Hi, invest pros... I have a few queries that needs clarification

But wat's market capitalisation really means? According to Wikipedia, ur formula seems wrong?

Why does Singapore composite index much more higher than Malaysia? and Hang Seng Index is about 15 times higher than Malaysia too.
Does that mean those listed companies in SG and HK are more financially stronger compare to those in Malaysia?

What influence share price? Why does it goes up and down? What is its determinant factors?

Hope u can help.

Why investors need to dump shares if Bush has announced a good economic plan that would benefit the economy? Thanks.

Interesting questions, I want to know the answers from pros also. Anticipating Cherroy's answers to these. *clap*

Let me help Cheeroy answer the easy ones.


'But wat's market capitalisation really means? According to Wikipedia, ur formula seems wrong?'

Market Capitalisation basically means how much the company is worth by public opinion. To get the value is to multiply the number of shares the company has in the market to the price per share.

For example : Take for example SHELL (stock code: 4234) in KLSE is currently priced at RM11 per share and SHELL has 300,000,000 shares outstanding.

The market capitalization of SHELL will therefore be;

RM11.00 * 300,000,000 shares = RM 3,300,000,000 or RM3.3 billion


This means the public thinks that SHELL as a company including it's assets and the ability to generate income is worth about RM3.3 billion.

A lot of things can affect the market capitalization, such as the public sentiment or feeling about the ability of the company to generate income. Let's say for example, there was an unfortunate accident in the SHELL refinery which is in Port Dickson. The refinery is not able to produce petrol anymore for 3 months. This would affect it's income as it cannot make its product to sell and generate profits. Because of this, the public sentiment will feel the SHELL share is not worth RM11 anymore and might not queue to buy the share at RM11 anymore. They calculate it is worth on RM7 now so they queue RM7 as buying price. This would be reflected in the market and show buy order at RM7.

RM7 * 300,000,000 = 2,100,000,000 or RM2.1 billion.

As you can see, the market capitalization has been reduced due to public sentiment about the ability of the company to generate revenue.

Share prices tend to be corrected lower when a dividend is issued. Remember the a share price reflects the ability to generate revenue as well as the current worth of the company assets like it's factory and cash in the bank. So if the company decides to give out dividend, the cash in their bank will lessen, and so the share price will reflect what the public will think the fair price per share will be after deducting the cash from it's bank.


'What influence share price? Why does it goes up and down? What is its determinant factors?'


The law of demand and supply or buyers and sellers are what determines how much a share price will be. The market is divided into buyers and sellers. If you ever been to a wet market during festive season, you can see the real market in action when the market vendor stocks start to dwindle due to frantic buying. Imagine everyone want to buy chicken for dinner, the vendor only got 100 chicken, and there is 200 people waiting in queue to buy. The price will increase because the vendor knows people wants to buy chicken from him. But if during the off peak season he has 100 chickens and only 50 people queue to buy, he needs to lower his prices to entice more buyers to buy his chicken which is cheaper.

The stock market is one big market with a lot of vendors and also a lot of buyers and everyone is competing with one another giving their best offers. There is no control like the government price control of chicken. If the stock is cheap, people will surely buy, if the stock is expensive, less people will buy. Try to read up on the law of supply and demand, that will make you understand all this chicken talk.

Thank you for ur clarification. How's bout the answer to the above question?

You cannot take like to like comparison with the index. Index is just a virtual number, just like KLCI start at 1986 (if not mistaken) with 100 points, while if you see FBM30, it started around 6,600 last year. To compute current index or share price of the component, 100 points is the based to use to calculate.

Index carries not much meaning. Todayi HSI is 23,000. Tomorrow, the HKex authorities can decide not to use HSI anymore and reform another new index, it can start at 1,000 or 50,000. Index is just a base comparison. Just like KLCI now is 1390 so it is benchmark against that it had risen 13.9x since its inception.

But if (not the real situation) KLCI started at 100 points while STI also started at the same level and same time. If STI index is double than KLCI like currently, then it means their shares price performance is doubled than KLCI.

But index performance can mean their better performance in economy as only good economy growth will generate more earning (profit) to listed company which eventually translate into higher share price.

This post has been edited by cherroy: Jan 31 2008, 03:57 PM

If this is the case, why does composite index around the world do not want to start at 100 points at their inception, so that comparison with other indexes are more easily?

Errr...., this question hard to answer, just like you ask why FBM30 was started at 6,600 level or newly second board index started at 6,+++ level.
A bourse like to use this number while the other like to use another figure.

There is no way to have a direct comparison, just like apple and orange case. Index is only being used as benchmark comparison like I mentioned before.

