Lanka Financial Market

Sri Lanka's stx down after rally on profit-taking

2011-12-03T20:22:00.001-08:00

The island nation's main share index closed 0.92 or 56.81 points down at 6,087.86 from its highest since Nov. 14. On Thursday, SEC Chairperson Indrani Sugathadasa stepped down "to uphold her principles," barely a month after her deputy
was moved amid broker complaints that tougher regulation was hurting sentiment.

"Though the market is driven on the sentiment that there will be more credits and margin trading, those will not boost share prices fundamentally," said an analyst on condition of anonymity.

Brokers have complained investor sentiment has turned negative due to firmer regulation by the SEC, which has looked into price manipulation and cut the amount of credit available, which has hit broker commissions and trading volume.

The bourse surged 4.14 percent on Monday from a 14-month low after Rajapaksa met the heads of stock brokerages who urged the president to take action to help the bourse rebound.

The day's turnover was 1.44 billion Sri Lanka rupees ($12.65 million), less than last year's average of 2.4 billion and this year's 2.4 billion.

Shares in retail favourite Touchwood Investment PLC fell 3.43 percent to 22.50 rupees while Entrust Securities Ltd fell 0.28 percent to 70.70 rupees.

Market heavyweight John Keells Holdings PLC, which saw foreign selling of 114,100 shares, ended 1.00 percent weaker at 168.20 rupees.

Total volume was 83.7 million shares, against a five-day average of 90.6 million. The 30-day and 90-day average trading volumes were 61.2 million and 102.7 million. Last year's daily average was 67.9 million.

The bourse has fallen 10.26 percent since Oct. 1. It is now Asia's 12th-best performer with a year-to-date loss of 8.26 percent after being at the top until June. It gave Asia's best returns in 2009 and 2010.

The bourse saw a net foreign outflow of 49.5 million rupees on Friday, and thus far in 2011, offshore investors have sold 17.8 billion, and a record 26.4 billion in 2010.

On Friday, the bourse was in neutral territory with the 14-day relative strength index at 44.2, above the lower neutral range of 30. Gainers outnumbered losers by 159 to 44 on Friday, Thomson Reuters data showed.

The rupee closed flat at 113.89/90 rupees a dollar for the eighth straight session, dealers said.

The central bank on Friday sold around $10 million to defend the currency, dealers said, extending its total dollar sales to $220 million since the 3 percent devaluation on Nov. 22.

Sri Lanka rupee rate should be market-driven

2011-11-26T06:57:00.001-08:00

COLOMBO, Nov 24 (Reuters) - Sri Lanka's rupee exchange rate should be driven by market forces except in cases of volatility, but this week's 3 percent devaluation was necessary medicine to ease a ballooning trade gap, the country's finance secretary said on Thursday.

Finance Ministry Secretary P.B. Jayasundera, the top technocrat in the island nation's finance ministry and architect of Sri Lanka's last 14 budgets, said the devaluation was a considered move that was essentially "a market correction."

Sri Lanka's currency, share, and bond markets are still adjusting to the devaluation after the central bank implemented it as ordered by President Mahinda Rajapaksa during his 2012 budget presentation on Monday.

"(Having) the reserve level of $6-7 billion is the time to do this correction. We had $8 billion reserves and the reserves are under pressure. If you continue to let that happen without giving a signal, at some point you will have to do this or take some other drastic measures," Jayasundera told Reuters.

Jayasundera said the exchange rate policy had encouraged imports, as did low interest rates, while exporters grew less competitive and had less incentive to expand.

Sri Lanka's trade deficit though August was $5.96 billion, nearly as big as 2008's record shortfall. The full-year forecast is $6.76 billion. Despite that, the central bank has spent more than $1 billion this year defending the rupee, while Asian peers let their currencies drop.

"In my view, some adjustment should have happened even before to prevent this. It should be a market-driven, stable exchange rate. When the market doesn't produce it, the central bank needs to come into help stability," he said.

The International Monetary Fund praised the devaluation as a move in the right direction, after it withheld the eight tranche of a $2.6 billion loan after the government refused to allow for a more flexible exchange rate.

SHERATON IN SRI LANKA

Jayasundera and Central Bank Governor Ajith Nivard Cabraal are the two most influential economic policymakers in Sri Lanka, aside from Rajapaksa, who at times steps into economic policy in his capacity as finance minister -- often surprising markets.

The honeymoon investor sentiment Sri Lanka enjoyed as an emerging frontier destination, after winning a 25-year civil war in 2009, has taken a series of hits in the past two months.

It cancelled a $500 million Chinese hotel deal over a land dispute, transferred a capital markets regulator who cracked down on investor misconduct, and rammed through a law allowing the state to take back assets leased to private companies.

"In my view none of the investors have been affected by these incidences. But of course the sentiment has. Serious investors are not worried," Jayasundera said.

The voiding of the hotel deal with China National Aero Technology Import and Export Corp. (CATIC) may hit the 2011 $1 billion foreign direct investment (FDI) target, he said.

The land in question, on the historic Galle Face seafront in Colombo, will be given to India's ITC Ltd. conglomerate, to build a hotel under the Sheraton name. ITC is a franchisee of the largest of Starwood Hotels and Resorts Worldwide's brands.

"The land will cost $70 million and the CATIC land will be released. The total investment would be $450 million," Jayasundera said.

Officials from ITC could not be reached for comment. (Additional reporting by Aniruddha Basu in Mumbai; Editing by Bryson Hull)

HIGHLIGHTS-Sri Lanka 2012 budget presentation

2011-11-26T06:47:00.001-08:00

Nov 21 (Reuters) - Sri Lankan President Mahinda Rajapaksa on Monday presented the 2012 budget to the island nation's parliament.

Following are highlights of his speech:

RUPEE DEVALUATION

"We need to reduce the import cost and increase export revenue. When our currency has strengthened, our trading partners' currencies have depreciated. So I propose to devalue the currency by 3 percent with effect from today."

ECONOMIC GROWTH:

"We have been able to maintain the growth rate at 8 percent in 2011, the same as 2010."

The government initially had forecast growth of 8.5 percent in 2011, but trimmed the forecast to 8.3 percent last month.

"In the Northern region, it is reported that the growth is 23 percent, well beyond 8 percent." Last year, economic activity in the former war zone -- which was under the control of Tamil Tiger separatists for decades until the Sri Lankan military defeated them in 2009 -- grew at a 14.2 rate.

NO ELECTIONS IN 2012

"I will not give any elections next year.

The Northern Provincial Council is the only remaining provincial government that has not had elections.

Devolution of power to the provincial level in the Tamil-dominated north is a crucial demand of Tamil parties negotiating with the government over political concessions, with the backing of several Western governments.

TAXES

"In addition to rice, we need self-sufficiency in green grams, peanuts, ginger, and corn in order to achieve food security. So I propose a high cess on imports of these products."

"Vehicle registration charges will be revised while they will be increased for luxury vehicles in order to increase revenue of provincial councils." He also said tourism vehicle import duties will be cut by 50 percent

INFRASTRUCTURE

"We have allocated 30 billion rupees ($271.8 million)for the inter provincial road network."

"We can be the regional sports hub and that can help to strengthen our economy. I propose 500 million rupees for development of infrastructure complexes and all sport goods will be tax-free in order to encourage sports."

TOURISM VISA FEES

"We have decided to impose a vise fee of $10 per person from the SAARC (South Asian Association for Regional Cooperation) region countries and $20 from the other regions' visitors. There won't be any charge on children to encourage family tourism. Tourists who spend a minimum of 48 hours also won't be charged. This will give an additional revenue of 2 billion rupees."

DEFENCE SPENDING

Of 230 billion rupees allocated to defense, 203 billion or 88 percent will be spent on salaries, food and uniforms.

STATE SECTOR WAGE HIKE

"I propose a salary increase of a 10 percent to the state sector employees including for the military."

PLANTATIONS

"We have a very limited land extent... we will completely stop the selling of government lands for the private sector and have decided only to lease out on a long-term basis

"If any investor does not adhere to the lease agreement, action will be taken to cancel the those lease agreements

"Now we have identified 37,000 acres of land under the plantation industries which are not used. These identified lands will be handed over to identified families for a 30-year lease, 2 acres each to develop small estates with lending facilities and seeds."

($1 = 110.375 Sri Lanka Rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Bryson Hull)

Sentiment indicators in Stock market

2011-11-26T04:56:00.001-08:00

Technical analysis is not just about charts. There are hosts of other indicators providing additional or
alternative pointers to market movements and hence tips on when to trade.

Some of them work on indications of general sentiment in the market.One of the difficulties with any of these guides, of course, is that as soon as they become generally known they fail to provide reliable signals.

An example is the ‘small-lot indicator’ (small trades in shares) as a useful counter-indicator in the United States. This works on the assumption that small investors are almost invariably wrong.

