Monday, February 22, 2016

How can margin call be good?

I read an article or a blog. The person claims that he faced margin call recently, but because his stock had already appreciated and it was an opportune time to sell. When the margin call subsided, he will continue to buy as the stock according to him is undervalued.


Investors. THINK. How can your stocks forced sold by your lenders be good?

It does not matter if the stock is undervalued or a wake up call. An investor has much less control during margin calls and stocks can be bearish for a long long time - like many months. When that happens, your holdings can be totally wiped out. Margin call can be especially painful when the holdings is large in proportion to the free floated shares. Imagine once the lender commence a margin call, and action is not taken to remedy, it can be a continuous spiral causing the stock to be continually shorted. That's how in some cases, market crash happened.

Stocks in the short term can be really volatile especially in today's age where computer algorithm trading creates huge volatility in the market.

This is not about borrowings for trading (as I am not totally against it), but be sure you have strong enough collateral to sustain. This advice or statement so irresponsible is really bad for man on the street who is discovering investments step by step.

The only instance it is good for the investor is when you act in opposite to the force sale i.e. it is opportune time to buy. When banks force sell, opportunists buy.

Thursday, February 11, 2016

Airasia: Sale by Wellington and EPF

I am not sure whether you will find this useful, but I have been working on some numbers in the selloff by Wellington and EPF (only data since this year). 56 million shares sold by both Wellington and EPF constitute about 1.47% of total shares of Airasia.

Wellington still has about 170 million stocks to sell, that is it intends to sell all. The way Wellington has been selling it seems so. EPF has around 150 million stocks. If both of them sells some 3 million stocks a day, it takes about 107 trading days (about 4 months) to fully sell. In an earlier article, I have mentioned of why Airasia's shares will not move up until the largest of holders have fully stopped selling.

I can't comprehend why these 2 largest shareholders have been selling. Wellington, perhaps are pulling themselves away from emerging markets. EPF? Well, you do not know what they are doing right? In my mind, they are buying worse off stocks. One should know, EPF will be able to control Malaysian stocks easily (which is also why the world have been facing selloff in the last 1 month while KLCI basically moved a fraction lower as against others.) If you noticed, now, basically EPF have been the biggest trader by far - and I am not surprise they have been supporting buying mostly composite stocks.

If one noticed, the last 5 trading days, despite both EPF and Wellington traded about 30% of the total traded, Airasia's shares have been trading around the RM1.36 to RM1.40 band. Someone must be buying religiously as well.

Well, I am not going to speculate on what happened, anymore.