D6 volume and liquidity
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D6 volume and liquidity

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Like water flowing into a lake or dam, money flows into the stock market.

Like water flowing into a lake or dam, money flows into the stock market.

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  • 1. Volume & Liquidity
    • … as Measures of INVESTOR SENTIMENT.
    • Theme: Surviving the Market.
    • March 2, 2011
    • Mark Angeles, Gus Cosio, Sandy Gilles
  • 2. Hold Long-Term “ Most prudent” method of investing.
    • Base Case:
    • 6% annual economic growth
    • 18% annual earnings growth.
    “ BULL market ” “ BEAR market” “ BULL market” “ BEAR market ”
  • 3. Survive the “DIPS.” BE present at the “RALLY.” “ BULL market ” “ BEAR market” “ BULL market” “ BEAR market ” Keep your COOL. “ Strong Hands” If you bought at 2000 For survival:
  • 4. Will the stock market keep on rising? 1. It depends: on the amount of money flowing in. 2. It depends: if the market can absorb the money. Is there money flowing in? Can stock market absorb the money? Money will flow in, if prospects are good Are prospects good? Yes, we have good economic outlook, business conditions Yes, if only more securities get listed, traded, Listed: More IPO’s needed. Traded: more “free float” in hands of public.
  • 5. The flow of funds… to the stock market … is like a river in a valley.
  • 6. Build a DAM, raise the river, form a lake.
  • 7. Water level goes up, over time. Until it overflows the dam. Build a taller Dam, To capture more water, Raise the level of the lake. Funds “stay voluntarily,” in a stock market that is attractive. A DAM “traps” the Water
  • 8. Feb 2009 to Feb 2011
  • 9. Investors sometimes pull out cash from the stock market … To spend on household. Jan 2007 to Feb 2011
  • 10. Strong Hands = invest, and stay invested. They can pull out anytime. But they stay.
  • 11. GSIS of South Korea = $270 bn Example of “Strong Hands” = SOCIAL SECURITY SYSTEM, GOVERNMENT SERVICE INSURANCE SYSTEM = $ 6 billion GSIS of Holland = $313 bn GSIS of Norway = $450bn GSIS of Japan= $1,370 bn
  • 12. Bigger Dam Higher Water Level
  • 13. More IPO’s Money for Stocks Free Float MORE What assures us that the index will keep on Rising? More Water + Higher Dam MORE MORE More IPO
  • 14. So we want to anticipate liquidity
    • Are investors buying Philippine stocks
    • Will they continue buying?
    • … depends on:
    • Are philippine stocks good to buy, for local residents?
    • Is money flowing out of other markets? Into the Philippines?
  • 15. What is the outlook for Philippine stocks Investing Buy-and-Hold. * You could make more by frequent trading Probably the same as recent history Telecom stocks: 18% a year, for the last 18 years High Risk Low Risk Low % High % Food: 14% a year, for the last 14 years Bank stocks: 11% a year, for the last 11 years Bank Deposits: 3% Inflation: 5%
  • 16. What was the history. What are the prospects? Pacific Basin Low-Risk, High Return High-risk, Low Return Investors study the FORECAST for this chart. Brazil, India, China Russia High-risk, Medium -Return Japan 10 15 20 25 30 35 40 45 % Risk Rate of return % 18 16 14 12 10 8 6 Canada USA Europe Australia U.K. World
  • 17. Average of 22% a year. Might go up 50% within a year, might also suffer some -8% declines. Pacific Basin Brazil, India, China Russia Expected Returns of 22% a year Risk of 30% a year Either 22+ 30 or 22 – 30 Japan 10 15 20 25 30 35 40 45 % Risk Rate of return % 18 16 14 12 10 8 6 Canada USA Europe Australia U.K. World
  • 18. Money flows Tourism $ Direct Investment Portfolio Investment Gifts & Grants
  • 19. The Philippines Economy Stock market BOND market Real Estate, Factories, etc INVEST- MENT
  • 20. Forecast of IMF, quite positive, for a change.
  • 21. Tokyo When do Philippine stocks move up? When money flows into the stockmarket. London New York LARGEST MARKET SECOND LARGEST THIRD LARGEST
  • 22. Tokyo IN 1990s, strong funds flows into Asia 1995 - 97 London New York ASIA funds