They buy at the top and sell at the bottom, so they provide a good counter-indicator. This has been gradually extended as it became clear it was not just the amateurs who got carried away by the prevailing or fashionable economic view: it became slightly transformed to the feeling that a universally bearish attitude in the country as a whole is a sign of an upturn and rampant bullishness is a sign to sell. Some companies even tabulate the number of investment advisers that are bullish or bearish as a sign to go the other way when unanimity seems imminent. In other words, when the small buyers start piling in it is time to sell, and vice
versa.

Word got around and so many people started acting on the theory that it became a self-defeating prophecy and confusion seems to have buried it.

The flow of funds indicators show demand for securities and where people are heading to put their cash. Sometimes the intensity of feeling about a company can be gauged by the volume of shares traded, especially if a chart can show whether the total is up, down or unchanged. The combination of price and
volume movements gives a pretty good indication of overall attitudes:

if prices and the amounts of shares traded are both rising it is an indication that the market for the share is set to rise;

a rising price but a declining volume of shares traded is a worrying trend indicating the price rise is running out of steam, and as the upward movement slows to a halt the direction is likely to reverse and the price will soon start to fall;

a falling price coupled with rising volume shows investors heading for the exit in growing numbers, which can only reinforce and accelerate the falling price;

the price and volume of shares traded both falling shows investors beginning to have second thoughts about selling and the downward pressure is therefore easing; soon it will bottom out and start upwards

What is Warrants

2011-11-26T04:47:00.001-08:00

Warrants are often issued alongside a loan stock to provide the right to buy ordinary shares, normally over a specified period at a predetermined price, known as the ‘exercise’ or ‘strike’ price.

They are also issued by some investment trusts. Since the paper therefore has some easily definable value, warrants are traded on the stock market, with the price related to the underlying shares:the value is the market price of the share minus the strike price.They can gear up an investment.

For instance, if the share stands at 100 rupees and the cost of converting the warrants into ordinary shares has been set at 80rupees, the sensible price for the warrant would be 20rupees. If the share price now rises to 200rupees, the right price

for the warrant would be 120rupees (deducting the cost of 80p for converting to shares). As a result, when the share price doubled the warrant price jumped six-fold.

What and why are shares?

2011-11-26T04:36:00.001-08:00

Businesses need money to get started, and even more to expand and grow. When setting up, entrepreneurs raise some of this from savings, friends and families, and the rest from banks and venture capitalists. Backers get a receipt for their money which shows that their investment makes them part-owners of the company and so have a share of the business (hence the name).

Unlike banks, which provide short-term finance at specified rates that has to be repaid, these investors are not lenders: they are the owners. If there are 100,000 shares issued by the company, someone having
10,000 of them owns a tenth of the business. That means the managing director and the rest of the board are
the shareholders’ employees just as much as the shop-floor foreman or the cleaner. Being a shareholder carries all sorts of privileges, including the right to appoint the board and the auditors.

In return for risking their money, shareholders of successful companies receive dividends. The amount varies
with what the company can afford to pay out, which in turn depends on profits.

At some stage the business may need more than those original sources can provide. In addition, there comes a time when some of the original investors want to withdraw their backing, especially if it can be at a profit.

The only way to do that would be by selling the shares, which meant finding an interested buyer,which in itself would be far from easy, and then haggling about the price, which would be awkward. A public marketplace was devised for trading them – a stock exchange. Companies ‘go public’when they get their shares quoted on the stock exchange to make things easy for investors a neat little device invented by the Dutch right at the start of the 17th century

How The Power Of The Masses Drives The Market

2011-11-26T02:56:00.001-08:00

The Force of Emotion
One way to see the market is as a disorganized crowd of individuals whose sole common purpose is to ascertain the future mood of the market (the balance of power between bulls and bears) and thereby profit from a correct trading decision today. However, it's important to realize that the crowd is comprised of a variety of individuals, each one prone to competing and conflicting emotions. Optimism and pessimism, hope and fear - all these emotions can exist in one investor at different times or in multiple investors or groups at the same time. In any trading decision, the primary goal is to make sense of this crush of emotion, thereby evaluating the psychology of the market crowd. (To read more on behavioral finance, seeUnderstanding Investor Behavior.)

Charles Mackay's famous book, "Extraordinary Popular Delusions and the Madness of Crowds", is perhaps the most often cited in discussions of market phenomena, from the tulipmania in 17th-century Holland to most every bubble since. The story is a familiar one: an enduring bull market in some commodity, currency or equity leads the general public to believe the trend cannot end. Such optimistic thinking leads the public to overextend itself in acquiring the object of the mania, while lenders fall over each other to feed the fire. Eventually, fear arises in investors as they start to think that the market is not as strong as they initially assumed. Inevitably, the market collapses on itself as that fear turns to panic selling, creating a vicious spiral that brings the market to a point lower than it was before the mania started, and from which it will likely take years to recover.

The Nature of Crowds
The key to such widespread phenomena lies in the nature of the crowd: the way in which a collection of usually calm, rational individuals can be overwhelmed by such emotion when it appears their peers are behaving in a certain universal manner. Those who study human behavior have repeatedly found that the fear of missing an opportunity for profits is a more enduring motivator than the fear of losing one's life savings. At its fundamental level, this fear of being left out or failing when your friends, relatives and neighbors seem to be making a killing, drives the overwhelming power of the crowd.

Another motivating force behind crowd behavior is our tendency to look for leadership in the form of the balance of the crowd's opinion (as we think that the majority must be right) or in the form of a few key individuals who seem to be driving the crowd's behavior by virtue of their uncanny ability to predict the future. In times of uncertainty (and what is more uncertain than the multitude of choices facing us in the trading universe?), we look to strong leaders to guide our behavior and provide examples to follow. The seemingly omniscient market guru is but one example of the type of individual who purports to stand as all-knowing leader of the crowd, but whose façade is the first to crumble when the tides of mania eventually turn.

Choices, Choices, Choices …
Due to the overwhelming power of the crowd and the tendency for trends to continue for lengthy periods of time on the basis of this strength, the rational individual trader is faced with a conundrum: does he or she follow the strength of the rampaging hordes or strike out defiantly with the assumption that his or her individually well-analyzed decisions will prevail over the surrounding madness? The solution to this problem is actually quite simple: follow the crowd when its opinion jives with your analysis and cut your losses and get out of the market when the crowd turns against you! Both following the crowd and getting out present their own unique challenges.

The Risks of Following the Crowd The key to enduring success in trading is to develop an individual, independent system that exhibits the positive qualities of studious, non-emotional, rational analysis and highly disciplined implementation. The choice will depend on the individual trader's unique predilection for charting and technical analysis. If market reality jives with the tenets of the trader's system, a successful and profitable career is born (at least for the moment).

So the ideal situation for any trader is that beautiful alignment that occurs when the market crowd and one's chosen system of analysis conspire to create profitability. This is when the public seems to confirm your system of analysis and is likely the very situation where your highest profits will be earned in the short term. Yet this is also the most potentially devastating situation in the medium to long term, because the individual trader can be lulled into a false sense of security as his or her analysis is confirmed. The trader is then subtly and irrevocably sucked into joining the crowd, straying from his or her individual system and giving increasing credence to the decisions of others.

Inevitably, there will be a time when the crowd's behavior will diverge from the direction suggested by the trader's analytical system, and this is the precise time at which the trader must put on the brakes and exit his position. This is also the most difficult time to exit a winning position, as it is very easy to second guess the signal that one is receiving, and to hold out for just a little more profitability. As is always the case, straying from one's system may be fruitful for a time, but in the long term, it is always the individual, disciplined, analytical approach that will win out over blind adherence to those around you. (Learn more in Master Your Trading Mindtraps and Removing The Barriers To Successful Investing.)

The Challenges of Going Against the Crowd and Getting OutA trader's best decisions will be made when he or she has a written plan that spells out under exactly what conditions a trade will be entered and exited. These conditions may very well be driven by the crowd, or they may occur regardless of the direction in which the crowd is moving. And there will be times when the trader's system issues a signal that is exactly opposite to the direction in which the crowd is moving. It is the latter situation of which a trader must be extremely wary.

In a sense, the crowd is never wrong over the short term. When the crowd is moving in a direction that is contrary to what a trader's system maintains, the trader's best decision is to get out! In other words, the trader should take his or her profits or realize losses and wait on the sidelines until such time as a positive signal is once again issued by the system. It is better to relinquish a certain amount of potential profit than to lose any amount of one's hard-earned principal. (Learn more in The Art Of Cutting Your Losses.)

The Bottom Line
Remember, the feeling that you are missing out on a surefire opportunity for profit is the most psychologically trying and dangerous situation that you are likely to face in your trading career. Indeed, the feeling of missed opportunities is more taxing than realizing losses - an inevitable eventuality if you stray from your chosen path. This is perhaps the ultimate paradox of trading, that our innate human instinct and desire to fit in with the crowd is also the situation that has led many an individual trader to financial ruin. Never fight the power of the crowd, but always be aware of how your individual decisions relate to the power of those around you.

