Sri Lanka Equity Forum
Dear Reader,

Registration with the Sri Lanka Equity Forum would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
Sri Lanka Equity Forum
Sri Lanka Equity Forum

Discussion Forum for Stock Market Investors in Sri Lanka

සිංහල පරිවර්තනය
Submit Post
Submit Post
Market Place

Add an ad

View all ads

Latest topics

» INVITATION TO FORUM MODERATORS
by mark Today at 8:04 am

» CSE from Dawn of Peace to Rebirth of Terrorism
by soileconomy Today at 7:52 am

» Pakistan’s trade with Sri Lanka comes to a halt
by Teller Today at 3:26 am

» INVEST ON AAIC, HASU, UAL.... YOU WILL NEVER WORRY......
by karuna2 Yesterday at 11:10 pm

» Sri Lanka’s largest pension fund EPF return to Colombo Stocks
by wisdom79 Yesterday at 10:46 pm

» Sri Lanka’s Top 10 Imports
by God Father Yesterday at 8:34 pm

» Sri Lanka's EPF enters stock market with blood in the streets
by God Father Yesterday at 8:21 pm

» Sri Lanka caught in the big power conflicts
by God Father Yesterday at 8:16 pm

» Why AAIC Should trade above RS.50/-
by wisdom79 Yesterday at 8:04 pm

» Market will test 4700
by karuna2 Yesterday at 8:04 pm

» Daily Stock Market Update
by Insights Equity Yesterday at 5:21 pm

» Hight Profile Selling at EAST
by Uaecoindubai Yesterday at 4:43 pm

» A Trader’s Guide to FIX Engine
by Brenda John Yesterday at 11:24 am

» Reasons for market to crash
by Uaecoindubai Yesterday at 10:08 am

» ගෙවුම් ශේෂය, වාහන බලපත් හා ඩොලරයේ මිල
by ChooBoy Mon May 20, 2019 5:59 pm

» Terrorism and its Impact on the Sri Lankan Economy
by ChooBoy Mon May 20, 2019 5:41 pm

» Top 10 Small Scale Business ideas & Opportunities in Sri Lanka 2019
by ChooBoy Mon May 20, 2019 4:39 pm

» Sri Lanka Equity Market Place
by Sstar Mon May 20, 2019 4:36 pm

» Sri Lanka Equity Market Talk
by Sstar Mon May 20, 2019 12:23 pm

» Sri Lanka Equity Market Help
by Sstar Mon May 20, 2019 12:18 pm

» LOFC IN FOR A BIG RUN
by stockback Sun May 19, 2019 5:20 pm

» Look PAP Amazing company
by Uaecoindubai Sun May 19, 2019 5:13 pm

» Sri Lanka Equity Market Place
by Uaecoindubai Sun May 19, 2019 5:13 pm

» CSE NOW AND AFTER ELECTION
by Ahcha Sun May 19, 2019 4:40 pm

» Do not be greedy, rely on small profits Guide to the markets
by Asoka Samarakone Sun May 19, 2019 12:11 pm

» 6 % of EPF funds in stock market
by hammurabi Sat May 18, 2019 3:47 pm

» Weekly Stock Market Roundup
by Insights Equity Sat May 18, 2019 12:54 pm

» EPF Enter Stock Market
by visvajith Sat May 18, 2019 12:20 pm

» UNION BANK (UBC) to be takeover by Union bank of india
by Soilconomy Sat May 18, 2019 8:54 am

» SEC yet to publish its 2017 Annual Report
by ChooBoy Sat May 18, 2019 6:01 am

» EAST Steady at 18
by Chanaka303 Fri May 17, 2019 10:20 pm

» 20th MAY IS IT A HOLIDAY FOR CSE?
by Winner123 Fri May 17, 2019 1:33 pm

» East total Hotel deal value US $ 58 Mn there will be another Dividend, Nahil's family is smart
by karuna2 Fri May 17, 2019 6:48 am

» What is going on with TFC.N0000
by Gihan04 Thu May 16, 2019 11:58 pm

» Sri Lanka's Commercial Bank's deposits surpass landmark Rs 1 Trillion in Q1 2019
by hammurabi Thu May 16, 2019 8:05 pm

» LIOC upward curve
by hammurabi Thu May 16, 2019 7:42 pm

» Maithree pala siresenas next winning chance
by Uaecoindubai Thu May 16, 2019 5:10 pm

» RENUKA CAPITAL PLC KZOO.N0000@2.80
by Uaecoindubai Thu May 16, 2019 5:05 pm

» Mahaweli coconut will be listed soon
by Uaecoindubai Thu May 16, 2019 4:57 pm

» BALA can come down to 9/-
by Uaecoindubai Thu May 16, 2019 1:08 pm

» Sri Lanka's tourist industry has debt and tax relief of up to two years????
by Uaecoindubai Thu May 16, 2019 1:08 pm

