What is Shares?
There are a number of different shares in the market, including preference shares, bonds, and gilts but the most popular type is the ordinary share which represent ownership of a company.
A person who buy shares, also known as equities or stocks, literally become a part-owner of that business. If, for example, a ABC Plc has 100,000 unit of shares worth RM1 each and you buy RM1,000 of shares, you own 1% of the company.
Companies do not have to list on the stock market to issue shares. Many businesses start life with friends and family as shareholders. These businesses are called unlisted firms and their shares are often referred to as ‘unquoted’.
Once a company decides to raise money from the general public it is called a Berhad and is a ‘listed firm’. Its shares are then referred to as ‘quoted’ or ‘listed’ on the stock market.
There are 646 shares listed on the main board of Bursa Malaysia, 268 on second board and 107 on Mesdaq in till year end 2005, from big household names such as BAT, Maybank and Petronas to smaller businesses like technology company.
As a shareholder you have a say in the company’s affairs by voting at company meetings and, of course, the ability to share in its fortunes. If the company does well, the value of your investment should rise but if it does badly, you could see your shares fall in value.
Hope this will provide a beter understanding of share market. Do share your understanding on your perspective.
A person who buy shares, also known as equities or stocks, literally become a part-owner of that business. If, for example, a ABC Plc has 100,000 unit of shares worth RM1 each and you buy RM1,000 of shares, you own 1% of the company.
Companies do not have to list on the stock market to issue shares. Many businesses start life with friends and family as shareholders. These businesses are called unlisted firms and their shares are often referred to as ‘unquoted’.
Once a company decides to raise money from the general public it is called a Berhad and is a ‘listed firm’. Its shares are then referred to as ‘quoted’ or ‘listed’ on the stock market.
There are 646 shares listed on the main board of Bursa Malaysia, 268 on second board and 107 on Mesdaq in till year end 2005, from big household names such as BAT, Maybank and Petronas to smaller businesses like technology company.
As a shareholder you have a say in the company’s affairs by voting at company meetings and, of course, the ability to share in its fortunes. If the company does well, the value of your investment should rise but if it does badly, you could see your shares fall in value.
Hope this will provide a beter understanding of share market. Do share your understanding on your perspective.
posted by Ho Sang @ 7:01 PM
2 Comments:
At 11:16 AM,
danielkong said…
In KLCI we do see warrant and bond for a particular company. What are the different between warrant and bond with share?
At 10:09 AM,
Ho Sang said…
"BOND" ~
Bond can only be invested by financial institution and bank, and corporation. Therefore, Retail investor can buy through unit trust which has invest in bond, namely fixed income fund. During bond invetsment, investor is giving a loan to the issuer. The issuer, such as a corporation or government, agrees to repay the loan with interest within an agreed amount of time. The yield on your bond investment, which is the amount being earned, is calculated by dividing the bond's annual income by its price. Until a bond matures, it can be bought or sold on the open market. If it changes hands before maturity, the price can fluctuate depending on interest rates at the time. When interest rates fall, bond prices rise and vice versa. The types of bonds offered for investments vary according to the issuer:
* The federal government issues Treasury bonds to finance the national debt and government programs.
* State and city governments issue municipal bonds to help pay for roads, schools, sewers and other public works projects.
* Public and private corporations issue bonds to help their businesses grow eg. premium bonds.
"WARRANT" ~
All the warrants that are listed in the Bursa Malaysia today including the Khazanah covered call warrants confers the right to purchase the underlying mother share at a specific price sometime in the future within a specified maturity period.
Warrants holders are not entitled to dividends that are paid out by the company as they only confer rights to future ownership rather than the ownership of the mother share itself. As such, warrants may not appreciate in price when the company declares dividends as would normally be the case for the mother share.
Warrant holders enjoy gearing phenomena. Most investors are familiar with gearing and its effects when purchasing properties utilising mortgage loan. Property owners by merely placing a 10% deposit and borrowing the rest can expect to double their capital invested if the price of the property appreciates by just 10%. With merely 10% deposit, he has effectively leverage himself ten times on the capital invested. Therefore his returns will also be ten times the return of the investment. Likewise if he loses, his loss will also be ten times any losses incurred in the investment!
Warrant holders buy the right to purchase the mother share at a predetermined price. Therefore whenever the mother share moves up, the value of the value of the warrant should move up in tandem because the purchase price of the mother share is already fixed. This relationship is of course less obvious when the warrants are `out of the money' which happens when the predetermined purchase price of the mother share is much higher than the current traded share price. Such warrants are generally considered worthless unless they still enjoy a long expiry period or life span.
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