Market Problems? Blame Investors

2011-11-26T02:53:00.001-08:00

Following the Crowd
Humans are prone to a herd mentality, conforming to the activities and direction of others. This is a common mistake in investing. Imagine you and a dozen other people are caught in a theater that's on fire. The room is filled with smoke and flames are licking the walls. The people best qualified to get you out safely, such as the building owner or an off-duty firefighter, shy away from taking the lead because they fear being wrong and they know the difficulties of leading a smoke-blinded group.

Then the take-charge person steps up and everyone is happy to follow the leader. This person is not qualified to lead you to the local 7-11, let alone get you out of an unfamiliar burning building, so, sadly, you are more likely to end up as ash than find your way out. This tendency to panic and depend on the direction of others is exactly why problems arise in the stock market, except we are often following the crowd into the burning building rather than trying to get out. Here are two actions caused by herd mentality:

Panic Buying - This is the hot-tip syndrome, whose symptoms usually show up in buzzwords such as "revolution", "new economy", and "paradigm shift". You see a stock rising and you want to hop on for the ride, but you're in such a rush that you skip your usual scrutiny of the company's records. After all, someone must have looked at them, right? Wrong. Holding something hot can sometimes burn your hands. The best course of action is to do your due diligence. If something sounds too good to be true, it probably is.
Panic Selling - This is the "end of the world" syndrome. The market (or stock) starts taking a downturn and people act like it's never happened before. Symptoms include a lot of blaming, swearing, and despairing. Regardless of the losses you take, you start to get out before the market wipes out what's left of your retirement fund. The only cure for this is a level head. If you did your due diligence, things will probably be OK, and a recovery will benefit you nicely. Tuck your arms and legs in and hide under a desk as people trample their way out of the market. (For more on this kind of behaviour, check out our Behavioral Finance Tutorial.)

We Can't Control Everything
Although it is a must, due diligence cannot save you from everything. Companies that become entangled in scandals or lie on their balance sheets can deceive even the most seasoned and prudent investor. For the most part, these companies are easy to spot in hindsight (Enron), but early rumors were subtle blips on the radar screens of vigilant investors. Even when a company is honest with an investor, a related scandal can weaken the share price. Omnimedia, for example, took a severe beating for Martha Stewart's alleged insider activities. So bear in mind that it is a market of risk. (For more on stock scandals, check out The Biggest Stock Scams Of All Time.)

Holding Out for a Rare TreatGamblers can always tell you how many times and how much they've won, but never how many times or how badly they've lost. This is the problem with relying on rewards that come from luck rather than skill: you can never predict when lucky gains will come, but when they do, it's such a treat that it erases the stress (psychological, not financial) you've suffered.

Investors can fall prey to both the desire to have something to show for their time and the aversion to admitting they were wrong. Thus, some investors hold onto stock that is losing, praying for a reversal for their falling angels; other investors, settling for limited profit, sell stock that has great long-term potential. The more an investor loses, however, the larger the gain must be to meet expectations.

One of the big ironies of the investing world is that most investors are risk averse when chasing gains but become risk lovers when trying to avoid a loss (often making things much worse). If you are shifting your non-risk capital into high-risk investments, you're contradicting every rule of prudence to which the stock market ascribes and asking for further problems. You can lose money on commissions by overtrading and making even worse investments. Don't let your pride stop you from selling your losers and keeping your winners.

XenophobiaPeople with this psychological disorder have an extreme fear of foreigners or strangers. Even though most people consider these fears irrational, investors engage in xenophobic behavior all the time. Some of us have an inborn desire for stability and the most seemingly stable things are those that are familiar to us and close to home (country or state).

The important thing about investing is not familiarity but value. If you look at a company that happens to look new or foreign but its balance sheet looks sound, you should not eliminate the stock as a possible investment. People constantly lament that it's hard to find a truly undervalued stock, but they don't look around for one; furthermore, when everyone thinks domestic companies are more stable and try to buy in, the stock market goes up to the point of being overvalued, which ironically assures people they're making the right choice, possibly causing a bubble. Don't take this as a commandment to quit investing domestically; just remember to scrutinize a domestic company as closely as you would a foreign one. (For ideas on how to get involved with foreign stocks, check out Go International With Foreign Index Funds.)

Concluding with a Handy ListSome problems investors face are not isolated to the investing world. Let's look at the "seven deadly sins of investing" that often lead investors to blindly follow the herd:

Pride - This occurs when you are trying to save face by holding a bad investment instead of realizing your losses. Admit when you are wrong, cut your losses, and sell your losers. At the same time, admit when you are right and keep the winners rather than trying to over-trade your way up.
Lust – Lust in investing makes you chase a company for its body (stock price) instead of its personality (fundamentals). Lust is a definite no-no and a cause of bubbles and crazes.
Avarice – This is the act of selling dependable investments and putting that money into higher-yield, higher-risk investments. This is a good way to lose your shirt--the world is cold enough without having to face it naked.
Wrath – This is something that always happens after a loss. You blame the companies, brokerages, brokers, advisors, the CNBC news staff, the paperboy - everyone but yourself and all because you didn't do your due diligence. Instead of losing your cool, realize that you now know what you have to do next time.
Gluttony – A complete lack of self-control or balance, gluttony causes you to put all your eggs in one basket, possibly an over-hyped basket that doesn't deserve your eggs (Enron, anyone?). Remember balance and diversification are essential to a portfolio. Too much of anything is exactly that: TOO MUCH!
Sloth – You guessed it, this means being lazy and not doing your due diligence. On the flip side, a little sloth can be OK as long as it's in the context of portfolio activity. Passive investors can profit with less effort and risk than over-active investors.
Envy – Coveting the portfolios of successful investors and resenting them for it can eat you up. Rather than cursing successful investors, why not try to learn from them? There are worse people to emulate than Warren Buffett. Try reading a book or two: knowledge rarely harms the holder.

ConclusionHumans are prone to herd mentality, but if you can recognize what the herd is doing and examine it rationally, you will be less likely to follow the stampede when it's headed in an unprofitable direction.

Read more: http://www.investopedia.com/articles/basics/03/062003.asp#ixzz1eo8QIJkP

Getting Into The Gold Market

2011-11-26T02:37:00.001-08:00

Gold Bullion This is perhaps the best-known form of direct gold ownership. Many people think of gold bullion as the large gold bars held at Fort Knox. Actually, gold bullion is any form of pure, or nearly pure, gold that has been certified for its weight and purity. This includes coins, bars, etc., of any size. A serial number is commonly attached to gold bars as well, for security purposes.

While heavy gold bars are an impressive sight, their large size (up to 400 troy ounces) makes them illiquid, and therefore costly to buy and sell. After all, if you own one large gold bar worth $100,000 as your entire holding in gold and then decide to sell 10%, you can't exactly saw off the end of the bar and sell it. On the other hand, bullion held in smaller-sized bars and coins have much more liquidity, and is a very common method of holding bullion.

Gold Coins For decades, large quantities of gold coins have been issued by sovereign governments around the world. For investors, coins are commonly bought from private dealers at a premium of about 1-5% above their underlying gold value.

The advantages of bullion coins are:

Their prices are conveniently available in global financial publications.
Gold coins are often minted in smaller sizes (one ounce or less), making them a more convenient way to invest in gold than the larger bars.
Reputable dealers can be found with minimal searching and are located in many large cities.

Caution: Older, rare gold coins have what is known as numismatic or "collector's" value above and beyond the underlying value of the gold. To invest strictly in gold, focus on widely circulated coins and leave the rare coins to collectors.

Some of the widely circulated gold coins include the South African krugerrand, the U.S. eagle and the Canadian maple leaf.

The main problems with gold bullion are that the storage and insurance costs, and the relatively large markup from the dealer both hinder profit potential. Also, investing in gold bullion is a direct investment in gold's value, and each dollar change in the price of gold will proportionally change the value of one's holdings. Other gold investments, such as mutual funds, may be made in smaller dollar amounts than bullion, and also may not have as much direct price exposure as bullion does.

Gold ETFs and Mutual Funds One alternative to a direct investment in gold bullion is to invest in one of the gold-based exchange-traded funds (ETFs). Each share of these specialized instruments represents a fixed amount of gold, such as one-tenth of an ounce. These funds may be purchased or sold in any brokerage or IRA account just like stocks. This method is therefore easier and more cost effective than owning bars or coins directly, especially for small investors, as the minimum investment is only the price of a single share of the ETF. The annual expense ratios of these funds are often less than 0.5%, much less than the fees and expenses on many other investments, including most mutual funds.

Many mutual funds own gold bullion and gold companies as part of their normal portfolios, but investors should be aware that only a few mutual funds focus solely on gold investing; most own a number of other commodities. The major advantages of the gold-only oriented mutual funds are:

Low cost and low minimum investment required
Diversification among different companies
Ease of ownership in a brokerage account or an IRA
Require no individual company research

Some funds invest in the indexes of mining companies, others are tied directly to gold prices, while still others are actively managed. Read their prospectuses for more information. Traditional mutual funds tend to be actively managed, while ETFs adhere to a passive index-tracking strategy, and therefore have lower expense ratios. For the average gold investor, however, mutual funds and ETFs are now generally the easiest and safest way to invest in gold.

