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Investors continue to ignore local market fundamentals
Turnover yesterday fell 65 percent and volumes lost 70 percent compared to Tuesday and all falls occurred in the last session. The index, at 927.01 points by the close, fell 15.43 points in the 6th call auction session down 1.66 percent to close at 911.58 - its lowest point since Oct. 11, but investors should note it will recover, as the volumes were not a true indicator of the index's December performance.
After failing to trade in the first 3 sessions, the lucky numbers of 888 stocks emerged by the fourth session; however, BCEL and EDL-Gen prices provided little stimulus, nor motivation for traders. As a result only 20,526 shares traded Wednesday for 103 million kip (US$12,826).
BCEL lost 3.90 percent (-300 kip) in the last session of the day yesterday on 5,000 shares and closed at 7,400 kip. That little trade also wiped US$532,386 off the market capitalisation, which fell from 1,051,648 million kip to 1,010,674 million kip. EDL-Gen also lost 1.66 percent in the last session (50 kip) on very low volumes of 15,526 stocks.
The Lao stock market has been a great success and is very stable, despite yesterday's fall on low volumes. Puzzling as it is, investors continue to ignore local “Stock Market Fundamentals”.
Some investors (those that own shares) say they still need more information. That is largely an invalid and unfounded statement, because there is a lot of information already available with very little research needed.
Normally, “timely” market information impacts on a share prices, but not so in Laos, as an emerging stock market.
Investors have said they need more information, to invest, but having monitored daily information that sentiment is largely viewed as an excuse. Anecdotal evidence suggests locally there possibly could be more information published in the Lao language (newspapers).
Given the dominance of foreigners working in Laos, there has been a lack of seminars and training in English. Expats employed locally in hydro and mining are big income earners. Many have expressed a positive desire to participate in the local market, but surprisingly they remain hesitant, because of a lack of knowledge about the simple procedures for opening a trading account.
Trading to date at the LSX has been brisk at times, but has also been very inconsistent and nothing to do about “timing the market”, as is the case in established exchanges.
Analysis of volumes and trading trends emphasises that investors have preferred with varying bids to secure a “profit taking” position as opposed to investing for the longer term. Sometimes the larger volumes are not the general market sentiment but instead are limited to just two or more experienced foreigners.
The 2 listed stocks have been very flat in price (at support). The situational analysis for both stocks is different. Volumes tend to support a “profit take” on BCEL, but a ‘hold and accumulate” for EDL-Gen.
Both EDL-Gen and BCEL have been very open and forthright via media releases to the public with “timely” information, particularly with detailed press releases. But such information at large has widely been ignored. To date, any positive news about expansion, profit or revenue improvement has had zero benefit to BCEL or EDL-Gen liquidity. Why? Because foreign investors are not subscribers or observers to local business news; as a result it is not reflected in market trading conditions, because the facts are that foreigners do not absorb local business activities.
To illustrate that point, announcements earlier this week from EDL-Gen would normally be a stimulus for an appreciation in the share price (promote a gain of at least 2 to 3 percent), but that positive information was widely ignored by investors. To recap, on that Monday, December 12, it was announced in the Vientiane Times Business Section that EDL-Gen had secured another milestone, with a signed loan agreement for US$300 million from Krung Thai Bank (KTB) for the expansion and improvement of the EDL network.
Translated, that means the company is continuing to pursue an expansion of business revenue and profit and direct spin-off automatically will occur to EDL-Gen (EDL's independent subsidiary). However, there was absolutely no reaction and definitely no benefit passed onto the share price. In very simplistic terms, the EDL-Gen share price didn't appreciate as would be the case in “normal” markets. This therefore presents and translates to a distinct advantage to local investors to seize the opportunity to accumulate some more stock.
vientiane times
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