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Stock Exchanges

Jobi mathai
S3 MBA
Stock exchanges
Securities refer to legal documents that show either
a person’s __________ of a company or _____ to
buy shares at specified dates, or he/she has ____
money to a business firm or a government.
ownership right
lent
A stock exchange is an organised market for the trading
of _________.
securities
……
Ab Ltd.
Function of stock exchanges
To individuals
To business
firms
To the economy
 As an ___________ channel
 Gaining __________
investment
protection
 Receiving ___________ information
 Raising _______
 Boosting _________
capital
credibility
 Raising _______ for the government
and public corporations
 Fully utilising _________
capital
resources
 As an economic ________ indicator
Demand Supply
Features of stock exchanges
 Keen / Little competition
______________ determine the prices
Market forces
_____________ as middlemen
Stockbrokers
Shares in the market are sold in standardised ____. lots
Market information on the stock exchange is _____. open
Trading on the stock exchange is being __________ to
ensure fairness in trading.
monitored
Process of securities trading
Investor Stockbroker
1. An investor places a _____________ with the stockbroker. market order
Process of securities trading
Investor Stockbroker
1. An investor places a _____________ with the stockbroker. market order
3. The representative will then carry out the market order by
buying from or selling to other broker representatives.
2. The stockbroker then sends the order to her
______________ who is on the trading floor.
representative
4. Details of the transaction are transferred electronically to
the ____________________________________________
for completion on or before the _______ day of transaction.
Automatic Order Matching and Executive System
second
Representative
Types of securities
_______: evidence that an investor owns a proportion of
a company
Shares
_________: allow the holder to buy a specified number
of shares at a fixed conversion price on or before a given
date.
Warrants
______: recognise that a loan has been made to a
company or government.
Bonds
________________________: investors’ money is
pooled together to invest in a portfolio that is managed
by a fund management company.
Unit trusts/Mutual funds
 _______ Placing
Methods of issuing shares
Methods of issuing shares in the stock exchange
 _____________________ Offer for subscription
 ______________ Offer for sale
 ___________ Rights issue
 ___________ Bonus issue
 __________________ Consideration issue
 ____________ Introduction
 ___________ Open offer
An offer to existing shareholders. It does
not have to be in proportion to the
shareholders’ existing holdings.
Financial institutions involved in issuing shares
An ____________ acts for a company wishing to
issue new shares.
issuing house
Functions of an issuing house
 As an ___________: agrees to buy the shares if they
are not bought by the public
underwriter
 Prepares the ___________ for submission to the
HKSAR Government and HKEx.
prospectus
 Distributes the prospectus to the public through
_____________ and _____.
stockbrokers banks
 Advertises the public offer
Primary market and secondary market
Primary market
Secondary market
 _________ market
 It is the market mainly between the
________________ and _____
_________
New issue
issuing institution
purchaser
 It is the market between ________
_________________ and ______
 Investors can buy securities that are
______________
existing
already in issue
bulk
 Firms can ___________ through
issuing securities
raise capital
securities holders buyers
Factors affecting the prices of shares
Changes in economic and political conditions
 General economic conditions
economic
conditions
If people expect a good economic
performance for a certain region,
the investment demand will
increase / decrease and share
prices are likely to rise / fall.
Factors affecting the prices of shares
Changes in economic and political conditions
 The prospect for the ________ and ________
If the prospect of aviation industry
is poor, the price of these shares
will rise / drop.
industry company
Factors affecting the prices of shares
Changes in economic and political conditions
 The interest rate
When the bank interest rate is high, the share
prices are likely to rise / fall.
Factors affecting the prices of shares
Changes in economic and political conditions
 The foreign exchange rate
When the foreign exchange rate of a country
rises, the share prices are likely to rise / fall.
exchange rate
time
share price
time
Factors affecting the prices of shares
Changes in economic and political conditions
 Political factor
If a country is unstable, its
share prices are likely to rise /
fall.
Dividend yield = x 100%
Factors affecting the prices of shares
Changes in economic and political conditions
Dividend yield
Annual dividend
Current share price
Higher dividend yield Share price rises / falls
P/E ratio = x 100%
Current per share earnings
Factors affecting the prices of shares
Changes in economic and political conditions
Dividend yield
Current share price
Higher P/E ratio Share price rises / falls
Price-earning ratio (P/E ratio)
Factors affecting the prices of shares
Changes in economic and political conditions
Dividend yield
Price-earning ratio (P/E ratio)
Speculation
presence of speculative activities  share price changes
Securities
prices
Speculation in securities market
 A ____ buys securities, hoping the price will increase.
A _____ sells securities, hoping the price will decrease.
bull
bear
 Bulls buy securities and buyers to be able to sell them
at higher price later. The actual owning of securities is
called a ____ position.
long
 Some bears sell securities even though they do not have
the securities in hand, the actual owing of securities is
called a ______ position.
short
 ______________ is a method of speculation that
involves the use of borrowed funds.
Margin trading
An example of margin trading
The Securities and Futures Ordinance
The monitoring of the securities market
 establishing the ______________ of the Securities and
Futures Commission and stating its functions and powers
accountability
 introducing a simplified ________ mechanism for
exchange and clearing house participants
licensing
 setting up a flexible _______________ mechanism for
securities and futures industry
civil and criminal
 setting up plans for ________ protection investor
 enforcing the rules of disclosure of a listed company’s
______
equity