Rajesh Sharma
(Number 22 is from Feb 01 and 1 is from March 22 and other in that reverse order.)
1. Market
has started to gallop. In such period, we should off load dead woods and should
change them into milking cows. It is difficult, but by experience and by going
through financial facts and credibility about the companies, some of us could
do the differentiation.
Alert 1: MFIs are too risky and they could be too rewarding. We
should see the size of our neck before swallowing MFIs. Insurance sector is
also risky. We should see the size of the bone before swallowing. And, banking sector is less risky but too lousy not only
for aggressive risk takers but also for rational risk takers sometimes. We all
should diagnose our risk taking capacity, both financial and psychological.
Alert 2: A galloping market
demands self discipline. By mistake if we ride a tiger, too difficult to get
down. Cooling down and taking informed decisions without any pressure of heavy
profit is the need of the hour.
2. Manipulators
are trying their best to get prime meat by slaughtering a BIG HE GOAT called
SCB. Their eyes are focused on SCB's 100% bonus shares. They wish to terrorise
and grab before book close at nominal price. After that they will start placing
roses around SCB. But, now such petty tricks are not so effective.
Context: SCB's Jhur Pradarsan, SCB's weak pradarshan etc
headlines. About 30 Arab without banks' participation is neither Jhur nor weak.
3. Both
the strength and weakness of Nepali share market is the domination of traders.
They keep market vibrant, which is good. Also, they keep market in pendulum
mode, which is too bad.
Hence, Nepali share market has been suffering from a
disease-like condition and needs a long, complicated and risky procedure to
have its remedy. The remedy is increased retention rate of shares. It is
possible when long term investors invest in the market in big numbers and
scale. Once again, this could happen when there is political stability in the
country and economy starts growing and expanding fast.
Till then, we have to
adjust with generally a vibrant-pendulum called trader-shaped market movement.
4. Everybody
who knows basics of share market in Nepal knows already that by going through
potential applicants, SCB may have much less demand of FPO shares than NLIC. It
is due to restriction in cross holding. No BFIs are allowed to apply. However,
making this provision silent and using selective information as an instrument
of rumor is interesting.
The media outlets including online portals and many analysts are
working overtime to discourage applicants so as to help their sponsors to grab
shares in wholesale. Those who are opposing FPO as an issue of principle are
the exceptions and I do not blame them at all.
5. Great effort by online portals/media outlets/ bloggers
/analysts/ commentators to discourage investors to apply for SCB FPO.
Unprecedented invasion of selective information/disinformation. But, people are
far smarter than the players. Overactive RUMOR MILL! A déjà vu scenario of
politics in capital market.
6. I
have received quite some questions in my inbox asking about SCB FPO. Rather
finding it difficult to reply individually, I thought to write here.
Notwithstanding any other reasons and just confining to profit
and loss, my opinion is that if you are a small investor and if you have your
own money, then apply and if you have to go for loan, please stay away.
Extraordinary risk taking people may travel to any distance.
My definition of small investors includes people of two category
- 1. who apply with less than 50,000 (this is in line with the official
practice in allotment of shares), and 2. who apply with less than 500,000 (
this is more acceptable range to call someone a small investor).
7. I
have three assumptions - 1. local elections will be held and will accelerate
the process of political stability, 2. Increased government spending and
prudent behaviours from banks will improve liquid situation for loans, and 3.
Better regulation and technology will bring investor confidence back at higher
level. (This paragraph is copied from my reply to a friend in messenger.)
With such assumptions, I think the market will be moving up
slowly but steadily with some speed breakers in between. In coming
August/September, we may see time for minting money.
Note: Satutary warning - Please park your money at your own
risk.
8. Investment in capital market is a profession. In a
profession, one has to understand the basics preferably better to have advance
knowledge, should have minimum skill and resources, need to have or acquire
risk taking attitude, determination and perseverance. In underdeveloped markets
like ours, he or she should wear skin of rhinoceros to protect ownself against
rumors.
9. The market is passing through rough weather. It is something
like crossing large and deep air vaccums for a light aircraft. Staying on the
course with minimum nervousness and plenty of courage is what the pilot does.
