Chapter 6 Equity Market

FinancialEnglish,湖北经济学院国际金融教研室孙玲61311029recle02,Chapter6EquityMarket,1.Equity2.EquityMarket,Whatisacompany?,Itisaninstitutioncreatedtoconductbusiness,havingindependentregisteredassets,fullresponsibilityofmanagementandprofit/loss.,Companysystemisanefficientorganizationalformformodernenterprisesystem.Whilemanagementstructureofcompanyslegalbodyisthecoreofthecompanysystem.Today,state-ownedenterpriseshavesetupthemanagementstructureoflegalbody,butitneedstobestandardized.,Share-holdingCompany,Sincethestockmarketisanimportantcomponentofshare-holdingsystem,somebasicconceptsaboutshare-holdingcompanyshouldbeintroducedatthebeginningofthischapter.Modernshare-holdingsystemisconsistedofthreeessentialsincludingshare-holdingcompany,stocks,andthestockmarket.,Share-holdingCompany,Itisanorganizationalandpropertyform.Withthissystem,fundsandcapitalcouldbegatheredfromdifferentinvestorsbypayingcompanysshare.Theraisedfundscouldbeallocatedandusedbythemanagementofcompany.Alsoinvestorsareabletogetinvolvewiththemanagementofcompanyandtheallocationofdividends.,Share-holdingCompany,CharacteristicsofShare-holdingTheownershipandthemanagementrightareseparate.Thecompanyownersarediversifiedandchangeable.Strongsocialrestriction,OrganizationalStructure,BoardofStockholders(BOS)anditsauthorityOperationalPolicythesearesecuritieslistedonastockexchangeaswellasthoseonlytradedprivately.,Thesizeoftheworldstockmarketisestimatedatabout$36.6trillionUSatthebeginningofOctober2008Theworldderivativesmarkethasbeenestimatedatabout$480trillionfaceornominalvalue,12timesthesizeoftheentireworldeconomy.,2.FunctionsofStockMarket,CapitalCollectionNon-CapitaltoCapitalTransformationofCapitalOwnershipStockPriceGatheringandDeliveringInformationOptimizingResourceAllocationPromotingManagementofCompanies,3.PriceValuationofStocks,FaceValueBookValue/Share=MarketPrice=,TotalAsset-TotalLiability,TotalAmountofShares,ExpectedReturnperShare,MarketInterestRate,Stockmarketindex,Themovementsofthepricesinamarketorsectionofamarketarecapturedinpriceindicescalledstockmarketindices.Suchindicesareusuallymarketcapitalizationweighted,withtheweightsreflectingthecontributionofthestocktotheindex.Theconstituentsoftheindexarereviewedfrequentlytoinclude/excludestocksinordertoreflectthechangingbusinessenvironment.,StockPriceIndexTheDow-JonesAverageStandard&PoorsIndexNikkeiIndex东京证券交易所指数HangSengIndex恒生指数FinancialTimesIndexShanghaiStockIndex&ShenzhenStockIndex,4.IssuanceofStocks,PurposesofIssuanceAcquiringLong-termCapitalResourceMelioratingCapitalStructureAwarenessImprovementEquityImprovement,MethodsofIssuancePublicOffering&InternalOfferingInitialOffering&AdditionalOfferingDirectOffering&IndirectOfferingParIssue,MarketPriceIssue,andMiddlePricePremium,Par,andDiscountNegotiatedIssue&CompetitiveIssue,4.IssuanceofStocks,5.NegotiationofStocks,SecondaryMarketExchangeMarket&Over-the-CounterMarketNASDAQNationalAssociationofSecuritiesDealersAutomaticQuotations,1)NewYorkStockExchange,sometimesreferredtoastheBigBoardisaphysicalexchange,alsoreferredtoasalistedexchangeonlystockslistedwiththeexchangemaybetraded.TheoriginoftheNYSEcanbetracedtoMay17,1792,whentheButtonwoodAgreementwassignedby24stockbrokersoutsideof68WallStreetinNewYorkunderabuttonwoodtreeonWallStreetwhichearlierwasthesiteofastockade(围栏)fence.,1)NewYorkStockExchange,OnMarch8,1817,theorganizationdraftedaconstitutionandrenameditselftheNewYorkStock