimental value placed by borrowers on gold which is used as collateral. Hence we expect this development not to have a significant adverse impact on the asset quality of the domestic banking sector.
However, a persistence of the downward trend in gold prices could affect the future loan growth from this sector which accounts for over 12% of the total loans disbursed by the banking system.
Despite some sell down being witnessed in some blue chip counters, the outlook for the domestic economy appears to be favourable with both the IMF and the UN-ESCAP expecting Sri Lanka’s GDP growth to reach 6.3% and 6.5% in 2013E respectively. Whilst expecting a general slowdown in global economic activity, the IMF expects Sri Lanka to continue to record the fastest growth rate for the South Asian region in 2013E. Further, the Central bank’s decision to keep policy rates stable for the month of April as well its commitment towards lowering market rates would augur well for equity valuations. Reaffirming the above, foreign investor expectations of the Colombo bourse continue to remain broadly positive as indicated by the YTD net foreign inflow of approx. LKR 7.5 bn to date.
Source: Asia Wealth Management Research
Bob Farrell's 10 Market Rules to Remember
Bob Farrell was an acclaimed market strategist at Merrill Lynch from 1967-1992. Bob guided clients through the bull market of the late 1960's, followed by the bear markets of the mid-1970's, then the Great Bull Market which began in 1982.
Most of the good analysts in those days focused on the markets,and individual stocks, rather than trying to make huge macro bets on the economy. Consequently, they tended to have more success over time.
In any event, Mr. Farrell came up with these "Market Rules to Remember", which I believe still have relevance today. I thought they might be useful to post on my site.
1) Markets tend to return to the mean over time.
2) Excesses in one direction will lead to an opposite excess in the other direction.
3) There are no new eras — excesses are never permanent.
4) Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
5) The public buys the most at the top and the least at the bottom.
6) Fear and greed are stronger than long-term resolve.
7) Markets are strongest when they are broad and weakest when they narrow to a handful of blue chip names.
8) Bear markets have three stages — sharp down — reflexive rebound —a drawn-out fundamental downtrend.
9) When all the experts and forecasts agree – something else is going to happen.
10) Bull markets are more fun than bear markets
Most of the good analysts in those days focused on the markets,and individual stocks, rather than trying to make huge macro bets on the economy. Consequently, they tended to have more success over time.
In any event, Mr. Farrell came up with these "Market Rules to Remember", which I believe still have relevance today. I thought they might be useful to post on my site.
1) Markets tend to return to the mean over time.
2) Excesses in one direction will lead to an opposite excess in the other direction.
3) There are no new eras — excesses are never permanent.
4) Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
5) The public buys the most at the top and the least at the bottom.
6) Fear and greed are stronger than long-term resolve.
7) Markets are strongest when they are broad and weakest when they narrow to a handful of blue chip names.
8) Bear markets have three stages — sharp down — reflexive rebound —a drawn-out fundamental downtrend.
9) When all the experts and forecasts agree – something else is going to happen.
10) Bull markets are more fun than bear markets
Friday, 19 April 2013
LSL Weekly Market Review 19 Apr 2013
Retail participation was up and running soon after the festivities on Tuesday which was promising for all stakeholders. Block trades on banking counters helped to prop up turnover levels with PABC seeing a 15% stake being split amongst 6 trades. Banking counters were also seen regaining momentum whilst Lion Brewery touched an all-time high price of Rs. 340.00.
ASI gained 12.80 points (0.22%) to close at 5,852.68 and the S&P SL20 index gained 18.03 points (0.54%) to close at 3,351.57. Turnover was Rs. 1,580.0
On Wednesday, sentiment remained strong buoyed by interest on blue-chips. Foreign accumulation of blue-chips has seen local investors also building their appetite for equities. Banking counters and John Keells Holdings continued to be the dominant performers in the market. Retail activity is rallying around the surge in foreign buying. However, investors are cautioned to stick to value investing to minimize unwarranted speculation.
ASI gained 15.85 points (0.27%) to close at 5,868.53 and the S&P SL20 index gained 10.42 points (0.31%) to close at 3,361.99. Turnover was Rs. 611.5Mn.
On Thursday, retail activity surged ahead of institutional interest on stocks. Low-capped and mid-capped counters saw continued retail speculation. Blue-chips retreated on mainly losses on banking and financials. Lower yields on treasuries seemed to have spurred retail activity with the CBSL expecting lower rates going forward.
ASI gained 23.30 points (0.40%) to close at 5,891.83 and the S&P SL20 index lost 10.84 points (0.32%) to close at 3,351.15. Turnover was Rs. 800.9Mn.
Indices closed lower mainly on the losses on blue-chips on Friday. Most banking counters lost marginally on thin volumes. Ceylon Tobacco Company surged ahead with a dividend announcement around the corner. Retail activity which was rallying around foreign was seen taking an off-day. Colombo Land in particular received plenty of retail activity today. Negotiated deals on Commercial Bank took the lion’s share of the turnover.
ASI dipped 9.58 points (0.16%) to close at 5,882.25 and the S&P SL20 index lost 15.03 points (0.45%) to close at 3,336.12. Turnover was Rs. 1,033.9Mn.
Top contributors to turnover were Commercial Bank with Rs. 520.4, Nations Trust Bank with Rs. 54.9Mn and Colombo Land & Development with Rs. 53.3Mn. Most active counters for the day were Colombo Land & Development, Citrus Leisure warrant 19 and HVA Foods.
Notable gainers for the day were Colombo Land & Development up by 8.9% to close at Rs. 41.50, Kelsey Homes up by 8.8% to close at Rs. 16.00 and Beruwala Walk Inn up by 8.7% to close at Rs. 2.50. Notable losers for the day were SMB Leasing down by 10.0% to close at Rs. 0.90, Amana Takaful down by 5.9% to close at Rs. 1.60 and Ceylon Leather Products down by 5.6% to close at Rs. 3.40.
Cash map for today was 38.99%. Foreign participation was 34.7% of total market turnover with net foreign buying at Rs. 491.0Mn.
Subscribe to:
Posts (Atom)