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LSX: A US$38 million success story
The Lao Stock Market opening and subsequent trading over the past 12 months has been an unqualified success. Turnover and volumes were at their highest in February and their lowest in August.
The exchange managed to trade for 248 days in its first full year, turning over 302,212,565,200 kip.
The annual turnover was around US$37.8 million for a total share trade of 40.16 million stocks.
On average daily, 162K stocks traded for US$152.34K, 78 percent higher than Tuesday's close.
The mysterious and irrational unpredictable trading continued in yesterday's opening session. This caused the index to slowly amble down 15 percent in all since the unveiling of 1,000 points on January 11 last year.
The conclusion to the first full complete financial year's trading was very much as expected yesterday: low volumes and modest turnover. The most important factor was that the exchange opened on schedule and can only experience growth from here on in. Investors didn't buy “the bluff” yesterday, when traders willing presented stocks in what is best described as a “psychological game”. Trades yesterday failed to trigger any direct response or capture any imagination to stimulate a change. A quick check on the LSX website will confirm both the “low volumes” and the candlesticks “flat line” trend, for both the index and the stocks. A 200 to 400 kip variance is insignificant, as a 2 to 5 cent move is normal. 69 percent of the market's turnover in January so far has belonged to EDL-Gen at 18.8K per day compared to 5.9K for BCEL.
In the first session, 5000 BCEL stocks were snapped up by the winners for a bargain 7,000 kip. That however represented 250 kip (3½ percent) to the losers with a fall by the banking stock and caused the index to descend 5.53 points to a new record low of 885.13 points, on a turnover of just US$4,371.
With prices firmly unchanged, EDL trades made an entrance at 4,100 kip down 200 kip to its IPO 12 months ago. A total of 24,476 shares closed by 10am as turnover climbed to US$14,464. Volumes rose 25 percent yesterday but turnover was down US$4,200 to the previous day, because of the fall in BCEL volumes.
Regardless of where the index is, it doesn't represent the reality of the market or the trades because it is all on low volumes, which fail to register the intrinsic values of the stocks on offer. A 15 to 20 percent rally is not off the agenda. The end of this current flatline price resistance cycle is proving much harder to predict than next week's weather.
The exchange over the past 12 months registered some phenomenal highs in February. However, since then it's been hard to see any consistency. The smaller foreign investors look as though they have gambled on the direction of the stocks over the past 4 months. As a result there are winners and losers. Regardless of trades, the market has on the technical charts flatlined since August.
Anyone that bought the stocks when they first listed on January 11 2011 are in a 40 percent profit position with BCEL and almost a break even position with EDL-Gen when the dividend is taken into account.
The potential for both stocks is seen in the medium to long term. Both stocks have great potential to rally but that requires some bigger volumes. Investors in the interim period should be prepared to hold onto their stocks because both stocks we considered to be well undervalued, with fundamentals clearly illustrating both stocks hold unrealised potential over the longer term.
vientiane times
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