Jeffrey Timmermans

Global Financial JournalismWeek 5: Covering stock markets

Friday, 1 March, 13

What’s a share?

✤ Entitles owner to a partial ownership stake in a company

✤ Entitles owner to a (small) share in everything the company owns, including its profits

✤ Net profit = profit attributable to shareholders

✤ Dividends are paid to shareholders from net profit

✤ Does not entitle owner to a management role in the company

Friday, 1 March, 13

What moves share prices?

✤ Supply & Demand

✤ The broader economy

✤ Economic growth

✤ Inflation/interest rates

✤ Prices of other assets

✤ Company earnings, especially expectations of future earnings

Friday, 1 March, 13

Share prices are news because...

✤ They reflect market participants’ expectations of the future performance of that company

✤ And those expectations are focused on how much those companies will earn in the future (net profit)

✤ Changes in those expectations lead to changes in share prices

Friday, 1 March, 13

Advance prep

✤ Get a list of potential market sources – and their contact details –ready beforehand

✤ You’re welcome and encouraged to share sources

✤ Try to start writing your comment before market close

✤ Much of background (on global/local events) can be prepared in advance

✤ Can use “told Reuters” quotes if totally unable to get own quotes/good quotes.

Friday, 1 March, 13

Breaking down the stock market

✤ Benchmark index

✤ Sectoral sub-indexes

✤ Individual share prices

✤ Compare individual prices with other prices and sub-indexes

✤ The index doesn’t tell the whole story: it’s a market of stocks

Friday, 1 March, 13

Writing about indexes & averages

✤ Focus (usually) on the benchmark index in your lede, but don’t neglect sector indexes or broader indexes

✤ Comparisons between indexes can be illuminating

✤ Use percentage change for daily moves

✤ Has a trend been broken?

✤ Has a new high or low been reached?

Friday, 1 March, 13

Hong Kong stock indexes

Source: Hang Seng Indexes (12:00pm Feb. 28, 2013)

Friday, 1 March, 13

Top 10 Hang Seng Index levels

Source: Hong Kong Exchanges, data as of Sept. 31, 2010

Friday, 1 March, 13

Sector Research

✤ Sectors broken into industries

✤ Compare individual companies with their industries to find stories

✤ Individual sectors often have their own market sub-indexes, for easy comparison

Friday, 1 March, 13

Market Sectors

✤ Basic materials (chemicals, paper, metals)

✤ Consumer cyclical (cars, clothes, housing)

✤ Consumer non-cyclical (food, beverages)

✤ Energy (oil, pipelines, coal)

✤ Financial (banks, brokers)

✤ Healthcare (drugs, hospitals, biotech)

✤ Industrial (airplanes, electric components)

✤ Technology (computers, semiconductors)

✤ Telecom (phones, wireless)

✤ Utilities (electric, gas, water)

Friday, 1 March, 13

Writing about shares

✤ A good stock market comment delves below the index to look at the individual shares driving the market activity

✤ Always check moves of big market-cap shares

✤ Look at market breadth: number of “gainers” vs. “decliners”

✤ An indication of the conviction of sentiment

✤ Don’t forget about volume

Friday, 1 March, 13

Market capitalization

✤ Total shares outstanding multiplied by current share price

✤ A measure of the size of a company

✤ Denominated in a particular currency

✤ Used to weight shares in a market index Source: Google Finance

Friday, 1 March, 13

Reading stock charts

Open

Low

High

Close

Daily volume

Friday, 1 March, 13

Stock Analysis

✤ Fundamental

✤ Examines company’s finances, operations relative to competition

✤ Focus on ratio analysis

✤ Technical

✤ Examines company’s past stock price & trading volume for clues to future

✤ Focus on chart patterns

Friday, 1 March, 13

Price/earnings ratio

✤ Current share price divided by earnings per share

✤ A measure of how “cheap” or “expensive” a share is

✤ Can be based on past earnings or predicted future earnings

✤ Compare individual share’s P/E with market or sector average Source: Google Finance

Friday, 1 March, 13

Technical Measures

✤ Support & Resistance

✤ Moving averages

✤ Visual chart patterns: head and shoulders

✤ Relative strength, stochastics, Bollinger bands

✤ Volume analysis: upticks and downticks

Friday, 1 March, 13

Support & Resistance

Support

Resistance

20-daymovingaverage

Friday, 1 March, 13

Brokerage Ratings

✤ Brokers initiate coverage, then upgrade or downgrade

✤ Based on expectations of future earnings

✤ Range from “buy” to “sell,” with different jargon

✤ Sell recommendations are seldom issued

✤ Upgrades/downgrades can affect a stock’s price

Friday, 1 March, 13

Finding “cause”

✤ Any big economic news?