Gold Futures and OptionsFutures are contracts to buy or sell a given amount of an item, in this case gold, on a particular date in the future. Futures are traded in contracts, not shares, and represent a predetermined amount of gold. As this amount can be large (for example, 100 troy ounces x $1,000/ounce = $100,000), futures are more suitable for experienced investors. People often use futures because the commissions are very low, and the margin requirements are much lower than in traditional equity investments. Some contracts settle in dollars while others settle in gold, so investors must pay attention to the contract specifications to avoid having to take delivery of 100 ounces of gold on the settlement date. (For more on this, read Trading Gold And Silver Futures Contracts.)

Options on futures are an alternative to buying a futures contract outright. These give the owner of the option the right to buy the futures contract within a certain time frame at a preset price. One benefit of an option is it both leverages your original investment and limits losses to the price paid. A futures contract bought on margin can require more capital than originally invested if losses mount quickly. Unlike with a futures investment, which is based on the current value of gold, the downside to options is that the investor must pay a premium to the underlying value of the gold to own the option. Because of the volatile nature of futures and options, they may be unsuitable for many investors. Even so, futures remain the cheapest (commissions + interest expense) way to buy or sell gold when investing large sums.

Gold Mining CompaniesCompanies that specialize in mining and refining will also profit from a rising gold price. Investing in these types of companies can be an effective way to profit from gold, and can also carry lower risk than other investment methods.

The largest gold mining companies operate extensive global operations; therefore, business factors common to many other large companies influence their investment success. As a result, these companies can still show profit in times of flat or declining gold prices. One way they do this is by hedging against a fall in gold prices as a normal part of their business. Some do this and some don't. Even so, gold mining companies may provide a safer way to invest in gold than through direct ownership of bullion. However, the research and selection of individual companies requires due diligence on the investor's part. As this is a time consuming endeavor, it may not be feasible for many investors.

Gold Jewelry Most of the global gold production is used to make jewelry. With global population and wealth growing annually, demand for gold used in jewelry production should increase over time as well. On the other hand, gold jewelry buyers are shown to be somewhat price sensitive, buying less if the price rises swiftly.

Buying jewelry at retail prices involves a substantial markup – up to 400% over the underlying gold value. Better jewelry bargains may be found at estate sales and auctions. The advantage of buying jewelry this way is that there is no retail markup; the disadvantage is the time spent searching for valuable pieces. Nonetheless, jewelry ownership provides the most enjoyable way to own gold, even if it is not the most profitable from an investment standpoint. As an art form, gold jewelry is beautiful. As an investment, it is mediocre - unless you are the jeweler.

Conclusion Larger investors, who wish to have direct exposure to the price of gold, may prefer to invest in gold directly through bullion. There is also a level of comfort found in owning a physical asset instead of simply a piece of paper. The downside is the slight premium to the value of gold paid on the initial purchase, as well as the storage costs.

For investors who are a bit more aggressive, futures and options will certainly do the trick. But, buyers should beware: these investments are derivatives of gold's price and can see sharp moves up and down, especially when done on margin. On the other hand, futures are probably the most efficient way to invest in gold, except for the fact that contracts must be rolled over periodically as they expire.

The idea that jewelry is an investment is quaint, but naive. There is too much of a spread between the price of most jewelry and its gold value for it to be considered a true investment. Instead, the average gold investor should consider gold oriented mutual funds and ETFs, as these securities generally provide the easiest and safest way to invest in gold

Read more: http://www.investopedia.com/articles/basics/08/gold-strategies.asp#ixzz1eo4TMSvX

Don't Dump On The Dogs

2011-11-26T02:35:00.001-08:00

Take a Long Hard LookBefore deciding to sell, take a careful look at the investment. Is it really a dog, or it is a solid investment that just happens to be out of favor at this particular point in time? If you have a solid asset allocation strategy, your portfolio is likely to contain a variety of investments. After all, diversification is a well-known strategy for reducing risk and increasing returns in your portfolio. (To learn more, read Introduction To Diversification and The Importance Of Diversification.)
In a diversified portfolio, some investments will deliver better performances than others, and some will likely be below the benchmark. After all, everything can't beat the benchmark all the time. That doesn't necessarily mean that the poor performers are bad investments.
Reassess Your AssetsConsider your holdings from a strategic perspective. If your stocks are doing poorly during a time when the stock market is down, there's no need for panic. Instead of simply selling, think about why you bought those stocks in the first place. Do they still serve that purpose? If you bought a particular stock for its long-term growth potential, a down quarter or a down year doesn't automatically mean that it's time to sell - in fact, it may mean just the opposite. (Learn to use security selection as a way to minimize risk while maximizing return in Achieving Optimal Asset Allocation.)
Long-term investors understand and accept that the value of their investments won't always go up. Rather than buying and selling stocks in an ongoing effort to chase performance, they select investments carefully, choosing each one for a specific reason: to create a portfolio in which the whole is greater than the sum of its parts. For example, a small-cap growth stockmay have been added to a portfolio in pursuit of alpha, but it's not going to deliver big results in a market dominated by large-cap value. That doesn't make it a bad investment. Likewise, blue chip stocks may lag when small caps are in favor. (To learn how selecting a mix of securities can be the core of your investing strategy, read Asset Allocation Strategies.)
When a Dog Is a DogWhile making a hasty decision to sell is not a good strategic plan, sometimes a dog is truly a dog. To decide if the stock you are thinking about selling really should be sold, you'll need to take a close look at the situation.
By looking at the balance sheet and reviewing a company's financial situation, as well as its standing against industry peers, you can make a sound judgment regarding its status. If your analysis reveals a company that has lost its luster and truly is a dog, you can pull the trigger and sell with no regrets. (For an easy-to-understand tutorial that provides an overview of the techniques for analyzing a company's financial statements and reports, see Introduction To Fundamental Analysis.)
Running With the PackSpeaking of dogs, the dogs of the Dow is a famous and successful investment strategy that revolves around building a portfolio equally distributed among the 10 companies in the Dow Jones Industrial Average (DJIA) that have the highest dividend yield at the beginning of the year, then readjusting that portfolio on an annual basis to reflect any changes that have occurred to these 10 companies throughout the calendar year.
By buying these companies, you are essentially buying the cheapest stocks in the DJIA - companies that are temporarily out of favor with the market, but still remain relatively successful. Of course, the hope is that the true value of these bargain stocks will be realized, and you will be able to capture a tidy profit at the end of the year by selling them and buying the new "dogs." Some value managers live by this strategy. (To learn more, read Barking Up The Dogs Of The Dow Tree.)
Every Dog Has Its DaySeeing underperforming stocks lounging around in your portfolio can certainly raise your hackles, but sometimes those (seemingly) lazy mutts are good dogs that just aren't having their day. Before you bark up the wrong tree with a decision to sell, spend some time sniffing around. You might find that you holdings have the right pedigree after all.

Read more: http://www.investopedia.com/articles/stocks/09/dont-dump-on-the-dogs.asp#ixzz1eo3yVzyv

Evaluating A Company's Management

2011-11-26T02:30:00.001-08:00

The Job of Management
A strong management is the backbone of any successful company. This is not to say that employees are not also important, but it is management that ultimately makes the strategic decisions. You can think of management as the captain of a ship. While not physically driving the boat, he or she directs others to look after all the factors that ensure a safe trip. (For further reading, see Lifting The Lid On CEO Compensation.)

Theoretically, the management of a publicly traded company is in charge of creating value for shareholders. Management is to have the business smarts to run a company in the interest of the owners. Of course, it is unrealistic to believe that management only thinks about the shareholders. Managers are people too and are, like anybody else, looking for personal gain. Problems arise when the interests of the managers are different from the interests of the shareholders. The theory behind the tendency for this to occur is called agency theory. It says that conflict will occur unless the compensation of management is tied together somehow with the interests of shareholders. Don't be naive by thinking that the board of directors will always come to the shareholders' rescue. Management must have some actual reason to be beneficial to shareholders.

Stock Price Isn't Always a Reflection of Good Management
Some say that qualitative factors are pointless because the true value of management will be reflected in the bottom line and the stock price. There is some truth to this over the long run, but strong performance in the short run doesn't guarantee good management. The best example is the downfall of dotcoms. For a period of time, everybody was talking about how the new entrepreneurs were going to change the rules of business. The stock price was deemed as a sure indication of success. The market, however, behaves strangely in the short term. Strong stock performance alone doesn't mean you can assume the management is of high quality.

Length of Tenure
One good indicator is how long the CEO and top management has been serving the company. A great example is General Electric whose former CEO, Jack Welch, was with the company for around 20 years before he retired. Many herald him as being one of the best managers of all time.

Warren Buffett has also talked about Berkshire Hathaway's superb record of management retention. One of Buffett's investment criteria is to look for solid stable managements that stick with their companies for the long term. (Learn more in Management Strategies From A Top CEO.)