&ExchangeBoard.,1)NewYorkStockExchange,1)NewYorkStockExchange,Ordersenterbywayofexchangemembersandflowdowntoafloorbroker,whogoestothefloortradingpostspecialistforthatstocktotradetheorder.Thespecialistsjobistomatchbuyandsellordersusingopenoutcry(叫价).,1)NewYorkStockExchange,SinceSeptember30,1985,theNYSEtradinghourshavebeen9:3016:00onalldaysoftheweekexceptSaturdays,SundaysandholidaysdeclaredbytheExchangeinadvance.,2)NASDAQ,acronymofNationalAssociationofSecuritiesDealersAutomatedQuotationsisanAmericanstockexchange.Itisthelargestelectronicscreen-basedequitysecuritiestradingmarketintheUnitedStates.Withapproximately3,200companies,ithasmoretradingvolumeperdaythananyotherstockexchangeintheworld,2)NASDAQ,Itwasfoundedin1971bytheNationalAssociationofSecuritiesDealers(NASD),whodivestedthemselvesofitinaseriesofsalesin2000and2001.ItisownedandoperatedbytheNASDAQOMXGroup,thestockofwhichwaslistedonitsownstockexchangein2002,andismonitoredbytheSecuritiesandExchangeCommission(SEC).,2)NASDAQ,WhentheNASDAQstockexchangebegantradingonFebruary5,1971,theNASDAQwastheworldsfirst.Atfirst,itwasmerelyacomputerbulletinboardsystemanddidnotactuallyconnectbuyersandsellers.,2)NASDAQ,OneormoreNASDAQmarketmakerswillalwaysprovideabidandaskpriceatwhichtheywillalwayspurchaseorselltheirstock.,2)NASDAQ,isavirtuallistedexchange,whereallofthetradingisdoneoveracomputernetwork.TheprocessissimilartotheNewYorkStockExchange.However,buyersandsellersareelectronicallymatched.,2)NASDAQ,NASDAQwasthesuccessortotheover-the-counter(OTC)andthesystemsoftrading.Aslateas1987,theNASDAQexchangewasstillcommonlyreferredtoastheOTCinmediaandalsointhemonthlyissuedbyStandard&PoorsCorporation,Marketparticipants,Manyyearsago,worldwide,buyersandsellerswereindividualinvestors,suchaswealthybusinessmen,withlongfamilyhistories(andemotionalties)toparticularcorporations.Overtime,marketshavebecomemoreinstitutionalized,Marketparticipants,buyersandsellersarelargelyinstitutions(e.g.,pensionfunds,insurancecompanies,mutualfunds,indexfunds,exchangetradedfunds,hedgefunds,investorgroups,banksandvariousotherfinancialinstitutions).,Marketparticipants,Theriseoftheinstitutionalinvestorhasbroughtwithitsomeimprovementsinmarketoperations.Thus,thegovernmentwasresponsibleforfixed(andexorbitant)feesbeingmarkedlyreducedforthesmallinvestor,butonlyafterthelargeinstitutionshadmanagedtobreakthebrokerssolidfrontonfeestheythenwenttonegotiatedfees,butonlyforlargeinstitutions,IntroductionStageInthisstage,thefirmseekstobuildproductawarenessanddevelopamarketfortheproduct.Theimpactonmarketingmixisasfollows:Productbrandingandqualitylevelisestablished,andintellectualpropertyprotectionsuchaspatentsandtrademarksareobtained.Pricingmaybelowpenetrationpricingtobuildmarketsharerapidly,orhighskimpricingtorecoverdevelopmentcosts.Distributionisselectionuntilconsumersshowacceptanceoftheproduct.Promotionisaimedatinnovatorsandearlyadopters.Marketingcommunicationsseekstobuildproductawarenessandtoeducatepotentialconsumersabouttheproduct.,GrowthStageInthisstage,thefirmseekstobuildbrandpreferenceandincreasemarketshare.Productqualityismaintainedandadditionalfeaturesandsupportservicesmaybeadded.Pricingismaintainedasthefirmenjoysincreasingdemandwithlittlecompetition.Distributionchannelsareaddedasdemandincreasesandcustomersaccepttheproduct.Promotionisaimedatabroaderaudience.,MaturityStageAtmaturity,thestronggrowthinsalesdiminishes.Competitionmayappearwi