Counter
Monday, March 2, 2009
Oilexco gets breather from Toronto Stock Exchange
Oilexco Inc, which received an extension on delisting of its shares by the Toronto Stock Exchange (TSX), said it was exploring several options for its shares to continue trading in Canada. The company said in a statement on late Monday that the TSX now agreed to delay the previously announced delisting date to Feb. 17, while Oilexco pursues listing on a different stock exchange in Canada. The Calgary, Alberta-based oil explorer on Feb. 5 had said it obtained bankruptcy protection under Canadian laws following its move in January to put its British assets under creditor protection. The company had said on Jan.7 that it placed its Oilexco North Sea Ltd unit under administration and continued to pursue the sale of the assets of the North Sea company. Several Canadian companies, including North America's biggest telephone equipment maker Nortel Networks Corp and Canadian locomotive builder Railpower Technologies Corp are on the verge of delisting from the Toronto Stock Exchange after seeking protection from creditors in a tumbling market. Oilexco's Canada-listed shares plunged more than 95 percent over the second half of last year as the company ran into funding troubles. The shares closed at 14.5 Canadian cents on Monday on the Toronto Stock Exchange.
Buffett says economy in shambles
Berkshire Hathaway Inc, Warren Buffett's insurance and investment company, barely broke even in the fourth quarter because of losses on derivatives contracts tied to the stock market.
Profit fell 96 percent, the fifth straight quarterly decline, and Berkshire's net worth tumbled $10.9 billion in the year's final three months. Net worth per share fell 9.6 percent in 2008, only the second decline since Buffett began running Berkshire in 1965. It fell 6.2 percent in 2001.
In his eagerly anticipated annual letter to Berkshire shareholders, Buffett also offered a gloomy economic outlook, saying "the economy will be in shambles throughout 2009 -- and for that matter, probably well beyond."
Still, despite what he called "paralyzing fear" resulting from the credit crisis and falling housing and stock prices, he remained optimistic about American resilience, and praised government efforts to avoid a "cataclysmic" breakdown in the financial system.
"Though the path has not been smooth, our economic system has worked extraordinarily well over time," he said. "It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead.
Berkshire generates about half its results from insurance, including auto insurer Geico Corp, but operates more than 70 businesses that offer such things as carpeting, ice cream, paint, real estate services and underwear.
Buffett is one of the world's most-admired investors, and Forbes magazine last year called him the second-richest American.
Quarterly net income for Omaha, Nebraska-based Berkshire sank to $117 million, or $76 per Class A share, from $2.95 billion, or $1,904, a year earlier. Revenue fell 12 percent to $24.59 billion.
Excluding $3.25 billion of investment losses, more than double the previous nine months combined, operating profit rose 43 percent to $3.37 billion, or $2,175 per Class A share, from $2.35 billion, or $1,518.
The amount in part reflected underwriting gains at Berkshire Hathaway Reinsurance Group, and investment gains and a termination fee related to an aborted effort to buy Constellation Energy Group Inc.
"They are doing better than many rivals in a very difficult investment and operating environment," said Bill Bergman, senior equity analyst at Morningstar Inc in Chicago. "We had a 5-star rating, the highest we have, on Berkshire, and after reading the letter I feel better than I did yesterday."
Buffett said insurance and utility results helped offset his mistakes, including a decision to buy shares of oil company ConocoPhillips when oil and gas prices were near their peak. He said his "terrible timing" cost Berkshire "several billion dollars." Buffett said he has also lost most of a $244 million investment in shares of two Irish banks.
Berkshire's book value, or assets minus liabilities, fell to $109.27 billion at year end from $120.16 billion at the end of September, and from $120.73 billion at the end of 2007.
DERIVATIVE LOSSES
Results were battered by $4.61 billion of pretax losses on about 251 derivative contracts largely tied to the longer-term performance of four stock market indexes and the credit quality of higher-risk "junk" bonds.
Profit fell 96 percent, the fifth straight quarterly decline, and Berkshire's net worth tumbled $10.9 billion in the year's final three months. Net worth per share fell 9.6 percent in 2008, only the second decline since Buffett began running Berkshire in 1965. It fell 6.2 percent in 2001.
In his eagerly anticipated annual letter to Berkshire shareholders, Buffett also offered a gloomy economic outlook, saying "the economy will be in shambles throughout 2009 -- and for that matter, probably well beyond."
Still, despite what he called "paralyzing fear" resulting from the credit crisis and falling housing and stock prices, he remained optimistic about American resilience, and praised government efforts to avoid a "cataclysmic" breakdown in the financial system.
"Though the path has not been smooth, our economic system has worked extraordinarily well over time," he said. "It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead.
Berkshire generates about half its results from insurance, including auto insurer Geico Corp, but operates more than 70 businesses that offer such things as carpeting, ice cream, paint, real estate services and underwear.
Buffett is one of the world's most-admired investors, and Forbes magazine last year called him the second-richest American.
Quarterly net income for Omaha, Nebraska-based Berkshire sank to $117 million, or $76 per Class A share, from $2.95 billion, or $1,904, a year earlier. Revenue fell 12 percent to $24.59 billion.
Excluding $3.25 billion of investment losses, more than double the previous nine months combined, operating profit rose 43 percent to $3.37 billion, or $2,175 per Class A share, from $2.35 billion, or $1,518.
The amount in part reflected underwriting gains at Berkshire Hathaway Reinsurance Group, and investment gains and a termination fee related to an aborted effort to buy Constellation Energy Group Inc.
"They are doing better than many rivals in a very difficult investment and operating environment," said Bill Bergman, senior equity analyst at Morningstar Inc in Chicago. "We had a 5-star rating, the highest we have, on Berkshire, and after reading the letter I feel better than I did yesterday."
Buffett said insurance and utility results helped offset his mistakes, including a decision to buy shares of oil company ConocoPhillips when oil and gas prices were near their peak. He said his "terrible timing" cost Berkshire "several billion dollars." Buffett said he has also lost most of a $244 million investment in shares of two Irish banks.
Berkshire's book value, or assets minus liabilities, fell to $109.27 billion at year end from $120.16 billion at the end of September, and from $120.73 billion at the end of 2007.
DERIVATIVE LOSSES
Results were battered by $4.61 billion of pretax losses on about 251 derivative contracts largely tied to the longer-term performance of four stock market indexes and the credit quality of higher-risk "junk" bonds.
17. National Stock Exchange, Vestar Capital Partners
VESTAR CAPITAL PARTNERS
Vestar Capital Partners appointed Peter Baumgartner as managing director of Vestar Resources, the firm's team of seasoned professionals who serve as advisors for the private equity firm's portfolio company management teams.
Most recently, Baumgartner was a partner and managing director at Mercer/Oliver Wyman.
NATIONAL STOCK EXCHANGE
National Stock Exchange appointed Sarah Heffron, executive director at J.P. Morgan, as a director on the National Stock Exchange Inc board and on its parent company, NSX Holdings Inc.
FEDERAL AGRICULTURAL MORTGAGE CORP (AGM.N)
Farmer Mac appointed Michael Gerber as acting president and chief executive officer, succeeding Henry Edelman, effective immediately. Gerber will continue to serve as chief executive of Farm Credit of Western New York, an association in the Farm Credit System.
EVERCORE PARTNERS INC (EVR.N)
The U.S. merger advisory firm hired Ray Newton III as senior managing director in its private equity group, Evercore Capital Partners. Newton was previously with Perseus LLC. His appointment is effective Oct. 1 and he will be based in New York.
BANK OF NEW YORK MELLON CORP (BK.N)
The financial services company hired Simon Putt, previously with Fidelity International, as director, head of UK Institutional Client Relationship Management. Putt will be based in London.
CAPITAL & REGIONAL PLC (CAL.L)
The British property fund manager promoted Charles Staveley to group finance director effective Oct. 1. He was deputy finance director with the company earlier.
Vestar Capital Partners appointed Peter Baumgartner as managing director of Vestar Resources, the firm's team of seasoned professionals who serve as advisors for the private equity firm's portfolio company management teams.
Most recently, Baumgartner was a partner and managing director at Mercer/Oliver Wyman.
NATIONAL STOCK EXCHANGE
National Stock Exchange appointed Sarah Heffron, executive director at J.P. Morgan, as a director on the National Stock Exchange Inc board and on its parent company, NSX Holdings Inc.
FEDERAL AGRICULTURAL MORTGAGE CORP (AGM.N)
Farmer Mac appointed Michael Gerber as acting president and chief executive officer, succeeding Henry Edelman, effective immediately. Gerber will continue to serve as chief executive of Farm Credit of Western New York, an association in the Farm Credit System.
EVERCORE PARTNERS INC (EVR.N)
The U.S. merger advisory firm hired Ray Newton III as senior managing director in its private equity group, Evercore Capital Partners. Newton was previously with Perseus LLC. His appointment is effective Oct. 1 and he will be based in New York.
BANK OF NEW YORK MELLON CORP (BK.N)
The financial services company hired Simon Putt, previously with Fidelity International, as director, head of UK Institutional Client Relationship Management. Putt will be based in London.
CAPITAL & REGIONAL PLC (CAL.L)
The British property fund manager promoted Charles Staveley to group finance director effective Oct. 1. He was deputy finance director with the company earlier.
16. Zimbabwe stock exchange restarts, trades in dollars
Zimbabwe's stock exchange restarted after a three-month halt on Thursday and trades were in U.S. dollars for the first time, a move the new government hopes will help attract investment and revive the economy.
The ZSE, along with property, had been viewed by investors in Zimbabwe as one of the few relatively safe havens in an economy ravaged by the world's highest inflation rate.
Trading stopped in November during a central bank crackdown on banks and stockbrokers accused of allowing traders to use fraudulent cheques to purchase shares.
The ZSE asked the government for permission to trade in foreign currency when it restarted given the collapse of the Zimbabwe dollar, a request the central bank approved earlier this month.
Trading got off to a slow start on Thursday with very few buyers. There was applause when shares in manufacturing firm Apex (APEX.ZI) traded hands, making it the first successful foreign currency-denominated deal.
Long-time rivals President Robert Mugabe and MDC leader Morgan Tsvangirai last week formed a unity government after months of wrangling and have pledged to make reviving the economy a top priority.
Renaissance Capital said it favours Zimbabwean stocks.
"While the key risks remain, namely political risk and a still deteriorating macroeconomic environment, we believe valuations have fallen to more attractive levels," it said in a research note.
Washington Mehlomakhulu, an equities analyst with Highveld Financial Services in Harare, said investors whose funds were tied up in stocks were likely to welcome the news, but that dollarisation of the market would present challenges.
"There might not be enough liquidity to fund transactions, especially from local buyers, and there are restrictions on foreign investors who might have the interest and the money," he said.
"We actually expect a huge sell-off from locals once the market is back running. Many wanted trading to resume so they could sell shares and get a bit of financial relief." (Nelson Banya; +263 912 782 287)
The ZSE, along with property, had been viewed by investors in Zimbabwe as one of the few relatively safe havens in an economy ravaged by the world's highest inflation rate.
Trading stopped in November during a central bank crackdown on banks and stockbrokers accused of allowing traders to use fraudulent cheques to purchase shares.
The ZSE asked the government for permission to trade in foreign currency when it restarted given the collapse of the Zimbabwe dollar, a request the central bank approved earlier this month.
Trading got off to a slow start on Thursday with very few buyers. There was applause when shares in manufacturing firm Apex (APEX.ZI) traded hands, making it the first successful foreign currency-denominated deal.
Long-time rivals President Robert Mugabe and MDC leader Morgan Tsvangirai last week formed a unity government after months of wrangling and have pledged to make reviving the economy a top priority.
Renaissance Capital said it favours Zimbabwean stocks.
"While the key risks remain, namely political risk and a still deteriorating macroeconomic environment, we believe valuations have fallen to more attractive levels," it said in a research note.
Washington Mehlomakhulu, an equities analyst with Highveld Financial Services in Harare, said investors whose funds were tied up in stocks were likely to welcome the news, but that dollarisation of the market would present challenges.
"There might not be enough liquidity to fund transactions, especially from local buyers, and there are restrictions on foreign investors who might have the interest and the money," he said.
"We actually expect a huge sell-off from locals once the market is back running. Many wanted trading to resume so they could sell shares and get a bit of financial relief." (Nelson Banya; +263 912 782 287)
Pakistan stock exchange postpones floor removal
KARACHI, Oct 26 (Reuters) - Directors of Pakistan's main stock exchangedecided on Sunday to postpone the removal of a floor that has been propping upits index since August, an exchange official said.
The Karachi Stock Exchange imposed the floor at 9,144 points on Aug. 28,after a 36 percent fall from the beginning of the year on political uncertaintyand a sagging economy. The exchange board said on Oct. 14 the floor would beremoved on Oct. 27.
No date has been fixed for the removal of the floor.
The exchange's managing director told a news conference the floor wouldnot be removed until a support fund was in place.
"It is in our collective interest to return to our normal tradingparameters," said managing director Adnan Afridi adding that stabilisationmeasures had to be in place when the floor was removed.
The floor has stifled trade and the index ended flat at 9,182.88 pointson Friday.
The stock market regulator said on Wednesday it had approved a 20 billionrupee ($247 million) fund being set up by the government to support share priceswhen the floor was removed.
Afridi said the fund had been approved but authorities were working outits mechanics.
The fund would invest in nine state-owned entities, an exchange officialsaid on Friday, adding that a special session would be held on Saturday toenable the fund to buy stocks 12.5 percent lower than current prices.
But authorities postponed the special session on Saturday because of whatan SEC official described as some differences between the brokers and exchangeofficials.
Earlier on Sunday, the exchange directors held a meeting with the primeminister's top adviser on economic affairs, Shaukat Tarin.
Tarin has said he wanted to see the floor removed, but he told DawnTelevision earlier on Sunday, if the support fund was not in place, then apostponement of the floor's removal was an option for exchange directors.
The fund will invest in nine state-owned companies: Oil and GasDevelopment Co Ltd, Pakistan Petroleum Ltd , National Bank of Pakistan, PakistanState Oil , Sui Southern Gas Co Ltd, Sui Northen Gas Co Ltd, Kot Addu Power CoLtd, Pakistan Telecommunication Co Ltd and Habib Bank Ltd.
The Karachi Stock Exchange imposed the floor at 9,144 points on Aug. 28,after a 36 percent fall from the beginning of the year on political uncertaintyand a sagging economy. The exchange board said on Oct. 14 the floor would beremoved on Oct. 27.
No date has been fixed for the removal of the floor.
The exchange's managing director told a news conference the floor wouldnot be removed until a support fund was in place.
"It is in our collective interest to return to our normal tradingparameters," said managing director Adnan Afridi adding that stabilisationmeasures had to be in place when the floor was removed.
The floor has stifled trade and the index ended flat at 9,182.88 pointson Friday.
The stock market regulator said on Wednesday it had approved a 20 billionrupee ($247 million) fund being set up by the government to support share priceswhen the floor was removed.
Afridi said the fund had been approved but authorities were working outits mechanics.
The fund would invest in nine state-owned entities, an exchange officialsaid on Friday, adding that a special session would be held on Saturday toenable the fund to buy stocks 12.5 percent lower than current prices.
But authorities postponed the special session on Saturday because of whatan SEC official described as some differences between the brokers and exchangeofficials.
Earlier on Sunday, the exchange directors held a meeting with the primeminister's top adviser on economic affairs, Shaukat Tarin.
Tarin has said he wanted to see the floor removed, but he told DawnTelevision earlier on Sunday, if the support fund was not in place, then apostponement of the floor's removal was an option for exchange directors.
The fund will invest in nine state-owned companies: Oil and GasDevelopment Co Ltd, Pakistan Petroleum Ltd , National Bank of Pakistan, PakistanState Oil , Sui Southern Gas Co Ltd, Sui Northen Gas Co Ltd, Kot Addu Power CoLtd, Pakistan Telecommunication Co Ltd and Habib Bank Ltd.
Saturday, February 14, 2009
Share Market Basics
You can buy and sell any stock over the Internet that is online stock trading, you don't need to call up a broker. You can do online stock trading with a minimal investment you should get started today and then start learning about the stock market and choose the stocks you want to invest in.
Day Trading
Day trading is defined as the buying and selling of a security within a single trading day. It is designed to produce short-term profits. Day trading demands access to some of the most complex and sophisticated financial services and instruments in the markets. Trading with a stop-loss is extremely important for all traders to cut losses while they are still small, and to preserve their trading capital in case the market moves against their trade. Trading at certain times of the day is simply not profitable and in fact is highly risky. Day trading involves taking advantage of price movements in stocks within one trading day. Day trading strategies demand the use of leveraged or borrowed money to make profits. Day trading used to be the sole preserve of financial firms and professional investors and speculators. Day trading is however a mentally and psychologically challenging activity and is by no means meant for everyone. If you can't be highly disciplined and stick by predetermined selling points, day trading is not for you.
What is Technical Analysis?
Day trading is defined as the buying and selling of a security within a single trading day and market directions based on statistical analysis of variables such as trading volume, price changes, etc., to identify patterns. Research and examination of the market and securities as it relates to their supply and demand in the marketplace. The technician uses charts and computer programs to identify and project price trends. Now technical analysis has become increasingly popular. Technical analysts use their findings to predict probable, often short-term, trading patterns in the investments that they study. It suppose markets have memory. If so, past prices, or the current price momentum, can give an idea of the future price evolution.
What is Fundamental Analysis?
Fundamental analysis is about using real data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security. It is scientific study of the basic factors which determine a share's value. The analyst studies the industry and the company's sales, assets, liabilities, debt structure, earnings, products, market share; evaluates the company's management, compares the company with its competitors, and then estimates the share's intrinsic worth. More effective in fulfilling long - term growth objectives of shares, rather than their short - term price fluctuations.
The truth of the matter is that the market is a game of money flow played by the big players as they move money around from stocks, to options, to financial futures, and back and forth in a number of different ways, all in the pursuit of greed and large profits. And remember, I previously mentioned that "a good portion of that money is being made off the backs of the uninformed individual stock trader and investor who blindly trades and invests in the stock market today." The principle in the markets is "Buy when everyone else sells and sell when everyone else buys". Investors should know that when buying a stock they are simply buying ownership in the companies.
Day Trading
Day trading is defined as the buying and selling of a security within a single trading day. It is designed to produce short-term profits. Day trading demands access to some of the most complex and sophisticated financial services and instruments in the markets. Trading with a stop-loss is extremely important for all traders to cut losses while they are still small, and to preserve their trading capital in case the market moves against their trade. Trading at certain times of the day is simply not profitable and in fact is highly risky. Day trading involves taking advantage of price movements in stocks within one trading day. Day trading strategies demand the use of leveraged or borrowed money to make profits. Day trading used to be the sole preserve of financial firms and professional investors and speculators. Day trading is however a mentally and psychologically challenging activity and is by no means meant for everyone. If you can't be highly disciplined and stick by predetermined selling points, day trading is not for you.
What is Technical Analysis?
Day trading is defined as the buying and selling of a security within a single trading day and market directions based on statistical analysis of variables such as trading volume, price changes, etc., to identify patterns. Research and examination of the market and securities as it relates to their supply and demand in the marketplace. The technician uses charts and computer programs to identify and project price trends. Now technical analysis has become increasingly popular. Technical analysts use their findings to predict probable, often short-term, trading patterns in the investments that they study. It suppose markets have memory. If so, past prices, or the current price momentum, can give an idea of the future price evolution.
What is Fundamental Analysis?
Fundamental analysis is about using real data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security. It is scientific study of the basic factors which determine a share's value. The analyst studies the industry and the company's sales, assets, liabilities, debt structure, earnings, products, market share; evaluates the company's management, compares the company with its competitors, and then estimates the share's intrinsic worth. More effective in fulfilling long - term growth objectives of shares, rather than their short - term price fluctuations.