Strategy and Goals
Ask yourself, what kind of goals has the management set out for the company? Does the company have a mission statement? How concise is the mission statement? A good mission statement creates goals for management, employees, stockholders and even partners. It's a bad sign when companies lace their mission statement with the latest buzz words and corporate jargon.

Insider Buying and Stock Buybacks
If insiders are buying shares in their own companies, it's usually because they know something that normal investors do not. Insiders buying stock regularly show investors that managers are willing to put their money where their mouths are. The key here is to pay attention to how long the management holds shares. Flipping shares to make a quick buck is one thing; investing for the long term is another.

The same can be said for share buybacks. If you ask management of a company about buybacks, it will likely tell you that a buyback is the logical use of a company's resources. After all, the goal of a firm's management is to maximize return for shareholders. A buyback increases shareholder value if the company is truly undervalued.

Compensation
High-level executives pull in six or seven figures per year, and rightly so. Good management pays for itself time and time again by increasing shareholder value. But knowing what level of compensation is too high is a difficult thing to determine.

One thing to consider is that managements in different industries take in different amounts. For example, CEOs in the banking industry take in more than $20 million per year, whereas a CEO of a retail or food service company may only make $1 million. As a general rule you want to make sure that CEOs in the same industries have similar compensation. (Learn more in Whom Should Corporations Please?)

You have to be suspicious if a manager makes an obscene amount of money while the company suffers. If a manager really cares about the shareholders in the long term, would this manager be paying him/herself exorbitant amounts of money during tough times? It all comes down to the agency problem. If a CEO is making millions of dollars when the company is going bankrupt, what incentive does he or she have to do a good job?

You can't talk about compensation without mentioning stock options. A few years back, many praised options as the solution to ensuring that management increases shareholder value. The theory sounds good, but doesn't work as well in reality. It's true that options tie compensation to performance, but not necessarily for the benefit of long-term investors. Many executives simply did whatever it took to drive up the share price so they could vest their options to make a quick buck. Investors then realized the books had been cooked, so share prices plummeted back down while management made out with millions. Also, stock options aren't free, so the money has to come from somewhere, usually the dilution of existing shareholder's stock.

As with stock ownership, look to see whether management is using options as a way to get rich or if it is actually tied to increasing value over the long run. You can sometimes find this in the notes to the financial statements. (For more on this, see Footnotes: Start Reading The Fine Print.)

If not, take a look in the EDGAR database for a Form 14A. The 14A will list among other factors background information on the managers, their compensation (including options grants) and inside ownership.

The Bottom LineThere is no single template for evaluating a company's management, but we hope the issues we've discussed in this article will give you some ideas for analyzing a company.

Looking at the financial results each quarter is important, but it doesn't tell the whole story. Spend a little time investigating the people who fill those financial statements with numbers.

Top 4 Things Successful Forex Traders Do

2011-11-26T02:25:00.001-08:00

Leg No.1 - Approach
Before you start to trade, recognize the value of proper preparation. The first step is to align your personal goals and temperament with the instruments and markets that you can comfortably relate to. For example, if you know something about retailing, then look to trade retail stocks rather than oil futures, about which you may know nothing. Begin by assessing the following three components.

Time Frame
The time frame indicates the type of trading that is appropriate for your temperament. Trading off of a five-minute chart suggests that you are more comfortable being in a position without the exposure to overnight risk. On the other hand, choosing weekly charts indicates a comfort with overnight risk and a willingness to see some days go contrary to your position.

In addition, decide if you have the willingness and time to sit in front of a screen all day or if you would prefer to do your research quietly over the weekend and then make a trading decision for the coming week based on your analysis. Remember that the opportunity to make substantial money in the markets requires time. Short-term scalping, by definition, means small profits or losses. In this case you will have to trade more frequently. (Find out about the various styles of this trading inour Forex Walkthrough from beginner to advanced.)
Methodology
Once you choose a time frame, find a consistent methodology. For example, some traders like to buy support and sell resistance. Others prefer buying or selling breakouts. Yet others like to trade using indicators such as MACD, crossovers etc. (Learn more in our Technical Analysis Tutorial.)

Once you choose a system or methodology, test it to see if it works on a consistent basis and provides you with an edge. If your system is reliable more than 50% of the time, you will have an edge, even if it's a small one. If you backtest your system and discover that had you traded every time you were given a signal and your profits were more than your losses, chances are very good that you have a winning strategy. Test a few strategies and when you find one that delivers a consistently positive outcome, stay with it and test it with a variety of instruments and various time frames. (For more, check out our Trading Systems Tutorial.)
Market (Instrument)
You will find that certain instruments trade much more orderly than others. Erratic trading instruments make it difficult to produce a winning system. Therefore, it is necessary to test your system on multiple instruments to determine that your system's "personality" matches with the instrument being traded. For example, if you were trading the USD/JPY currency pair in theforex market, you may find that Fibonacci support and resistance levels are more reliable in this instrument than in some others. You should also test multiple time frames to find those that match your trading system best. (Uncover the history and logic behind this popular trading tool in Taking The Magic Out Of Fibonacci Numbers, and Advanced Fibonacci Applications.)

Leg No.2 - AttitudeAttitude in trading means ensuring that you develop your mindset to reflect the following four attributes:

PatienceOnce you know what to expect from your system, then have the patience to wait for the price to reach the levels that your system indicates for either the point of entry or exit. If your system indicates an entry at a certain level but the market never reaches it, then move on to the next opportunity. There will always be another trade. In other words, don't chase the bus after it has left the terminal; wait for the next bus. (Learn more in Patience Is A Trader's Virtue.)
DisciplineDiscipline is the ability to be patient – to sit on your hands until your system triggers an action point. Sometimes the price action won't reach your anticipated price point. At this time you must have the discipline to believe in your system and not to second-guess it. Discipline is also the ability to pull the trigger when your system indicates to do so. This is especially true forstop losses.
ObjectivityObjectivity or "emotional detachment" also depends on the reliability of your system or methodology. If you have a system that provides entry and exit levels that you know have a high reliability factor, then you don’t need to become emotional or allow yourself to be influenced by the opinion of pundits who are watching their levels and not yours. Your system should be reliable enough so that you can be confident in acting on its signals. (Find out how your mindset can play a larger role in your success than market influences Trading Psychology And Discipline.)
Realistic ExpectationsEven though the market can sometimes make a much bigger move than you anticipate, being realistic means that you cannot expect to invest $250 in your trading account and expect to make $1,000 each trade. Short-term time frames provide less profit opportunities than longer term, but the risk with longer-term time frames is higher. It's a question of risk versus reward.

Leg No.3 - Discrimination
Different instruments trade differently depending on who the major players are and why they are trading that particular instrument. Hedge funds are motivated differently than mutual funds. Large banks that are trading the spot currency market in specific currencies usually have a different objective than currency traders buying or selling futures contracts. If you can determine what motivates the large players then you can often piggy-back them and profit accordingly. (For more on this type of strategy, see Stop Hunting With The Big Players.)

AlignmentPick a few currencies, stocks or commodities and chart them all in a variety of time frames. Then apply your particular methodology to all of them and see which time frame and which instrument is most responsive to your system. This is how you discover a "personality" match for your system. Repeat this exercise regularly to adapt to changing market conditions.

Leg No.4 - Management (Implementation)Since there is no such thing as only profitable trades, no system will trigger a 100% sure thing. Even a profitable system, say with a 65% profit to loss ratio, still has 35% losing trades. Therefore, the art of profitability is in the management and execution of the trade. (Learn more in The Myth Of Profit/Loss Ratios.)

Risk ControlIn the end, successful trading is all about risk control. Take losses quickly and often if necessary. Try to get your trade in the correct direction right out of the gate. If it backs off, cut out and try again. Often it is on the second or third attempt that your trade will move immediately in the right direction. This practice requires patience and discipline but when you get the direction right you can trail your stops and almost always be profitable at best, or break even at worst.

The Bottom LineThere are as many nuanced methods of trading as there are traders. There is no right or wrong way to trade. There is only a profit-making trade or a loss-making trade. Warren Buffet says there are two rules in trading: Rule 1: Never lose money. Rule 2: Remember Rule 1. Stick a note on your computer that will remind you to take small losses often and quickly - don't wait for the big losses. (For additional information, take a look at our Forex Walkthrough, it goes from beginner to advanced.)

Read more: http://www.investopedia.com/articles/forex/09/5-important-forex-attributes.asp#ixzz1eo1YSmGy

Forex: Dollar edges higher as stocks erase gains

2011-11-25T09:44:00.001-08:00

FXstreet.com (Córdoba) - The Dollar resumed the upside and moved closer to daily highs versus most competitors as US stock indexes reversed their early gains and turned flat minutes ahead of the Wall Street close.

After a short-lived bounce that was contained by the 1.3295 area, EUR/USD wobbled and dropped to the 1.3230 zone where it is currently quoting, 0.9% below its opening price and not far from its 7-week low of 1.3211.