Composite index is just a name of it like KLCI has 100 components. In US DJ is consist of 30 stocks only, while S&P 500 consists of 500 stocks. While Nikkei consist of 225 stocks. Just index is a way for guidance and benchmark. If no index then it is hard to tell the overall market is up or down or up how many as market generally mix bag with up and down counters. With index, then people can qoute today is up 1.xx%. Although it sometimes will not reflect fully the whole market pciture, it is roughtly good to represent most of the time.

erm... my question is if i wanna invest in a specific industry, how can i know what company are doing in the industry..??

for example, i wanna to know which company are doing in oil&gas industry... how i know got what company are in this industry...

any tools can aid on us??

what i see in newspaper classification are too rough...they just have consumer ,industrial ,construction,financial and others...quite difficult if need to read all annual report or research report to know thier nature of business...

there should be under "Trading & Services"
a few counters that i could recalled: eg. KNM, KENCANA, SCOMI, DIALOG, SAPCRES...

any of you know where we can get intraday or week candlestick report for klci?

Sorry there I beg to differ, this is not always the case, it's all depends on the mathematic methodologies underlying the indices on how it is calculated. Different exchanges could use different method, Bursa uses market cap-weighted and some could just use simple price change

Yup, forget about the mathematical side.
It can be different.

But mostly bourses generally uses the market capitalisation as a way to compute the index. DJ is the most special one, it uses price weight to compute the DJ instead of market cap.

I've just turned 18 and I've learned I'm able to invest in the KLSE. I would like to learn more especially if what I think I know is wrong. I have a few questions:

1. How much minimum do you need to invest in the KLSE? For instance if I choose to invest in very cheap stocks, is it 500 units of shares is the minimum purchase if I'm not mistaken?

2. Where do you suggest I open a CDS account and a trading account? I live in the Damansara area.

3. How exactly do shares get traded? You call your remiseier? Or online trading?

Any other advice and opinions would be greatly appreciated.

This post has been edited by Soulsareworthless: Feb 8 2008, 10:45 PM

1. No minimum but for trading more than 10k, deposit is required(not sure), just don't get yourself burned. Minimum purchase is 100 units.

2. Check the websites for your nearest office that do SE

3. Trade yourself... you call them to either sell or buy stock, with charges of course. Online trading, never heard of it.

Read more finance news, bla bla, etc etc... all about company that you interest to invest, do more study, bla bla, and if you don't want get yourself burnt so much, put upfront at least 1k then let it burnt itself or get dividens from it.

Correct me if I'm wrong.

1. The minimum is 100 odd lots as said. There's no need for deposit for RM10k, I just call my remisier to buy and only pay up 3 days later.

2. Anywhere is the same actually, if you are doing conventional trading. The charges are all standardized.

3. There are 2 ways you can trade, either through remisier (conventional) or online trading on a online platform. A lot of brokers have such facility already, so it is still the same (charges). You just need to look for one which has a stable platform and doesn't go offline too often. But you will still have a remisier, so even if it goes offline, you can still call up your remisier.

For more information on the basics of trading, visit www.bursamalaysia.com or do some googling to learn more before trading. It is advisable that you do paper trading (simulation) before trading with real money.

This post has been edited by Jordy: Feb 9 2008, 12:03 AM

Which means you don't have to have money in a specific account which will be credited whenever you buy shares? How do you pay your remisier?

How and where can I do paper trading?

1. No min on the amount but min share is 1 lots aka 1 x 100 shares.

2. Any investment bank or securities firm. Don't know the Damansara area, check the KLSE website which got full list of it.

3. Calling remiser or online trade to put an order, both will do but online trade get lower commission rate.

A trading account and a CDS is sufficient for one to trade already, once reach t+3, you pay by check or bank in into the investment bank account.

Paper trade, you can try Bursa Pursuit 'game' annually. Now no more. Several investment bank got paper trade function for newbie to tryout, I don't know which website got offer, may be some other forumers can help on this.

Learn the market first before committing. It involves hard-earned money in stake, should treat it cautiously. Don't start invest or trade before fully understand and know the risk of it.

Cheers.

PS: Merged with the FAQ thread to avoid multiple thread

Absolute values are unimportant. What's important are the percentage changes to the index, and how those changes in the index relate to changes in other indices.

I will offer you a quick way I use when I am writing up my industry reports. This assumes you don't have access to a range of premium subscripion-only tools e.g. Bloomberg, S&P Netadvantage, Mergermarket, etc.

If you are interested in a particular industry, say Oil & Gas, if you go to klse.com.my, you can look at the IPO document of a recently listed company in that industry.

In each IPO document is an industry description. This industry description usually describes the dynamics of the industry e.g. competitors, customers, etc.

Viola, instant industry understanding