The same applies to us. We should keep ourselves on the course with minimum
injuries. There would be plenty of time in future not only to heal but also to
win in a marathon. A lamp post may not have light now, still it reminds us that
there was light in the past and that could be in future. Optimists may see
defeat in battles but if they stay on the course, they could win the wars.
10. Professional
excellence is what we need. However, we investors in share market forums are at
least talking different.
Some of us are ultra nationalist, some are astrologers, some
more are sadists, some are casual comedians, a few are wolfs and too many are
novice in market complexities.
Hence, there may not be surprises, when market moves in opposite
directions.
11. People
without any exposure to economics/finaces through academic background or self
studies may be in great difficulty to survive in the secondary market.
There could be two exceptions. 1. You are among a few persons
who could enjoy the privillage of insideer trading. 2. You have extraordinary
common sense.
Others could earn if they limit their endeavour to IPOs.
12. Looking
at the monkey on the tree, a lion waits down. Monkey falls down at close to
lion's mouth. Without making great effort, the lion starts killing and eating
the monkey tastefully.
Note: Some friends have asked about the context. It is about
selling shares even today at bargain price, much less than the price overall
market sentiment could have provided the bench mark.
13. IPO:
Book Building
Book building is a systematic process of generating, capturing,
and recording investor demand for shares during an initial public offering
(IPO), or other securities during their issuance process, in order to support
efficient price discovery.
Book building - Wikipedia
https://en.wikipedia.org/wiki/Book_building
14. Politically motivated messengers/propagandists of boom and
doom are among a few major problems in Nepali capital market.
15. There
is the growing tendency among the market participants that the small investors
are headless chickens and they need extra protection. In this process, people
are asking for intervention from the regulators and government even in petty
operational issues. More intervention will invite a situation where free market
could not exist. The market should be allowed to function within its legal
operational boundaries as a free entity.
The activities that are considered good today may be bad for
tomorrow. Let's not welcome a lion tasting human blood. If it happens once, it
may repeat the same practice again and again. We should have a vision of a free
market and our policies and implementation strategies should support the vision
to realize.
16. Those
who did negative publicity of any company and tried to influence market are
paying heavy price if they are traders/investors. The fall in Nepse right now
could be primarily influenced by irresponsible activities of the bankers, but
the negative campainagers disguised as advocates of investors did no small harm
in shaping the mind by inserting fear and anger among the investors. In this
big fall, only big to medium size investors could survive. Too bad days for
small investors
and disaster for the traders. This is too big to save from this avalanche being
in normal state.
However, there are always
exceptions and there are people with exceptional qualities. We should face the
situation with strong heart and tranquil mind. During the devastating
earthquake, people lost many things - near and dear once, property, and so many,
but they are reassembling lives with boldness and hope. Let's not loose hope
and courage and let's not be emotionally paralyzed. Let's see the happenings,
try to act according to our need and leave the rest for future.
17. Darkness
motivates people to discover ways and means of light. Night gives hope of
seeing the dawn - bright and beautiful.
Long ago, Darwin through his Theory of Natural Selection taught
us to be fittest to survive.
Hence, in these painful days of devastating floods in Nepalese
capital market, those who remain motivated and hopeful and explore strategies
to be fittest would survive and flourish in near future that may have a span of
couple of months or years. And, for others it would be wise to listen Vishnu Sharma, the great
teacher in Hitopadesh, who advised "Rajdware, smasanecha ardha tyajati
pundit" meaning who sacrifices half (of that under his/her possession) in
a palace and grave yard (in disastrous circumastances) is a wise person.
Let's listen to Darwin or Vishnu
Sharma and buy peace of mind. We are travelling through rugged terrain and
bumpy roads. Either we train ourselves mentally, emotionally and physically or
abandon the journey and search for another route suited to our physical state
and temperament. Crying could provide solace but that will not give us
solution.