» BFN slowly slowly unloading
by Uaecoindubai Thu May 16, 2019 1:04 pm

» Dark times - Sampath Bank
by Uaecoindubai Thu May 16, 2019 12:55 pm

You are not connected. Please login or register

Sri Lanka Equity Forum » Stock Market Talk » WHAT IS THE CONNETION BETWEEN BANK INTEREST RATES AND THE FOREIGN INVESTMENTS ( BRIEF EXPLAINATION)

WHAT IS THE CONNETION BETWEEN BANK INTEREST RATES AND THE FOREIGN INVESTMENTS ( BRIEF EXPLAINATION)

Go down  Message [Page 1 of 1]

kalu_mahaththaya


Equity Analytic
Equity Analytic
BANK INTEREST RATES AND THE CENTRAL BANK POLICY RATES (SDFR AND SLFR) TO CONTROL THE INFLATION. BANK INTEREST RATES ARE ANOTHER TOOL FOR THE SAME PURPOSE (MONETORY POLICY - OTHER TOOL IS STATUTORY RESERVE RATIO).

AT THIS MOMENT, THE CENTRAL BANK HAS INCREASED THEIR POLICY RATES TO ABSORB THE EXCESS LIQUIDITY FROM THE ECONOMY TO CONTROL THE DEPRECIATION OF RUPEE AGAINST US DOLLAR.

FOREIGN INVESTMENTS ARE CONCERNED ON TWO ECONOMICAL FACTORS.

1. PRICES OF SHARES
2. EXCHANGE RATES

WHEN THE BANK INTEREST RATES ARE HIGH PEOPLE TENDS INVEST IN BANK DEPOSITS RATHER INVEST IN STOCKS. THEREFORE THEY SELL SHARES AND SHARE PRICES GO DOWN.

THIS IS THE TIME FOREIGN INVESTORS COME TO THE MARKET. THEIR EXPECTATION ARE TO BUY SHARE AT THEIR LOWES PRICE IN HIGHER EXCHANGE RATES (THEY GAIN MORE RUPEES FOR DOLLARS). WHEN THE ECONOMY BECOMES STABLE THE RUPEE BECOMES APPRECIATED AGAINST DOLLAR.

AT THIS TIME, BANKS DECREASE THEIR INTEREST RATES AND CENTRAL BANK REDUCE THEIR POLICY RATES ( THIS IS NOT A SINGLE EVENT BUT CHAIN OF INCIDENTS BUT HERE, I EXPLAIN WHAT NEED FOR LOCAL INVESTORS) THIS WILL DISCOURAGE PEOPLE TO KEEP DEPOSITS AND ENCOURAGE TO BORROW FROM BANKS.

NOW, THE LOCAL INVESTORS COME TO THE MARKET AND START PURCHASING SHARES.

WHEN WE CONSIDER THE SHARE QUANTITIES IN THE MARKET, MOST OF VALUABLE " FREE FLOAT SHARES "ARE ABSORBED BY FOREIGN INVESTORS AT THAT POINT. WHEN LOCAL INVESTORS COME AND PURCHASE THE SHARES, THE PRICES OF SHARES INCREASING RAPIDLY DUE TO LACK OF AVAILABLE SHARES IN THE FREE FLOAT.

AT THAT POINT FOREIGN INVESTORS TENDS TO SELL THEIR SHARES. THEIR OBJECTIVE IS TO GAIN HIGH PROFITS FOR THEIR INVESTMENTS AND GAIN MORE DOLLORS IN ITS EXCHANGE.

THE SHARE PRICES OF BLUE CHIPS AT THE ECONOMIC BOOMING PERIOD AND THE LAGGING PERIOD MAY NOT HAVE MUCH DIFFERENCE..BUT FOREING INVESTORS GAIN  PROFIT AT THE CURRENCY EXCHANGE. THIS THING CAN NOT BE APPLIED FOR LOCAL INVESTORS BECAUSE THEY COULD ONLY GAIN A PROFIT WHEN PRICES OF SHARES ARE GOING UP. THEREFORE, HIGHER FOREIGN INVESTMENTS MAY NOT GIVE HIGHER RETURNS FOR LOCAL INESTORS.

I THIS JUST A SIMPLE EXPLAINATION TO SHOW THE CONNECTION BETWEEN SHARE PRICES, INTEREST RATES AND INVESTMENTS. THERE ARE MANY MORE MICRO AND MACRO FACTORS WHICH INFLUENCE THE INCREASING AND DECREASING OF SHARE PRICES. BUT THIS MAY GIVE YOU A LITTLE HELP TO CALCULATE THE POSITIION WHEN YOU TEND TO PURCHASE OR SELL SHARES...

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum