Once again speculation in East African Cables stock has resulted in an an unconventional jump from 204 to 213 shillings (9 shillings) per share on a volume of just under 3,000 shares traded yesterday. Compare that to another fast rising stock - HFCK that gained 2 shillings (24.75 to 26.75 shillings) on a volume of about 300,000 shares traded on the same day.
Earlier this year, EA Cables made another astounding 17 shilling jump on an even smaller volume of just 1,000 shares.
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10 comments:
Bankelele,
I would not consider that type of move in a stock unusual or astounding as that is only about 5%. Its quite common for even the most liquid stocks in the world, such as Goog, to move over 10% in a day. Even very liquid commodities can move that much (see Crude Oil yesterday which moved almost 4% in a single day).
The fiery one (Forbes 400 by 2010).
fiery one: The movement is ok, but at those miniscule volumes traded?
I smell a rat here! These two stocks have been going at it for a long time and the sudden movements might be signaling some sort of internal "artificial" stock price enhancement! Whatever it is - such stock movements scare the hell out of any sane investors.
Maybe am crazy or something - but someone please look at these charts (Volume and price charts for E.A Cables and Housing Finance)
EA CABLES:
http://www.nairobist.com/stocks/listing/?id=31&action=more_details
HOUSING FINANCE
http://www.nairobist.com/stocks/listing/index.php?id=16&action=more_details
Compare these two charts and tell me tell me if this is natural stock price growth. After analyzing those go to finance.yahoo.com or wsj.com and look at how stock prices grow relative to their volume traded? Something very very strange on!
A couple of points Bankelele. First, I think this is a terrific blog. You are on to something as I'm sure many Kenyans are tired of politics 24/7.
Point taken regarding the low volume but isn't low volume a problem generally with the vast majority of the NSE? I've seen days where the market volume in dollars for the entire NSE is only around 2 million! On a global scale this is a beyond laughable (compare to 1.5 trillion daily in foreign exchange) so I guess my response is I don't see anything remarkable about the low volume on these two stocks relative to the vast majority of the stocks traded on the NSE.
In my humble opinion (despite my moniker), there is very little reason -aside from patriotism- to invest in the NSE given the low volume, high commissions, delayed settlements and other structural problems, etc. At the end of the day, the most patriotic thing one can do is try to accumulate wealth wherever in the world you find the best opportunities and then transfer it back (e.g., by helping family) especially given that its now possible to easily trade on global markets over the internet.
The fiery one
Hey Anonymous,
Are you related to any of these companies? You seem bitter bana! I think what Bankelele is pointing out here is that there is something unusual with these trades (EA Cables). Anyone whose taken Finance 101 understands the relationship between liquidity and stock price movement. Patriotism is the last thing an investor should consider when making sound investments - I only invest because I am looking for good/guaranteed returns. If something doesn't seem right - then we ought to find out why and I think Bankeleleasked the right questions- We all know the Stock market in Kenya is a weak-efficient market and hopefully the likes of Bankelele will help make this market more efficient.
Hello Stock Yangu,
Your message cracked me up. No need to be so defensive. I just stated a few facts and you responded with personalized insults (e.g., your implying I know nothing about finance by stating "anyone who has taken finance 101 blah blah blah").
Again, I was only trying to point out a few facts that can present a problem to novice investors on the NSE. My only point in response to Bankelele's post is that the problems discussed are not restricted to the companies mentioned - they are very common on the NSE. I backed this up by stating some facts, e.g. low volume (the daily volume on the NSE is less than what I as a small-time investor trade on many days), (2) commisions are way too high (often up to 4 or 5% of the total trade. This is unacceptable. I just sold some Gold contracts a few minutes ago in the expectation that the price of Gold will drop over the next day or two and paid $7 per contract in commissions - each contract represents approx. $80k of Gold. I would not have made the trade if the commissions were $4,000 as opposed to $7). (3) Settlement takes too long (several days) before you have access to your cash as Bankelele has pointed out in prior posts.
I also feel I should get a bit personal in response to you (I give as good as I get on every level). Unlike you, I will respond to specific statements. Remember this, there is no such thing as "guaranteed returns" in any stock investment as you mention in your post! (that's a good one by the way).
In any event, I was hoping we could try to be constructive in this forum by helping each other become better investors. I only wanted to start by adding my two cents in response to Bankelele's post. My point is simply that the problems mentioned are systemic and not restricted to the stocks that have been identified as problematic. I didn't realize a simple comment like this would happen the door to personal insults. I hope these issues are resolved one day so we can all participate.
Despite all this, I wish you the best in your investing and many happy returns.
The fiery one.
Didn't mean to turn this personal. Your last comments made everything clear. Hopefully we can get more people involved in such discussions.
"Learning new things everyday"
Fiery One & Stock Yangu: Thanks for the constructive and educational debate which is very welcome here.
As a footnote, EA Cables contiuned its astounding growth up 7 shilings yesterday 213 to 220 but on a (more regular) volume of 92,375 shares traded.
Hello Stock Yangu,
I am also responsible for some of the misunderstanding and I apologize in that regard. I look forward to many constructive and mutually beneficial discussions with you.
Bankelele,
It is a pleasure meeting like-minded Kenyans. I am currently watching Gold in London and expect to add to my position in which I hope to profit from a drop in price over the next few days (currently at $682/ounce).
The fiery one!
Just for clarification purposes, i am a different guy from the original anonymous who has been posting comments to this post. Continuing the education thingy (not sure if this applies to EA Cables though since this thin trading happened on one day only), as a guy who regularly trades stocks in the US, i wish to point out that thinly traded (low volume) stocks actually fluctuate MORE (and hence are considered much riskier) than stocks with high liquidity.
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