GBP/USD shows a similar picture as it pulled back to the 1.5450 area after failing to rise past 1.5500. USD/JPY and USD/CHF hover barely below daily highs around 77.70 and 0.9300 respectively.

Currencies linked to commodities weakened versus the Dollar erasing intraday gains. AUD/USD is quoting at the 0.9720 area, virtually unchanged since opening, while USD/CAD rose back to the 1.0490 region.

Sri Lanka shares rebound after panic sell-off

2011-11-25T06:31:00.001-08:00

COLOMBO, Nov 25 (Reuters) - Sri Lanka's stock market closed down 1.04 percent on Friday, bouncing back after an erroneously entered trade triggered a panic selloff that forced a 30-minute trading halt when the sensitive Milanka Price Index dropped more than 5 percent.

Investors dumped shares amid fears of higher inflation and interest rates after this week's currency devaluation, and an erroneous trade in Distilleries Company of Sri Lanka PLC triggered panic.

The island nation's main share index plummeted 3.08 percent in early trade but closed 1.04 percent or 60.99 points weaker at 5,806.76, lowest since Sept.2, 2010.

The Colombo Stock Exchange in a statement said it is investigating the error trade.

The Milanka index, which comprises the most liquid 25 stocks, fell 5.13 percent to hit year low of 4,881.74 on a error trade closed 1.8 percent or 92.58 points weaker at 5,052.91.

Shares of Distilleries closed 3.74 percent weaker at 144 rupees a share from Thursday's close of 149.60.

The plantation sector index fell 2.53 percent on Friday, extending its weekly fall to 13.24 percent in reaction to a budget proposal to redistribute 37,000 acres of unused state planting land to small farmers.

Market heavyweight John Keells Holdings PLC ended 0.51 percent weaker at 174.10 rupees.

The day's turnover was 1.63 billion Sri Lanka rupees ($9 million), well below last year's average of 2.4 billion and this year's 2.4 billion. Average turnover in the last 10 sessions has been 986 million rupees.

Total volume was 106.3 million shares, against a five-day average of 60.7 million. The 30-day and 90-day average trading volumes were 55.9 million and 101 million. Last year's daily average was 67.9 million.

The bourse has fallen 14.4 percent since Oct. 1 and it is Asia's 11th-best performer with a year-to-date loss of 12.5 percent.

The bourse saw a net foreign inflow of 18.2 million rupees on Friday ending six straight outflow sessions, but thus far in 2011, offshore investors have sold 17.3 billion, and a record 26.4 billion in 2010.

Losers outnumbered gainers by 141 to 71 on Friday, Thomson Reuters data showed.

The rupee closed flat at 113.89/90 rupees a dollar from Thursday's close in thin trade, dealers said.

Dealers also said the pressure on the rupee eased after the central bank's comments to Reuters on Wednesday.

Two currency dealers Reuters spoke to said the central bank had sold at least $120 million since the devaluation to defend the currency at the new level amid depreciation pressure.

FACTORS TO WATCH: - Investors' moods after the devaluation - The potential for imported inflation post-devaluation - Reserve cost of defending the new rupee rate

Stock Market Crash - What Happens When the Stock Market Crashes?

2011-11-25T06:10:00.001-08:00

Over the last 18 months we've experienced a world financial stock market crash controlled completely by the bears. Many investors and traders are sitting on the fence and simply not participating, and remaining undecided.

Have you ever wondered on those days where billions of dollars are simply wiped suddenly from the stock market, what happens to that money.....surely it just can't vanish can it?

To put it simply, the Stock Market is really people, humans who are either a buyer or seller and controlled by emotions. Fear and greed tend to dominate human emotions...and this is what causes a stock market crash or commonly a Crash!

When enough sellers offload a stock because of their own fear of loss based on something they've heard, it will cause the price of that stock to drop. In the event of a disaster or bad news, especially on a global scale, when those sellers panic and sellout on a mass scale, stock prices plummet!

This is what causes a crash...so where does the money go?

When you really think about it - there must be someone willing to buy for a desperate / nervy investor to successfully sell their shares doesn't there?

And if a company has good management, solid financial prospects, and offers a very good ground for investing in before a stock market crash occurs, then what has changed about that company during and after a market crash?

For most companies like that, the only thing that changes is their share price.

For the savvy investor......this represents an awesome buying opportunity. Buy when others are fearful the Warren Buffett saying goes.

So while the novice investor dumps their stock and leaves the market once conditions become undecided or volatile, the savvy investor rubs their hands together in glee. This is the guy who loves a stock market crash, because more often than not, the volatile times are when the best bargains are to be had, just ask Warren Buffett.

Throughout a bear market, the only thing that affects a company's falling share price is the downturn in economic and market conditions. And while we as humans tend to think the good times will never end while we're in them, we also give in to the assumption that when things are bad that they will remain that way forever.

During these conditions, those who are inexperienced, impatient and fearful will often oversell their shares. So a stock market crash is really just a means for transferring funds out of the hands of those who don't know what they are doing and into the hands of those who know exactly what they are doing.

Thanks

Anthony Manly
Options Trading Course Trainer, friend, investor, author
wealth creator

Article Source: http://EzineArticles.com/3602362

Sri Lanka rupee flat; T-bills hit 16-mo high

2011-11-23T17:29:00.001-08:00

COLOMBO, Nov 23 (Reuters) - Sri Lanka's rupee ended flat on Wednesday after the central bank reimposed a trading band of 113.50/90, 30 cents below early trading levels, while the benchmark 91-day treasury bill rates shot up 44 basis points to a 16-month high.

The rupee closed flat at 113.89/90 rupees a dollar from Tuesday's close after it traded as high as 114.20 on the day, which was the upper end of the trading band set by the central bank at that point, traders said.

The central bank governor on Wednesday told Reuters the rupee will not be allowed to depreciate any further and the bank will keep the trading band at 113.50/90 for now.

Three currency dealers Reuters spoke to said the central bank paid at least $60 million on Wednesday to defend the currency at the new level amid depreciation pressure.

Dealers also said local and foreign investors tried to sell off rupee-denominated treasury bonds, but ran up against a lack of liquidity to cash out and buyers.

The 91-day T-bill hit a 16-month high of 7.95 percent at auction on Wednesday.

The stock market fell 0.42 percent or 25.59 points to 6,035.36 as many investors stayed away, looking for positive signals amid a credit crunch and margin calls.

Heavyweight John Keells Holdings PLC, which contributed to 9.5 percent of turnover, ended flat at 175
rupees, while No. 1 mobile phone operator Dialog Axiata PLC which accounted 9.4 percent of the days turnover closed flat at 7.80 rupees.

The plantation sector index edged up 0.35 percent in low volume after it fell 3.01 percent on Tuesday in reaction to a budget proposal to redistribute 37,000 acres of unused state planting land to small farmers.

The day's turnover was 603.9 million Sri Lanka rupees ($5.30 million), lowest since Nov. 16 and well below last year's average of 2.4 billion and this year's 2.4 billion. Average turnover in the last 10 sessions has been 822 million rupees.

Total volume was 38.7 million shares, against a five-day average of 50.7 million. The 30-day and 90-day average trading volumes were 55.1 million and 101.2 million. Last year's daily average was 67.9 million.

The bourse has fallen 11 percent since Oct. 1 and it is Asia's 10th-best performer with a year-to-date loss of 9.1 percent after being on the top for most of 2011, and giving the best returns in Asia in 2009 and 2010.
The bourse saw a net foreign outflow of 76.5 million rupees on Wednesday, and thus far in 2011, offshore investors have sold 17.3 billion, and a record 26.4 billion in 2010.

Losers outnumbered gainers by 108 to 67 on Wednesday,Thomson Reuters data showed.

FACTORS TO WATCH:
- If the central bank can maintain a narrow dollar trading
range
- Rupee depreciation due to heavy importer dollar demand
- Impact on the stock market due to acquisition bill
- Impact on the 2012 budget

Forex: GBP/USD coming lower, towards 1.5485/75 area - CharmerCharts

2011-11-23T02:22:00.001-08:00

FXstreet.com (Barcelona) - Pound recovery attempt from 1.5580 has been capped below 1.5655/65 resistance area, and the pair retreated again in Asia, breaching 1.5580 support, and, according to Carol Harmer, technical analyst at CharmerCharts, heading towards 1.5485/75 area.

Below 1.5580, the pair will extend losses towards 1.5485/75, says Harmer: "We lose 1.5580 and we are looking at the market coming quite a bit lower with 1.5485/75 then the targeted area. Here we cover shorts...Med term charts are beginning to go into extreme oversold territory, but the weekly charts are still firmly pointing lower and this will take precedence over the daily ones…"

Sri Lanka rupee down 3.1 percent after devaluation

2011-11-22T17:25:00.001-08:00

Cenbank sets rupee at 113.50/90, from 110.00/40
* Cenbank spends $15 mln to defend rupee-dealers
* Bond investors struggle to exit

COLOMBO, Nov 22 (Reuters) - Sri Lanka's rupee fell nearly 3.1 percent on Tuesday as traders tested the lower limit of the trading range set by a state bank in the morning, to implement a 3 percent devaluation ordered by the president the day before.