The truth of the matter is that the market is a game of money flow played by the big players as they move money around from stocks, to options, to financial futures, and back and forth in a number of different ways, all in the pursuit of greed and large profits. And remember, I previously mentioned that "a good portion of that money is being made off the backs of the uninformed individual stock trader and investor who blindly trades and invests in the stock market today." The principle in the markets is "Buy when everyone else sells and sell when everyone else buys". Investors should know that when buying a stock they are simply buying ownership in the companies.
Stock Exchange - Everyday Trading On The Stock Exchange
The stock markets are pretty unpredictable. One minute you could be excited and encouraged thanks to the fact that the stocks you invested in are booming, and the next you could be broken because the bull run reversed and the stock fell even lower than it started.
Obviously, a profit or a loss is calculated by comparing the prices of purchase and sales of the stocks.
Stock exchange trades usually are done in the day. This is because of the assumption that it is during the day, that most of the big companies around the world normally conduct business transactions.
As the saying goes, a work day cant ever be too long for stock trades. It is a common feeling that a work day is too short to negotiate all trades you wished to.
Stock trade transactions
Prior to the purchase and sale of stocks,one is expected to do some homework, meaning do some background checks on the companies you are planning to invest into.
The choice is solely yours, where you put your money in, or if you take out investment from a particular stock. Make sure you have a well thought out decision because your profits of commercial transactions will be based on this.
When you buy securities, you should inform your brokerage partner on your intention and the amount you would like to buy, on whatever stock
.Make sure you have all adequate information on your choice of stock. What good would it do to invest in a company on the edge of bankruptcy?.
Your money would soon disappear with the company's losses.
Evolution
In a time span of over 4 centuries, trading has gradually evolved to be a safer and better tool for investment.
Within this short period, the stock markets of Commerce have emerged as the largest and most widely used investment strategy in the world, across every market, from the third world to the American economy.
Any country's average economic performance is today judged and evaluated on the basis of how its local stock market trading or exchange is doing. This system of research in the economy should proliferate and spread over time.
Every day, as mentioned earlier, brings fresh threats and promises of new markets for stocks on the Exchange. Trading is not similar to trading the previous day.
Every day is just as promising and just as risk prone as the other day in the stock market. But one thing is certain, when you face a terrible day, you still have the hope that tomorrow will bring success.
This is one of the beauties of the rapid and happening stock trades exchange. Go ahead, try your own hand at it.
Obviously, a profit or a loss is calculated by comparing the prices of purchase and sales of the stocks.
Stock exchange trades usually are done in the day. This is because of the assumption that it is during the day, that most of the big companies around the world normally conduct business transactions.
As the saying goes, a work day cant ever be too long for stock trades. It is a common feeling that a work day is too short to negotiate all trades you wished to.
Stock trade transactions
Prior to the purchase and sale of stocks,one is expected to do some homework, meaning do some background checks on the companies you are planning to invest into.
The choice is solely yours, where you put your money in, or if you take out investment from a particular stock. Make sure you have a well thought out decision because your profits of commercial transactions will be based on this.
When you buy securities, you should inform your brokerage partner on your intention and the amount you would like to buy, on whatever stock
.Make sure you have all adequate information on your choice of stock. What good would it do to invest in a company on the edge of bankruptcy?.
Your money would soon disappear with the company's losses.
Evolution
In a time span of over 4 centuries, trading has gradually evolved to be a safer and better tool for investment.
Within this short period, the stock markets of Commerce have emerged as the largest and most widely used investment strategy in the world, across every market, from the third world to the American economy.
Any country's average economic performance is today judged and evaluated on the basis of how its local stock market trading or exchange is doing. This system of research in the economy should proliferate and spread over time.
Every day, as mentioned earlier, brings fresh threats and promises of new markets for stocks on the Exchange. Trading is not similar to trading the previous day.
Every day is just as promising and just as risk prone as the other day in the stock market. But one thing is certain, when you face a terrible day, you still have the hope that tomorrow will bring success.
This is one of the beauties of the rapid and happening stock trades exchange. Go ahead, try your own hand at it.
Nigerian Stock Exchange and a Study in Profit-Taking
Critics of the Nigerian Stock Exchange maintained that the market had not been tested to capacity even with the recapitalization of banks. They claimed that the depth of the stock market was not one where a lot of people would invest in billion dollar offers. The reasons varied, one was the capitalization level of existing banks and other reasons were the assumed amount of investment capital the Nigerian public was willing to invest in the Nigerian Stock Market. Dangote Sugar owned by Nigerian billionaire Aliko Dangote was one of many companies that were influenced by the opinion that the stock market would not be able to subscribe to the wealth of a public offer that ran into billions of dollars. Previously, Dangote Sugar was a privately owned company not quoted on the Nigerian Stock Exchange.
Following the gains from the recapitalization exercise in the banking sector, a huge number of banking establishments recorded over-subscriptions of various public offers running into billions of dollars. Institutions such as Zenith Bank and First Bank recorded over-subscription levels of more than 400% in their various public offers. Following such gains the management of Dangote Sugar reversed its opinion as to the depth of the Nigerian Stock Market and the possibilities available when it came to the funds that could be raised from the market. The company decided to apply for listing by way of an initial public offer and the application was granted.
Dangote Sugar is a company which primarily deals with the importation and sale of sugar and other than the Honeywell Group, had no major competitor as far as the whole of Nigeria was concerned. With a population of over a 150 million people, all of whom are potential consumers of sugar, Dangote had a strong foothold in the Nigerian market. At its conclusion of a $420 million dollar initial public offer, Dangote Sugar reported an over subscription in excess of 40% only to become Nigeria's most capitalized company 19 days later with a capitalization of 404 billion naira up from 108 billion naira and representing a gain of more than 125% in share price within 19 days of trading.I
nvestors who had bought into the share price at 18 Naira were taking gains at 40 Naira and above within weeks. Meaning an individual who had bought into the company as it listed freshly on the stock exchange with about 1.8 million naira would be worth 4.0 million naira only two or three weeks later. The myth had been shattered about the depth and profitability of the Nigerian Stock Market and a lot more followed in terms of success on the market.
That is indeed a proof that every segment of Nigeria economy can be profit pulling if decisions were made wisely.
Following the gains from the recapitalization exercise in the banking sector, a huge number of banking establishments recorded over-subscriptions of various public offers running into billions of dollars. Institutions such as Zenith Bank and First Bank recorded over-subscription levels of more than 400% in their various public offers. Following such gains the management of Dangote Sugar reversed its opinion as to the depth of the Nigerian Stock Market and the possibilities available when it came to the funds that could be raised from the market. The company decided to apply for listing by way of an initial public offer and the application was granted.