18. Nirmal
Pradhan was overwhelmingly an investor before losing tremendous amount of money
during the deep as well as prolonged bear phase when Nepse nose dived from 1175
to 292. He effectively turned himself to trader. He took trading as skilfully
as possible. Even some people blamed him for manipulation through his
investment fund - Rajdhani. We never knew the reality. However, he traded
smartly and made money from NCCB, NBL, NHPC, EBL etc. He recovered his loss and
even made more
money.
Hence, changing from investor to
trader or trader to investor could be a normal practice. No profession is good
or bad in itself. Those who have to earn more by maximising transactions with
small amount could do so by being traders or those who afford to put sizable
amount of money and could wait to earn handsomely may do so as investors. But,
both need to keep an eye open to watch the market and respond accordingly.
19. Those who are fighting battles taking opposite sides of
market down to 1200 or even less and market up to 2000 or even more are really
capable and qualified to predict the future of the market? Are they really
investors? Are they genuine traders? I have doubts.
20. Posts
in social networking sites:
- Tommorow, A is going to sell company x.
- B will hold company y.
- C will buy company z tommorow or sooner.
Hence, the following messages
will be there:
A will write, x is a wonderful
company. I am planning to buy. Anybody is there to sell 500 kitta?
B will write, y is the most
valuable company in the market. Buy as much as possible. You will be malamal
within a year.
C will write, z is a kabadi
company. I made great mistake by buying it's shares. I am going to sell even at
very low price. If anybody is interested to buy, please contact me
Keys: Sell is buy, buy is sell
and valuable is I am holding.
It is entertaining to read but
injurious to listen.
21. In
regard to share market, liquidity situation is one of many impacting factors.
It is not the single most important factor particularly in Nepali share market
where savings/surplus mobilization plays important role. Among small
shareholders, still loan from formal banking system has not become culture of
investment.
IPOs/FPOs are being oversubscribed by several times and in
secondary market also the transaction has generally been around 50 corer
recently. This tells a different story.
Here, it is psychology that makes
big difference. When investors see opportunity they manage money be it
grandmother's lifetime saving, selling salable items under their command,
arranging loan from friends and relatives, and many other innovative ways. If
it is just 20% from small investors in the FPO of NLIC, still they mobilized 10
Arab and, I think, a large part of it is not loan from the banking system.
Hence, investor sentiment makes a
big difference in our market. Now, in a volatile and bearish market, fear
factor has been in command. Most recently, courage also has come out of the
cage and has started influencing the market. The first destination is stabilization
in a given range. However, it is behaving strangely, both ways up and down. The
economic ggrowth rate has been projected above 5%.
Our market is vibrant because the
traders are many and supper active. It is dominated by traders. Now, traders
are fighting for their very survival. They are injured, they are in hurry and
they are also highly confused. Their state of mind has been revolving around
bewilderment.
Many investors including Mutual
Funds and Investment Companies are still in watch and wait mood.
Therefore, we may continue to see
for some time the same volatility in the market till investor sentiment
including trading behavior does not improve and investor confidence will not
change. This could be best attained by policy responses by the government and
regulators. They are active in policy responses and investor friendly
operational improvement. Hence, I am hopeful that market will enter into
relative stability soon and investor sentiment would move to positive
territory. At micro level, the performance of the companies is largely better.
At macro level, the politics is moving towards stability though with several
sand bags in between.
For me, this is buying time in
several small installments and also by being highly selective.
Note: Any free advice could be
injurious to our financial health. Hence, we should assess our situation
objectively and should decide on the merit of own analysis. So, I request the
readers to make any investment decisions on the basis of your own judgement.
22. The
problems in the social networking sites, financial portals/TV programs and
financial journals/newspapers in Nepal are three types of people.
1. Those who have no idea about the market, litter the sites by
writting anything and many thing. A few among them have occupied the position
of a hero, strangely.
2. Many among those who know about the basics of the market are
governed by their own interests and write/talk accordingly.
3. Those who do not know about
basics of the market and are cow animal type ask innocent questions and get
misled by people of two types as mentioned above.
Hence, due to disinformation, it
is too difficult to get benefit from the media including electronic and print
media and social networking sites.
Therefore, getting ourselves
educated or hiring services of fund management companies are the better
options.
