Turnover fell for the fourth straight day as the Vientiane stock exchange's market liquidity came under pressure again yesterday. The index may have gained 3.64 percent in the last session yesterday but that was insignificant when volumes and diminishing daily turnover are taken into account. It's been a bit like waiting and watching for the kettle to boil, as stock prices again remained stable in a relatively tight holding pattern and as a result volumes fell away.
In what has become a very familiar pattern for the week, no trades were recorded in the first 3 closings on Thursday. The week's trading has been dreary, having recorded three successive days of falling volumes of -74, -70 and -50 percent. The liquidity (value of turnover) has also suffered with the big daily falls of -83, -65 and -42 percent respectively. This week's daily average has fallen -48 percent compared to last week from US$135,500 to an average of US$71,000 per day. The close yesterday was poor as the exchange just managed to register 10,352 shares down 50 percent to the previous day. Turnover remained suppressed down 42 percent compared to Wednesday at 59,842,600 kip. That figure was well off last week's daily average at only US$7,484 and firm identifiable buy-in opportunities still exist.
BCEL in yesterday's close reclaimed 150 kip to 7,550 kip and EDL-Gen remained becalmed at 4,250 kip.
Opinions will always differ but it appears local shareholders, based on “fundamentals” and the low volumes, would be best to hold and accumulate stock and dismiss any contemplation of selling.
Strategically experienced traders would see events as a time to go defensive, await a rally and revalue their holdings for BCEL to at least 8,500 kip and EDL-Gen to 5,000 kip. That reasoning is arrived at after examing trades and moving averages, which support that the stocks are “oversold” and “undervalued” at current trading rates.
Technical Analysis applied on Wednesday sees that at 911.58 points the Lao LSX Index is trading -1.63 percent below its 20 day moving average, which sits at 926.44 and -5.64 percent below the 100 day moving average of 963.00 points.
At 4,250 kip, EDL-Gen is trading down -1.62 percent below its 20 day moving average price of 4,230 and -6.75 percent below its 4,560 kip 100 day moving average price.
BCEL within 50 kip is right on its 20 and 100 day moving average price at 7,400 kip, indicating that a breakout to the upside is long overdue.
As for fundamentals, they are positive, supported by BCEL's released profit results of a 200 billion kip (US$2.60 million) 9 months 2011 YTD; a price rally is certainly warranted and overdue.
EDL-Gen fundamentals: investors should take into account that EDL-Gen will be an indirect beneficiary of a recent EDL loan of US$300 million, negotiated with Krung Thai Bank (KTB) for the expansion and improvement of the EDL network. That long term will directly benefit EDL's efficiency in power generation. EDL-Gen as the sole electricity distributor in Laos will receive any transposed improvements EDL passes on to the electricity grid. EDL (regarded as and often referred to as the parent company of EDL-Gen) also signed off a US$500,000 agreement to conduct a financial analysis and study of EDL's management and planning. That consortium agreement was recently made between EDL and KTB Advisory Company Limited and Mekong IVM and Consultants Company Limited.