Special Topics in Economics Special Topics in Economics Econ. 491Econ. 491

Chapter 11:Chapter 11:

Stock Exchange Market ReportStock Exchange Market Report

I. Stock Exchange Market Developments I. Stock Exchange Market Developments ReportReport

The report analyzes the developments about Stock The report analyzes the developments about Stock exchange market during a particular period of time exchange market during a particular period of time (week, month, quarter, year).(week, month, quarter, year).

The report consists of three sections; stock exchange The report consists of three sections; stock exchange developments, factors affecting stock exchange developments, factors affecting stock exchange market during the given period, and expectations market during the given period, and expectations about the performance of the stock exchange market .about the performance of the stock exchange market .

II. Stock Exchange DevelopmentsII. Stock Exchange Developments

In this section, the changes in the main stock In this section, the changes in the main stock market index are described based on numerical market index are described based on numerical data .data .

A numerical table is used in this section to A numerical table is used in this section to show the changes in the main index between show the changes in the main index between two periods.two periods.

Sources of the main stock market index can be Sources of the main stock market index can be obtained from different places but mainly from obtained from different places but mainly from Bloomberg, and Reuters., and Reuters.

The “Country” Stock Exchange Developments ReportThe “Country” Stock Exchange Developments Report

The “country” stock exchange performs …..(strongly/poorly) at the end of month X compared to month Y . The “country” stock market is influenced by many economic and other developments during the month X .

First; Stock Exchaneg DevelopmentsFirst; Stock Exchaneg Developments

“ “The main index for the The main index for the “country” stock exchange market …….(increases / …….(increases / decreases) at the end of month X. Particularly, the index closed at…..……decreases) at the end of month X. Particularly, the index closed at…..……(higher / lower) rate by ….% in month X compared to the month Y closing (higher / lower) rate by ….% in month X compared to the month Y closing points”.points”.

Source: ReutersSource: Reuters

Statement Closing index in the last month

(Y)

Closing index in the current month (X)

Change rate(%)

Kuwait Stock Exchange Index 7946.39 7785.48 2.02% -

According to the table , What is happening to sectors According to the table , What is happening to sectors related stocks in the stock exchange market?related stocks in the stock exchange market?

““Reflecting the market trend, most sectors closed in red Reflecting the market trend, most sectors closed in red (green) during the month of X. Oil and gas slipped by (green) during the month of X. Oil and gas slipped by 0.97 %. Basic materials rose by1.65 %, whereas 0.97 %. Basic materials rose by1.65 %, whereas industrials declined by 4.46 %.......list sectors here……industrials declined by 4.46 %.......list sectors here……” ”

Source: Reuters

Sector PerformanceOil and Gas -0.97%

Basic Materials 1.65%Industrials -4.46%

Consumer Goods 1.93%Health Care 3.00%

Consumer Services -0.86%

Second; Factors Affecting “country” stock exchange market

“There are many reasons causing the …..(downward/upward) trend in “country” stock exchange market during the month of X, the following are the main reasons”:

1- Announced Companies’ Profits (losses)

“……“…….Talk about the main leading companies only that .Talk about the main leading companies only that might affect the index because they have high weights might affect the index because they have high weights in the index…………….”in the index…………….”

2- Political instability

3- Some announced economic indicators

Inflation---- Inflation can have an adverse effect on stock market.Inflation can have an adverse effect on stock market. Inflation is the rate at which the price of goods and Inflation is the rate at which the price of goods and

services increases, which leads to a rise in the cost of services increases, which leads to a rise in the cost of manufacturing, transporting and selling goods.manufacturing, transporting and selling goods.

High inflation causes investors to think that High inflation causes investors to think that companies may hold back on spending; this causes an companies may hold back on spending; this causes an across the board decrease in revenue. The higher cost across the board decrease in revenue. The higher cost of goods coupled with the drop in revenue causes the of goods coupled with the drop in revenue causes the stock market to drop.stock market to drop.

When inflation is at a low rate, the stock market When inflation is at a low rate, the stock market responds with a surge in selling.responds with a surge in selling.

Interest RatesInterest Rates---- Interest rates as set by the central bank can have an Interest rates as set by the central bank can have an

affect on the stock market.affect on the stock market. Higher interest rates mean that money becomes more Higher interest rates mean that money becomes more

expensive to borrow. To compensate for the higher expensive to borrow. To compensate for the higher interest costs, companies may have to cut back interest costs, companies may have to cut back spending or lay off workers. spending or lay off workers.

Higher interest rates also mean that company can not Higher interest rates also mean that company can not borrow as much as it used to, and this has an adverse borrow as much as it used to, and this has an adverse affect on company earnings. affect on company earnings.

All of this adds up to a drop in the stock market.All of this adds up to a drop in the stock market. The decrease in the interest rate makes the opposite The decrease in the interest rate makes the opposite

conclusion. conclusion.

Foreign MarketForeign Market---- Economic trends in foreign markets can have an Economic trends in foreign markets can have an

effect on the stock market.effect on the stock market. When the economies in foreign countries are down, When the economies in foreign countries are down,

local companies cannot sell as many goods overseas local companies cannot sell as many goods overseas as they used to. as they used to.

This causes a drop in revenue, and that can show up This causes a drop in revenue, and that can show up as a drop in the stock market. as a drop in the stock market.

Foreign stock exchanges also have an effect on the Foreign stock exchanges also have an effect on the local stock market. local stock market.

If foreign exchanges start to fail or experience sharp If foreign exchanges start to fail or experience sharp drops, then that kind of activity can cause local drops, then that kind of activity can cause local investors to anticipate a ripple effect, resulting in a investors to anticipate a ripple effect, resulting in a drop in the local stock exchange.drop in the local stock exchange.

“On the other hand, there are other factors that limit the (increasing / decreasing) trend for the “country” stock exchange market during the month X. These factors are as follows:“

1- 1- “ list them here”“ list them here”

2- 2- “ list them here”“ list them here”

3- 3- “ list them here”“ list them here”

Third; Expectations

1- Expected economic indicators

“The …… expects in its monthly report released on the 12th of month X that …………”

2- Expected Projects for listed companies

“The …… expects in its monthly report released on the 12th of month X that …………”