Chile Forum

Perhaps one of you can enlighten me- Each month the AFP´s, like a bunch of sheep, all go out and invest the contributions from employees in the usual ,always highly recommended, shares of LAN, Falabella, SQM etc. The brokerage houses always make the same recommendations to their clients to buy the same old shares. Naturally, as a result of all this, the prices continue to increase regardless of PE´s being low etc. My question, which I haven´t been able to get an answer to even from the brokerage house I work with (which apparently is the largest here), is who is it that is always selling? There´s only a fixed number of shares out there in the market, and as it seems that it´s the AFPs that own most of those available to the public, I ´d like to know who doesn´t think LAN etc are the best investments and hence are always selling?

Smart Money sells when the little people are buying (and vice versa). Why do they buy? The brokers controlled by the Smart Money advised them to buy.

many people buy lan acciones when the companie value was 200 million dollars. today is 9,000 and 13,000 with latam. the lan acciones are now in a historic peak, many people of middle classes are selling cause they think is a good chance. they just want to save and win some money, not great investors. also some companies are very rude with minority acciones holders i dont know how are the lan internal rules but at least in enersis there was a big crossfire between minor and major acciones holders when they sold to endesa españa. i am definitely not fluent in financial english.
sorry for my english i hope you understand something that i wrote.

Thanks for the replies so far, but you still haven´t answered my question as I´m not talking about the average retail investor, as there will always be shares available for him. What I´m interested in is how the AFP´s manage to invest each and every month all the contributions from employees here in Chile. I can´t recall the amount that they have available each month, but we are talking in US$millions. I don´t know whether the AFP´s get together and have their cosy deals where I buy from you this month and then vice versa next month, because there just can´t be enough retail investors out there to cover the kind of cash they have to invest

[[[....There´s only a fixed number of shares out there in the market....]]]

Not quite, Companies can issue more stock. That's one of the ways that they acquire funds.

Generally, the number of sellers match the number of buyers (because the price adjusts until it does, in case that's your next question.)

dfjordan wrote:Thanks for the replies so far, but you still haven´t answered my question as I´m not talking about the average retail investor, as there will always be shares available for him. What I´m interested in is how the AFP´s manage to invest each and every month all the contributions from employees here in Chile. I can´t recall the amount that they have available each month, but we are talking in US$millions. I don´t know whether the AFP´s get together and have their cosy deals where I buy from you this month and then vice versa next month, because there just can´t be enough retail investors out there to cover the kind of cash they have to invest

A corporation can hold treasury stock on its balance sheet. These are shares that have been issued but are not in circulation, or they might be shares purchased by the company to take them off of the open market to make their P/E ratio more attractive. The company can sell treasury shares to employees, offer them as a stock option to employees, or simply retire them.

AFAIK, shares have to be formally issued and reported before they can be involved in any transactions. That's the way it works in the U.S., but Chile may be different.

Sure looks like a lousy investment to me! (At least now.)

If you go to yahoo! finance, you can look up the ticker LFL. This is the ticker for the ADR for LAN. I'm not sure if the figures provided are for the ADR only, or the original shares, but I would guess the latter. If you go to key statistics, you will see they have a trailing PE of over 29! Yikes! Shares outstanding are 338 million shares, with a float of 85 million. If you are unfamiliar with any of these terms, you can look them up on Investopedia. Hope this helps.

Does anybody have a good source for looking up financial information in Chile?

soory,voy a contestar en castellano. se llama aumento de capital y las compañías muchas veces lanzan nuevas series de acciones al mercado, porque esa es una forma más barata e inteligente de financiarse que ir a un banco que les va a cobrar intereses. al final mientras mas plata tu tienes mas barato te sale todo, incluso el financiamiento. sorry but its too difficult to me explain this in english. i can speak about weather and even sell a house, but financial world is way more sofisticated.

Real State wrote:soory,voy a contestar en castellano. se llama aumento de capital y las compañías muchas veces lanzan nuevas series de acciones al mercado, porque esa es una forma más barata e inteligente de financiarse que ir a un banco que les va a cobrar intereses. al final mientras mas plata tu tienes mas barato te sale todo, incluso el financiamiento. sorry but its too difficult to me explain this in english. i can speak about weather and even sell a house, but financial world is way more sofisticated.

Entiendo lo que dices pero éste no es el caso con LAN. Si LAN quiere ofrecer mas acciones al publico, estarán obligados a hacer un IPO

Thank you all very much for your input but what´s important to bear in mind in the case of Chile is that is that it´s not a normal stockmarket like you would have in say NY or London where shares are widely held. If I recall correctly, something like 40% of all shares in major companies are owned by the AFP´s and it´s them that make the market moves. It seems like I´m not going to find the real answer so suggest we stop this theme. I think the only way I´d really be able to get to the bottom of this would be if there was info available as to what transactions are done each day and in whose name, but guess that kind of info is not available.