The New Nation - Internet Edition

AK Azad

Today, I wish to share some of my views on our current stock market situation with few future predictions. These are solely my own conclusions gaining over my observation of last one year and also by exchanging views with my heartiest friends who are also new here but are rich in thoughts and I am honored of having such kind of association. I welcome all of yours ideas & suggestions on my perspective and also anticipate your own prediction to enhance ourselves to proceed further in this trade.

Here I would like to extract a well-known quote by Merril Lynch:

"The secret is to first learn, then to invest & then go on learning".

So friends, lets continue with my analysis (if you think it's worthy to read anyway):-

a. Categories of traders:-

#1. Institutional/organized investors including merchant banks, personal gigantic portfolio investors and speculators also.

#2. Middle-group investors who came to the stock market understanding short-time handsome return and have invested their own hard earned money or have borrowed the same from banks on high interest rate or from relatives.

#3. Day trader/in and out trader, chartist, contrarian etc.

b. Current behavior of traders:-

#1. They are buying and enriching their portfolios. This you can check everyday that after a sharp fall in price specially on A category chips, there is a big volume buy (thanks to www.biasl.net and also to Mr. Sohel who categorically showed this).

#2. They are behaving according to day-by-day wave and are selling in large and buying in small.

#3. They are more or less inactive.

c. Reason behind current situation:-

#1. Considering company fundamentals with P/E ratios they are building their position & waiting to revive the market in full keeping in mind the current upcoming political turmoil leading to a chaotic election and also after election impact.

#2. Basing on rumors such as fall of international stock market, economic crisis in USA which is affecting the whole world, recent heavy cut on Oil price, some world wide big investors considering Vietnam, India & Pakistan as their next invest option and so on. Also local reasons of what will happen to election, who will be on power, the giant companies will not make profit this year, government stocks is not declaring any stock dividends, banks in Bangladesh profit loss because of huge defaulter importers due to international market crisis, etc, etc.

#3. This group has actually anticipated the situation and is inactive at the moment because they have sold or selling their position to hold a substantial amount and waiting for the precise time to enter.

d. My observation and assumption are:-

A huge amount is & will be out-flowing from the market because of upcoming election which was injected at the time of present care-taker government drive against black money and came to this business because stock market is always considered to be the safe spot due to government's sensitive awareness. This investors in large have put up the money here actually not for a handsome return but keeping the money in business which they can en-cash when they need it. So when they withdraw their position, the market will collapse further.

The above will lead #2 traders to be more panic than ever and future buying opportunities will create. Consider in mind that #2 traders are everyday under pressure from the origination of the money as they are incurring day-by-day interest and can not and will not hold their position long.

A newly-formed government committee is reviewing possible impact of global financial crisis on the economy and work out plans to prevent its consequences. This includes SEC. This committee will take instant corrective measures.

This means the present government is and will be allowing more merchant banks with FI & NIFs to operate and also relax their loan terms to ease the current situation but in turn this will be boomerang for the small investors as they will maneuver the market more by creating pressure to offload the portfolios as their desire.

No foreign investors will be interested in this situation and will wait for a elected government to steer the market. Keep in mind that as the world stock market is collapsing, there would create more opportunities for them to invest in these uprising markets such as Vietnam, Bangladesh, India and even Pakistan.

e. My future predictions are:-

In the fall market, the only positive side is that somehow and somewhere the price correction is underway. Some overvalued chips specially banks are coming down considerably but we should keep in mind that company fundamentals & P/E ratios will be a key factor on long term opportunity. Also a good number of stocks like Jamuna Oil, Meghna Oil, Titas has already come in and others are in pipeline not mentioning Grameen Phone which is scheduled to be in the market early next year.

There will be a good buying opportunity when BNP will push the present government to free their top leaders and negotiate to confirm their main partners safe participation. Also Sheikh Hasina's return will be a major factor as she will also demand the same for herself and the party. The situation would be worsening from next week to the end of the election creating a wave depending on the circumstances but long-term builders will ultimately be gainers.

But please do keep in mind that at the end of the day, both the top parties will be participating in the election and there will be a good election to conclude. Meantime DSE will try to inject some more IVs to accelerate the market but this will not work for long so my personal suggestion would be to offload the shares in hand (if still any) which are not enough credible and wait for the correct time to come.

So in conclusion, my submission is that do not panic, act like a matured trader and wait for the opportunities to come and be fruitful by harvesting the proper seed and nurture it properly. I wish to end my article quoting one of my favorite quote:-"The winners do not do things unusually but do it in unusual ways."