Chapter 10 Stock Exchange Machanisam Ibrahim Sameer (MBA - Specialized in Finance, B.Com Specialized in Accounting & Marketing)

Transcription

1 Chapter 10 Stock Exchange Machanisam Ibrahim Sameer (MBA - Specialized in Finance, B.Com Specialized in Accounting & Marketing)

2 Introduction

3 Introduction

4 Introduction

5 How Does Stock Market Work?

6 How Does Stock Market Work?

7 Top Stock Market In the World New York Stock Exchange (NYSE) National Association of Securities Dealers Automated Quotations (NASDAQ) London Stock Exchange Group Japan Stock Exchange Shanghai Stock Exchange Hong Kong Stock Exchange

8 NYSE The world leading stock exchange in the world. Founded on 17 th May It is also known as Big Board.

9 NYSE NYSE is owned by intercontinental exchange and regulated by security exchange commission of USA.

10 NASDAQ NASDAQ was created by National Association Securities Dealers.

11 NASDAQ Is the second largest exchange in the world by market capitalization. It was founded in 4 th February 1971.

12 NASDAQ World 1 st electronic stock market.

13 NASDAQ The term NASDAQ is also used to refer to the Nasdaq Composite, an index of more than 3,000 stock listed on the Nasdaq exchange that includes the world s foremost technology and biotech giants such as Apple, Google, Microsoft, Oracle, Amazon, Intel & Amgen.

14 London Stock Exchange (LSE) Primary stock exchange in UK and largest in Europe.

15 London Stock Exchange (LSE) Originated in 1773, the regional exchanges where merged in 1973 to for the stock exchange of Great Britain and Ireland, later renamed LSE.

16 London Stock Exchange (LSE) Most international of all stock exchanges with 350 companies from more than 50 countries.

17 Japan Stock Exchange Group An Asian financial services corporation that operates multiple securities exchanges including Tokyo Stock Exchange and Osaka Securities exchange.

18 Japan Stock Exchange Group It was informed by the merger of the two companies on January 1, 2013.

19 Japan Stock Exchange Group The group provides and operates a marketplace for the trading of equities, future and options.

20 Shanghai Stock Exchange Shanghai Stock Exchange is the world s 5 th largest stock market.

21 Shanghai Stock Exchange Shanghai clearing house provides security for financial market participants and efficient clearing services development purposes.

22 Types of Market in Stock Exchange Bull Bear Stag

23 Bull Market A bull is where people are finding jobs, economy is rising, GDP is increasing & stock market is increasing.

24 Bull Market Number of share traded and companies entering the stock market is also high.

25 Bull Market Bull markets are characterized by optimism, investors confidence and expectations that strong results should continue.

26 Bull Market Bull does not last long and is also quiet risky and prices of stock in this period rise continuously.

27 Bull Market For example; Facebook has a bull market where it s stock are continuously increasing. When it was started the stock price of FB was just $38 but today it has increase to $125.

28 Bear Market It is period when there is recession, stock are falling and economy bad.

29 Bear Market Investors face tough choice to buy profitable stocks. If a person is pessimistic believing that stocks are going to drop he or she is called a bear and said to have a bearish outlook.

30 Bear Market Investors can make gains in a bear market by short selling. This techniques involves selling borrowed shares and buying them back at lower price.

31 Bear Market Bear market example can be Viacom Inc which was as high as $85 but fell to $41 in 3 years time.

32 Stag Market A stag specifically refers to a speculator who buys and sells stocks in short time frame s to make quick profits.

33 Stag Market A stag investor assumes that the price of a stock will rapidly increase over the short term within the first few hours or days. Short term profits and low risk business.

34 Credit Rating A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting.

35 Credit Rating The credit rating represents an evaluation of a credit rating agency of the qualitative and quantitative information for the prospective debtor, including information provided by the prospective debtor and other non-public information obtained by the credit rating agency's analysts.

36 Credit Rating Most well known credit rating agencies around the globe are:

37 Standard & Poor s Credit Rating

38 Moody s Credit Rating

39 Fitch Credit Rating

40 Credit Rating

41 Insider Trading Insider trading can mean that a person buys or sells stock based on information that is not available to the public. The person may be a corporate officer, director employee or someone who has received the non-public information.

42 Illegal Insider Trading - Example A board member of a company knows that a merger is going to be announced within the next day or so and that the company stock is likely to go way up. He buys 1,000 shares of the company stock in his mother's name so he can make a profit using his insider knowledge without reporting the trade to the Securities and Exchange Commission and without news of the purchase going public.

43 Illegal Insider Trading - Example A lawyer representing the CEO of a company learns in a confidential meeting that the CEO is going to be indicted for accounting fraud the next day. The lawyer shorts 1,000 shares of the company because he knows that the stock price is going to go way down on news of the indictment.

44 Circular Trading Circular trading in stock market refers to a fraudulent trading scheme where buy/sell orders are entered by a person or by persons acting in collusion with each other to operate the price of the underlying security. The person(s) buying or selling knows that the same number of shares at the same time and for the same price will be entered to neutralize the transaction. Hence, these trades do not represent a real change in beneficial ownership of the security.

45 Circular Trading

46 Circular Trading Examples SEBI discovered another incidence of circular trading by two brokers over the stock of Videocon Industries Ltd. in The involved brokers were Mansukh Securities and Finance Ltd. (MSFL) and Intec Shares and Stock Brokers Ltd. (ISSL). Together, they deflated the share price from Rs to Rs i.e. a 20% fall. In 2012, Sebi imposed penalties of Rs 2 lakh each on the two brokerage firms.

47 Mutual Funds Let's imagine you just overheard the following conversation among three friends: 'I had a great year last year. My mutual fund was up 10%.' 'Oh, yeah? Mine was up 12%.' 'Oh, my. Mine was down 1%.'

48 Mutual Funds A mutual fund is a basket of various investments, such as stocks, bonds, and cash. A mutual fund is funded by the investments of individual investors and institutions.

49 Types of Mutual Funds Equity funds invest in stocks of various sizes and domicile. For example, there are mutual funds that are classified as global, which have the ability to invest in both the U.S. and anywhere in the world. Mutual funds that are classified as domestic are mostly invested in the U.S. Growth funds typically invest in companies that are expected to have higher growth rates than others.

50 Types of Mutual Funds Fixed-income funds mainly invest in bondoriented investments, such as corporate bonds and municipal bonds. You may come across a municipal bond mutual fund that is state-specific.

51 Types of Mutual Funds Money market funds invest in high-quality, shortterm debt instruments, such as government treasury bills (also known as T-bills).

52 Advantages of Mutual Funds A simple way to make diversified investment. Managed by a financial professional. Allow investors to participate in a wide variety of investment.

53 Questions & Answers What else you want to know?

54 Thank You Ibrahim Sameer Seek knowledge from cradle to grave