  • 23. Tokyo Pull out in 1998, but returned cautiously due to the strong ECON growth of the region. London New York ASIA funds ASIA funds Excluding JAPAN Emerging Market Funds
  • 24. Tokyo Other parts of the world are in trouble? Move funds to Asia. London New York ASIA funds ASIA funds Excluding JAPAN Emerging Market Funds Russia India Middle East Rest of Europe Central America South America Canada China, Hong Kong, Taiwan, Singapore Thailand, Indonesia, Malaysia, Vietnam
  • 25.
    • Central Bank news: 'Hot money' inflow in February.
    • “ Hot money”, usually invested in stocks, surged 176 percent to $650 million as of Jan 01 -Feb. 11, up from $235 million in same period last year.
    • The index may trade lower first week of March, due to geopolitical concerns. Downside will be limited as bargain- hunters will scoop up depressed shares that have fundamental appeal.
    • This week, a number of key index constituents will report full year 2010 earnings. Investors would like to see this year’s earnings prospects.
  • 26.
    • Conventional Funds invested in the world:
    • 71 TRN dollars
    • =
    • Pension funds = 28 TRN
    • mutual funds = 22 TRN
    • insurance funds = 21 TRN
    • The largest 300 pension funds collectively hold about $6 trillion in assets.
  • 27. IN answer to the question: who will do the big-time investing in stock markets
  • 28.
    • Add the alternative assets = hedge funds, private equity funds, exchange-traded funds
    • Total funds invested = 105 TRN
    • PHIL Economic production = $350 bn
    • * In terms of PPP for fair comparison.
  • 29. Economic production
    • GDP in $ bn
    • Philippines $350bn
    • Switzerland $354 bn
    • Singapore $184 bn
    • GDP per capita / year
    • Philippines $3700
    • Switzerland $45,000
    • Singapore $39,567
  • 30. That is why Singapore has impressively large numbers of investors in MUTUAL FUNDS.
  • 31. America Europe Asia Africa Middle East Australia Today
  • 32. America Europe Asia Africa Middle East Australia Future
  • 33.
    • Technical analysis is the study of the price movement using the historical prices as interpolated in charts.
    • The main idea is to know how the price moves, to determine future price levels.
    • Charts: trends and patterns that can help you
    Technical Analysis INPUT
  • 34.
    • Logic:
    • You can predict future prices by studying past prices, or past behavior of prices in response to certain events.
    • Logic: 1. The market discounts everything. 2. Price moves in trends. 3. History tends to repeat itself.
    • Language:
    • Instead of talking about sales, earnings, economic growth, or cashflows, we will now talk about prices.
    • IT talks about …
    • Patterns in Price charts
    • Continuation patterns
      • Formations
      • Trendlines
    • Reversal patterns
    • Signals
    Technical Analysis INPUT
  • 35.
    • Indicators: money flow, trends, volatility, momentum.
    • Upmove + volume = good momentum – it has a longer way to go. It has PUSH.
    • Good volume confirms a trend. It confirms the momentum.
    • Low volume = weak trend
    Momentum Indicators
  • 36.
    • When volume tells a different story, it is a case of divergence, which refers to a contradiction between two different indicators.
    • The simplest example of divergence is a clear upward trend on declining volume. “Price is moving up, BUT NOT FOR LONG.”
    Volume as indicator Low Volume
  • 37. Quick Surge UPWARDS. Water Spills over. Return to Lower Level.
  • 38. Volume = number of shares or contracts that trade over a …. day. The higher the volume, the more active the security. Volume bars illustrate how many shares have traded per period. THEY SHOW TRENDS, in the same way that prices do. If volume is starting to decrease in an uptrend, it is usually a sign that the upward run is about to end. 
  • 39. Reversal pattern at peak of high volume LOW volume: the rally loses steam Reversal pattern at peak of high volume
  • 40. end