Thursday, 18 April 2013

Why Stock/Share prices fluctuate?

Many of us go online each day to search for the latest share prices on stock market websites. Have you ever wondered why we need to this from time to time? It is just because the share/stock prices keep on fluctuating all day long. The share price which you have seen at the start of the day (opening share price) may not be the same, when you see it at the end of the day (closing share price).

So, what’s the actual reason of all these fluctuations/variations in the share prices, which is affecting all the stakeholders? The best answer to this lies in the simple economics rule of supply and demand. This rule states that, whenever there is high demand and low supply, the price will go up. On the contrary, when the supply is more and demand is less, the price will go down. Therefore, when there is high demand for a stock supply is scarce, the share price goes up. And conversely, when more people are selling a specific stock (the supply goes up), and if the market demand is not proportional to that supply, then the share price will go down.

Now, the important question is why people want to buy or sell a specific stock? There are many answers to this question. News on electronic and print media promotes or demotes fame about a specific company. If people see, that a company share prices are going down and they can lose money in future, they start selling their shares to prevent the potential loss. On the other hand, if they see a rising trend in share prices then they might sell those shares to avail the profits right away. However, there are two aspects a shareholder is considering, while buying and selling shares:

1.Capital growth (in terms of total market price of the shares)

2.Dividends ( the profits company distribute to shareholders on quarterly, semi-annual and annual basis)

The shareholders who are consider to hold shares for long term don’t indulge themselves in the short term fluctuations (ups and downs) in the share prices. They don’t sell the shares as they are looking at the bigger picture. They will retain the shares for long term; as if the company is doing well, they will get dividends and also increase in share capital. However, there are short term investors who sell their shares as soon as they see share prices go up to avail the profits. The fear of future downfall in share prices drives them to sell their shares today.

The shareholders make their forecasting/estimates based on share price history of a company. Many financial service companies are always there to provide their services to the clients. These companies specialize themselves in providing advice about when, where and how to invest.

There could be many other reasons for ups and downs in the share prices like market factors and internal company performance issues. However, the most obvious reason for share price fluctuations is the market news and supply & demand principle.

In general, nobody can predict the accurate future share prices, however the best investors can do is to forecast using various financial tools. The people who are the best at forecasting are rich and make most of the money out of this industry.

Tuesday, 9 April 2013

ACCA Gold Member Firms

  1. Abbot Laboratories Pakistan Limited
  2. Cherat Cement Company Limited
  3. FAMCO Associates Pvt Ltd
  4. FDM Capital Securities (Pvt.) Ltd
  5. Haider Shamsi & Co
  6. Karachi Marriott Hotel (Hashwani Hotels Limited)
  7. Lakson Tobacco Company Limited
  8. M. Yousuf Adil Saleem & Co.
  9. Nasir Javaid Maqsood Imran
  10. Rafiq & Co
  11. Raoji Consulting Associates
  12. Rauf Ayoob & Company
  13. Riaz Ahmad Saqib Gohar and Co
  14. S.M. Suhail & Co. Chartered Accountants
  15. Trakker Private Limited
  16. Trakker Private Limited
  17. HLB Ijaz Tabbussum & Co Islamabad
  18. Islamabad Marriott Hotel (Hashwani Hotels Ltd)
  19. M Yousuf Adil Saleem & Co
  20. Tahir Farhan & Co Chartered Accountants
  21. Tourism Promotion Services Pvt Ltd
  22. Zeeshan Ali & Co
  23. AlBaraka Islamic Bank
  24. Bata Pakistan Limited
  25. DIC Pakistan Limited
  26. Fakharuddin Yousafali & Co.
  27. Highnoon Laboratories Limited
  28. Himont Pharmaceuticals Pvt.Ltd
  29. HNR Company (Pvt) Ltd. (Haier/Ruba)
  30. Javaid Jalal Amjad & Company Chartered Accountants
  31. Kamran & Co. Chartered Accountants
  32. M. Yousuf Adil Saleem & Co. Chartered Accountants (Deloitte)
  33. Malik & Co. Chartered Accountants
  34. Mansoor Aslam Seraj Saleem Chartered Accountants
  35. Manzoor Hussain Mir & Co Chartered Accountants
  36. Nasir Javaid Maqsood Imran Chartered Accountants
  37. Nimir Chemicals Limited
  38. Nimir Industrial Chemicals Limited
  39. Orbit Associates
  40. Pak Arab Fertilizers Limited
  41. Qamar Rashid and Co. Chartered Accountants
  42. Qavi & Co. Chartered Accountants
  43. Riaz Ahmad & Company Chartered Accountants
  44. Talib Zafar Associates
  45. Treet Group of Companies
  46. University of Engineering and Technology, Lahore
  47. Wateen Telecom Limited

What is Commercial Paper - Advantages and Disadvantages

Definition of Commercial Paper

Commercial paper is a short term discounted and unsecured promissory note to finance the short term needs of large institutional buyers. Many banks, governments and companies use such sort of funding to fulfil their needs.

Maturity time and Investors

The most important thing about commercial paper is that it matures within a short span of time and will not usually exceed 270 days. The average maturity period of commercial paper lies between thirty to thirty five days. Commercial paper is a low risk investment and is usually issued by those companies who have high credit ratings.

Commercial paper can be issued as an interest bearing note or it can traded at less than its par value (discount). So, investors usually buy commercial paper at less than par value and get the interest (profit), when it reaches maturity. The difference between the purchase price at the time of investment and the par value is the interest investors are seeking for. There are many investors in commercial paper industry that include commercial bank, trust departments and mutual funds. Commercial paper is always a better option to choose rather than going for large bank loans and paying a good deal interest on them.

Advantages of commercial paper

Commercial paper bears low risk and are considered as a safe and secure investment with a predictable return on investment. They help to establish national credit and also allow to enhance borrowing power with local banks. As previously mentioned, it’s a much cheaper way to source finance than the local banks that offer funds at high interest rates. The companies which issue commercial paper get two benefits out of it. They are able to able to enhance their prestige as a great credit worthy company and are able to issue greater chunks of commercial paper without any noticeable restriction from the regulatory authorities. Commercial paper give higher yields and one doesn't have to tie their funds for long term as they are short term investments.

Disadvantages of commercial paper

There is no secondary market for commercial paper and once your funds are tied up, it is difficult to get them out. You have to wait till the maturity time to get the face or par value for the commercial paper and to redeem funds. If we compare commercial paper with Treasury bills in terms of taxation, then T-bills are only taxed at federal level while commercial paper is taxed three times on federal, state and local level. Commercial papers are usually much expensive for general public to buy and only large corporations and banks can afford to buy them.