Dangote Sugar is a company which primarily deals with the importation and sale of sugar and other than the Honeywell Group, had no major competitor as far as the whole of Nigeria was concerned. With a population of over a 150 million people, all of whom are potential consumers of sugar, Dangote had a strong foothold in the Nigerian market. At its conclusion of a $420 million dollar initial public offer, Dangote Sugar reported an over subscription in excess of 40% only to become Nigeria's most capitalized company 19 days later with a capitalization of 404 billion naira up from 108 billion naira and representing a gain of more than 125% in share price within 19 days of trading.I
nvestors who had bought into the share price at 18 Naira were taking gains at 40 Naira and above within weeks. Meaning an individual who had bought into the company as it listed freshly on the stock exchange with about 1.8 million naira would be worth 4.0 million naira only two or three weeks later. The myth had been shattered about the depth and profitability of the Nigerian Stock Market and a lot more followed in terms of success on the market.
That is indeed a proof that every segment of Nigeria economy can be profit pulling if decisions were made wisely.
Market Penetration Pricing - A Quick Market Entry Pricing Strategy
Market penetration pricing is a quick-entry price strategy that assumes low price will gain high sales volume which, in turn, will result in lowering costs. This strategy is used in price sensitive markets. For example, consider the market for DVD players; it is a high volume market, it has a high number of competitors, the costs to produce DVD players have fallen, and new and/or changing technology allow businesses to rapidly introduce new features and benefits on new models. The businesses that introduce DVD players quickly, sell high volume at low or reasonable prices, are following a market penetration strategy.
Businesses using market penetration pricing are usually trying to penetrate the market by growing their share of the market. They assume that the lowest price will win market share. Make sure that if you use this pricing strategy that you test your market, your price sensitivity and your price elasticity or in-elasticity first. Also be sure to do your market research to gain an understanding of how your competitors will react to this penetration pricing strategy. For example, your low price may cause your competition to lower price, then you will lower your price again, and so on - no one wins with a strategy like this.
But your market penetration pricing strategy can also be a deterrent for new competitors who are considering entering the market. When they see how low your pricing is and realize that their margins will be low and the risk of gaining market share for new entrants is high, they might choose not to enter the market. For your business to be successful with this strategy, it must have the capability to enjoy the economies of scale that high volume will bring and be the low cost provider in the market.
If you are an existing business and your competitor is following a market penetration strategy, do a thorough market research assessment of your capabilities:
Can you drive your costs down?
Can you produce high volume?
Do you want to sell your product at a low price (and hope volume sales will get you both the market share and the profitability you want)?
If you answer no to any of these questions, don't follow this penetration strategy (or at least, consider this strategy very carefully). However, if you are a new business considering this strategy in a new, or scarcely populated, market, focus on how to drive your costs down and your efficiencies up.
Whatever pricing strategy you use, make sure that you specify it in your marketing mix plan and write down the reasons you chose that strategy. Then, at least on an annual basis at the time of your business plan update, review your chosen marketing strategy (including your pricing strategy) and ensure it is the right strategy for the product life cycle, for the market conditions, for your buyers, and for the competitive environment at that time.
Businesses using market penetration pricing are usually trying to penetrate the market by growing their share of the market. They assume that the lowest price will win market share. Make sure that if you use this pricing strategy that you test your market, your price sensitivity and your price elasticity or in-elasticity first. Also be sure to do your market research to gain an understanding of how your competitors will react to this penetration pricing strategy. For example, your low price may cause your competition to lower price, then you will lower your price again, and so on - no one wins with a strategy like this.
But your market penetration pricing strategy can also be a deterrent for new competitors who are considering entering the market. When they see how low your pricing is and realize that their margins will be low and the risk of gaining market share for new entrants is high, they might choose not to enter the market. For your business to be successful with this strategy, it must have the capability to enjoy the economies of scale that high volume will bring and be the low cost provider in the market.
If you are an existing business and your competitor is following a market penetration strategy, do a thorough market research assessment of your capabilities:
Can you drive your costs down?
Can you produce high volume?
Do you want to sell your product at a low price (and hope volume sales will get you both the market share and the profitability you want)?
If you answer no to any of these questions, don't follow this penetration strategy (or at least, consider this strategy very carefully). However, if you are a new business considering this strategy in a new, or scarcely populated, market, focus on how to drive your costs down and your efficiencies up.
Whatever pricing strategy you use, make sure that you specify it in your marketing mix plan and write down the reasons you chose that strategy. Then, at least on an annual basis at the time of your business plan update, review your chosen marketing strategy (including your pricing strategy) and ensure it is the right strategy for the product life cycle, for the market conditions, for your buyers, and for the competitive environment at that time.
Hollywood Stock Exchange - The First And Biggest Stock Simulator Is Looking Pretty Shabby
Back in 1993 on a movie tracking newsgroup, a group of guys started a predicting game. They set up a system where they could bid on upcoming films, and then figured out math formulas based on the buzz and the activity of those films in regards to the newsgroup to see if the price would rise or fall. It soon began to expand enough to become a website with an actual program running on it and thus the HSX or Hollywood Stock Exchange was born.
The HSX has gone through a lot of changes since those early beginnings, back in the dot.com boom of 2001, HSX went public and raised a good chunk of capital that it used to finance a TV channel, radio spots, and a whole slew of other market ideas, almost all of which have fallen through now.
Hollywood Stock Exchange is protected by US patents due to the specific formulas and processes they use and they have successfully protected themselves against software pirates who have attempted to nab the code for their own use. The HSX runs on a java platform with active server pages helping to keep the actual process hidden behind a shielded server wall.
When somebody decides to play the Movie market, they open a free account with HSX and are given 2 million Hollywood Dollars or H$. This is the online currency of the market, and is the only way to play the game. Players then buy and sell shares in the market and if they pick the right shares at the right time, their funds increase. I have been playing the HSX for about 18 months and have achieved more than H$43 million so far, which is not too bad.
Some of the biggest gains can come from predicting how much cash a movie will take on it's opening weekend. Because that is applied with a multiplier to the actual stock price, and if it is higher, then the stock price can jump up or down significantly. A big gain I managed to do was put some H$ onto Spiderman 3 before it released to theatres. That stock jumped more than H$43 on the strength of the box office, meaning every share held increased by that amount.
The HSX is a very good example of a prediction market, and the software that runs it is always being adjusted and tweaked by the operators to keep the system running at it's best performance. Thus we come to the big problem with HSX, downtime.
In the 18 months that this site has been monitored, not a week goes by that the site is not down for at least a couple of hours, or sometimes a full day. Quite often it will simply go down and nobody will say anything, then it recovers and people keep playing. Other times, the server will error or the database will fail, or any number of other excuses may occur that will cause the system to stop working, leaving the game's 10,000+ active players out of luck until the game is reset.
Now, even though the site is currently owned by an investment capital firm, I would imagine they would make it a priority to ensure their game, which is known around the world for what it is, would be kept up and stable. But it appears that they don't want to put too much into it. Even though HSX is ranked at 14,731 on Alexa's top 100,000 websites, which means it gets well over 10,000 hits a day if not more. HSX is also associated with the movie speculation site the numbers.com as they share information daily and have cross-links.