The rupee closed at 113.89/90 rupees a dollar on Tuesday from Monday's 110.35/40, the level where it froze on Monday.Central Bank Governor Ajith Nivard Cabraal on Tuesday told Reuters the government had set the new lower rupee rate via the state-owned Bank of Ceylon, which was quoting 113.50/113.90 at
the start of trading.

President Mahinda Rajapaksa, in his capacity as finance minister, shocked the market by announcing the devaluation in his budget speech on Monday, which ground trading to a halt.

Two currency dealers Reuters spoke to said the central bank paid at least $15 million on Tuesday to defend the currency at the new level amid depreciation pressure as local and foreign investors tried to sell off rupee-denominated treasury bonds.

"But there were no bids on the buying side on the bonds," one of the dealers said on condition of anonymity. Several dealers said some foreign investors tried to sell their bonds, but ran up against a lack of liquidity to cash out the investments and a minimal secondary market of buyers.

The stock market, fell 0.96 percent or 58.91 points to 6,060.95 as many investors stayed away.

Heavyweight John Keells Holdings PLC, which contributed to 48 percent of turnover, ended flat at 175 rupees.

Analysts said the plantation sector index fell 3.01 percent after a budget proposal to redistribute 37,000 acres of unused state planting land to small farmers.

The day's turnover was 1.2 billion Sri Lanka rupees ($10.9 million), highest since Nov. 18 and less than last year's average of 2.4 billion and this year's 2.5 billion. Average turnover in the last 10 sessions has been 832 million rupees.

Total volume was 41.8 million shares, against a five-day average of 61.1 million. The 30-day and 90-day average trading volumes were 56.3 million and 101.8 million. Last year's daily average was 67.9 million.

The bourse has fallen 10.7 percent since Oct. 1 and it fell to Asia's 10th-best performer with a year-to-date loss of 8.7 percent after being on the top for most of 2011, and giving the best returns in Asia in 2009 and 2010.

The bourse saw a net foreign outflow of 265 million rupees on Tuesday, and thus far in 2011, offshore investors have sold 17.2 billion, and a record 26.4 billion in 2010.

Losers outnumbered gainers by 152 to 35 on Tuesday, Thomson Reuters data showed.

FACTORS TO WATCH:
- If the central bank can maintain a narrow dollar trading
range
- Rupee depreciation due to heavy importer dollar demand
- Impact on the stock market due to acquisition bill
- Impact on the 2012 budget

Sri Lanka rupee trade halted after devaluation; stx slip

2011-11-21T10:12:00.001-08:00

Rupee trading freezes after devaluation
* Investors wary of 2012 budget proposals
* Stx down; foreign outflow at 51.7 million rupees

COLOMBO, Nov 21 (Reuters) - Sri Lanka rupee currency trading froze on Monday after President Mahinda Rajapaksa announced a surprise 3 percent devaluation with immediate effect in the 2012 budget speech to help exporters and cut import costs.

Central Bank Governor Ajith Nivard Cabraal said the devaluation will take effect from Tuesday, but assured that there will not be any further cut in the exchange rate in the immediate future.

"The rupee traded at 110.40 rupees a dollar before the announcement, but then the trading was totally halted," said a dealer asking not to be named. "There was a quote for 114.70 rupees in the market with a wide range, but everybody was waiting for the central bank's direction."

Analysts from both local and foreign banks in Colombo said they were surprised Rajapaksa announced the devaluation, since it is ordinarily the central bank's purview, but welcomed the move.

The rupee has been under tremendous pressure, with the International Monetary Fund urging more flexibility. Sri Lanka is in the middle of a $2.6 billion loan programme with the global lender.

On Friday the rupee weakened to 110.38/40 a dollar from Thursday's 110.18/20, after a state bank sold dollars at 110.40, raising the dollar trading band by 20 cents to 110.00/110.40
from 109.80/110.20.

The stock market, which closed as the budget was being presented, fell 0.34 percent or 20.66 points weaker to 6,119.86 as many investors stayed on the sidelines, awaiting cues from the budget.

Heavyweight John Keells Holdings PLC, which contributed to 60 percent of turnover, rose 0.34 percent to 175 rupees on last-minute local and foreign institutional interest.

Analysts said a budget proposal to redistribute 37,000 acres of unused state land given to plantations may hit the sector, while tourism shares may gain on some positive concessions.

The day's turnover was 871 million Sri Lanka rupees ($7.9 million), lowest since Nov. 17 and well below last year's average of 2.4 billion and this year's 2.5 billion. Average turnover in the last 10 sessions has been 757 million rupees.

Total volume was 29.3 million shares, lowest since Nov. 11, against a five-day average of 62.3 million. The 30-day and 90-day average trading volumes were 57.8 million and 102.3 million. Last year's daily average was 67.9 million.

The bourse has fallen 9.8 percent since Oct. 1 and it fell to Asia's eighth-best performer with a year-to-date loss of 7.8 percent after being on the top for most of 2011, and giving the best returns in Asia in 2009 and 2010.

The bourse saw a net foreign outflow of 51.7 million rupees on Monday, and thus far in 2011, offshore investors have sold 16.9 billion, and a record 26.4 billion in 2010. Losers outnumbered gainers by 105 to 82 on Monday, Thomson Reuters data showed.

FACTORS TO WATCH:
- If the central bank can maintain a narrow dollar trading
range
- Rupee depreciation due to heavy importer dollar demand
- Impact on the stock market due to acquisition bill
- Impact on the 2012 budget

Wall Street falls sharply amid debt concerns

2011-11-21T09:26:00.001-08:00

FXstreet.com (Córdoba) - US stocks fell more than 2% in early trade Monday amid ongoing euro zone debt woes and ahead of an expected announcement from the US congressional "super committee" that it had failed to reach a deficit reduction agreement.

The Dow Jones industrial average fell 245 points or 2.08% to 11,550. The Standard & Poor's 500 Index lost 24 points or 2.02% to 1,191. The Nasdaq Composite Index shed 55 points or 2.16% to 2,517.

The US congressional committee appointed by President Barack Obama three months ago is expected to announce its failure to prepare a bipartisan draft plan of tax increases and spending cuts necessary to reduce national deficit by $1.2 trillion over 10 years, 2 days before the deadline.

In the macroeconomic domain, US existing home sales rose by 1.4% in October to 4.97 million, surpassing market expectations.

In Europe, stocks fell sharply after Moody's warned about France's rating outlook, while Spanish bond yields rose amid elections of a new government. The Stoxx Europe 600 dropped 2.5%.

Gold fell to near $1,700 an ounce while crude oil futures dropped 2.0% to $95.60 a barrel.

Virgin - Richard Branson's Success Story

2011-11-19T09:02:00.001-08:00

(Ezine articles) Growing Up

Branson dropped out of school in 1967 at the age of 16 and started a magazine called Student. He hoped it would be a forum for politically-minded youth. He soon was publishing essays and interviews from such figures as Jean-Paul Sartre, James Baldwin, Alice Walker, and Robert Graves. Despite such a roster of great minds and literary figures, the magazine never made money and seemed bound to fail.

Starting the Business

Branson began marketing his next idea in the pages of Student; selling albums at a reduced rate through the mail. It rapidly became a more profitable business than the magazine itself. The staff of Student suddenly found themselves the employees of the Virgin discount record store. "Virgin" because no one had been in business before. Virgin had been going strongly but it was discovered Branson was dodging his tax payments. He was arrested and jailed.

Building an Empire

An out-of-court settlement was reached and, determined to keep the balance sheets carefully, Virgin Records was founded in 1973. Mike Oldfield's progressive "Tubular Bells" was the first record released through Virgin and became an international success. But, it was the signing of the Sex Pistols to his label in 1977 that truly established Virgin Records. Though the Pistols broke up soon after, Virgin became the largest indie label in the world. Bands like the Rolling Stone, Peter Gabriel and UB40 were signed to Virgin.

Over the next six years, Branson started over fifty different companies encompassing everything from filmmaking to air conditioner cleaning. Though he was making more than $17 million dollars from his various companies collectively, Branson insists that money is not the motivation behind his involvement in so many ventures. Rather, he enjoys attempting to do something more effectively than those who have tried before him.

In 1984, Branson started Virgin Atlantic Airlines - a company that would prove to be a great challenge as well as the cause of financial distress. Branson ignored discouraging comments that told him he could never compete with British Airways, and to look to the example of those who had failed before. The reason being that he had observed how airline companies did not look after their customers adequately enough - so he would be the one to bring affordable and enjoyable flights to the public. Virgin Air was immediately recognized for its service and luxury. In-flight massages, hydrotherapy baths and seat-back video screens were all part of the experience on-board a Virgin aircraft.

With fuel prices having doubled in the early '90s, terrorist attacks making people afraid to fly, and BA launching a campaign to put Branson out of the airline business, Virgin Atlantic struggled to stay afloat. Branson was forced to sell Virgin Records in order to raise enough money to keep Virgin Atlantic and pay off his creditors. The sale of the company that gave him his start was a crushing blow.

