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Liquidity keeps bulking up on Lao stock market
The week's bullish volumes continued as the trend for a fourth day, as the LSX index recorded another good day of US$105,600 in turnover. We are not into a bull market yet but we are certainly experiencing a rally, unaffected by euro or US economic woes.
The indexes first off-market call auction session was positive, even though it finished down 16 points, giving away the previous day's gains. The first session lost 16 points or 1.76 percent. The index also closed on that figure but for the fourth straight day the market retained very firm to strong volumes.
By Thursday's close the LSX had another good day's turnover of near 143,000 stocks for 845.4m kip (US$105,662). That was down 26 percent on Wednesday's figure, but still a respectable amount. Yesterday 91,200 stocks exchanged hands for 507m kip (US$63,396).
Technical analysis: When volumes and turnover start to increase that gives a signal - if it persists.
Usually a strong gain in volumes accompanies a selloff or a buy-in signal. Those that follow the theory “sell high, buy low” would put a buy and sell sign, as we have included on the accompanying chart, for BCEL as an example - only it's not our preferred recommendation. It is very easy to see where the high is and where the low was. But there is a problem with both stocks trying to apply that theory in practice because the percentage made would be around 3 or maybe 4 percent less after the buy and sell brokerage fees. What we mean is you would be in and out of the market too many times and the risk of losing your investment increases immensely.
Our preferred trading method uses three simple strategies:
• First keep some cash in reserve for opportunities or new IPOs as they arise.
• Put a “stop-loss” of around 10 to 20 percent to sell, if the price continues to fall, to protect a large percentage of your investment. To do this successfully you should talk to your broker or financial advisor. It's all about your strategy and your risk tolerance.
• The last point is research before you buy any stock. Then go for the long haul and take an active interest in your stock at least half an hour per week, to review your stocks' performances. Watch the news or read a paper's financial section. Only then will you gain additional knowledge about stock markets.
Conclusion: The LSX market has been in a flat line since the middle of May. Trading is in very thin volumes, thereby exaggerating any movement - of the price or the index. That was until this week when things changed in regards to volumes, which have been very good, but very little has changed for prices which are at support levels – resisting a selloff.
For example EDL-Gen started the week at 4,400 kip, rose to 4,500 kip and fell back to 4,400 kip yesterday.
That's only a 2 percent trading band at a discounted price, so buying and selling and paying broker fees is not an option.
As for BCEL, three price rises in seven days sounds ok, but it started at 7,350 kip and is now 7,500 kip, a 3 percent trading band. That's why we recommend investors ride it out or hold, accumulate and buy - in that order.
There is no profit in trading in those percentage bands. The volumes for September have ascended fairly steeply. We await the prices to do likewise. Again, use a dollar cost average technique to do this.
The final very important point is “learn when to sell” and be prepared to sell and reinvest in the stock you sell when the timing is right. We reiterate both stocks are intrinsically trading at a “premium discounted price”, so consult your advisor.
vientiane times
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