I find that quite sad as this type of site has a strong potential and it seems to be being squandered by the owners who seem to have no idea what to do with a concept like this, other than to let it sit without much improvement and let it die a slow death through neglect.
The HSX has gone through a lot of changes since those early beginnings, back in the dot.com boom of 2001, HSX went public and raised a good chunk of capital that it used to finance a TV channel, radio spots, and a whole slew of other market ideas, almost all of which have fallen through now.
Hollywood Stock Exchange is protected by US patents due to the specific formulas and processes they use and they have successfully protected themselves against software pirates who have attempted to nab the code for their own use. The HSX runs on a java platform with active server pages helping to keep the actual process hidden behind a shielded server wall.
When somebody decides to play the Movie market, they open a free account with HSX and are given 2 million Hollywood Dollars or H$. This is the online currency of the market, and is the only way to play the game. Players then buy and sell shares in the market and if they pick the right shares at the right time, their funds increase. I have been playing the HSX for about 18 months and have achieved more than H$43 million so far, which is not too bad.
Some of the biggest gains can come from predicting how much cash a movie will take on it's opening weekend. Because that is applied with a multiplier to the actual stock price, and if it is higher, then the stock price can jump up or down significantly. A big gain I managed to do was put some H$ onto Spiderman 3 before it released to theatres. That stock jumped more than H$43 on the strength of the box office, meaning every share held increased by that amount.
The HSX is a very good example of a prediction market, and the software that runs it is always being adjusted and tweaked by the operators to keep the system running at it's best performance. Thus we come to the big problem with HSX, downtime.
In the 18 months that this site has been monitored, not a week goes by that the site is not down for at least a couple of hours, or sometimes a full day. Quite often it will simply go down and nobody will say anything, then it recovers and people keep playing. Other times, the server will error or the database will fail, or any number of other excuses may occur that will cause the system to stop working, leaving the game's 10,000+ active players out of luck until the game is reset.
Now, even though the site is currently owned by an investment capital firm, I would imagine they would make it a priority to ensure their game, which is known around the world for what it is, would be kept up and stable. But it appears that they don't want to put too much into it. Even though HSX is ranked at 14,731 on Alexa's top 100,000 websites, which means it gets well over 10,000 hits a day if not more. HSX is also associated with the movie speculation site the numbers.com as they share information daily and have cross-links.
I find that quite sad as this type of site has a strong potential and it seems to be being squandered by the owners who seem to have no idea what to do with a concept like this, other than to let it sit without much improvement and let it die a slow death through neglect.
Find a Cheap Online Stock Broker - Compare Brokers First
It is important to take the time to do a good comparison when you are selecting your online stock broker. You should look at the category of discount brokers, which includes the cheap stock brokers who specialize in offering an online trading platform for individual traders. The big names in this category are also known for providing a quality service to their clients.
Beginning traders are often interested in finding an online broker with low trading costs. They want to pay low commissions and may not want to make a large initial deposit into their account. This is a good strategy for starting out for many reasons.
Whether you are a beginning or a more experienced trader, keeping your costs down is very important. Every dollar that you pay your stock broker in commissions and fees is one less dollar that you take home in profit. Unless you have proven to yourself that you can consistently turn out profitable trades, you may be cautious and want to start with a cheap online broker.
Using a cheap stock broker will give you the most flexibility in your trading. You can place smaller trades of just a few hundred dollars and your commission will cost you much less on a percentage basis. You can also trade more often, or cycle your trades quickly without having to worry about paying too much in commissions.
You may think that all online brokers are about the same when it comes to their commissions, but that is definitely not the case.
First, stock brokers have quite a variety of cost structures and you have to understand how each one will impact you for the kind of trading you are planning. Second, there is a definite cumulative effect that makes small differences in commissions per trade really add up.
For example, compare two cheap stock brokers. Broker A has a flat rate commission of $9.95 per trade. Broker B has a flat rate commission of $4.50. That is only a difference of $5.45 per trade, right? But remember when you buy a stock, you pay one commission and when you go to sell that stock you will pay a second commission. So now the difference is $10.90 per stock. Let's say that you actively trade over the course of a month and you buy and sell 15 stocks. You will pay $163.50 less in commissions for the cheap stock broker during the month. Over 3 months, that is $490.50 difference in commissions alone. That is nearly $500 in your profit over the course of one quarter that you are paying to your stock broker. So a little definitely adds up.
Beginning traders are often interested in finding an online broker with low trading costs. They want to pay low commissions and may not want to make a large initial deposit into their account. This is a good strategy for starting out for many reasons.
Whether you are a beginning or a more experienced trader, keeping your costs down is very important. Every dollar that you pay your stock broker in commissions and fees is one less dollar that you take home in profit. Unless you have proven to yourself that you can consistently turn out profitable trades, you may be cautious and want to start with a cheap online broker.
Using a cheap stock broker will give you the most flexibility in your trading. You can place smaller trades of just a few hundred dollars and your commission will cost you much less on a percentage basis. You can also trade more often, or cycle your trades quickly without having to worry about paying too much in commissions.
You may think that all online brokers are about the same when it comes to their commissions, but that is definitely not the case.
First, stock brokers have quite a variety of cost structures and you have to understand how each one will impact you for the kind of trading you are planning. Second, there is a definite cumulative effect that makes small differences in commissions per trade really add up.
For example, compare two cheap stock brokers. Broker A has a flat rate commission of $9.95 per trade. Broker B has a flat rate commission of $4.50. That is only a difference of $5.45 per trade, right? But remember when you buy a stock, you pay one commission and when you go to sell that stock you will pay a second commission. So now the difference is $10.90 per stock. Let's say that you actively trade over the course of a month and you buy and sell 15 stocks. You will pay $163.50 less in commissions for the cheap stock broker during the month. Over 3 months, that is $490.50 difference in commissions alone. That is nearly $500 in your profit over the course of one quarter that you are paying to your stock broker. So a little definitely adds up.
How To Find Potential Profitable Stocks
There first thing is knowing where to look. It is quite amazing sometimes where a tip or information will come from.Below is a list which will be a basic starting point. You will develop your own sources as your own experience grows.
1. Newspapers.Usually can be found in the business section, but can be found elsewhere particularly if they have done something out of the ordinary and the Media have got wind of it.
2. Specialist Magazines.The main ones in Australia can be found in any newsagency .The most popular being, “The Australian Financial Review” this comes out on a monthly basis.Another is “The Bulletin” which comes out on a weekly basis. Though not as informative as AFR it has an interesting page called “The Speculator.” The author has a reputation of having his finger “on the pulse” so to speak. Especially in the resources area.
