I dont understand how share prices will plummet when heavy sellings occur (common sense). Market Cap of a firm is always the market price * with no of common stock holders. When investors are selling, they are selling at the lower price they bought (occuring losses). Where have these losses gone?

Apart from that, during IPO a firm will raise capital for capital budgeting and etc. However, in the secondary market when tradings are made, will the firm has cash inflow from secondary trading progress? Meaning a raise in market cap will boost the firm's coffer? An investor will set a "buy price" target but how is that going to raise the share price for the firm?

Anyone please clarify?

Anyone cares to answer my question =="

Cherroy,

Some mind-boggling concepts you just threw to me. "Money loss and evaporated", "Value of money is created or disappeared in stock market". These 2 statements raise my curiosity even further. If we are looking stock market as a bubble, meaning when "money loss and evaporated", the bubble will shrink and everyone will be "killed" in the market. On the contrary, when the bubble expands, everyone will get a "kill" in the market till the bubble bursts one day for whatever reasons.

If a stock market can create and diminish money on its own, fuelling by sentiments, speculations and information, why in the first place it was created? It is just an imaginary casino to me apart from IPO where reasonable explanation to raise cash is logical. To offset this doubt of mine, I was wondering if the condition to issue IPO to investors will only make sense if secondary market is be available for investors to "gamble"?

Besides that, why is a portion % of shares being floated by a firm whereas a certain % not being floated? Essentially, the shares that are not floated are owned by government, pension funds n etc. What are the benefits that rest behind this?

My last question is regarding "price getting cheaper when more shares are dumped". It is known that to sell you must need a buyer. The transaction will be completed with a medium (brokerage firm). How are these transactions affect the share prices? More demand for the particular share, the price will bull up? I am confused..

Skidder,

Believe me I actually bookmarked Investopedia. I am just confused by the market when share prices plummeted, why firms ( ex: Merrill Lynch) are so worried because trading in the secondary market never really moves their coffers. Confidence? I dont know..

Thanks Cherroy for the valuable inputs. Now it makes economic sense. Just need someone to correct and consolidate my assumptions.

The finaly part I didnt get it. Movement of share prices. Share prices are moved by information (I wouldnt want to argue any other methods. With due respect to fundamental or technical analysis no offence.). My question is how are share prices being determined, From IPO to the secondary market. Lets say i sold of 100 lots of share in Comp XYZ at price RM A. How are these 100 lots going to affect the share price? What happens when heavy selling? What I doubt is the computation of the share price by the market, computer, or actually a human being? Any mathemical formula to tell the share price when a certain No. of share units are sold at RM A for Comp XYZ and vice versa on the buying side.

Cherroy, darknight81, skiddtrader,

Thanks for the summary you had made in examples to clarify my doubt. Essentialy share prices are determined by "auction" in the share market, driven by supply and demand. It is up to individual assumptions, analysis to determine the "best price" to buy or sell. NO mathematical formula or rocket science model to pinpoint the exact price. However all these are on the secondary market where trading is concern.

In IPO how does a company value its share price when it is born in the market? Base on their assets value? Or prior to the offering a complex financial model will be developed to determine the "appropriate and attractive price"?

thx skiddtrader and Cherroy for the clarification. Appreciate them

Capital gain maybe?

Some 'hero' rescuing KLSE? from 17 point reduction to 12 point

Financial market in a tumult. If AIG go bust what will happen to those in MSIA who took their loan to pay of for their mortgage loan???

Najib name Finance Minister effective Immediately. Another Richard Fuld or Martin Sullivan?

LOL at this...

Does Najib has any accounting/finance/economics bankground?

I know Pak Rah doesnt have.

I didnt know Datuk Nazir Razak got any relation with Najib.

Time to buy Commerz?

SAPP out of BN....

My question is, besides watching and shorting, what else can we do?

Is it possible for someone to list down how an investor can take advantage on a bearish stock market?

I know some of these are:

1) Put Option (shorting)
2) Short selling
3) Forex?
4) Commodities (eg Gold) ?

Is better to heed Adam's advice on this. Everytime when Labor Department announced the statistics on unemployment especially at a time like this, the market will lose its confidence.

will some cables be unplugged?

Anyway Gold soaring..Anyone investing in commodities?

This post has been edited by keelim: Sep 18 2008, 11:57 AM

By constantly pumping liquidity into the market, inflationary pressure will definitely start to mount by year end. How long can the FED sustain the economy by virtually adjusting back the market through pumping more liquidity? The housing market has to correct itself. If there is any further news on mergers or bankruptcy, will the Fed continue to print money to boost the market confidence? To me, it is just providing temporary relief and later continue to allow the market to slump in a slow and excruciating pain.

This post has been edited by keelim: Sep 19 2008, 08:10 AM