✤ Any major local news?

✤ What’s happening in other markets?

✤ Look for sector-wide moves, then individual share moves

✤ Don’t always believe traders’ explanations

Friday, 1 March, 13

Finding “context”

02 Oct 2006 07:40 GMT DJ Tokyo Shares End Up For 4th Session On Exporter Gains

TOKYO (Dow Jones)--Strength in export-oriented shares helped guide Japan's stock market higher for the fourth straight session Monday, but market watchers said the market's sluggish volume indicates the rally will have a tough time overcoming strong resistance in coming sessions.

The Nikkei 225 Stock Average rose 126.71 points, or 0.8%, to 16254.29. Monday's gain followed a combined 570.13-point rise in the previous three sessions, including a 102.73 rise last Friday. It was the first time in almost three months that Japan's market had a four-session winning streak.

Blue-chip exporters such as Canon and Honda led the way, boosted by a drop in the yen to its lowest level against the dollar since Apr. 17 and the stronger-than-expected corporate sentiment reflected in the Bank of Japan's "tankan" survey released earlier Monday. Canon closed 1.6% higher at Y6,260 while Honda gained 2.5% to Y4,070.

Still, volume for the day was 1.606 billion shares on the TSE's first section, or Y2.3 trillion by value - below the 100-day moving average of 1.686 billion shares.

"The biggest weakness is the sluggish volume," said Hiroshi Arano, an adviser at Dai-ichi Kangyo Asset Management.

For the rally to overcome near-term resistance between 16300 and 16400 this week, volume needs to increase to around Y2.5 trillion in value terms, he added.

A month ago, traders said, local institutional investors sold off shares when the Nikkei 225 broke above its monthly average level for March of 16311. Selling above that level allows institutions to book capital gains for the current fiscal year ending in March 2007. While the market touched an intraday high of 16329.24 Monday, it soon afterwards dropped below the 16311 level.

The odd man out Monday among the exporters was Sony, which dropped 1.0% to Y4,730 on lingering concerns about the company's brand image from quality problems. Last Friday, Toshiba and Fujitsu said they would also recall Sony-made lithium-ion batteries following earlier recall plans by Lenovo and other computer makers.

Friday, 1 March, 13

Hong Kong shares may start higher, trim February losses572 words28 February 201301:12 GMTReuters NewsLBAEnglish(c) 2013 Reuters Limited

HONG KONG, Feb 28 (Reuters) - Hong Kong shares may start higher on Thursday, trimming steep losses so far this this month, after U.S. Federal Reserve Chairman Ben Bernanke reaffirmed his commitment to strong stimulus.

Bernanke, facing a congressional panel for a second day, also downplayed signs of internal divisions, saying the policy of quantitative easing has the support of a "significant majority" of top central bank officials.

Sun Hung Kai Properties and Citic Pacific are among companies expected to post corporate earnings later in the day.

On Wednesday, the Hang Seng Index edged up 0.3 percent to 22,577. The China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.4 percent.

The benchmarks are down 4.9 and 8.1 percent respectively so far this month, the worst performance for both indices since May 2012.

Elsewhere in Asia, Japan's Nikkei was up 2 percent, while South Korea's KOSPI was up 1.1 percent at 0100 GMT.

FACTORS TO WATCH:

* Brazilian mining company Vale SA expects moderate growth in the Chinese steel market in 2013, a situation that should keep average prices close to current levels, a company executive said. Vale posted its first net loss in 10 years in the fourth quarter after taking $5.66 billion in charges for underperforming mines and other mills, a loss twice as big as expected.

* China Vanke Co Ltd, the country's biggest real estate developer, is looking to extend its foreign investment drive beyond the high-end U.S. market, as Beijing weighs new measures to cool mainland property prices.

* Macau casino SJM Holdings Ltd, controlled by the family of billionaire tycoon Stanley Ho, posted a 27 percent increase in net profit for 2012.

Friday, 1 March, 13