Colombo Stock Exchange
Colombo stock exchange saw it all time highs after the post conflict of war, but abruptly market was dragged down diminishing most of the investors money. My question is what was the main cause behind this ? are we going to see a further deterioration? and if you can please give me your opinion on when to invest? and why?
Answered By :Sarath Rajapakse After nearly thirty years of stagnation (with the exception of a few spurts here and there) the market started to rise spritedly with the the end of the war in early 2009. This bull run was fuelled not by any economic fundamentals or better than expected company results. The motive force that propelled the market was hope of a prosperous future as a result of a great economic revival which was to follow at the conclusion of the economy crippling war. These expectations were not misplaced since the economy grew by an impressive 8.0% in 2010 followed by a record 8.3% growth in 2011. The economy is expected to grow by over 7.2% in 2012. However this market rise in anticipation of a bright future was not in the interest of some parties. They conspired and acted relentlessly till the market was forced down artificially, destroying financially all who enthusistically invested in the market. Though the conspirators won the first round truth should eventually prevail and the market would soon stage a come back in 2012. In 2009 and 2010 our small market was the world's number two best performing market and it is likely to perform ahead of the rest in the current year with the acceleration in development activities and the opening up of a free port(s) and a financial hub with currency convertibility.
I am neither an advocate of nor a believer in fundamental analysis hence what I can recommend to you is to follow our technical analytical recommendations and buy those with 'BUY' signals in monthly and weekly charts as soon as a 'BUY' signal appears on the daily chart. But if you follow technical analysis never ever fail to sell on the first appearance of a 'SELL' signal on the daily chart of the stock that you have already purchased.
Happy Trading!!!
Reader's Comment(s)
By simpleton 2012-04-18 10:07 AM
Im quite amused by what is written up their specially when this forum is expected to let the the audience approach technically competent people to answer such questions. In my personal opinion (and to add some reality to the comments written above), what i saw in this market was that the lack of liquidity resulted in the stocks being pushed up my high net worths who drove the market multiples to unrealistic levels. This drove away the foreign participants and as a result state owned entities came into fill the void by collecting large quantities. Like the respondent correctly pointed out the "small market" was in fact what resulted in the market being overheated to unrealistic values. Small market = no volumes = easy share manipulation To understand technical analysis and to invest based on such theories is only practical if the market is quite liquid and if the trends persist. For example the basic candle stick chart would show a "filled candle stick' under two circumstances - 1. if a large number of players actually impact the supply-demand forces and ends the day with share closing in green or 2. One high networth actually do pushes the share and still the same result is seen. So the same trigger can occur artificially and under proper trading environments. Similarly if you run a Bollinger band on any of these illiquid stocks, you will still see the same volatility which cannot be justified under fundamental nor technical aspects. We are entering a bear market - as the interest rate goes up the investors who are seeing lower risk-higher returned products (liked FD's) will appear more favorable. So the liquidity is likely to dry up unless we get foreign money coming into the market to replenish what is going out. In an economy where the savings ratio has gone down from 19% to 15% and this gap is expected to be filled by FDI's which are not materializing - i seriously wonder how we can see "buy" signals as this gentleman pointed out. On a final note, i was (un)fortunate to attend one of the forums LBO conducted to which the author attended. Which ended up in being a farce and disrespecting a lot of astute investors as well as other panelists who were contributing constructively to the topic. " what I can recommend to you is to follow our technical analytical recommendations" - please dont use this medium to market your personal agendas. LBO - keep up the good work :)
By Sunil Perera 2012-04-19 9:26 AM
What he said is "... follow our technical analytical recommendations...". What he wanted to say is "let us be your stock broker and earn some commission while you suffer". Sorry LBO, you have started a great service but ruined it by having answers (or rather jokes) like this.
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