3. The Internet.This is particularly an area where you will find a wealth of information, sometimes too much.I receive the vast majority of my information in the form of newsletters. This arrives by E- Mail on a daily basis. I then sift through it and keep the information I want and discard the rest.(A list of these newsletters can be found at the website on the bottom of this page.)
4. Other Media.Radio and television can be useful sources of information. Usually on the nightly 6 pm news and the various finance/ business programmes that abound on Foxtel and other finance channels.
5. Friends, relatives and casual acquaintances.I have found by personal experience that once it is known that you are interested in the share market; people will go out of their way to give you their latest tips and information.I never knock them back but I always do my own personal research first before I take it any further.6. Personal Experience.This is hard to define. I call it “Being tuned in.” As I can be looking for one thing and something else entirely different will turn up.As I have stated before you never know where that little bit of information is going to spring from.This only a basic guidelines as you will develop your own sources, as your experience grows and time progresses.
1. Newspapers.Usually can be found in the business section, but can be found elsewhere particularly if they have done something out of the ordinary and the Media have got wind of it.
2. Specialist Magazines.The main ones in Australia can be found in any newsagency .The most popular being, “The Australian Financial Review” this comes out on a monthly basis.Another is “The Bulletin” which comes out on a weekly basis. Though not as informative as AFR it has an interesting page called “The Speculator.” The author has a reputation of having his finger “on the pulse” so to speak. Especially in the resources area.
3. The Internet.This is particularly an area where you will find a wealth of information, sometimes too much.I receive the vast majority of my information in the form of newsletters. This arrives by E- Mail on a daily basis. I then sift through it and keep the information I want and discard the rest.(A list of these newsletters can be found at the website on the bottom of this page.)
4. Other Media.Radio and television can be useful sources of information. Usually on the nightly 6 pm news and the various finance/ business programmes that abound on Foxtel and other finance channels.
5. Friends, relatives and casual acquaintances.I have found by personal experience that once it is known that you are interested in the share market; people will go out of their way to give you their latest tips and information.I never knock them back but I always do my own personal research first before I take it any further.6. Personal Experience.This is hard to define. I call it “Being tuned in.” As I can be looking for one thing and something else entirely different will turn up.As I have stated before you never know where that little bit of information is going to spring from.This only a basic guidelines as you will develop your own sources, as your experience grows and time progresses.
Top 5 Rules of Stock Trading
This article is for those who had some experience in stock picking and who have been through the agony or the thrills of losing or gaining money.The very fact of stock trading is presence of emotions of losing money and risks associated with it.None of the high money making instruments can guarantee you no risks. High risk means high gains and high losses as well. But there are some rules of stock trading which should be followed as they come from experience of traders rather than just a walk down the Wall Street rule book Here are the rules:
1. First and foremost decide what trade you are playing for. Is it a Buy today sells tomorrow? Is it a Long term bet on economy? Is it the merger and acquisition 5 % gain that you are playing for? Is it pure momentum play?
2. There is an unsaid rule which all the best on the street know and it is cut your losses and get out rather than being emotional about your trade. It is a trade and your reputation is not at stake. You can't be right all the times. The market is supreme.
3. Whenever you are making money have a realistic goal. A 17 % earning on a per year basis is a fantastic bet and one should not be greedy to just hold on to it till it doubles. Always take the profits and let others also make profits on the stocks.
4. Always have money for your immediate requirements and only after you have allocated for the insurance and household savings, should you be betting in the stock market. Never try to bet with the money you had saved for Buying your House.
5. Always buy on negative news and sell on good news. Market always discounts the future. Never try to play on news since the market has already discounted the news and you could be surprised to be a late entrant.With this we come to an end of the article "The 5 most important rules of stock trading".
1. First and foremost decide what trade you are playing for. Is it a Buy today sells tomorrow? Is it a Long term bet on economy? Is it the merger and acquisition 5 % gain that you are playing for? Is it pure momentum play?
2. There is an unsaid rule which all the best on the street know and it is cut your losses and get out rather than being emotional about your trade. It is a trade and your reputation is not at stake. You can't be right all the times. The market is supreme.
3. Whenever you are making money have a realistic goal. A 17 % earning on a per year basis is a fantastic bet and one should not be greedy to just hold on to it till it doubles. Always take the profits and let others also make profits on the stocks.
4. Always have money for your immediate requirements and only after you have allocated for the insurance and household savings, should you be betting in the stock market. Never try to bet with the money you had saved for Buying your House.
5. Always buy on negative news and sell on good news. Market always discounts the future. Never try to play on news since the market has already discounted the news and you could be surprised to be a late entrant.With this we come to an end of the article "The 5 most important rules of stock trading".
The Stock Market Drop - How to Make Money in a Tough Economy
Imagine your friends laughing when you say you made a lot of money as the stock market dropped. Then imagine their faces when you show them your incredible gains. They won't laugh any more. They'll beg for help.Everybody loves it when the stock market goes up. Many people panic when it falls. But they don't need to. An American market exists that allows traders to make money regardless of whether stocks are going up or down.Professional investors know how to hedge their bet. They take precautions because they know the economy will move through various cycles. What goes up will eventually come down.The common man and woman are different. They assume investing is difficult so they don't take time to learn simple methods that might benefit their lifelong effort to get ahead. They throw their money into mutual funds or a 401-K account and hope for the best. This may work when things are going well in the financial markets. In a crisis, this method will be the cause of many a sleepless night.Every family could use some extra money each month. And it's not a pipe dream, if you are capable of taking simple direction and absorbing new information.Here's how you to make money when the stock market falls: hedge your bet by trading the mini-sized Dow Jones futures market. I know what you're thinking. Futures?! Isn't that a great way to lose money? My answer: Have you ever lost money in the stock market?Today's economic conditions should be a reminder that our money is always at risk. Yesterday's victories may be tomorrow's defeats. All the more reason to hedge - always - your most important investments.The mini-sized Dow Jones electronic market is global and stays open for business throughout the night and into the next day. It closes briefly at the end of each business day, all day Saturday, then opens again late Sunday afternoon. Plenty of time to access and manage your online account.One significant reason for learning this market is its simplicity. You can learn to trade the market up and down - and it's all legal. For people who have only traded stocks, it is sometimes difficult to understand how a futures trader can make money when a market drops. But it's true, it can be done, without breaking any laws.This is not true of some "short selling" that takes place in the stock market. Some rogue brokerages break Securities and Exchange Commission rules and in the process rob good, honest investors. That is not what I'm suggesting. But that illegal practice is precisely why you would be wise to learn how to hedge your stock portfolio with the mini-sized Dow Jones futures market.There are many tutorials to help you understand how to trade this market. Google "mini-sized Dow Jones" or "the mini-Dow" and you'll have plenty to choose from.But don't fall for offers that ask you to pay big bucks for software and platforms you won't need. I'm not suggesting you day trade - not at first anyway. So choose a guidebook that is modestly priced and then learn as much as you can from it before buying your next book.The Chicago Board of Trade and the CME Group Exchange websites offer good, free information to help you understand the basics of trading futures. Take full advantage.Finally, be a specialist. Master the one market that can do you the most good. The mini-sized Dow Jones stock index will be enormously beneficial if you have long-term or short-term stock investments. You'll soon realize that by concentrating on one market you don't have to be Warren Buffet to make smart moves.
