Macroeconomics Presentation topic: Stock market

A stock market or equity market is the aggregation of buyers and sellers (a loose network of economic transactions, not a physical facility or discrete entity) of stocks (shares); these are securities listed on a stock exchange as well as those only traded privately. 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 financial capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange affords the investors gives them the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments. Some companies actively increase liquidity by trading in their own shares

The stock market

1 Stock market overview

2 Stock market’s problem

3 Policy and implications

1 Stock market overview

1.1 What is stock?

• Stock market: a financial market-> savers can directly provide fund for borrowers

• Sale of stock: equity finance

• Owner of stock: a part of owner of the corporation

• Gain from stock: profit

• Stock index: an average of a group of stock prices

1.2 What does it mean to own stock?

• a stock holder has a share in the company it holds stock in

• Advantage: get profit in form of dividend

• Disadvantage: lose money if the price goes down

1.3 How to obtain stock?

• Mutual funds: an institution that sells shares

to the public and uses the proceeds to buy portfolio of various types of stocks.

1.4 Kinds of stock:

• Preferred stock

• Common stock

1.5 What makes stock prices go up and down?

• Company gets profit or loss

• Good or bad time of the year.

• Economy working in general: inflation,

recession…

2 Stock market’s problem

2.1 From 2000 to 2005

• Lack of experience

• Market did not attract many investors; domestic and foreign

companies.

• Limited by the number of products, types and quality.

2.2 From 2006 to 2007

• Too easy

monetary policy was applied-> Money supply

• Easy fiscal policy

2.3 From 2007 to 2008

• There were too many demands while the supplier was not enough for market

• Many illegal problems were occurred inside it

• The value of market exceed the limitation; therefore market was out of controlled

2.4 From 2009 to 2012

• The development was not enough for lasting for

a long time

• The policy is not effective enough to control the market in Vietnam

• Participants who have too little or even no

knowledge about stock market

2.4 From 2009 to 2012

• High inflation : -> Stock investors tendency:

- Private saving increase

- Send money to the bank more-> Corporate need to borrow from the banks-> pay interest

-> lower profit-> stock price decrease

- Invest in foreign stocks-> Outflow increase

• The market price of stock is low, many stock company is under threat All the stock is at their lowest price of all times

In 2011, 433 stocks have price under 10,000 VND (62%) and186 stocks have price under 5,000 VND (26,7%) in total of 696 stocks in HOSE and HASTC

Policy and implications