From this point on, Branson developed a new approach to business called "branded venture capital". Through this method, Branson licenses the well-known Virgin name and logo in exchange for a controlling interest in the venture. Consequently, Branson has his company's name fixed to more than 200 different companies, among which are Virgin Bridal, Virgin Publishing, a blimp company and a modeling agency.

Branson is known for his unusual business practices (no central headquarters, no board meetings, and he can't operate a computer), his showy publicity stunts (like driving a tank into Times Square and buzzing over Big Ben in an Airbus jet), and his adventurous exploits (he was the first person to cross the Atlantic in a hot air balloon and has attempted three times to fly it around the world). It might be thought that such an approach to business could have ruined him, but Virgin is a towering $5 billion dollar giant. And Branson keeps dreaming for the future. In discussing the prospect of starting a shuttle service into space, Branson has said, "Why not? It's virgin territory."

GBP/USD

2011-11-19T00:06:00.001-08:00

(fxstreet) The pair finished the week with a net loss of around 200pips as concerns over the stability in Europe continued to drive investor sentiment. In terms of the UK specific commentary, this week saw the release of higher than expected ILO unemployment rate, while the BoE slashed its growth and inflation outlook in its quarterly inflation report. As a result, there is a growing consensus that the central bank will boost the Asset Purchase Facility (APF) once the current program expires. In terms of technical levels, supports are seen at the 21Day Lower Bollinger Level at 1.5746 and then at 1.5682. On the other hand, resistance levels are seen at the 10DMA line at 1.5910 and then at the 21DMA line at 1.5964

Euro Crisis At A Tipping Point?

2011-11-18T23:45:00.001-08:00

(Fxstreet) The European sovereign debt crisis is rapidly approaching what could be a significant tipping point as it threatens to spread to the heart of Europe. In recent days Italian 10-year bond yields have soared to 7.22% and today Spain was forced to pay 6.975% at its auction. Even French 10-year yields have climbed to 3.71%, its widest spread over German bond yields since the Euro Zone was started. All of this has happened despite large ECB purchases of periphery country bonds over the last few months and the installation of technocratic governments in Greece and Italy.

The fear has now spread to the heart of Europe. Jennifer Mckeown, senior European economist at Capital Economics stated that, "Growing concerns about France threatens to take the Eurozone crisis to a new level. If a further rise in bond yields or large bank losses leave France unable to support the periphery, the burden on Germany and the few remaining 'core' might become too heavy to tolerate."

Although hopes were raised based on new technocratic prime ministers in Greece and Italy, any policy based on fiscal restraint and austerity will send their economies into further decline resulting in even higher deficits and bond yields. This could be accompanied by further defaults that send shockwaves through the global economy and financial system.

Despite the urgency, Europe's leaders still cannot decide upon the best course of action since all of the available options have potentially serious side effects on the economy and financial system at a time when Europe is already headed for a recession, if it is not already in one. EU industrial production for October was down 2% while Germany's ZEW (confidence index) has entered deep recessionary territory. The leading indicators for Italy and France have also dropped to levels indicating recessions in the past. Austerity unaccompanied by national monetary policy and the ability to devalue can only exacerbate this negative trend.

The problems appear to be spreading to the rest of the globe as well. Both Indian and Brazilian industrial production is weakening while their leading indexes are pointing down. Korean industrial production has been flat all year. Notably, the developing nations' economies are heavily export-driven, and Europe is an important customer for their goods, although there are undoubtedly country-specific factors at work as well.

The U.S. economy is far from immune. Yesterday a report from Fitch Ratings warned of the increasing risks facing U.S. banks from the European crisis. They said U.S. lenders "could be greatly affected if contagion continues to spread beyond the stressed European markets." Significantly, investors don't have a lot of transparency from U.S banks in terms of the amount of exposure to various entities or the ability of their hedging strategies to hold up under crisis conditions. They also have vivid memories of 2008 and are quick to jump ship on any hint of problems.

While U.S. economic numbers have recently improved somewhat there are still big hurdles ahead. Consumers have increased spending recently only by reducing the savings rate back down to a paltry 4% while personal income remains in the doldrums. The need for households to deleverage will keep consumer spending under pressure for some time to come. Unemployment remains elevated and housing won't pick up for some time. Headwinds to growth include the impending tightening of fiscal policy and the year-end expiration of the 100% depreciation allowance on capital equipment that undoubtedly shifted some capital expenditures into 2011 from 2012. The ECRI, which has a good record on accurately forecasting the economic cycle, has publically forecast a recession in the period ahead. Furthermore, in a study just released, the San Francisco Fed concluded that "the odds are greater than 50% that we will experience a recession in early 2012."

A large number of pundits believe that there is so much much fear in the market that it can only go up from here. In our view, however, the market has been in a trading range based on indecision and that there is every bit as much fear of missing the next bull market as there is of getting caught in a severe downturn. We continue to believe that the downside risks far outweigh the potential rewards at this time.

Sri Lanka stocks up ahead of budget; rupee weaker

2011-11-18T23:30:00.001-08:00

Investors snap up shares ahead of 2012 budget
* Foreign outflow of 182.9 million rupees
* Rupee weaker; cenbank ups trading band

COLOMBO, Nov 18 (Reuters) - Sri Lanka's stock market gained on Friday in bargain-hunting ahead of the 2012 budget next week, while the rupee currency ended weaker as the central
bank raised the dollar trading band.

The main share index rose 0.79 percent or 47.96 points firmer at 6,140.52, highest since Nov. 15. The government on Wednesday after the market closed said it had no plans to target any other businesses for takeover aside from the 37 properties listed in an asset acquisition act passed last week.

Shares in Lanka Walltile PLC rose 5.4 percent to 100.10 rupees. After the market closed, Lanka Ceramic PLC informed the bourse that it had bought 5.5 million
shares of Lanka Walltile.

Market heavyweight John Keells Holdings PLC, which accounted for a 28.2 percent of the day's Turnover, fell 0.29 percent to 174.40 rupees.

The bourse fell 4.9 percent in first three days of the week and 2.87 percent so far this week, which analysts attributed to investor confusion about the legislation. Credit ratings agencies warned the act could hurt investor sentiment.

The day's turnover was 1.8 billion Sri Lanka rupees ($16.3 million), highest since Oct. 31 but less than last year's average of 2.4 billion and this year's 2.5 billion. Average turnover in the last 10 sessions has been 757 million rupees.\

Total volume was 86.4 million shares, highest since Nov. 16, against a five-day average of 65.1 million. The 30-day and 90-day average trading volumes were 59.5 million and 102.8 million. Last year's daily average was 67.9 million.

The bourse has fallen 9.5 percent since Oct. 1 and is Asia's seventh-best performer with a year-to-date loss of 7.5 percent after being on the top for most of 2011, and giving the best returns in Asia in 2009 and 2010.
The bourse saw a net foreign outflow of 182.9 million rupees on Friday, and thus far in 2011, offshore investors have sold 16.9 billion, and a record 26.4 billion in 2010.

Gainers outnumbered losers by 154 to 49 on Friday, Thomson Reuters data showed.

The rupee weakened to 110.38/40 a dollar from Thursday's 110.18/20, after a state bank sold dollars at 110.40, raising the dollar trading band by 20 cents to 110.00/110.40 from 109.80/110.20 in line with regional currency depreciation and heavy importer dollar demand for dollars, dealers said.

FACTORS TO WATCH:
- If the central bank can maintain a narrow dollar trading
range
- Rupee depreciation due to heavy importer dollar demand
- Impact on the stock market due to acquisition bill

Markets eyeing developments in Italy and Greece

2011-11-16T07:11:00.001-08:00

FXstreet.com (Barcelona) - European markets bounced up temporarily on Wednesday after two days of posting decreases and a negative opening. ECB's rumored purchases of Italian and Spanish bonds amounting to 2.000 million euro stimulated investors' optimism and caused the Euro to to pick up from fresh multi-week lows. The Euro was also affected by recent reports that UniCredit will ask the ECB for more funding for Italian banks, according to Reuters.

In Italy Mario Monti is preparing to announce the composition of his new cabinet. It is rumored that he will combine his duties as prime minister with the Finance portfolio. Monti hopes that by presenting the new government he will calm the markets.

In Greece, the government formed by Lucas Papademos will be subject to a vote of confidence today, which it is expected to survive without problems because, as Finance Minister Evangelos Venizelos believes, “It is a symbolic, political action.” The Greek PM however will need to quickly begin implementing painful reforms despite divisions in his coalition and amid continuing street protests.

Meanwhile, Herman Van Rompuy and José Manuel Durao Barroso revealed on Wednesday before the European Parliament a proposition to allow the EU to inspect the Member States' budgets and suspend their right to vote in case they do not fulfill all the required fiscal commitments. The proposition will be considered during the upcoming EU leaders' summit at the beginning of December