Friday, February 6, 2009
Financial market
In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient-market hypothesis.
Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity.
Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy.
In finance, financial markets facilitate –
The raising of capital (in the capital markets);
The transfer of risk (in the derivatives markets);
International trade (in the currency markets)
– and are used to match those who want capital to those who have it.
Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends.
Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity.
Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy.
In finance, financial markets facilitate –
The raising of capital (in the capital markets);
The transfer of risk (in the derivatives markets);
International trade (in the currency markets)
– and are used to match those who want capital to those who have it.
Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends.
Types of financial markets:
The financial markets can be divided into different subtypes:
Capital markets which consist of:
Stock markets, which provide financing through the issuance of shares or common stock, and enable the subsequent trading thereof.
Bond markets, which provide financing through the issuance of bonds, and enable the subsequent trading thereof.
Commodity markets, which facilitate the trading of commodities.
Money markets, which provide short term debt financing and investment.
Derivatives markets, which provide instruments for the management of financial risk.
Futures markets, which provide standardized forward contracts for trading products at some future date; see also forward market.
Insurance markets, which facilitate the redistribution of various risks.
Foreign exchange markets, which facilitate the trading of foreign exchange.
The capital markets consist of primary markets and secondary markets. Newly formed (issued) securities are bought or sold in primary markets. Secondary markets allow investors to sell securities that they hold or buy existing securities.
Capital markets which consist of:
Stock markets, which provide financing through the issuance of shares or common stock, and enable the subsequent trading thereof.
Bond markets, which provide financing through the issuance of bonds, and enable the subsequent trading thereof.
Commodity markets, which facilitate the trading of commodities.
Money markets, which provide short term debt financing and investment.
Derivatives markets, which provide instruments for the management of financial risk.
Futures markets, which provide standardized forward contracts for trading products at some future date; see also forward market.
Insurance markets, which facilitate the redistribution of various risks.
Foreign exchange markets, which facilitate the trading of foreign exchange.
The capital markets consist of primary markets and secondary markets. Newly formed (issued) securities are bought or sold in primary markets. Secondary markets allow investors to sell securities that they hold or buy existing securities.
Importance of stock market
Function and purpose
The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.
History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'être of central banks.
Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.
The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.
The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.
History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'être of central banks.
Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.
The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.
Relation of the stock market to the modern financial system:
The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth, compared to less than 20 percent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to be found in other industrialized countries. In all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another.
The stock market, individual investors, and financial risk
Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).
With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.
This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. Buffett began his career with $100, and $105,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century.
With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.
This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. Buffett began his career with $100, and $105,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century.
The First Stock Exchanges
In 11th century France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers.
Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met.
House Ter Beurze in Bruges, Belgium.
However, it is more likely that in the late 13th century commodity traders in Bruges gathered inside the house of a man called Van der Burse, and in 1309 they institutionalized this until now informal meeting and became the "Bruges Bourse". The idea spread quickly around Flanders and neighbouring counties and "Bourses" soon opened in Ghent and Amsterdam.
In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351, the Venetian Government outlawed spreading rumors intended to lower the price of government funds. There were people in Pisa, Verona, Genoa and Florence who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of influential citizens, not by a duke.
The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits—or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. In 1688, the trading of stocks began on a stock exchange in London.
[edit] The role of stock exchanges
Stock exchanges have multiple roles in the economy, this may include the following:[1]
[edit] Raising capital for businesses
The Stock Exchange provide companies with the facility to raise capital for expansion through selling shares to the investing public.[2]
[edit] Mobilizing savings for investment
When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels and firms.
[edit] Facilitating company growth
Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.
[edit] Redistribution of wealth
Stocks exchanges do not exist to redistribute wealth. However, both casual and professional stock investors, through dividends and stock price increases that may result in capital gains, will share in the wealth of profitable businesses.
[edit] Corporate governance
By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately-held companies (those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies. The dot-com bubble in the early 2000s, and the subprime mortgage crisis in 2007-08, are classical examples of corporate mismanagement. Companies like Pets.com (2000), Enron Corporation (2001), One.Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI WorldCom (2002), Parmalat (2003), Fannie Mae (2008), Freddie Mac (2008), Lehman Brothers (2008), and Satyam Computer Services were among the most widely scrutinized by the media.
[edit] Creating investment opportunities for small investors
As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors.
[edit] Government capital-raising for development projects
Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature.
[edit] Barometer of the economy
At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.
Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met.
House Ter Beurze in Bruges, Belgium.
However, it is more likely that in the late 13th century commodity traders in Bruges gathered inside the house of a man called Van der Burse, and in 1309 they institutionalized this until now informal meeting and became the "Bruges Bourse". The idea spread quickly around Flanders and neighbouring counties and "Bourses" soon opened in Ghent and Amsterdam.
In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351, the Venetian Government outlawed spreading rumors intended to lower the price of government funds. There were people in Pisa, Verona, Genoa and Florence who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of influential citizens, not by a duke.
The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits—or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. In 1688, the trading of stocks began on a stock exchange in London.
[edit] The role of stock exchanges
Stock exchanges have multiple roles in the economy, this may include the following:[1]
[edit] Raising capital for businesses
The Stock Exchange provide companies with the facility to raise capital for expansion through selling shares to the investing public.[2]
[edit] Mobilizing savings for investment
When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels and firms.
[edit] Facilitating company growth
Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.
[edit] Redistribution of wealth
Stocks exchanges do not exist to redistribute wealth. However, both casual and professional stock investors, through dividends and stock price increases that may result in capital gains, will share in the wealth of profitable businesses.
[edit] Corporate governance
By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately-held companies (those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies. The dot-com bubble in the early 2000s, and the subprime mortgage crisis in 2007-08, are classical examples of corporate mismanagement. Companies like Pets.com (2000), Enron Corporation (2001), One.Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI WorldCom (2002), Parmalat (2003), Fannie Mae (2008), Freddie Mac (2008), Lehman Brothers (2008), and Satyam Computer Services were among the most widely scrutinized by the media.
[edit] Creating investment opportunities for small investors
As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors.
[edit] Government capital-raising for development projects
Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature.
[edit] Barometer of the economy
At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.
Stock exchange
A stock exchange, securities exchange or (in Europe) bourse is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets is driven by various factors which, as in all free markets, affect the price of stocks (see stock valuation).
There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities.
There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities.
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