Circumstances that affect the securities rate

Written by Sandeep Nehra

Once upon a time on Wall Street, there was told that the event is as much as anyone lnbo willing to pay for it. And it’s true – the market rate for all securities is determined for buyers and how they interact with the sellers. As soon as investors receive new information, they decide one of two things – pay more or less for their shares. They are changing the perception of constantly pushes prices up and down.

Share price or any other securities depends on supply and demand. Demand for the securities is called the desire of potential investors to buy these securities for those investors who already own them. If investors know that the securities can get money, they buy them. The proposal is based on the number of securities issued by the company and is in the market. Often a situation, where major of shareholder took over a large package of shares in the company to have control over it. He is not going to sell his shares, so that we can assume that these shares on the market are not there. By the way, such shareholder may be a state.

Often, supply is limited and not everyone who wants to own a certain type of securities can buy them. The more investors want to buy the securities, the more they are willing to pay for them high demand for paper pushing their price up. As the price increases, owners are reluctant to part with their securities: suddenly the price will grow further and sell can be more profitable?

Growth continues until then there alleged sellers do not come to the conclusion that the yen of securities owned by them is quite high and can be sold. Another reason that could stop growth is the views of buyers, the price rose too much and securities are not worth as much for them to ask. Then the owners wishing to sell their securities, should reduce prices to a level which will suit buyers, price falls until while potential buyers do not come to the decision that the paper is once again worth the price for them to ask sellers. This pendulum can oscillate in different directions several times in one day.

The laws of supply and demand explain the fluctuations of securities. But as investors and analysts come to the conclusion that securities worth buying or selling at a given price? To understand how much it costs to pay for the shares or debentures to a certain type, it is necessary to assess the status and prospects of the issuer as well industry in which it operates, and finally, the state and prospects of the economy as a whole.

First of all, investors and analysts examine “financial” health of the company, offering securities. It is unlikely that investors will invest big money in securities of companies which does not inspire confidence. They observe the business of the company and its securities on the data on income and past payments to holders of shares and bonds.

In the past, investors analyze the plans for the future. A company with a bad history of income can have a good future, a company with a good story, in a state of decline. Lawsuits filed against the company, the threat of strikes, intense competition and stricter government regulation, which would limit the company’s ability to profit, may reduce the value of its securities. Forecasts for large profits, news about that the company intends to market a new product that will be in great demand, increase the rate of its shares and bonds.

Rumors’ by controlling stake in a company is going to buy another company, usually bid up stock prices. This happens because the buyer control package will be ready to pay for the shares he needs a sufficiently high yen. In anticipation of this event other investors start buying shares to then resell them at a higher rate of a person who is seeking a controlling share. If, however, for controlling the action unfold struggle between several buyers at the same time, the stock price will rise even more.

Another important issue that needs attention is a state economic sector in which the company operates, have issued securities.

Rate the company’s securities may increase or decrease depending on whether investors believe that this branch of industry will develop or conversely, will deteriorate. For example, a company can succeed financially, but if there was a decline of industry, investors may question the company’s ability to maintain development. In this case, the share prices of the company may fall. Many industries are subject to periodic ups n downs. For example, the construction of houses is reduced, when rising interest rates on loans to purchase real estate.

Finally, we should observe the general trends in the economy, indicate the upcoming change.

A key indicator of the rate of economic growth is the speed at which increases the gross national product (GNP). GDP shows the final result of the country for a certain period. It includes the market value of goods and services produced during this time. Another important indicator is inflation. Inflation is manifested in the rapid growth of prices. In an inflationary environment, costs the company grow faster than it raises the yen on their products. Thus, its profits are declining.

Inflation has a great influence on other key indicators – interest rates on bank loans. Rise in interest rates means that government; enterprises and consumers must pay more to borrow money from banks. As a result, the government budget deficit increases, companies are forced to reduce its plans for new developments, and consumers spend less. This may cause a downturn in the economy – a period of sluggish economic growth changes in the economy show and many other indicators. Among them, the unemployment rate, the rate of national currency against foreign, etc.

Finally, there is nothing to change people’s attitudes to saving and investing more than their perception of important political events. If investors do not know how big political event will affect the national economy, they are likely to delay the purchase of securities. For example, if investors do not know how the new president takes private enterprise and not whether he intended to review the results of privatization, the price of shares in privatized enterprises will fall as people are awaiting developments.

Here, for example, several major events that have great impact (both positive and negative) on U.S. and global economy. In 1930, U.S. President Hoover signed the law that was set very high trade restrictions on imported goods. Investors feared that Europe could take retaliatory measures, impose high trade barriers against products manufactured in the U.S. and it will hit the U.S. economy, and so in crisis. They were right. The stock market, which rose to a record low of 230 points (according to Dow Jones) after the crash of 1929 to the mark of 294 points, again began a long decline.

The murder of President Kennedy took place in 1963. When investors learned about the November 22, 1963 assassination of President Kennedy, they quickly began prolazhu shares. Their fears and doubts have led to a loss of $ 13 billion for the shares are less than one hour. To control the panic selling NWF had ceased operations.

Arab countries imposed an embargo on oil. 1973. October 19, 1973 Arab nations interrupt oil supplies in the U.S. November 9, the Dow Jones fell 24.24 points – the lowest since 1962, burning goals. Economists, analysts attributed the fall of the fear of energy shortage, which contributed to higher prices in all sectors of the economy.

Ronald Reagan was elected President of the United States in 1980. The report of the victory of Ronald Reagan in the presidential elections resulted in an increase in share prices on Nov. 5, 1980. Defense, oil and technology stocks rose in price: investors believe that Reagan used to support the defense will fly and improve prospects of American business.

Iraq occupied Kuwait, Friday. August 3, 1990. The next day, the Dow Jones fell 120 points. Worries about the situation in the Middle East has caused a jump in oil prices, confidence in the U.S. economy faltered, and the prices of stocks and bonds fell.

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