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I am new to Share market. Lot of doubts in my mind.

1) Why there is share market?
2) How and Who determine the "A" company price is x.xx ?
3) How to know a company is Undervalue or Overvalue?
4) How can Study annual report help in knowing a company financial status?
5) What are the fundamentals knowledge I must have?

Thank you!!

a basic article for you... good to know some basics... Why a company want to go public?

We say we buy stocks or shares of a public listed company, but do we know why would a company want to go public?

So, why would a company want to go public? Why would they want to go through all the procedures and restrictions once they go public? Well, one of the reasons could be to raise a large amount of money for whatever purpose, for company expansion or some mega-projects. Now, there are a few ways out there for them to raise money, one is to loan form the bank, or to 'get' from the public.

Notice that I use the word ‘get'. It is not a typing mistake... When I say the company ‘get’ the money from the public, it means the company is going public and by offering shares. Of course there are rules and regulations that the company needs to follow.

Now, since the company is gong to get listed, they need to offer their shares to the public for the first time. They will go through a process called “Initial Price Offering (IPO). It is like offering their shares at a discounted price to the public because the price will normally be lower than the market price.

How much can they raise? That will depend on how much shares are offered. Just imagine, if they offer one million units of shares at RM1 a unit, they can actually raise RM1 million. And the best part is, they never need to return that money… That is why I say they practically ‘get’ the money from the public.

will post some more later ya... hehe... hope they are useful to you...

Regards & happy learning...

Hi, here is the one that says what determines share price... is it the company's performance?

Everyday we see price of stocks going up and down. When there is good news or high profit reports, the price of the company goes up. But if there is ill news or massive loss, the price goes down. Looking at the pattern, is the share price determined by company performance?

A very important point that you need to understand here is that the share price is not 'directly' determined by the company's earnings and performance... It is directly determined 'directly' by the balance between the demand and supply.

What do I mean? I'm quite sure you would have noticed that news and earnings would affect the company's price.... When there is good news or when the company reports a good annual profit, the price would go up. But if there is ill news or negative earnings, the price will go down... Then, why do I say performance do not directly affect the price? Haha... Noticed that I use the word directly?

The share market price works something like inflation, when demand overwhelms the supply, the price goes up... And the same goes opposite... More buyers than sellers, then the buyers will offer a higher price in order to get the product (shares). So the price goes up... So that is why I say, the demand is the factor that 'directly' affects the price..

However, company performance do affect demand. When a company do well, there will more demand for their shares, and the price will go up... So, indirectly they do have some effects... Hehe...

So, it is important that you don't freak and go into panic buying or selling when there are news about the company.. The news will only have effect on the price when it is significant enough to cause a change in demand.....

hehe... post this two first... let me know when you have finished la... then i post more ya... hehe... hope they help cos my fundamental knowledge is really limited... hehe...

Regards & happy learning...

Stock Markets exist so that you can share the wealth of the rich or contribute to their holidays funds. Depending on how smart you are, it is one way or the other.
A company is deemed undervalued when it is sound and solid and selling at low PE (PE means market price per share divided by earnings per share) with good dividend yields and possibility of capital gain.
An annual report tells you all about the company. You need to have some knowledge of accounting to understand it.
I don't know what you mean by "A" company. Please be more specific.
Cheers!

All the above questions are VERY RELEVANT. Those are good questions for new comers.

RL basically answer most of it in details.

However, I am waiting for Ben to explain to us more on

"3) How to know a company is Undervalue or Overvalue?"

1) Why there is share market?
Largest legalised casino. Well, actually a few brokers sat under a tree and made the first exchange.

2) How and Who determine the "A" company price is x.xx ?
The buyer and the sellers.

3) How to know a company is Undervalue or Overvalue?
You wont know.
In FA context there would be overvalue or undervalue but it would be meaningless actually, because the value is assigned by the individual and often disregarded by the market.

4) How can Study annual report help in knowing a company financial status?
Not much actually but comparison should be done. Should not look at the annual report itself only.

5) What are the fundamentals knowledge I must have?
TA.

Hi,

I found the default font is too small and the color is too dark, can something be done.

Hard to read the articles posted, if the eye sight is not good.

Thanks.

Ben wrote:
An annual report tells you all about the company. You need to have some knowledge of accounting to understand it.
I don't know what you mean by "A" company. Please be more specific.
Cheers!

The "A" company here just simply a name of a company.
From some replies above, I got learn something new. Actually what I mean here is who determine the Price when a New company go IPO. What factors they determine that? By thier Capital? By thier assest? By thier previous annual earning and future growth?

A company is deemed undervalued when it is sound and solid and selling at low PE (PE means market price per share divided by earnings per share) with good dividend yields and possibility of capital gain.

Can give an example of and undervalued share by this calculation? I kinda hard to imagine by that. Thank you.

hehe... post this two first... let me know when you have finished la... then i post more ya... hehe... hope they help cos my fundamental knowledge is really limited... hehe...

Regards & happy learning....

finished. Loud and clear! Thanks for the explaination. You may continue to next Q.
Thanks again.

But got few Questions from yr 2 replies.
-Where can I buy IPO ? Since the price is lower, isnt it better to buy IPO ?
-although demand and supply is "directly" affect the price, but the company performance in certain ways will "directly" affect the supply and demand right? So the performance of the company is very important for us when choose a share?

MNRB at 4.86 is an example of an undervalued stock.
It's dividend yield is 8.23 and PE is 8.95.
A stock has three values. They are market value, intrinsic value and NTA value. When the market value is much higher than its intrinsic value, I deem it as overvalued. When it's the other way round, it's undervalued.
The price of an IPO is determined by its management.
The management when determining the price has to follow certain guidelines issued by Bursa. It has to take into account such things as earnings, prospective earnings, growth, etc. In short, it has to look into the fundamental aspects of the company.