May 1, 2015

The Ups and Downs of Stock Market

PSEI April 30, 2015

Stock market could go up and down but the trend would show the direction. PSEi end up down by 1.41% to 7,714.82 yesterday, April 30, 2015. Declining stock market does not mean that businesses in the country are failing; a drop in stock prices could indicate that there is a rebalancing in the valuation of stocks. In other words, over-valued stocks could be dropping because no one would want to buy at a high price – so the tendency of the sellers is to lower the price. When price lowered to an acceptable price – investors would probably buy the stocks with an assumption that prices would not lower anymore and would probably go up. These are few of the scenarios in the stock market.

In investing in stock market, it is very important evaluate the stocks carefully. Evaluation could be done by comparing the stock prices by industry. Also it is very important know the company being invested by doing research on its business performance. On one hand, looking at the historical data of the stock price could reveal a significant trend for short and long term growth of the stock.

Macroeconomically speaking, a growth in the stock index would be a good indicator of growing business in the country. Yet, when index is overvalued - its tendency is to go down. One of the factors that significantly affect stock market volatility is hot money. Hot money is foreign money being invested in emerging economies with an investment growth goal. When a hot money flies back out of the country, this sometimes causes a decline in the stock price (depending on the volume of stocks hold by foreigners with a tendency to fly out). Major factors that affect hot money fly out are exchange rate and local & international economic data. 

1 comment:

  1. There is a big eye for the stock of emerging markets because most of the stocks are perceived to grow; some are under valued and could be bought at lower price compared to developed nations stocks.


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